Warren Buffett has been purchasing Occidental Petroleum (OXY) stock (NYSE:OXY) like crazy lately. Berkshire Hathaway (BRK.A ) (BRK.B) just purchased another 5.99 million shares, increasing its holding to 20.9%. In late September, Buffett used the recent drop in oil prices and the OXY stock (NYSE:OXY) to expand Berkshire’s stake in one of its top ten holdings.
Because of the potentially large market opportunity, the firm is continuing to take steps to capitalize on the opportunities it sees ahead. This method might provide the gasoline for OXY stock (NYSE:OXY) to provide huge profits for Buffett in the future years.
Securing another prospective collaboration
Occidental Petroleum has been forming alliances with companies to explore a broad range of CCS prospects. Its most recent agreement is with Western Midstream Partners (WES), a master limited partnership (MLP) that it used to own. The parties agreed to investigate possibilities to develop and supply low-carbon intensity oil and gas products in a letter of intent.
Occidental is to investigate the installation of carbon capture facilities on its upstream oil and gas operations in the Texas, Delaware, and Colorado DJ Basins. Meanwhile, Western Midstream plans to investigate the installation of carbon capture systems on its natural gas plants and other large collection and treatment facilities.
This collaboration can potentially cut Occidental Petroleum’s emissions from oil and gas production in Delaware and DJ Basins, allowing it to sell net-zero output. Meanwhile, as it carries carbon dioxide to Occidental’s facilities, it might provide Western Midstream with a consistent source of cash flow.
OXY Stock: Creating a strong solution
This is the latest in a series of agreements inked by Occidental this year to expand its CCS business. It is developing an end-to-end system for managing the full carbon lifecycle.
In late August, the business broke ground on the world’s biggest direct air capture (DAC) facility in the Permian Basin of Texas. When completed in 2024, the facility will be capable of capturing up to 500,000 metric tons of CO2 per year, with the possibility to grow up to 1 million metric tons in the future. The business plans to install this one of 70 DAC facilities globally by 2035.
Occidental has already negotiated commercial contracts to support that initial plant and numerous additional midstream partners to assist it in transporting collected carbon to sequestration and use locations.
Finally, the business has been securing subsurface pore space ideal for carbon sequestration. It has leased more than 30,000 acres of subsurface pore space in Louisiana from premier forestry REIT Weyerhaeuser (WY).
Buffett’s top oil choice has untapped upside potential.
Most investors consider Buffett’s continuous purchase of OXY stock (NYSE:OXY) to be a gamble on oil prices. While this is undoubtedly true, investors should not ignore the company’s developing CCS business, which has significant upside potential. If the market grows as Occidental forecasts, it might significantly boost Buffett’s investment in the following years.
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