In 2025, Occidental Petroleum (OXY) continues to be a focus in the investment world, largely due to the strong support from the “Oracle of Omaha,” Warren Buffett, and his conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). However, behind Buffett’s endorsement, the company’s own characteristics and risks are equally worthy of investors’ attention.
Buffett’s Long-Term Confidence and Investment Logic
Since first acquiring shares of Occidental Petroleum in 2019, Buffett has repeatedly expressed his confidence in the company’s management and development strategy. Berkshire Hathaway has not only accumulated more than a quarter of Occidental’s outstanding shares but also holds warrants to further increase its stake. In 2024, Buffett explicitly stated that Berkshire plans to hold Occidental shares “indefinitely,” a declaration that has undoubtedly bolstered market confidence.
The core of Buffett’s investment in Occidental lies in its growth potential. In 2019, the company made waves in the industry by outbidding Chevron to acquire Anadarko Petroleum, demonstrating its ambition to compete with energy giants rather than remain a second-tier player. This acquisition, financially backed by Berkshire, further highlights Buffett’s approval of Occidental’s strategic direction.
Risks and Challenges That Cannot Be Ignored
However, Occidental’s growth path is not without risks. First, the acquisition of Anadarko significantly strained its balance sheet. When oil prices crashed during the pandemic in 2020, the company was forced to cut its dividend, exposing its vulnerabilities in financial stability. Although Occidental has worked to optimize its debt structure in recent years, its dividend yield remains at just 2.2%, far below ExxonMobil’s 3.7% and Chevron’s 4.4%. This indicates that the appeal of investing in Occidental lies primarily in its capital appreciation potential rather than stable dividend income.
Second, the company’s relatively small size—with a market capitalization of around $40 billion—pales in comparison to giants like Chevron ($300 billion) and ExxonMobil ($450 billion). In a highly uncertain energy market, Occidental’s stock price is more volatile. Over the past year, its shares have fallen more than 20%, while Chevron’s declined by only 5%. Geopolitical events and energy price fluctuations further amplify its operational risks.
Uncertainty After Buffett’s Retirement
Another potential risk stems from Buffett’s planned step down as CEO of Berkshire Hathaway at the end of 2025. Although he will remain chairman of the board, investment decision-making authority will be transferred to his long-time lieutenants. Whether these successors share Buffett’s enthusiasm for Occidental remains to be seen. The market will closely monitor any changes in Berkshire’s holdings, as any reduction in its stake could exert downward pressure on Occidental’s stock price.
Overall, Occidental Petroleum is a typical high-risk, high-potential-return stock. While Buffett’s backing provides significant credibility, the company’s financial structure, competitive pressures, and macroeconomic uncertainties pose substantial risks. The stock is more suitable for growth-oriented investors who can tolerate short-term volatility, rather than those seeking stable income.
