Author Topic: OXY - Occidental Petroleum  (Read 2254 times)

woodstove

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OXY - Occidental Petroleum
« on: November 15, 2019, 05:40:45 AM »
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.


scorpioncapital

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Re: OXY - Occidental Petroleum
« Reply #1 on: November 15, 2019, 08:57:52 AM »
Why is such a quality management so reckless with debt ? That seems to be the main concern.

kab60

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Re: OXY - Occidental Petroleum
« Reply #2 on: November 15, 2019, 10:02:59 AM »
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.

woodstove

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Re: OXY - Occidental Petroleum
« Reply #3 on: November 15, 2019, 10:02:46 PM »
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

kab60

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Re: OXY - Occidental Petroleum
« Reply #4 on: November 16, 2019, 12:14:04 AM »
Icahns letter is on his website.

ValueMaven

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Re: OXY - Occidental Petroleum
« Reply #5 on: November 16, 2019, 03:03:27 PM »
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

Haasje

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Re: OXY - Occidental Petroleum
« Reply #6 on: November 16, 2019, 04:05:41 PM »
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.

ValueMaven

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Re: OXY - Occidental Petroleum
« Reply #7 on: November 17, 2019, 04:50:59 AM »
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'


https://www.youtube.com/watch?v=N2YZ_xd-Nj0

DooDiligence

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Re: OXY - Occidental Petroleum
« Reply #8 on: November 17, 2019, 10:13:11 AM »
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'


https://www.youtube.com/watch?v=N2YZ_xd-Nj0

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scorpioncapital

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Re: OXY - Occidental Petroleum
« Reply #9 on: November 17, 2019, 03:48:39 PM »
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.