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Berkshire Hathaway currently has a 20% stake in Occidental.
Callaghan O’Hare/Bloomberg
Occidental Petroleum
stock jumped Friday after
Berkshire Hathaway
got approval from the Federal Energy Regulatory Commission to acquire up to 50% of the big energy company in the secondary market.
Occidental Petroleum shares (ticker: OXY) rose $4.60, or 7%, to $69.48 on the news. The Federal Energy Regulatory Commission, or FERC, filing could mean that Berkshire Hathaway (BRK/A, BRK/B) will continue to increase its stake in Occidental, above its current 20% stake.
In the filing dated Friday, Berkshire stated that on July 11 it filed “an application pursuant to section 203(a)(2) of the Federal Power Act (FPA)1 requesting authorization for Applicant to acquire in secondary market transactions up to 50% of the common stock of Occidental Petroleum Corporation (Occidental) (Proposed Transaction).”
The FERC approved Berkshire’s request, according to the filing Friday.
The FERC filing apparently was necessary because Berkshire’s big utility unit, Berkshire Hathaway Energy (BHE), owns energy assets that are FERC-regulated. There are some energy assets owns by Occidental that are a focus in the filing.
“Applicant represents that the Proposed Transaction will not have an adverse effect on competition,” Berkshire states in the filing.
It remains to be seen if the FERC filing is more of a regulatory formality or will usher in a new round of Occidental purchases by Berkshire. There remains speculation that Berkshire, headed by CEO Warren Buffett, ultimately wants to buy all of Occidental. Berkshire didn’t immediately respond to a request for comment.
Buffett has been price conscious in Berkshire’s buys of Occidental since the initial stake was disclosed earlier this year. Berkshire has bought nearly all of Occidental stock under $60 a share, appreciably below the current price.
Berkshire’s most recent purchases occurred in early August and were made at prices ranging from $57 to $60 a share. Berkshire holds 188 million Occidental shares now worth about $13 billion.
Bill Smead, a manager of the
Smead Value
fund (SMVLX), an Occidental holder, thinks Buffett wants to buy the rest of Occidental. He likens the situation to Burlington Northern Santa Fe more than a decade ago. Berkshire accumulated a stake of about 22% in the railroad and then reached a deal to buy the rest of the company in 2009.
Write to Andrew Bary at andrew.bary@barrons.com
