Buffett has a history with OXY.
From CFRA
IMPACT OF MAJOR DEVELOPMENTS. In April 2019, OXY won a hostile takeover bidding war for the former
Anadarko Petroleum (APC). Its winning bid was an offer of $59/share in cash and 0.2934 shares of OXY
stock for each share of APC (a $29 billion cash outlay, plus stock). To help fund the deal, OXY received a cash
infusion from Warren Buffett, under which Buffett provided $10 billion in cash for 100,000 preferred shares
yielding 8% interest and a warrant to purchase up to $5 billion in OXY stock at $62.50/share (about 2x that
of current pricing). We note that paying 8% on the preferreds is about double that of OXY’s other debt
financing, and the warrants (exercisable in 10 years) would add almost 9% to the float, above and beyond
the initial boost from the issuance of new OXY shares, which rose 19% at year-end 2019 versus one year
earlier. The Buffett cash infusion enabled the equity portion to comprise less than 20% of the financing, and
as a result, OXY shareholder approval was not needed.
In April 2020, Buffett’s preferred share coupon of $200 million was paid out via 17.3 million common shares
(a 29% premium) in lieu of cash. If this practice persists, and assuming current pricing as of August for OXY
shares as well as a 29% premium on future payouts, we think these preferreds will cause the common share
count to rise by another 8.5%. To the degree that OXY shares recover in price, the dilution would be
lessened.
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