Comparative Analysis of Investment Value Between Buffett's Acquisition of OxyChem and Sinopec

Based on the collected data, I now provide you with a professional investment analysis report.

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On October 2, 2025, Berkshire Hathaway announced an all-cash acquisition of OxyChem, the chemical subsidiary of Occidental Petroleum, for $9.7 billion. The transaction was officially completed on January 2, 2026, making it Berkshire’s largest acquisition since its $11.6 billion purchase of insurance company Alleghany in 2022[1][2].

Notably, Berkshire currently holds approximately 28% of Occidental Petroleum’s shares, making it the largest shareholder. Occidental is also Berkshire’s 7th largest holding. Buffett first stepped into Occidental in 2019, when he committed $10 billion to support Occidental’s acquisition of Anadarko Petroleum, in return for preferred shares and common stock warrants[1][3].

OxyChem is one of the largest chlor-alkali and polyvinyl chloride (PVC) producers in North America, with operations in the United States, Canada, and Latin America. According to public data, OxyChem achieved earnings of $1.1 billion and sales of $4.9 billion in 2024[2]. Its products are widely used in water treatment, pharmaceuticals, healthcare, and commercial and residential development, making it a global bulk chemical product manufacturer.

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This transaction fully embodies Buffett’s consistent value investment philosophy. This can be clearly seen from the following dimensions:

In August 2024, Occidental lowered OxyChem’s full-year pre-tax earnings guidance by approximately 15% to the range of $800 million to $900 million, mainly due to oversupply in the main product market[1]. This put pressure on OxyChem’s valuation, and Buffett chose to act at this time, securing an acquisition price of approximately $9.7 billion based on an expected valuation of around $12 billion, equivalent to a discounted acquisition.

As Berkshire is already Occidental’s largest shareholder, it has in-depth knowledge of OxyChem’s business model and financial status. This investment decision within its “circle of competence” reduces the risk of information asymmetry.

Occidental plans to use $6.5 billion of the transaction proceeds to repay debt, with the goal of reducing its debt to below $15 billion. Occidental had approximately $24 billion in debt at the end of 2024, and this transaction effectively alleviated its debt pressure[2]. From the statement by Greg Abel, Berkshire’s Vice Chairman of Non-Insurance Operations, it can be seen that Berkshire applauds Occidental’s move to “strengthen its balance sheet with transaction proceeds”.

The chemical industry has obvious cyclical characteristics. OxyChem’s main products, chlor-alkali and PVC, are bulk chemicals, whose prices are greatly affected by supply and demand. In 2024, the industry faced oversupply pressure, and product prices and profits were under pressure, which is exactly the investment opportunity Buffett described as “be greedy when others are fearful”.

Historically, Buffett acquired specialty chemicals manufacturer Lubrizol for approximately $9.7 billion in 2011, which was his second major bet on the chemical industry[2]. This cross-cycle investment layout shows that Buffett is optimistic about the long-term development prospects of the chemical industry.

OxyChem’s downstream application scenarios form good complementarity with other businesses under Berkshire. Chemical products can be used in fields such as water treatment, pharmaceuticals, and healthcare, which have potential synergies with Berkshire’s operating enterprises covering insurance, railways, energy, consumer goods, and other sectors.

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The core motive for Occidental to sell OxyChem is to alleviate debt pressure. After announcing the acquisition of CrownRock in December 2023, the company set a target of “debt principal below $15 billion”. With approximately $24 billion in debt at the end of 2024, the $6.5 billion in debt repayment funds from the sale of OxyChem is a key step to achieving this goal[1][2].

By divesting its chemical business, Occidental can focus more on its core oil and gas business. Vicki Hollub, President and CEO of Occidental, stated: “This transaction accelerates Occidental’s strategy to strengthen its balance sheet and focus on its transformed, deep and diversified oil and gas portfolio.” This reflects Occidental’s intent to focus its strategy.

Although analysts believe the $9.7 billion sale price is low (previous valuation was approximately $12 billion), for Occidental, selling non-core assets to optimize its financial structure and focus on main business development may be a better path to unlock shareholder value at this stage. Vicki Hollub also stated that as Occidental’s cash position improves, the company will begin redeeming the preferred shares held by Berkshire (which currently carry an 8% dividend) in 2029[1].

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Sinopec (600028.SS) is one of China’s largest oil and gas producers, ranking first in China in refining capacity and ethylene production capacity. The company’s main businesses include oil and gas exploration and development, refining and processing, oil product sales, and chemical product production and sales[4].

Indicator	Value	Industry Comparison
Market Capitalization	$742.3 billion	Large integrated energy company
Price-to-Earnings Ratio (P/E)	20.97x	Comparable to Occidental Petroleum (20.43x)
Price-to-Book Ratio (P/B)	0.90x	Below 1, in a net-breaking state
Return on Equity (ROE)	4.33%	Medium level
Net Profit Margin	1.22%	Relatively stable

Based on the DCF valuation model, the intrinsic value analysis of Sinopec is as follows:

Scenario	Valuation	Relative Increase from Current Price
Conservative Scenario	¥72.27	+1073.2%
Base Case Scenario	¥98.49	+1498.9%
Optimistic Scenario	¥281.48	+4469.5%
Weighted Average	¥150.75	+2347.2%

This valuation model is based on the following core assumptions:

• The base case scenario uses the historical average of the past 5 years (revenue CAGR 9.9%, EBITDA margin 5.8%)
• Weighted Average Cost of Capital (WACC) is 6.3%
• Terminal growth rate of 2.5%

From a valuation perspective, the current stock price is significantly discounted relative to its intrinsic value, which provides a high margin of safety for long-term investors[5].

Sinopec has typical high-dividend defensive allocation value. According to public information, the company’s dividend payout ratio was approximately 69% in 2024, and it has promised that cash dividends from 2024 to 2026 will not be less than 65% of the annual net profit attributable to parent company shareholders[4]. Calculated based on the current stock price, the dividend yield is at a relatively high level in the A-share market, which is highly attractive to investors pursuing stable cash returns.

According to the technical analysis results, Sinopec shows the following characteristics:

• Trend Judgment
  : In an uptrend (to be confirmed), a buy signal appeared on December 29
• Key Price Levels
  : Support level at $6.06, resistance level at $6.68, next target at $6.85
• MACD Indicator
  : No death cross signal, indicating a bullish trend
• KDJ Indicator
  : K value 61.3, D value 68.8, indicating possible short-term adjustment
• Beta Coefficient
  : 0.56, relatively low volatility compared to the market[6]

From a technical perspective, Sinopec may face a test of the resistance level around $6.68 in the short term, but the medium-term uptrend has not been broken.

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Similar to the combination of Occidental Petroleum and OxyChem, Sinopec covers the entire industrial chain layout of upstream oil and gas exploration, midstream refining and processing, and downstream product sales.

Sinopec’s current price-to-book ratio is 0.90x (net-breaking), and its price-to-earnings ratio of 20.97x is at a historically low level, which is similar to the valuation background when Occidental sold OxyChem.

With the gradual recovery of the global economy, energy demand is growing, and the prosperity of the petrochemical industry is expected to rebound, which provides a similar industry background for both companies.

Sinopec has a market capitalization of $742.3 billion, which is approximately 17.6 times that of Occidental Petroleum ($42.17 billion). Sinopec’s chemical business accounts for a relatively small proportion, focusing mainly on refining and sales, while OxyChem is a specialized chemical producer.

Sinopec is a state-owned enterprise, and major decisions need to consider national strategies and social responsibilities; Occidental is a purely private enterprise, with maximizing shareholder interests as its core goal. As Occidental’s major shareholder, Berkshire can exert important influence on strategic decisions.

The A-share market and the U.S. stock market have significant differences in investor structure, valuation methods, market efficiency, etc. Sinopec receives more attention and research in the A-share market, and its valuation is relatively more effective.

Berkshire has approximately $344 billion in cash reserves, which allows it to flexibly carry out large-scale mergers and acquisitions; as a central state-owned enterprise, Sinopec’s capital expenditures are subject to more regulatory constraints.

The core logic of Buffett’s investment in OxyChem can be summarized as follows:

1. Acquire high-quality assets at the low point of the industry cycle
   —— Sinopec’s current valuation is at a historical low, with a similar margin of safety
2. Focus on main business and optimize capital structure
   —— Sinopec continues to promote focus on core businesses and improve asset efficiency
3. Stable cash flow and high dividends
   —— Sinopec has high dividend characteristics, which meets the cash return requirements of value investment

Buffett’s investment logic has certain replicability, but investors need to consider the following factors:

• The special governance structure of Sinopec as a central state-owned enterprise
• The policy environment of the domestic oil and gas industry
• Valuation differences between the A-share market and the U.S. stock market
• The company’s chemical business accounts for a relatively small proportion, so the cyclical fluctuations of the chemical industry have limited impact on overall performance

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Sinopec has defensive allocation value with high dividends, low valuation, and stable cash flow, suitable for long-term fixed-investment. It is recommended to adopt the core strategy of “high dividends + cycle management + transformation tracking”, build positions in batches in the $6.0-$6.5 range, and consider adding positions if the price falls below $6.0.

From the perspective of DCF valuation, the current price has a significant discount, with considerable medium-term upside potential. Combined with technical analysis, investors can choose to participate after the stock price pulls back to the support level of $6.06.

International oil prices directly affect the company’s exploration and development and refining business profits, and the trend of oil prices in 2026 is uncertain.

Economic downturn may lead to a decline in energy demand, affecting the company’s performance.

As a central state-owned enterprise, Sinopec’s capital allocation and dividend policies may be affected by policy guidance.

Although the proportion of chemical business is limited, attention still needs to be paid to price fluctuations of bulk chemicals such as chlor-alkali and PVC.

The company’s stock has a high average daily trading volume and good liquidity, but attention needs to be paid to liquidity differences between the Hong Kong stock market and the A-share market.

It is recommended that investors focus on the following indicators:

• International oil price trends and OPEC+ production policies
• Changes in capital expenditures and cash flow in the company’s quarterly financial reports
• Adjustments to dividend policies
• Changes in the prosperity of the chemical business
• Trends in central state-owned enterprise reform and industry integration

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Buffett’s $9.7 billion acquisition of OxyChem sends a clear signal: at the bottom of the energy and chemical industry cycle, high-quality assets have long-term investment value. This transaction embodies the core principle of value investment —— acquiring high-quality assets with stable cash flow and competitive barriers at a reasonable price.

For Sinopec, the company’s current valuation level is similar to the background when OxyChem was sold. As China’s largest integrated energy and chemical enterprise, Sinopec has scale advantages, full industrial chain layout, and high dividend characteristics, and has good long-term allocation value at the current valuation level.

However, when drawing on Buffett’s investment logic, investors need to fully consider Sinopec’s special attributes as a central state-owned enterprise, the valuation characteristics of the A-share market, and differences in domestic and foreign market environments. It is recommended that investors combine their own risk preferences and investment objectives, build positions in batches within a reasonable valuation range, and use high dividend income as a safety cushion to wait for valuation repair opportunities.

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[1] Securities Times Network - “Buffett’s Sudden Move! Heavyweight Stock Plunges, Latest Action” (https://www.stcn.com/article/detail/3367345.html)

[2] Sina Finance - “Nearly $10 Billion! Large Chemical Enterprise Acquired!” (https://finance.sina.com.cn/jjxw/2026-01-05/doc-inhfhavn6741352.shtml)

[3] CNBC - “Warren Buffett Berkshire Occidental Oxychem” (https://www.cnbc.com/2025/10/02/warren-buffett-berkshire-occidental-oxychem.html)

[4] Xueqiu - “Sinopec (600028) Stock Price, Market Trend, News, Financial Reports, Data” (https://xueqiu.com/S/SH600028/time?page=5)

[5] Jinling API - DCF Valuation Data

[6] Jinling API - Technical Analysis Data