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Warren Buffett is betting big on one Texas oil stock.
His company has already acquired a 26.8% ownership stake. And the U.S. government approved a request to buy up to 50% of the company.
This single oil stock trade is making headlines on CNBC and in the Wall Street Journal. Yet the media is overlooking an even bigger story…
Berkshire Hathaway Invests Billions in Next Generation Energy Technology
In fact, Warren Buffett is partnering up with his buddy Bill Gates. And they’re investing over $2 billion in one tiny Wyoming coal town.
Berkshire Hathaway (NYSE: BRK-B) has acquired a 26.8% stake in Occidental Petroleum (NYSE: OXY).
The total Berkshire position in Occidental includes:
- $16.8 billion of common stock
- $10 billion of preferred stock paying an 8% yield
- 83.9 million warrants with an exercise price of $59.62
Buffett’s company had previously been limited to owning 25% of Occidental. However, the Federal Energy Regulatory Commission approved a request allowing Berkshire to buy 50% of Occidental stock.
It looks like Buffett will continue increasing his stake in Occidental.
Last week Berkshire bought nearly 52 million OXY shares at between $64 – $68 per share.
This is a similar playbook to 2009 when Berkshire acquired Burlington Northern Santa Fe. Berkshire had bought 23% of BNSF BEFORE making an offer to buy the entire company. After buying a sizable stake in the market – Berkshire spent $26 billion to buy the entire company.
Berkshire is currently sitting on $105 billion in cash.
It would likely cost Berkshire $55 – $60 billion to acquire the entire company – assuming a 20% – 25% premium to the recent share price of Occidental.
Berkshire clearly has the cash to buy Occidental. However, Buffett may simply continue buying the stock in the market because that’s cheaper than making an offer to buy the entire company.
OXY shares are trading around $67.
Wall Street analysts expect the company’s earnings to exceed $13 per share this year. And that means the stock is dirt cheap – trading at just 5-times earnings.
Right now, we’re in the early stages of an energy super cycle – with soaring demand exceeding supply.
The world needs new sources of energy – and they need it fast.
That’s why Warren Buffett is quietly launching a secret energy project in rural Wyoming.
In fact, Warren Buffett and Bill Gates are personally investing over $2 billion in this project. And the Department of Energy has promised to put up another $2 trillion.
Frankly, this project could transform energy production across the United States. Plus, it could spark a new $6 trillion energy revolution.
Yours in Wealth,
Ian Wyatt