16 August 2022 - 19:52One of the benefits of being Warren Buffett is that you make things happen just by showing up. If he so much as gestures at a stock, it is liable to pop immediately, providing a nice self-fulfilling gain. When it comes to Occidental Petroleum, the Buffett effect runs far deeper than that, and yet it is less pronounced — which says a lot about the US oil sector in 2022.
They were right to be. They’d been sidelined, and the timing was awful. Oxy swapped an appealing equity story of decent growth and solid dividends for debt-laden empire building — just as the oil price began dropping and a year before the pandemic took hold. No-one could foresee a pandemic, of course. But oil crashes? They happen.
Factor in dividends and buybacks, and the annualised return on Oxy’s stock since then has been all of 3.2%. That’s less than half the yield on that preferred stock to Buffett. And it’s a fraction of the 15.1% and 16.3% made on the energy sector and the S&P 500, respectively. The biggest winners? Those Anadarko shareholders, with a 130.9% annualised return.
Based on payouts to date, and assuming flat dividends, Oxy would hit that $4 per share mark by the end of 2022 if it buys back roughly another $2bn between now and New Year’s Eve. Forecast free cash flow is more than triple that, so it looks easily done.