Warren Buffett is often hailed as the world’s greatest investor. In the 60 years he has been at the helm of Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), Buffett has turned it into a $1 trillion powerhouse. 

Since 1965, when he took control, Buffett has delivered an average annual return of about 20%, doubling the S&P 500’s 10% performance. A $1,000 investment in Berkshire back then would be worth over $40 million today, while the same in the S&P 500 would be just $320,000.

Buffett’s secret? Buying great companies at fair prices and holding them for the long haul. One of his favorites is Occidental Petroleum (NYSE: OXY), the largest independent producer in the Permian Basin, one of the most critical fossil fuel production regions in the U.S.

Berkshire owns a massive 28.2% stake — 265 million shares. But with OXY sitting near its 52-week low of $45.17, down from a high of $71.18, is it a steal for your portfolio, or a risky bet?

Why Occidental Is Buffett’s Favorite Oil Stock

Buffett started buying OXY stock in 2019, ramping up in 2022 to 2023, and spending $1.5 billion more in 2024. He bought the stock on five different occasions in just one week to close out the year. It brought his stake to just under $13 billion at today’s price. 

Buffett loves Occidental’s low-cost oil production in the Permian Basin, its $18.5 billion acquisition of CrownRock in 2024 (boosting output to 1.34 million barrels daily), and its focus on carbon capture tech, like the STRATOS project, set to launch later in 2025. 

Occidental’s CEO, Vicki Hollub, has Buffett’s trust, and she’s focused on efficiency, paying down $4.5 billion in debt after the CrownRock purchase, and boosting dividends. It hiked the payout 22% in 2024, and increased it another 9% the other day to $0.24 per share.

Buffett’s bet is a long-term one as he sees Occidental as a cash cow in a world still needing oil for decades.

Occidental risks a dry well

But Occidental is near its 52-week low for a reason. Oil prices are volatile, and West Texas Intermediate crude sits below $69 a barrel today due to oversupply fears and a slowing global economy. 

Occidental’s fourth-quarter earnings showed $6.8 billion in revenue, down 5% year-over-year, while earnings rose 8% to $0.80 per share, though lower oil prices still squeezed margins. Still, it was better than what Wall Street was expecting, but the stock fell anyway.

President Trump’s tariffs could also spark a trade war, raising costs and cutting demand if China or Europe retaliate. The CrownRock deal added $10 billion in debt, bringing OXY’s total debt to $25 billion, and if oil prices fall further, Occidental’s cash flow could be strained. It could risk dividend cuts, however unlikely that seems now. Plus, the shift to renewables poses a long-term threat.

Some analysts suggest oil demand might peak by 2035, but there has been a lot of fear-mongering around peak oil for years.

Long-Term Outlook for Occidental

Looking ahead, Occidental’s future is promising but not guaranteed. The CrownRock acquisition makes it a Permian powerhouse, with low breakeven costs of $40 per barrel. That means it can profit even if oil prices dip further. 

Its carbon capture projects could tap into a potential $100 billion market by 2030, positioning it as a green energy player. While the Energy Information Administration sees Brent crude oil prices stabilizing at $74 a barrel in 2025, supporting Occidental’s $5 billion free cash flow target, it does forecast a drop back to $66 a barrel in 2026. 

Its 1.9% dividend yield and $5.6 billion share repurchase program, signal shareholder value. But if oil demand dives or debt becomes unmanageable, growth could stall.

Should You Add Occidental to Your Portfolio?

At $48 a share today, Occidental Petroleum looks like a bargain. Its forward P/E ratio of 12 is comparable to ExxonMobil (NYSE:XOM). Buffett’s massive stake and Occidental’s Permian strength also make it tempting, especially with a potential oil price rebound. Buying at this price means you can buy OXY stock for cheaper than the $51 average price Buffett paid.

But the risks of volatile oil prices, high debt, and energy transitions could drag OXY stock lower if things sour. If you’re okay with some risk and have a long-term horizon like Buffett, Occidental Petroleum could be a smart buy for your portfolio at this price, but don’t expect quick gains. The gusher will come down the road.

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