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Warren Buffett’s Berkshire Hathaway Inc. on Friday was given federal approval to acquire “up to 50%” of Occidental Petroleum Corp.’s common shares.
In the filing to FERC initially in July, Berkshire noted that it already owns 18.72% of the outstanding shares of Oxy, as it is commonly known (No. EC22-87-000). The purchases would be completed in the secondary market.
As Oxy was working to snatch Anadarko Petroleum Corp. from Chevron Corp. in a takeover fight in 2019, CEO Vicki Hollub reportedly flew to Omaha to meet with Buffett, who agreed to invest up to $10 billion to help. The agreement handed the investment firm 100,000 shares of Oxy cumulative perpetual preferred stock, then valued at $100,000/share, and a warrant to purchase up to 80 million shares of common stock at $62.50/share.
An Oxy spokesperson told NGI on Friday that the approval “allows Berkshire, from a FERC perspective, to accumulate up to 50% ownership of Oxy’s common shares, which is necessary because we own assets subject to FERC regulation. The prior FERC approval threshold was at 25%.”
Oxy shares jumped by more than 9% Friday afternoon to trade at about $70.82.
Berkshire Hathaway Energy Co. (BHE) is the holding company whose subsidiaries “are engaged in a number of diverse business activities,” including energy, the Federal Energy Regulatory Commission filing noted.
Among BHE holdings are Kern River Gas Transmission Co., MidAmerican Energy Co. and Northern Natural Gas, which owns the largest interstate natural gas pipeline system in the United States.
BHE also controls Northern Powergrid, NV Energy and PacifiCorp, the grid owner/operator in the West, which serves two million customers in six western states.
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On the LNG side, BHE GT&S, an interstate natural gas transmission and storage company, provides a variety of liquefied natural gas services through Pivotal LNG, a 25% stake in Cove Point LNG, and other LNG processing and storage initiatives.
In Western Canada, BHE controls AltaLink, the largest regulated transmission company in Alberta, which supplies electricity to more than 85% of the population. Additional BHE subsidiaries include BHE Renewables, BHE U.S. Transmission and HomeServices of America.
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Oxy has a substantial upstream arm, with the Lower 48 business primarily working in the Permian Basin. Occidental Chemical Corp., aka OxyChem, operates the 894 MW Taft cogeneration qualifying facility in the Midcontinent Independent System Operator Inc. (MISO) market, however. Berkshire stressed it would not be an issue.
The conglomerate assured in its application to the Commission that there would be no “adverse effect on competition.” Taft “comprises 0.48% of the approximately 187,000 MW of installed capacity in the unconcentrated MISO market,” it stated.
Regarding vertical competition, Oxy affiliates “do not own or control any transmission facilities, and while affiliates of BHE own transmission facilities in MISO, service on their transmission systems is provided under the MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff.” The transaction also would not involve “any inputs to electricity production.”
One area where Oxy and Berkshire may see eye to eye is in the transition to lower emissions. Oxy Low Carbon Ventures LLC (OLCV) is working on a variety of U.S. projects, including a massive direct air capture project (DAC) to serve the Permian operations.
OLCV, through its 1PointFive business unit, is developing carbon sequestration hubs on the Gulf Coast and across the United States. The unit in April signed a letter of intent Enterprise Products Operating LLC for a potential Gulf Coast carbon sequestration hub.
Meanwhile, BHE’s CleanMachine compressor package last year received the first TrustWell Responsibly Sourced Gas certification for midstream equipment by Project Canary.
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Related topics: ferc Investment Oil And Gas oil and gas production Shareholders Stake Upstream
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