woodstove Posted November 15, 2019 Share Posted November 15, 2019 OXY - Occidental Petroleum does not already seem to have a topic of its own. So I'll start one. There is a significant investment by Berkshire in OXY, $10B in preferred stock. As of yesterday's SEC filing, we see that Berkshire has 7m+ shares of OXY. Not huge, but interesting. Here is my take on the situation, and I would appreciate comments -- very many folks here have more detailed understanding than myself. OXY seems to me to be well managed, a low cost operator, profitable. Perhaps overstretched at present for the Anadarko acquisition, but should work out in time. The CEO (Hollub) inpressed me on the last conference call -- a real oilman, I told my wife. A few days after, it was pleasant to have that confirmed by an industry award recognizing her as Roughneck of the Year. I like the way she treated her team, recognition where deserved, not hiding problems but addressing, and relying on expertise of colleagues in, eg, financial and governmental matters. Company says economics work at $40-oil, and with $55-oil presently, should be ok I imagine. As I recollect from earlier look, board seems to have good representation of industry knowledge. So, why Berkshire buy some common shares in addition to preferred shares investment? The company is under threat of dismantlement. Protect prior investment. Also, stabilizing the situation is an opportunity at an attractive price. I continue to be impressed by Berkshire thinking and acting 10-year horizon. Disclosure: I'm already in OXY, 2nd largest US holding after BRK. Comments? Thanks, kr. Link to comment Share on other sites More sharing options...
scorpioncapital Posted November 15, 2019 Share Posted November 15, 2019 Why is such a quality management so reckless with debt ? That seems to be the main concern. Link to comment Share on other sites More sharing options...
kab60 Posted November 15, 2019 Share Posted November 15, 2019 Perhaps they did the Anadarko acquisition to remove a target from their own back? No idea but anyone considering an investment should read Icahns scathing letter. Link to comment Share on other sites More sharing options...
woodstove Posted November 16, 2019 Author Share Posted November 16, 2019 Those are interesting thoughts -- thank you both! Is Icahn's letter available online? Perhaps an SEC filing? I can google it, but if you know a more direct website, etc ... About debt -- I was quite concerned prior to the Q3/2019 conference call, and had only toe-in-water stance re OXY until then. Debt load was the main concern, ie sustainability of the enterprise. However, I now believe management has control of debt deleveraging tasks. That is just my opinion, of course. I tend to trust management statements in the first instance, and look for the little things to decide if they are reliable, competent, forthright without revealing competitive info, etc. I guess that is quality management -- I don't know how to judge quality in the abstract. Maybe Philip Fisher's list of criteria? Whatever. I am trusting the OXY people close to the task, ie management, to do a competent job. They have a plan, and if they can work it, then great! In which case, was the debt reckless? Depends upon the nature of the un-hedgable risks, at the time they were undertaken. Perhaps what info Icahn is seeking with his document access lawsuit, though I rather imagine he is nowadays more feeling emotional. The best thing as a rational investor is likely to work on strengthening the enterprise and accruing the benefits of that as a shareholder. There may be some nice little synergies via the merger, but that too is in the eye of beholder. Part of the thesis is the potential for pleasant surprises. Not for me to elaborate -- let time unfold. I have no special insight. On the question of remove target from back, well I just do not know. Others here have much better perception. Thanks again for feedback, kr Link to comment Share on other sites More sharing options...
kab60 Posted November 16, 2019 Share Posted November 16, 2019 Icahns letter is on his website. Link to comment Share on other sites More sharing options...
ValueMaven Posted November 16, 2019 Share Posted November 16, 2019 Buffett's track record with energy is remarkable. Even still this is down a lot. Interesting why he went with the preferrds plus warrants ... this recent equity purchase is extremely small. Wouldn't read too much into it. OXY is now a really leveraged play on oil Link to comment Share on other sites More sharing options...
Haasje Posted November 17, 2019 Share Posted November 17, 2019 I think OXY is working on some divestments. Getting leverage down is a priority. The way I understand it there are significantly greater advantages to having scale and large connected properties in shale as compared to traditional oil drilling. I don't own it but have held Anadarko during the deal. Management seems strong regarding operations. In deal matters, some of the moves seemed a bit brash to me. Maybe the market is completely missing how extremely accretive the deal will turn out but more likely it is another overpay to empire build. However, market did price that in already. Link to comment Share on other sites More sharing options...
ValueMaven Posted November 17, 2019 Share Posted November 17, 2019 Munger talking positive on OXY when the stock was $20 higher ... 'OXY is in my part of the world...i like it - I think it has potentail' Link to comment Share on other sites More sharing options...
DooDiligence Posted November 17, 2019 Share Posted November 17, 2019 Munger talking positive on OXY when the stock was $20 higher ... 'OXY is in my part of the world...i like it - I think it has potentail' We wait for people to come to us. Love it. Thanks Link to comment Share on other sites More sharing options...
scorpioncapital Posted November 17, 2019 Share Posted November 17, 2019 Anybody know what is this Anglo- Swiss they referenced about Siberian oil and Solomon bringing it to them ? I couldn't find any reference on the internet to Anglo Swiss. Link to comment Share on other sites More sharing options...
ValueMaven Posted November 18, 2019 Share Posted November 18, 2019 agreed - was the first time i've heard of that!! basically Salomon got burnt Link to comment Share on other sites More sharing options...
RadMan24 Posted November 18, 2019 Share Posted November 18, 2019 Good interview for Buffett's perspectives - feel free to compare that to Ichan's Link to comment Share on other sites More sharing options...
SI Posted November 18, 2019 Share Posted November 18, 2019 The equity web got was likely the pref div which could be script at oxy’s discretion. Link to comment Share on other sites More sharing options...
gfp Posted November 18, 2019 Share Posted November 18, 2019 Its a very good point, but I'm not sure that explains ~7.5 million shares of OXY owned by BRK. The OXY deal closed on August 8th and the OXY shares listed are owned as of September 30th. If it was something like $115 million, that could explain it - but it is almost double that amount and I'm not even sure there has been a dividend payment on the Prefs yet - cash or otherwise. I believe Berkshire's deal terms are in a filing somewhere, so maybe it is easy enough to check when the first dividend payment would have arrived. --> https://www.sec.gov/Archives/edgar/data/797468/000095015719000529/ex10-1.htm dividend payment dates: "January 15, April 15, July 15 and October 15" The equity web got was likely the pref div which could be script at oxy’s discretion. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted February 28, 2020 Share Posted February 28, 2020 OXY is in a bit of a pickle. https://www.bloomberg.com/opinion/articles/2020-02-28/occidental-earnings-buffett-eats-profits-ahead-of-coronavirus?sref=kOk687Pk "Occidental Goes Skinny-Dipping in a Tsunami" Link to comment Share on other sites More sharing options...
scorpioncapital Posted February 28, 2020 Share Posted February 28, 2020 I am of the old fashioned view that when Berkshire lends credit at a relatively high rate , it does so against companies it neither thinks is going belly up nor ones he thinks are going to be failures. Sure it will cut into returns but I think uncle Warren does look out for the companies he is involved with , debt or equity , at least I hope this is a correct Interpretation Link to comment Share on other sites More sharing options...
Spekulatius Posted February 28, 2020 Share Posted February 28, 2020 You know all hope is lost when an oil company emphasizes their “carbon reduction leadership” in their sucky earnings presentation. Link to comment Share on other sites More sharing options...
kab60 Posted February 29, 2020 Share Posted February 29, 2020 Anyone attracted to this space might wanna check out Equinor. You get a free option on offshore wind (check out Ørsted to get an Idea as for how that might evolve). Large divy, nice FCF yield after building out their large oilfield Johan Sverdrup. And none of these crappy decline rates like onshore. Also, all the ESG guys have piled into Ørsted, Vestas, Enphase, SMA etc - Equinor is still tainted, obviously, by their large Oil and Gas footprint. Link to comment Share on other sites More sharing options...
Spekulatius Posted February 29, 2020 Share Posted February 29, 2020 Anyone attracted to this space might wanna check out Equinor. You get a free option on offshore wind (check out Ørsted to get an Idea as for how that might evolve). Large divy, nice FCF yield after building out their large oilfield Johan Sverdrup. And none of these crappy decline rates like onshore. Also, all the ESG guys have piled into Ørsted, Vestas, Enphase, SMA etc - Equinor is still tainted, obviously, by their large Oil and Gas footprint. Vitaliy Katsenelson likes it too: https://contrarianedge.com/equinor-a-good-crisis-is-never-wasted/ Link to comment Share on other sites More sharing options...
kab60 Posted March 1, 2020 Share Posted March 1, 2020 Yep, but funny he glosses over offshore wind. Everyone is trailing Ørsted, but Equinor seems pretty committed. Equinor has a target of 4-6 GW in 2026, Ørsted 15 GW in 2030. Ørsted will probably raise that target sooner rather than later, but still, 4-6 GW is worth quiet a bit in a negative interest rate environment, and the market is growing hugely. Comes down to execution, but Sverdrup was 30 pct below cost estimates, GE is entering offshore wind and lowering prices on turbines, so pretty good dynamics. When offshore wind becomes sizeable and can fund projects internally it would make sense to spin it off. Check Ørsteds multiple. From AR: 2026, Equinor expects a production capacity from renewable projects of 4 to 6 GW, Equinor share, mainly based on the current project portfolio. Thisis around 10 times higher than today’s capacity, implying an annual average growth rate of more than 30%. Towards 2035, Equinor expects toincrease installed renewables capacity further to 12 to 16 GW, dependent on availability of attractive project opportunities. Equinor expects to achieveunlevered real project returns of 6 to 10% and can achieve significantly higher return on equity investments through portfolio optimisation and efficient useof project financing Link to comment Share on other sites More sharing options...
960v Posted March 9, 2020 Share Posted March 9, 2020 Things got interesting today! Link to comment Share on other sites More sharing options...
960v Posted March 9, 2020 Share Posted March 9, 2020 Speculation or Investment? Anyone looking at buying this after today? Dividend might go away for sometime, but 5-10 yr results may be worth the wait. It has been on my radar for awhile but with today's valuation I am considering it. BRKs stake could prove useful if additional funding is required to meet debt obligations and after watching the interviews both Buffett and Munger like the Permian basin and the company. Vicki Hollub appears solid and the Anadarko deal makes sense; although the leverage is notable. So it really boils down to if they can meet their debt obligations and if they will need additional capital, which BRK can provide (at a premium of course!). Time to pull out the calculator and financial statements. Link to comment Share on other sites More sharing options...
txvalue Posted March 9, 2020 Share Posted March 9, 2020 You know that somewhere a CVX exec is kicking around buying out OXY and Anadarko for less than OXY paid for Anadarko. Link to comment Share on other sites More sharing options...
960v Posted March 9, 2020 Share Posted March 9, 2020 I am sure they are :) Although is there support for a deal like that at this time? Would shareholders and the board approve? Interesting times. Link to comment Share on other sites More sharing options...
bizaro86 Posted March 9, 2020 Share Posted March 9, 2020 You know that somewhere a CVX exec is kicking around buying out OXY and Anadarko for less than OXY paid for Anadarko. Maybe they'll wait until the price for both is less than the break fee they received. Link to comment Share on other sites More sharing options...
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