Occidental Petroleum's Lithium Leach Field Strategy: A Warren Buffett-Backed Energy Play

Occidental Petroleum Corporation (OXY) is making a bold pivot into the clean energy sector through an innovative lithium extraction strategy powered by cutting-edge technology. In partnership with Berkshire Hathaway’s BHE Renewables, the company is developing what could become a game-changing lithium leach field operation in California’s Imperial Valley. This strategic shift signals how traditional energy companies are repositioning themselves in a world increasingly dependent on battery-powered vehicles and renewable energy storage—and it’s exactly the kind of transformation that caught legendary investor Warren Buffett’s attention.

Partnering on Next-Generation Lithium Extraction

The cornerstone of Occidental’s clean energy ambitions rests on a joint venture announced in early June. Occidental and BHE Renewables teamed up to demonstrate and commercialize TerraLithium’s Direct Lithium Extraction (DLE) technology, a proprietary solution designed to extract high-purity lithium compounds from geothermal brine. The lithium leach field operation aims to tap into the 50,000 gallons of lithium-rich brine that BHE’s 10 geothermal power plants process every minute across the Imperial Valley while generating 345 megawatts of clean energy.

What makes this approach revolutionary is the dual-use efficiency: rather than treating lithium extraction as a separate, resource-intensive process, Occidental and BHE are extracting lithium as a byproduct of geothermal power generation. This integrated lithium leach field model transforms waste into valuable output. Richard Jackson, President of Occidental’s U.S. Onshore Resources and Carbon Management Operations, emphasized the significance: “By leveraging Occidental’s expertise in managing and processing brine combined with BHE Renewables’ deep knowledge in geothermal operations, we are uniquely positioned to advance a more sustainable form of lithium production.”

The global lithium market stands at an inflection point. According to the International Renewable Energy Agency, battery lithium demand is projected to surge tenfold by the end of the decade. Meeting this explosive growth requires innovative supply solutions, and Occidental’s lithium leach field strategy could position the company as a critical supplier of battery-grade lithium for electric vehicles and energy storage systems.

Strong Financial Foundation Supporting the Transition

Occidental Petroleum boasts a market capitalization of $53.7 billion and operates across the U.S., Middle East, and North Africa with over a century of hydrocarbon exploration expertise. The company’s transition isn’t just a strategic pivot—it’s backed by solid financial performance.

In its first-quarter results, Occidental exceeded Wall Street expectations with $6 billion in total revenue and adjusted earnings of $0.63 per share, outperforming analyst forecasts. The company closed the quarter with nearly $1.3 billion in unrestricted cash and generated $720 million in free cash flow, demonstrating the financial muscle needed to fund its lithium leach field development and other clean energy initiatives.

For the second quarter, Occidental projected production reaching between 1.23 and 1.27 million barrels of oil equivalent per day—its highest quarterly output in more than three years. This robust operational performance is driven by increased U.S. onshore activity and resumed Gulf of Mexico production, providing the cash generation needed to support the company’s energy transition.

Dividend Strength Amid Transformation

Investors seeking income alongside growth exposure will find Occidental’s dividend policy attractive. The company announced a quarterly dividend of $0.22 per share, translating to an annualized $0.88 per share and a forward yield of 1.46%. With a conservative payout ratio of just 17.78%, Occidental retains substantial flexibility to increase dividends or reinvest in growth initiatives like its lithium leach field projects.

Valuation metrics suggest the stock trades at a discount to historical levels. At 15.46 times forward earnings, OXY is trading below its five-year average of 31.83x, potentially indicating undervaluation relative to its transformation potential. Over the past six months, shares have gained 8.6%, though the 52-week return remains modest at 2%.

Buffett’s Vote of Confidence

Warren Buffett’s Berkshire Hathaway has been accumulating Occidental stock since the first quarter of 2022, with his conviction strengthening in recent years. Between early June and mid-June, Berkshire aggressively increased its position by approximately 2.6 million shares through SEC filings. This brought Berkshire’s total ownership to roughly 250.6 million shares valued at $15.2 billion—a commanding stake that reflects Buffett’s confidence in Occidental’s lithium leach field strategy and broader clean energy positioning.

Berkshire’s dual role—as both a major shareholder and technology partner through BHE Renewables—underscores the long-term commitment to making this lithium extraction model commercially viable at scale.

Looking Ahead: Analyst Expectations

Wall Street maintains a cautiously optimistic stance on Occidental. The consensus rating is “Moderate Buy,” with a notable split among the 21 analysts covering the stock: six assign “Strong Buy,” 14 recommend “Hold,” and one suggests “Strong Sell.”

Earnings projections indicate profit per share rising 5.1% to $3.89 in fiscal 2024, then jumping 28.5% to $5.00 in fiscal 2025, reflecting confidence in both core operations and new lithium initiatives. The mean price target of $72 implies 19.5% upside potential, while Scotiabank’s street-high target of $90 suggests the stock could rally as much as 49.4% from current levels for investors betting on successful lithium leach field commercialization and sustained energy demand.

Occidental’s transformation through strategic partnerships, innovative extraction technology, and Buffett-backed credibility positions it as a compelling hybrid opportunity: a legacy energy company reinventing itself for the battery-powered future through its lithium leach field operations.