In recent years, Warren Buffett’s investment company, Berkshire Hathaway, has consistently increased its stake in Occidental Petroleum (NYSE: OXY), now owning over 28% of the company. Recently, Berkshire added another $35.7 million worth of Occidental stock, which now makes up 4.3% of its investment portfolio—its sixth-largest holding. Buffett’s strong preference for this oil giant is clear. But why does he favor Occidental over other energy-related companies in the U.S.?
A close look at Occidental Petroleum’s latest quarterly report reveals some key drivers behind Berkshire’s continued bullish stance. The company’s steady growth in production, robust cash flow, and investments in diversified business areas such as carbon capture appear to be the main reasons fueling Buffett’s interest.
In the most recent quarter, Occidental Petroleum achieved an average production of nearly 1.5 million barrels of oil equivalent per day (BOE/d), surpassing the mid-point of its guidance. This record-breaking U.S. production was driven by significant growth in the Permian Basin and Rockies regions. Despite a 7% drop in average oil prices during the quarter, Occidental’s oil and gas segment managed to generate a pretax profit of $1.2 billion, showing remarkable resilience. The company’s strong U.S. oil and gas asset base—particularly in the Permian Basin, known for its abundant shale oil reserves—is widely seen as a reliable cash flow generator for the future.
Apart from its oil and gas operations, Occidental benefits from its chemicals business (OxyChem) and its midstream and marketing segment. In the latest quarter, OxyChem contributed $270 million in pretax profit, exceeding expectations. Thanks to this diversified business model and improved operational efficiency, Occidental reported $3.1 billion in total cash flow for the quarter, with $1.4 billion in free cash flow (FCF). These financial resources were directed toward shareholder dividends and debt repayment. Occidental has made substantial progress in deleveraging, achieving its $4.5 billion near-term debt reduction goal seven months ahead of schedule.
Debt reduction has been a key focus for Occidental since its $12 billion acquisition of CrownRock, and the company is now entering the next phase of its deleveraging strategy. Following the achievement of its immediate debt goal, the company has initiated efforts to divest between $4.5 billion and $6 billion in assets. Occidental recently agreed to sell $1.2 billion worth of assets to address 2025 debt maturities and beyond. At the same time, Occidental is rewarding shareholders by returning excess free cash flow: for instance, it recently announced a 9% increase in its dividend, signaling its commitment to balancing debt reduction with investor returns.
In addition to its strong oil and gas production and chemicals business, Occidental has been heavily investing in carbon capture and storage (CCS) technology to diversify its portfolio. Its Stratos Carbon Capture and Storage Hub is set to begin operations this year, with half of its 250,000-tonne capacity expected to be online by the end of 2025 and full capacity by mid-2026. The project will help reduce carbon emissions while generating stable cash flow from carbon credit sales and net-zero oil production.
Another key project is the OxyChem Battleground modernization and expansion initiative, which is expected to gradually ramp up by mid-2026. This and other OxyChem enhancements are forecasted to add approximately $325 million in annual earnings starting in 2026.
Berkshire Hathaway’s continued focus on Occidental Petroleum reflects Buffett’s confidence in the company’s steady oil and gas production, undervalued free cash flow, and its early investment in carbon capture technologies—an area seen as critical for the future. Despite the oil market’s volatility and the rapid rise of renewable energy, Buffett remains convinced that oil will continue to play a key role in the global energy mix for decades. Companies like Occidental, with vast oil reserves and advanced CCS capabilities, are well-positioned to benefit from both fossil fuel demand and the transition to cleaner energy.
For long-term investors, Occidental’s recent stock price pullback presents a strategic buying opportunity. Buffett’s latest investment signals his belief that, with its diversified business model, focus on debt reduction, and commitment to innovation, Occidental is building a foundation for sustained cash flow and long-term shareholder value.
