The latest regulatory filings reveal that from May 16th to May 18th, Berkshire Hathaway purchased an additional 3.46 million shares of Occidental Petroleum at prices ranging from $58.11 to $58.66 per share, amounting to a total investment of approximately $201 million.
In fact, Berkshire Hathaway has been gradually increasing its holdings of Occidental Petroleum since early 2022. During a recent Berkshire Hathaway shareholders' meeting, Buffett stated, "We really like the resources, industry position, and technical capabilities of Occidental Petroleum in the Permian Basin. They have a lot of excellent oil wells and have done a lot of beneficial things. It's a completely different kind of oil business." Buffett's optimism about the resources in the Permian Basin stems from the company's acquisition of Anadarko Petroleum in 2019.
This led to intense controversy and criticism for Vicki Hollub, the CEO who spearheaded the acquisition, and at one point, she even faced the risk of being ousted by investors.
However, in the end, the rise in oil prices and the rebound of the company's stock price proved the success of this transaction. In the traditionally male-dominated oil industry, Vicki Hollub has stood out as the only female CEO. Buffett has spoken highly of this female entrepreneur on numerous occasions in public. He said, "We are familiar with Occidental Petroleum's management team, and they have done a lot of good things, built many new wells, and can generate profits." Their connection began with that 2019 deal, which allowed Buffett to make significant profits and showcased Vicki Hollub's abilities in the oil industry.
I. From Musical Dreams to the Oil Industry: The Female Elite Vicki Hollub
Vicki Hollub was born into an ordinary family in Alabama. Her mother worked at a restaurant and later became a shop assistant, while her father was a self-taught carpenter. In her teenage years, Vicki mastered the French horn, a challenging instrument to learn, and was already able to play in a band.
Immersed in music, she dreamed of one day performing for the Philadelphia Orchestra or the Boston Symphony Orchestra. However, a music professor brought her back to reality. The professor laid out a very objective plan for her, listing the things she needed to do to achieve her dream. Perhaps it was this plan that made Vicki realize herself that achieving her musical dream was not very realistic. Afterward, she gave up her music dream and decided to try something different.
In the end, Vicki chose to study mineral engineering at the University of Alabama. Due to the requirement of going underground, the mineral engineering industry was not female-friendly. Vicki openly admitted that she was greatly shocked when she first entered a coal mine. The confined, cold, and damp underground environment made it difficult for her to accept. Fortunately, she had an opportunity to visit an active drilling rig. There, she witnessed them drilling a deep well, and that moment ignited the excitement within Vicki.
Perhaps Vicki was destined for this industry. That experience made her fascinated with the oil industry. In 1981, after successfully graduating, Vicki was recruited by a petroleum company in Mississippi. A year later, that company was acquired by Occidental Petroleum. Vicki began her career at Occidental Petroleum. During her years at the company, she held various positions and had a presence in Russia, Venezuela, and Ecuador, among other places. In those locations, she was often the only woman on-site. Vicki gradually transitioned from a technical role to a management role. Due to her exceptional abilities and approachability, she gained recognition from those around her.
In 2016, at the age of 56, Vicki became the first female CEO of Occidental Petroleum, as well as the first female CEO in the oil industry.
II. Aggressively Competing for Occidental Petroleum, Bonding with Buffett
The Permian Basin, located in the western part of Texas and the southeastern part of New Mexico, is the largest oil-producing region in the United States. In April 2019, it produced 4.1 million barrels per day, surpassing Saudi Arabia's vast Ghawar oil field, making it the largest oil-producing region in the world at that time. Every major player in the oil industry coveted the abundant resources in this area.
Oxy's pursuit of Anadarko - two years in the making
When it comes to this acquisition, many people only remember the fierce bidding war between Vicki Hollub and $Chevron(CVX)$ . But from the very beginning, this deal was fraught with difficulties.
In July 2017, Vicki first contacted Anadarko's CEO, Al Walker, but the outcome of that discussion was not favorable. Although Walker, a former banker, was interested in selling Anadarko, he didn't want to sell it to just anyone. Vicki chose to respond forcefully and directly made a formal offer to Anadarko, proposing to acquire the company through an all-stock transaction at $61 per share.
At that time, Anadarko's stock price was only $49.88, and Vicki's offer represented a premium of 23%. Walker could only inform the board of directors that this deal would dilute Occidental Petroleum's stock price. Clearly, they hoped that Occidental Petroleum would pay more in cash. Vicki after obtaining approval from Occidental Petroleum's board of directors, increased the offer.
Vicki continued to raise the stakes, increasing the bid to $76 per share. However, just then, an unexpected turn of events occurred. In February 2019, Chevron entered the scene. Anadarko also caught their attention, and Chevron's size was five times that of Occidental Petroleum. Although Chevron's bid was lower than Occidental Petroleum's bid, they offered 25% in cash, with the rest in stock.
In the end, Vicki and her team realized that the crux of the matter was cash. They needed to quickly find sufficient cash in order to successfully acquire Anadarko. The rest of the story is well-known. Berkshire Hathaway had a bounty of cash and a keen interest in energy investments. Having Buffett's endorsement would make the deal much smoother.
On April 28, 2019, Buffett personally welcomed the female leader of Occidental Petroleum. The negotiation lasted for about an hour, which was incredible to many people to make such a significant decision in such a short time. But that was Buffett.
Vicki referred to him as a genius and openly stated, "I doubt anyone can walk in and talk to him about anything he doesn't already know." In the end, Vicki secured a commitment of $10 billion in cash from Buffett. As compensation, Buffett received $10 billion worth of preferred shares of Occidental Petroleum with an 8% dividend yield, and he also obtained warrants to purchase 84 million shares of common stock at a price of $59.62 per share.
Overnight, Buffett owned a 10% stake in Occidental Petroleum. Forbes labeled the interest rate Buffett demanded as "close to usurious," which would later lay the groundwork for conflicts between Vicki and the shareholders.
III. Facing Carl Icahn's Challenge
In May 2019, Occidental Petroleum's shareholder Carl Icahn filed a lawsuit. Confronting Vicki's acquisition of Anadarko, Carl Icahn publicly stated that the transaction lacked shareholder voting.
Carl Icahn wants to fire Occidental's entire board of directors | CNN Business
The challenges faced by Vicki did not disappear simply because the acquisition of Anadarko went smoothly. Carl Icahn criticized Occidental Petroleum for taking on too much debt due to the transaction, believing that Vicki paid an excessive price, making the company too vulnerable to the impact of oil price declines. He was particularly angered by the generous terms Vicki provided to Buffett, believing that it was overly advantageous to Berkshire Hathaway, and demanded Vicki's resignation.
Faced with various accusations, Occidental Petroleum emphasized that through the acquisition of its competitor, the company obtained a stronger foothold in the Permian Basin oil fields. If oil prices were to rise, they would reap significant benefits.
Unfortunately, since 2019, international oil prices have been declining. In just one year, the company's stock price fell by 28.25% in 2019. During that summer and autumn of 2019, Vicki was busy dealing with various pressures. By 2020, Occidental Petroleum's stock price had further declined by 56.63%. Due to the severe drop in oil prices that year, some Permian operators who couldn't afford the costs even began shutting down wells.
In hindsight, 2020 proved to be the most challenging year for the oil industry. By the end of 2020, crude oil prices rebounded, and Occidental Petroleum's stock price soared, starting an upward trend in December 2020. Furthermore, due to the Russia-Ukraine conflict, oil prices continued to surge.
As for the final outcome of the conflict between Vicki and Carl, it concluded with Carl liquidating all of his Occidental Petroleum stocks in the first quarter of 2022. That marked a high point for Occidental Petroleum, and Carl can be considered as having achieved his goals and exiting the scene, thus bringing an end to the protracted war with Vicki Hollub.
"If you've never failed, you've never known how to act"
In 2019, the year when she successfully acquired Anadarko, Vicki made it to the Forbes list of the 100 most influential women globally. It was not her first time receiving such an honor, as she was previously selected as one of Fortune magazine's most influential women in 2018.
Vicki attributes her success to her knowledge reservoir and practical experience, which drives her continuous self-improvement. In Buffett's eyes, Vicki is also an exceptionally qualified CEO, and he has always spoken highly of her. Vicki excels at seizing opportunities, and one thing she has done at Occidental Petroleum is never refusing anything. Whenever there is an opportunity to do different work, move to different places, or undertake different projects, she never declines.
As the only female CEO in the oil industry, Vicki has been adorned with many accolades, but she remains humble. She admits that the attention she receives as the first female CEO of a major oil company has been "exaggerated." She acknowledges the presence of other outstanding female leaders who have influenced the industry for a long time.
To this day, Vicki continues to embrace her passion for work, instilled in her during her graduation from the University of Alabama, which instilled in her a passion for victory. Now, she seeks that same passion for success in her employees. "I carried it throughout my career, and it still serves me today."
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