To The Moon

In September 2024, oil prices are falling, leading to lower valuations in the energy sector. This pullback could be a buying opportunity, especially for $Occidental(OXY)$ , a major holding in Warren Buffett's $Berkshire Hathaway(BRK.A)$ $Berkshire Hathaway(BRK.B)$ .

Berkshire has steadily increased its stake in Occidental, now owning nearly one-third of the company's shares. As energy stocks decline with international oil prices, Occidental's stock plunged to $50.99 at one point, currently at $51.75, down 55% from its all-time high. This price is below Buffett's average entry point of about $54 per share.

Stock Decline

According to SEC filings, about 90% of the shares Berkshire acquired since March 2022 were purchased at nearly $56. In June 2024, Berkshire bought 7.3 million shares at around $60 over nine consecutive trading days. Overall, their average cost sits at approximately $54 due to earlier lower-cost acquisitions.

It's worth noting that Berkshire also holds $10 billion in Occidental's preferred stock and has warrants for nearly 84 million common shares, bought for $5 billion (about $59.62 per share).

Despite the recent dip, Occidental is considered a "small giant" in the energy sector. The company has a vast chemicals and pipeline business and is the largest oil producer in the Permian Basin. Occidental operates in the U.S., Middle East, Africa, and Latin America, with three main segments: oil and gas, chemicals, and midstream & marketing.

Occidental's annualized dividend stands at $0.88, with a yield of 1.69%.

The Perform in Q2 2024

In Q2 2024, Occidental achieved its highest quarterly production in four years, exceeding its guidance. The company reported $1.3 billion in free cash flow, with new onshore wells outperforming expectations.

Capital efficiency continues to improve, with unconventional well costs down 10% year-over-year. The energy giant credits these savings to better hydraulic fracturing efficiency and operational improvements.

Outlook for OXY Stock

Occidental completed its acquisition of CrownRock, a high-margin asset, and aims to lead the carbon capture and storage (CCS) market—projected to be worth up to $3 trillion. Recently, it secured $650 million from the U.S. Department of Energy for developing direct air capture (DAC) centers.

Analysts predict Occidental's adjusted earnings per share will grow from $3.61 in 2024 to $3.95 in 2025, yielding a forward P/E ratio of 13, which is quite reasonable.

Among 21 analysts covering OXY, six rate it as a "strong buy," one as "moderate buy," 13 as "hold," and one as "strong sell." The average 12-month price target for OXY is $70.59, suggesting over 36% upside potential.