Berkshire’s OxyChem acquisition could be Buffett’s last deal before he passes the torch to Greg Abel in a few months.
On Jan. 1, 2026, Warren Buffett will step down as chief executive officer (but remain chairman) of Berkshire Hathaway (BRK.A 0.00%) (BRK.B 0.33%) — handing the reins to his successor, Greg Abel. With less than three months before the switchover, Buffett showed he was still in charge by executing a $9.7 billion deal to acquire OxyChem from Occidental Petroleum (OXY 1.23%).
Here’s what this deal might mean for Berkshire investors and whether it’s a mistake or a textbook savvy move by the legendary value investor.
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A familiar business partner
Buffett and Berkshire’s history with Occidental Petroleum, commonly known as Oxy, is extensive. Berkshire gave the company a $10 billion loan in 2019 to help it buy fellow exploration and production (E&P) company, Anadarko Petroleum, in exchange for preferred stock and warrants.
Berkshire then began buying Oxy stock in 2022 — growing the position over time. At the time of this writing, Berkshire owns 26.9% of Occidental Petroleum. However, Buffett has stated during recent Berkshire Hathaway annual meetings that he wouldn’t buy the company outright, preferring to let it function on its own with plans to hold shares “indefinitely.” But I guess that commitment didn’t pertain to buying out one of Oxy’s largest segments.
OxyChem versus Oxy
At $9.7 billion, the purchase price of OxyChem is massive relative to Oxy’s market cap of $43.6 billion. The value of Berkshire’s 26.9% stake in Oxy is roughly $11.7 billion. Meaning that Berkshire owns almost half the company (as it existed before the sale of OxyChem).
While Occidental Petroleum mainly engages in the exploration and production of oil and natural gas in the Permian Basin, OxyChem is a petrochemical business that produces chemicals used to manufacture chlorine, polyvinyl chloride resin used for water supply piping and medical supplies, refrigerants, and more. OxyChem is also involved in Oxy’s carbon capture and storage (CCS) and direct air capture (DAC) projects. These initiatives offer ways to reduce carbon emissions in the oil and gas industry. OxyChem will provide the feedstock chemicals for the company’s largest DAC project, known as STRATOS.
Oxy has been one of the best-positioned companies in CCS and DAC due to its expertise in carbon production, transportation, and storage, as well as its water management and chemical business. The sale of OxyChem doesn’t derail Oxy’s low-carbon aspirations, but it likely marks a shift in focus toward near-term, free cash flow-generating projects and balance sheet improvement.
Extracting value from Oxy
Oxy investors weren’t happy with the deal, as Oxy’s stock price dipped 7.3% on Oct. 2. As for Berkshire investors, the glaring question is why would Buffett and his team buy OxyChem and not more shares in Occidental Petroleum?
Most likely, the move was a result of Buffett specifically targeting OxyChem as a better investment opportunity than the rest of the company. Berkshire has significant exposure to oil and gas through its existing Oxy holding, its massive $18.8 billion stake in Chevron, and through Berkshire Hathaway Energy, which primarily holds oil and gas and utility infrastructure assets.
Berkshire has a track record of buying energy and industrial companies when they are out of favor. In 2020, it bought Dominion Energy‘s gas transmission and storage business for, coincidentally, $9.7 billion. In 2011, it bought chemical giant Lubrizol for, again, $9.7 billion. So when presented with the opportunity to scoop up OxyChem for what has become a magic number for Buffett, the deal may have been too irresistible. But more likely, it’s just classic Buffett.
Sailing into the sunset
Instead of chasing high-flying artificial intelligence stocks, Buffett’s massive deal for OxyChem is a worthy final chapter in his decision-making tenure at Berkshire Hathaway. It’s value investing at its finest. Oxy is a company he’s very familiar with. And Buffett went ahead and targeted an attractive part of the business at a compelling price.
The deal reinforces the investment thesis in Berkshire, which is that the company is highly diversified and selective, acting as a steward of its investors’ capital. Berkshire is holding record amounts of cash, cash equivalents, and Treasury bills — a sign that it doesn’t see compelling buys in the public markets. Given megacap growth stocks are leading the market to new highs, it’s unsurprising that Berkshire is underperforming the S&P 500 year to date. But investors shouldn’t buy Berkshire for how it may perform over a short period, but rather for its unapologetically contrarian approach to investing that focuses on value rather than whatever is in style.
Berkshire’s OxyChem deal cements Buffett’s legacy as an independent thinker. It symbolizes his value investing philosophy and perspective on today’s current market. That doesn’t mean investors should dump growth stocks and follow in Buffett’s footsteps. Rather, it reinforces the importance of only buying stocks with high valuations if you have the conviction to hold them through periods of volatility and believe the company can continue to grow its earnings to justify a premium valuation.
Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends Dominion Energy and Occidental Petroleum. The Motley Fool has a disclosure policy.