Occidental Petroleum Continues to Demonstrate Why Warren Buffett's Company Sees So Much Value in the Oil Stock

Core Insights - Occidental Petroleum has attracted significant investment from Berkshire Hathaway, with the latter increasing its stake to 28.8% of Occidental's outstanding shares, making it the sixth largest holding in Berkshire's portfolio at 4.3% [1][2] Financial Performance - In the fourth quarter, Occidental produced an average of nearly 1.5 million barrels of oil equivalent per day, exceeding production guidance by 13,000 BOE/d, driven by record U.S. production in the Permian Basin and Rockies [3] - The oil and gas segment reported a pretax income of $1.2 billion, remaining flat compared to the third quarter despite a 7% decline in average oil prices [3] - The chemicals business, OxyChem, generated $270 million in pretax income, surpassing guidance, while the midstream and marketing segment also exceeded expectations [4] - The company achieved robust cash flow of $3.1 billion, with free cash flow of $1.4 billion after $1.8 billion in capital spending [4] Debt Management - Occidental utilized free cash flow to pay dividends and repay $4.5 billion in debt ahead of schedule, following a $12 billion acquisition of CrownRock [5] - The company plans to sell $1.2 billion in assets as part of its strategy to divest $4.5 billion to $6 billion in assets to strengthen its balance sheet [6] - Cash from asset sales will be used to repay the remaining $1 billion of maturing debt this year, with plans to build cash for future debt maturities [7] Capital Expenditure and Growth Strategy - Capital spending is projected to be between $7.4 billion and $7.6 billion, aimed at developing oil and gas resources primarily in the Permian and Rockies [8] - Major projects include the Stratos carbon capture and storage hub, expected to start operations this year, with a capacity of 250,000 tonnes [9] - The OxyChem Battleground modernization project is anticipated to enhance annual earnings by approximately $325 million starting in 2026 [10] Strategic Outlook - Occidental's operational efficiency is driving record production and strong free cash flow, enabling debt reduction and shareholder returns through a growing dividend [12] - The company's investments in chemicals and carbon capture are expected to enhance cash flow resilience in the future [12] - Berkshire Hathaway's continued investment reflects confidence in Occidental's strategic execution and future value, especially as shares have declined about 30% from recent peaks [13]