Occidental Petroleum's (NYSE:OXY) stock price hit a 52-week low, raising fear for investors, but as they say, it’s best to buy low and sell high.
The stock is under pressure in early 2025 because of increasing oil inventory and supply globally and lower oil prices than last year, but the long-term outlook remains intact.
The long-term outlook includes solid cash flow, balance sheet improvement, and capital returns that have piqued the interest of Warren Buffett and Berkshire Hathaway (NYSE:BRKa). They own roughly 30% of the stock and have been approved to buy as much as 50% and are likely buyers
Occidental: A Buy and Hold Stock With Catalysts on the Horizon
Investors should remember that Buffett and Berkshire Hathaway are not traders but buy-and-hold investors with an ultra-long-term outlook. Shifting focus back to Occidental, it is amid a massive repositioning effort setting it up for sustainability, including a shift to greener energy businesses and improving capital returns.
The company has numerous projects expected to begin coming online later this year to boost sales, diversify the business away from crude oil production, and widen margins.
The first is the STRATOS direct air capture (DAC) plant under construction in east Texas. It is the largest facility of its kind and is expected to begin commercial operations, removing CO2 directly from the air, by Q3. It will not significantly impact business this year but is expected to drive revenue growth in 2026 as operations ramp to full capacity. The carbon capture market was worth over $3 billion annually in 2024 and is expected to triple before the decade's end.
Another critical project for Occidental Petroleum investors to know about is the Battleground chemical plant expansion and upgrade. The expansion is intended to boost volume in the higher-margin mid-stream chemical business and is expected to commence operations in mid-2026.
Occidental’s Cash Flow and Balance Sheet Improvement Drives Value
All other factors aside, Occidental’s operational quality, cash flow improvement, and focus on shareholder value are of interest. The company has leaned hard into debt reduction, redeeming billions in preferred stock owned by none other than Berkshire Hathaway.
At the end of 2024, balance sheet highlights include hitting the near-term $4.5 billion debt reduction target while increasing the cash balance and current and total assets. Liability remains elevated but is falling quickly, and equity is also rising. Shareholder equity improved by more than 13% in 2024 and is expected to grow in 2025.
Coincidentally, Occidental’s institutional interest is solid and growing in 2025. The trends include them reverting to buying on balance from selling in Q3 and activity ramping in Q4 2024 and Q1 2025.
The Q1 2025 activity is noteworthy because it set a new multi-year high, including a February purchase by Berkshire Hathaway. Within two months, the group netted about $1 billion in stock or 2.5% of the market cap at $45.
Occidental Petroleum: Buffett Will Buy OXY in March
Buffett will likely buy more stock in March unless something has changed in the OXY outlook. The price action has retreated to a significant support target that aligns with his initial entries and is a critical pivot point for the market. That point is in the range of $43 to $48, consistent with a market reversal driven by OXY’s improving financial condition and confirmed by Buffett’s buying.
If the market falls below this level, it could continue to decline, potentially shaving another $5 to $15 off the stock price, but that is unexpected. What is expected is for this market to bottom at or near its current levels and consolidate. 