Why Warren Buffett loves Occidental so much

As a cyclical stock, when oil prices are low, Buffett can encroach on the cash flow of other investors, and when oil prices are high, Buffett still has options in his hand, so Buffett won't lose any money.

Occidental went to Warren Buffett in 2019 and borrowed $10 billion; Occidental then issued Warren Buffett $10 billion in preferred stock (8% dividend, non-voting, preferred payment) and 84 million warrants to buy common stock at an exercise price of ~$59 per share.

Occidental's 20-22 year shareholder returns are about: $1.7B, $800M, $4B; of which each year's distribution to Buffett (repurchase of preferred stock + preferred stock dividends) is over $800M.

Year-to-date, $2.572 billion shareholder return, of which $1.286 billion was distributed to Buffett (preferred stock redemption)

According to sensitivity calculations, at an oil price of about $55/barrel, the preferred dividend swallows up all of the cash flow; at an oil price of about $76/barrel, investors get a share of roughly 30 percent of Occidental's cash flow

To summarize, as a cyclical stock, when oil prices are low, Buffett can encroach on the cash flow of other investors, and when oil prices are high, Buffett still has options in his hand, so Buffett won't lose any money.