Billionaire investor Warren Buffett said Monday Berkshire Hathaway’s $10 billion investment in Occidental Petroleum is a bet on oil prices over the long term.
“It’s also a bet on the fact that the Permian Basin is what it is cracked up to be,” the chairman and CEO Berkshire told CNBC’s Becky Quick in an interview. But “oil prices will determine whether almost any oil stock is a good investment over time.”
“If [oil] goes way up, you make a lot of money,” he added.
Occidental revealed on Tuesday that Berkshire had committed to invest $10 billion in the company to help fund its proposed acquisition of Anadarko. Berkshire would make the investment by purchasing 100,000 shares of preferred stock, which pays out an 8% annual dividend.
Buffett was willing to invest $20 billion to help Occidental acquire Anadarko Petroleum, sources told CNBC’s David Faber.
Asked why Berkshire wouldn’t just buy Anadarko itself, Buffett said, “That might have happened if Anadarko came to us, but we wouldn’t jump into some other deal that we heard about from somebody else coming to us seeking financing.”
Later in the interview, longtime investing partner and vice chairman Charlie Munger responded to the question as well, saying, “Nobody asked us to.”
Buffett added he previously never had any sort of communication with Anadarko.
Occidental on Sunday put a revised buyout offer in front of Anadarko, offering to pay shareholders in mostly cash as it seeks to derail Chevron’s acquisition of the international oil and gas driller.
