Occidental Petroleum (NYSE: NYSE: OXY ) has been on a strategic path to strengthen its financial footing since its high-stakes acquisition of Anadarko Petroleum (NYSE: APC ) back in 2019. The $55 billion deal, supported by a $10 billion preferred stock investment from Warren Buffett's Berkshire Hathaway (NYSE: BRKa ) (NYSE: BRK.A)(NYSE: BRK.B), was a bold move that expanded Occidental's presence in the Permian Basin. The company offered an attractive $76 per share, with 50% of the equity value in cash, outshining Chevron (NYSE: CVX )'s $65 per share bid.
Following the acquisition, Occidental faced financial strain due to the high cost of Berkshire Hathaway's investment. However, the company has been actively reducing this burden through the redemption of the preferred stock.
The road to recovery for Occidental began after facing a severe cash crunch triggered by the 2020 oil price crash. The company took drastic measures including cutting its dividend by 98.7%, selling assets, and focusing on repaying debt incurred from the Anadarko deal. The situation led to share dilution as payments to Berkshire were made in stock.
In today's climate, with oil prices rebounding, Occidental has managed to generate excess free cash flow which is being used to enhance shareholder value. This includes increasing dividends and initiating share repurchases, marking a turnaround from the company's previous financial challenges.
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