Do you know what Warren Buffet’s heaviest position in the energy sector is? Occidental Petroleum Co. (NYSE: OXY).
Despite a 21.4% drop in oil prices off its January 16, 2025, peak as measured by the United States Oil Fund, LP (NYSEARCA: USO) or the 23.7% drop in its stock year-to-date (YTD) stock price as of April 11, 2025, Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) has not sold a single share of OXY this year.
If you’ve been debating whether to step into OXY stock at a cheaper average price than Warren Buffet, here are the four bull and three bear investment cases to help you make a more informed decision.
4 Reasons You Should Considering Buying OXY Stock
1. Stronger Financials and Buffett’s Endorsement Boost Investor Confidence
Occidental generated $4.3 billion in free cash flow in 2024. CrownRock added another $1 billion.
[content-module:TradingView|NYSE: OXY]With $2.1 billion in cash and plans for further divestitures in 2025, Occidental is actively deleveraging. Though its debt remains high, Buffett’s 28.2% stake and endorsement enhance investor confidence.
Berkshire’s 28.2% ownership and Warren Buffett's endorsement of CEO Vicki Hollub give it a lot of credibility, which helps to reduce perceived risk.
2. Optimized Midstream Operations Are Driving Profit Margins
Occidental revised its domestic crude transport contracts, boosting midstream margins.
In its Q4 2024 earnings call, Hollub notes that the company's "midstream team also successfully revised key domestic crude transportation contracts to further enhance future cash flows.”
These changes reflect a broader efficiency strategy that includes $6.8 billion in capital spending—on the low end of guidance—to drive long-term shareholder value.
3. CrownRock Deal Strengthens Dominance in the Permian Basin
[content-module:Forecast|NYSE: OXY]The $12.4 billion acquisition of CrownRock expanded Occidental's footprint in the Permian Basin, further enhancing its portfolio with 94,000 net acres in the Midland Basin and over 170,000 barrels of oil equivalent per day. This includes around 1,700 undeveloped wells of which 1,250 have a sub-$60 per barrel breakeven cost and 750 locations with sub-$40 breakeven costs.
The Midland Basin accounts for 40% of Occidental’s Permian operations. Its operational synergies being located adjacent to its existing prolific wells helps to enhance its scale and dominance as the largest driller and oil producer in the Permian Basin.
4. A Bold Bet on Carbon Capture Tech and Net-Zero Future
Occidental is leading the decarbonization movement among oil drillers with its direct air capture (DAC) technology. This pulls air into its proprietary engineered contacter system that separates and compresses the carbon dioxide (CO2) into high-purity CO2 to sequester in geologic formations that are more than a mile underground or utilize later for new products.
Through its 1PointFive subsidiary, Occidental collects carbon dioxide removal (CDR) credits, which it then sells to companies like Microsoft Co. (NASDAQ: MSFT) and Airbus S.E. (OTCMKTS: EADSY) to generate hundreds of millions to billions in new revenues.
The United States Environmental Protection Agency (EPA) granted a Class VI permit to sequester CO2 from its $1 billion STRATOS DAC facility in Texas on April 7, 2025. Occidental plans to open 100 more DAC facilities by 2035 to diversify its revenue streams away from oil and pursue its commitment to reaching net-zero carbon emissions before 2050.
3 Risks That Could Weigh on OXY Stock
1. Elevated Debt Still a Red Flag
In 2024, Occidental took on an additional $9.1 billion in new debt with its acquisition of CrownRock, further ballooning its debt to $29 billion.
Buffett initially got involved with Occidental through a $10 billion preferred stock deal to help it acquire Anadarko Petroleum in 2019. He praised Hollub for her visionary leadership and fiscal discipline. She has been able to put a debt reduction plan in motion that involves asset sales and using cash flow to pay down $4.5 billion of debt by the end of 2024. Occidental's current debt-to-equity ratio is 0.95.
S&P Global Ratings maintains a BB+ rating with a stable outlook, which is below investment grade status.
Its balance sheet is "healthier" than at the beginning of 2024, but it wouldn’t really be considered a “fortress” balance sheet due to the heavy debt burden and the S&P Global Ratings BB+ rating, which is below investment grade status.
2. Net Margins Are Under Pressure
Occidental’s Q4 2024 net margin declined from up 13,94% to down 4.37% a year earlier, driven by a one-time environmental charge. Adjusted for this, margins actually improved to 11.65%, up from 9.9% in Q3 2023.
Nonetheless, reliance on adjustments underscores vulnerability in core profit performance.
3. Declining Oil Prices Remain a Macro Headwind
Falling oil prices are definitely going to impact revenue, cash flow and margins. There’s no getting around this. Additionally, the Trump administration wants energy prices to continue to fall as supply gets driven higher with its “Drill Baby, Drill” policies.
The U.S. Energy Information Administration (EIA) expects a general decline in oil prices for 2025, with an average of $68 per barrel in 2025 and $61 in 2026. But, depending on the well type, Occidental would still be above its $60 per barrel breakeven costs level.
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