After the surprising comeback, Warren Buffett’s Berkshire Hathaway must endure critical timing on merging and sealing the deal. Before, the company made investments during the financial crisis. It allowed Occidental to raise the offer, ease the burden and persuade Chevron to leave. Buffet’s time is critical.
The company invested $10bn warrants and shares paying 8% dividends. It turns to a familiar playbook used with Goldman Sachs Group Inc. and General Electric Co. Occidental is opportunistic, it has a large capital-intensive and cash producing assets. In terms of security, it has high barriers to entry protection. Plus it would get a veteran oil manager in Occidental Chief Executive Officer Vicky Hollub.
Vicky Hollub is a key person to Berkshire because the company relies heavily on managers to operate the industry. The deal is currently under good condition too. The company maintains $40 a barrel for the hiked dividend. This rate is the lowest when crude is three times costly. Occidental also paid back all the debt during the bidding war with Chevron Corp. Anadarko announced plans to repurchase $3bn shares.
Basically, Occidental does not have financial hedges to protect against low oil prices. So, the company is able to get the full upswing when prices soar. When Russia received sanctions from U.S., many countries seek oil producer alternatives. Occidental is the largest acreage holder and producers of oil. Its field in West Texas and New Mexico is the largest in the U.S.
Compared to many of its competitors, Occidental has environmental concern for operating zero emissions by 2050. Buffett’s merger with Occidental is actually a concern on how they operate during a volatile oil market. So far, they have planned to reach long term stable returns and bulk of business experiences from the past.