Occidental Petroleum Stock Falls. It Lost a Potential Buyer.

Some takeover premium may be leaking out of Occidental stock.
Chevron
(CVX) was considered a potential buyer for Occidental, given that both companies are big players in the Permian basin. Chevron, however, said it has enough exposure to the region.

Chevron also made a run at Anadarko Petroleum in 2019 and was outbid by Occidental in a deal facilitated by
Berkshire Hathaway
(BRK.A), which provided $10 billion of expensive 8% preferred financing to Occidental.

The two biggest U.S. energy companies,
Exxon Mobil
(XOM) and Chevron, have each made roughly $60 billion deals for independent energy companies, making it unlikely they will seek to purchase Occidental. 

The No. 3 U.S.-based energy company is
ConocoPhillips
(COP), but its market value is less than half of Chevron at $150 billion, while Occidental is valued at $55 billion. Occidental would be a big deal for Conoco.

The major European energy companies,
Shell
(SHEL),
BP
(BP), and
TotalEnergies
(TTE), face considerable pressure from climate activists not to expand in the oil and gas sector, making them less likely to do a major U.S. deal. The European majors have been shedding U.S. assets in recent years and pressure from climate activists is much stronger in Europe than in the U.S.

It is possible Berkshire Hathaway, which owns 25% of Occidental Petroleum, could buy the entire company but CEO Warren Buffett said at Berkshire’s annual meeting in May that Berkshire doesn’t seek to control it.

That suggests Occidental may have to go it alone. But it has a strong asset base focused on the U.S. and a leading position in the incipient carbon capture business. Buffett is a big fan of Occidental CEO Vicki Hollub, as well, calling her an extraordinary manager at the annual meeting. 

Write to Andrew Bary at [email protected]