The ‘Apple’ Of Warren Buffett’s Eye Is Reporting Earnings

Warren Buffett might have sold a hefty portion of his Apple (AAPL) holdings, but the investor has kept adding Occidental Petroleum (OXY). The energy producer reports second-quarter earnings and revenue late Wednesday. OXY shares angled higher early Wednesday.

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Analysts expect Occidental Petroleum Q2 profit to grow 15% to 78 cents per share with revenue totaling $6.93 billion, representing a more-than-3% increase compared to a year ago. The company saw first-quarter earnings crater 42% and sales decline 17%.

However, investors on Wednesday are expected to be laser focused on the company’s plan to reduce debt and its plans associated with its $12 billion acquisition of Permian Basin producer CrownRock. The deal adds 94,000 net Midland Basin acres and production of 170,000 barrels of oil equivalent per day to Occidental’s holdings.

Occidental Petroleum stock jumped almost 2% during early market action on Wednesday. The stock edged down a fraction Tuesday to 56.13. OXY shares have booked five consecutive daily declines and are down around 8% in August.

Occidental’s second-quarter results follow Permian Basin producer Diamondback Energy (FANG) reported better-than-expected Q2 earnings and revenue on Tuesday, with EPS growing 23%. Supermajors Exxon Mobil (XOM) and Chevron (CVX) also recently announced second-quarter earnings and revenue.

Buffett has a 6.7% stake in CVX.

OXY, Ecopetrol And Oil Prices

On Aug. 1, Occidental Petroleum reported that Colombia-based Ecopetrol (EC) “decided not to acquire any interest in the CrownRock assets,” according to a regulatory filing. There had been speculation that Ecopetrol would take a 30% stake, or $3.6 billion, in CrownRock.

Ecopetrol has a joint venture in the Midland Basin with Occidental Petroleum and has first right of refusal on participating in OXY projects or deals in the basin.

On July 29, OXY also signed a $818 million deal to sell its Barilla Draw property in the Delaware Basin to Permian Resources (PR).

Warren Buffett Stocks: What’s Inside Berkshire Hathaway’s Portfolio?

Meanwhile, geopolitical risk in the Middle East has increased as conflict begins to center between Israel and Iran. But rather than the usual spike in oil prices caused by risk of such conflict, U.S. West Texas Intermediate (WTI) oil prices dropped to $74.80 per barrel as of Wednesday. Futures for Brent crude, the international benchmark, traded around $78 per barrel Wednesday.

What for now appear to be healthy supplies of oil, and ongoing soft demand in China, continue to hold oil at low levels. U.S. oil prices and Brent futures have both declined around 9% in August and are down around the same level for the year.

Warren Buffett Keeps Buying OXY

Occidental Petroleum stock is pulled back from an April high, trading well below both its 50-day moving average and its 200-day line. OXY is down around 6% on the year. It has sunk more than 20% since the April 12 high.

However, this downturn has provided a buying opportunity for Warren Buffett. Between June 5-June 17, Berkshire Hathaway (BRKB) purchased OXY every trading day, scooping up more than 7 million shares with purchase prices around 60, according to regulatory filings.

Since the latter half of 2022 Buffett has loaded up on OXY. The billionaire investor targeted shares in the $57-$61.50 price range. Warren Buffett’s Berkshire Hathaway substantially increased its stake in the international oil play over the past year, putting OXY among Buffett’s top holdings.

MarketSurge charts show OXY stock finding price support around the 55-57 range, dating back to June 2022.

Buffett Won’t Take Control

Berkshire Hathaway also owns $10 billion of Occidental preferred stock and has warrants to buy another 83.9 million common shares for $5 billion.

Berkshire Hathaway holds a 28.8% stake in Houston-based Occidental Petroleum, according to FactSet.

In August 2022, the Federal Energy Regulatory Commission granted Berkshire Hathaway approval to purchase up to 50% of available OXY stock. However, Warren Buffett told shareholders in early 2023 he has no intention of taking over the company.

In December 2023, Warren Buffett also spent $588.7 million on more than 10 million shares of OXY stock, with a price range of 55.58 to a fraction more than 57, in the days following the energy company’s announcement it was acquiring CrownRock.

Occidental stock has a 14 Composite Rating out of 99. The Warren Buffett stock also has a 24 Relative Strength Rating and a 10 EPS Rating.

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