Famed investor Warren Buffett’s portfolio has seen a new favorite emerge in recent years and that is Occidental Petroleum (OXY). Founded in 1920, Occidental Petroleum is a prominent American energy company with a diverse portfolio in oil, gas, and chemicals. The company is primarily engaged in hydrocarbon exploration and production, along with petrochemical manufacturing.

Buffett made his first investment in the company in 2019, purchasing 4.7 million shares at an average price of $47.28 per share. Since then, he has steadily increased his stake in the company to nearly 30%. 

Meanwhile, with more than $300 billion sitting in cash, some reports have emerged that Buffett may be looking to acquire Occidental Petroleum outright. Occidental CEO Vicki Hollub’s recent comments that if Buffett buys the company, “It would be a dream come true,” have added fuel to the fire.

Will Hollub’s “dream come true”? 

Buffett will be hosting Berkshire Hathaway’s (BRK.B) closely watched annual meeting on May 3, and investors will be closely watching for any key announcements. If Buffett declares that he is buying Occidental, it would be a significant win for any holders of OXY stock. 

Occidental’s Financials 

Currently valued at a market cap of $38 billion, OXY stock is down 18.3% on a YTD basis. Notably, the stock offers a dividend yield of 2.38%. With a payout ratio of just 30.4%, the scope for further growth remains.

Occidental’s results for the mots recent quarter were a mixed bag, with revenues missing estimates but earnings beating them. Net sales fell by 5.7% on a year-over-year basis to $6.8 billion. Earnings came in at $0.80 per share, up from $0.74 per share in the prior year and above the consensus estimate of $0.67 per share.

Worldwide production and sales both increased in 2024 as compared to 2023 by 2.3% and 2.6% to 4,995 mboe/d and 5,003 mboe/d, respectively. 

However, operating cash flow declined to $11.7 billion in 2024 from $12.3 billion in 2023. Overall, the company’s liquidity position remained comfortable though, as it closed the December quarter with a cash balance of $2.1 billion, which exceeded its short-term debt levels of $1.1 billion.

Strategic Initiatives

To address the issue of static production, Occidental Petroleum is turning its attention to roughly 2 billion barrels of oil that remain locked deep underground within its footprint in the resource-rich Permian Basin. Rather than traditional methods like water flooding or steam injection, the company is opting to utilize carbon dioxide as a more efficient solvent to unlock these reserves.

Occidental’s confidence in carbon dioxide-based recovery is underscored by its creation of a dedicated carbon capture arm, 1PointFive, and its 2023 acquisition of Carbon Engineering, a Canadian firm whose core technology employs potassium hydroxide to extract carbon dioxide directly from the atmosphere through chemical absorption. One of the company’s key initiatives, the STRATOS project, is slated to commence operations by mid-2025, with capacity ramping up through the end of that year and into 2026. Once operational, the project is expected to capture around 500,000 tonnes of carbon dioxide annually.

In parallel, the company’s acquisition of CrowRock, a Midland-based oil and gas producer, has expanded Occidental’s footprint in the Permian Basin and is anticipated to support both higher output and stronger cash flow going forward. The geology of the Permian gives Occidental a strategic edge, as more oil can be extracted per acre than in most other regions, enabling sustained production over the long term.

Additionally, Occidental’s business model excludes refining operations and benefits from a low break-even price point. The company reports most of its U.S. wells have break-even thresholds below $50 per barrel, with the overall corporate average sitting under $60, positioning Occidental to enjoy widening profit margins amid stable or rising oil prices.

Analyst Opinions on OXY Stock 

Analysts have deemed the stock a “Hold” with a mean target price of $48.25, which denotes upside potential of about 20% from current levels. Out of 24 analysts covering the stock, three have a “Strong Buy” rating, two have a “Moderate Buy” rating, 17 have a “Hold” rating and two have a “Strong Sell” rating.