Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
As of September 2024, declining oil prices have led to relatively low valuations for energy stocks. For investors, this pullback presents an opportunity to buy the dip, especially in Occidental Petroleum (stock symbol: OXY), a key holding in Warren Buffett’s Berkshire Hathaway portfolio.
Berkshire Hathaway has increased its stake in Occidental Petroleum in recent years and now owns nearly one-third of its outstanding shares. With international oil prices dropping, energy stocks, including Occidental, have declined, with its stock price plummeting to $50.99 at one point, now rebounding to $51.75. This is a 55% decline from its all-time high and below Buffett’s initial purchase price of approximately $54 per share on average.
Information filed with the SEC reveals that since March 2022, 90% of Occidental shares purchased had a transaction price around $56 per share. In June 2024, Berkshire bought 7.3 million shares over nine days at about $60 per share. Considering earlier lower-cost purchases, the average holding cost is around $54.
Berkshire also holds $10 billion in Occidental preferred stock and warrants to purchase nearly 84 million shares of common stock at $59.62 per share.
Despite current challenges, Occidental Petroleum is seen as a “small giant” in the energy sector, with extensive chemical and transport pipeline operations. It’s the largest oil producer in the Permian Basin in Texas, and it engages in acquiring, exploring, and developing oil and gas resources across the U.S., Middle East, Africa, and Latin America. Its operations are split into three segments: Oil and Gas, Chemical, and Midstream and Marketing.
The company offers an annualized dividend of $0.88 per share, yielding a 1.69% dividend rate.
In Q2 2024, Occidental achieved its highest quarterly production in four years, exceeding the midpoint of its production guidance, and recorded $1.3 billion in free cash flow. New onshore well production surpassed expectations, with a 10% decrease in unconventional well costs compared to the same period last year due to improved hydraulic fracturing utilization and operational efficiency.
Occidental Petroleum recently acquired high-margin assets from CrownRock and aims to lead the carbon capture and storage (CCS) market, a sector potentially worth $3 trillion. The U.S. Department of Energy has awarded the company $650 million to develop Direct Air Capture (DAC) centers.
Analysts predict that adjusted earnings for OXY will rise from $3.61 per share in 2024 to $3.95 in 2025, resulting in a price-to-earnings ratio of 13, indicating a reasonably valued stock. Of the 21 analysts covering OXY, six recommend a “strong buy,” one suggests a “moderate buy,” 13 recommend “hold,” and one advises a “strong sell.” The average 12-month price target for OXY is $70.59, implying an upside potential of more than 36%.
For investors considering Occidental Petroleum, the current climate offers a potentially lucrative entry point, bolstered by Berkshire Hathaway’s significant investment and positive future outlook. As the company continues to strengthen its position in traditional and emerging energy markets, investors may find substantial value in the long term.
