Warren Buffet-Backed Occidental Petroleum To Acquire Carbon Engineering For $1.1 Billion

Occidental Petroleum Corp. (NYSE: OXY), backed by Warren Buffett, has announced its acquisition of Canadian startup Carbon Engineering Ltd. for a sum of $1.1 billion. The agreement, pending regulatory approvals, is anticipated to be finalized by the end of the year, with Occidental making the payment in cash.

The collaboration between Occidental and Carbon Engineering has spanned four years, with the former utilizing the latter’s innovative technology for its ambitious Stratos project situated in West Texas. Notably, the Stratos project aims to establish the world’s largest direct air capture (DAC) plant by 2025. This acquisition is poised to propel technology innovation and expedite cost reductions for direct air capture, aligning with Occidental’s vision for delivering enhanced shareholder value.

Vicki Hollub, CEO of Occidental, expressed her optimism about the acquisition: “We expect the acquisition of Carbon Engineering to deliver our shareholders value through an improved drive for technology innovation and accelerated DAC cost reductions.”

The praise from Buffett earlier this year highlights Hollub’s effective leadership, with his firm’s stake in Occidental recently reaching 25%, solidifying Berkshire Hathaway Inc. as the company’s principal shareholder.

There is an observed surge in momentum surrounding carbon capture and sequestration (CCS) as a favored climate solution within the petroleum industry. This comes on the heels of record-breaking profits achieved by industry giants last year, coupled with substantial tax incentives secured for CCS technology through the Inflation Reduction Act.

Notably, this acquisition marks the second recent CCS deal within the “Big Oil” sector, with Exxon Mobil Corp. having acquired CO2 pipeline operator Denbury Inc. for $4.9 billion just last month.

Major US oil companies are also recently shifting their focus to lithium, a crucial component in electric vehicle batteries. Exxon Mobil, in particular, has ambitious plans for a large lithium processing facility near Magnolia, Arkansas, aiming to produce up to 100,000 metric tons of lithium annually, which would account for 15% of current global production. 

Occidental’s ambitions extend beyond the Stratos project, as it envisions incorporating Carbon Engineering’s groundbreaking technology into its King Ranch DAC hub, strategically located in south Texas. This endeavor recently garnered financial support from the Department of Energy, further validating its significance in the pursuit of carbon reduction.

Carbon Engineering, initially founded in Calgary by Harvard University Professor David Keith, has pioneered methods for directly extracting substantial volumes of CO2 from the atmosphere. This extracted carbon can then be repurposed for a range of industrial applications or securely sequestered underground. The startup’s early investors included prominent figures such as Bill Gates, Chevron Corp., BHP Group Ltd., and Occidental, in addition to several influential family offices.

Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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