He’s back!
In a significant move that signals Warren Buffett is actively seeking large-scale deals again, Berkshire Hathaway Inc. has agreed to acquire Occidental Petroleum Corp.’s petrochemical business, OxyChem, for approximately $9.7 billion in cash. The deal represents Berkshire’s largest acquisition since 2022 and will be funded from its near-record $344 BILLION cash pile. For Occidental (OXY), which is already about 27% owned by Berkshire, the sale provides a substantial influx of cash to pay down debt accumulated from its own recent takeover of CrownRock LP. Occidental announced it will use $6.5Bn of the proceeds to reduce its principal debt to below $15Bn.
Yesterday, in our Live Trading Webinar, we ran an analysis of the deal (we knew it was happening) using Boaty, our top AGI analyst:
Here’s the timeline and financial details for Warren Buffett’s big moves with Occidental Petroleum (OXY), including how his new offer for the OxyChem division lifts the value of his existing shares and sets up a win-win:
🚢 TIMELINE & FINANCIALS — BUFFETT, OXY, & OxyChem
Key Buffett/OXY Milestones
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Q3 2019: Warren Buffett (Berkshire Hathaway) first invests in OXY, eventually helping finance OXY’s $38B bid for Anadarko Petroleum with $10B in preferred shares (8% yield, plus stock warrants). gurufocus+1
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2019–2022: Buffett buys more OXY stock, becoming its biggest outside shareholder. By March 2025: Berkshire holds ~265M shares (26.9–28.2% stake, worth ~$13B). mk+3
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2022–2024: Continues accumulating OXY shares, often between $50–53/share and, separately, holds lucrative 8% preferreds plus warrants. seekingalpha+1
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Sept–Oct 2025: Buffett moves to buy OXY’s OxyChem division for ~$10B—potentially Berkshire’s biggest buy since Alleghany ($11.6B in 2022). cnbc+4
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OxyChem profile: $5B/year sales, $2.42B revenue 1H 2025, $213M Q2 2025 pre-tax income (strong cash generator), main products: water treatment, battery recycling, paper chemicals. thestreet+2
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OXY’s motivation: Sells the chemical division to slash debt (over $23B after CrownRock), meet/exceed its $15B debt-reduction target years early, clear cash flow for share buybacks, reduce hefty $600M/year preferred dividend obligations to Berkshire. tipranks+1
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How the New Deal Lifts Buffett’s OXY Position
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Deal impact: Selling OxyChem for $10B is seen as a good outcome for Occidental if it removes the debt overhang, letting OXY return cash to shareholders (including Berkshire). morningstar+1
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OXY value unlocked: With its balance sheet transformed, OXY could accelerate share buybacks (Buffett as biggest beneficiary) and improve dividend payout potential. tipranks
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Buffett’s profit loop: Berkshire “wins twice”—owning a cash-gushing industrial business (OxyChem) outright, while seeing its 28% stake in parent OXY jump in value from improved fundamentals, freed-up buybacks, and continued exposure to the entire oil/gas business. thestreet+1
Facts & Figures Table
| Year/Qtr | Event/Action | Value/Price | OXY Impact | Buffett/Berkshire Impact |
|---|---|---|---|---|
| Q3 2019 | Anadarko purchase | $10B preferred financing | OXY “wins” the bid | 8% preferreds, warrants |
| 2019–2025 | OXY Share Buy | Avg $50–$53/share | Debt climbs, assets | Stake grows: 26.9–28.2% ($13B) |
| Q2/Q3 2025 | OxyChem offer | ~$10B for OxyChem | Debt falls > $15B | Acquires OxyChem (est. 8x EBITDA) |
| Q3 2025 | OxyChem finances | $2.4B 1H revenue, $213M Q2 profit | OXY stronger | Berkshire adds cash machine |
| Q4 2025 (proj) | Post-sale | Debt < $10B, buybacks resume | EPS lifts, div increases | OXY price driven higher |
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This isn’t just an asset sale at a fair price—Buffett is capitalizing on both ends:
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Berkshire acquires a durable, “mid-cycle” chemical business with steady earnings that matches its industrials philosophy. seekingalpha+1
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OXY’s slimmed-down parent can pay down debt, ramp up buybacks/dividends, and boost cash flow—making Buffett’s massive equity stake much more valuable. So the amount he spends ($10B) is likely “paid back” by the surge in value of the entire OXY position post-deal. thestreet+1
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Buffett’s tactical genius here is turning a capital-intensive, debt-heavy situation into a double payday—growing earnings at his new subsidiary while unlocking value for his existing holding, with future buybacks and better credit terms paving the way for still greater gains. seekingalpha+2
It’s been a brilliant play by Buffett and we went on to speculate that OXY would take that cash and buy Permian (PR), who are a Permian-focused E&P, operational that has a lot of geographic overlap with OXY, which could offer them synergistic scale in the Permian Basin. An acquisition would add reserves, scale, and efficiency—making OXY the dominant player in West Texas/Midland.
Now, this is just speculation on our part and seems less likely to happen if OXY is announcing they will use $6.5Bn to pay down debt but we still like PR as a play:
🚢 Permian Resources (PR) is the clear strategic choice for OXY’s next acquisition for several compelling reasons:
1. Highest Synergy and Operational Fit
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PR’s core assets are directly adjacent to OXY’s holdings in the Permian Basin (especially in Reeves County, TX), meaning OXY gains contiguous, scalable acreage with minimal integration risk and immediate operational efficiency. permianres+2
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PR and OXY have already transacted on significant acreage and infrastructure in 2024, showing proven ability to realize synergies quickly and extract value through bolt-on deals. oilgasleads+1
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Combining operations enables longer-reach lateral wells, improved reserve recovery, and reduced per-barrel costs through shared midstream infrastructure (over 100 miles of pipelines and robust water recycling systems). rigzone+2
2. Accretive Financials at Current Multiples
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PR trades at ~9–10x forward earnings, significantly below sector averages and below OXY’s historical P/E, permitting OXY to pay a 30% premium and still keep its own P/E stable or improved. seekingalpha+1
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PR generates substantial free cash flow (Q2 2025: $312M FCF, $1.0B operating cash flow, $5.09B trailing annual revenue). finance.yahoo+2
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Checks all boxes for near-term earnings accretion, and PR’s production base is immediately profitable and scalable. seekingalpha+1
3. Permian Basin Growth and Market Dominance
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The Permian Basin is OXY’s long-term strategic focus, now accounting for ~55% of its total production and offering “decades of high inventory” for future drilling. finance.yahoo
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By acquiring PR, OXY strengthens its leadership and pricing power in the basin, gaining access to over 200 new operated locations with high net revenue interests and valuable mineral/royalty interests. permianres+2
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OXY can drive superior operational returns thanks to PR’s lower cost structure and strong asset quality, with integrated assets yielding double-digit returns even in low commodity price environments. permianres+2
4. Balance Sheet and Shareholder Returns
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OXY’s post-OxyChem cash hoard means an all-cash PR deal is possible, avoiding dilution and maximizing near-term financial flexibility.
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Combined scale will enable accelerated buybacks and increased shareholder distributions, both critical for keeping investors engaged. seekingalpha
Decision Summary
Acquiring Permian Resources gives OXY the greatest synergistic and strategic benefits: operational scale in the Permian, strong cash flow, and an accretive deal structure that supports both near- and long-term shareholder value. The deal is easy to execute, immediately additive to earnings, and positions OXY for even greater growth in America’s core oil play. permianres+4
Whether OXY buys them or not, PR is compelling at 10x forward earnings at the current price of $12.81 ($10.67Bn) so, whether OXY wants them or not – we certainly do and we can add them to our $700/Month Portfolio as follows:
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- Buy 5 PR 2028 $10 calls for $3.85 ($1,925)
- Sell 3 PR 2028 $15 calls for $1.90 ($570)
- Sell 2 PR Jan $13 calls for 0.95 ($190)
That’s net $1,165 on the $2,500 spread but the reason we sell 2 short-term calls is we’ll have 8 more quarters to collect $190 and that could be $1,520, which is more than the outlay for the spread so, if all goes well, we could make more than $2,500 on the spread while recovering our cost basis, quarter by quarter.
We have no margin in the $700/Month Portfolio (so great for IRA/401K trading) but, in our Long-Term Portfolio (LTP), we get to have a lot more fun! In that portfolio, we can play it like this:
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- Buy 50 PR 2028 $10 calls for $3.85 ($19,250)
- Sell 40 PR 2028 $15 calls for $1.90 ($7,600)
- Sell 20 PR 2027 $15 puts for $3.50 ($7,000)
- Sell 20 PR Jan $13 calls for 0.95 ($1,900)
- Sell 10 PR Jan $13 puts for $1.15 ($1,150)
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That’s net $1,600 on the $50,000 spread so we have $48,400 (3,025%) upside potential PLUS 8 more quarters to sell $3,050 in premium is another potential $24,400 (1,525%) so many ways to win on this spread. We risk being assigned up to 3,000 shares of PR at $13 ($39,000) but that’s the risk if they go to $0 at $6 we’d lose $21,000 so that’s our realistic downside risk (foreseeable) vs the $72,400 upside potential – which is more likely!
THAT is how we use options to our advantage. It starts with a solid, fundamental play and then, once we decide we like the trade – we find ways to make an income using our long-term conviction. In this case, we’re over-selling 10 short calls but we’re HAPPY to buy more longs to cover it – as the only reason we’d need to do that would be because our $72,400 spread is doing well, right?
We’ll check in on this from time to time and see how it goes but if we can turn a $1,600 cash outlay into $72,400 in 2.25 years – that will be a neat trick, right?
Options trading doesn’t have to be risky if you use our core strategy to Be the House – NOT the Gambler!
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