Energy ETFs Strengthen After Buffett Raises Stake on Occidental

Energy sector-related exchange traded funds received a boost after Warren Buffett’s Berkshire Hathaway Inc. raised its bet on Occidental Petroleum Corp (NYSE: OXY).

On Thursday, the Invesco Dynamic Energy Exploration & Production Portfolio (NYSEArca: PXE) gained 4.3%.

Meanwhile, shares of Occidental Petroleum rose 7.6%. OXY makes up 6.2% of PXE’s underlying portfolio.

Berkshire Hathaway purchased an additional 18.1 million shares of Occidental Petroleum Corp. and now holds a 14.1% stake in the oil exploration company, Bloomberg reports.

Buffett appears to be taking on a greater exposure to the energy sector as surging oil prices bolster the U.S. shale industry outlook. He typically does not buy in to pricey stocks. Occidental is currently trading around 11 times projected 2022 earnings, but company profits are highly sensitive to energy price swings.

Berkshire previously disclosed in early March that it acquired common stocks of the oil giant, along with preferred stock holding, a little less than two years after exiting its common stock holding in Occidental.

Occidental has rallied this month on Berkshire’s earlier investment and on the Russia-Ukraine war, which triggered a jump in global oil prices.

While Occidental benefits from the elevated energy prices, chief executive officer Vicki Hollub has warned that U.S. oil drillers won’t be aggressively expanding on their production in the short term to fill the supply gap caused by sanctions on Russia, pointing to labor shortages and other supply chain challenges.

The industry has also been burned once before after aggressively throwing money into expanding operations when oil prices were high before they came crashing down. Energy players are now taking a more conservative approach to the U.S. oil patches and keep spending growth limited so they can raise free cash flow and return value to shareholders.

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