Occidental bulks up in U.S. while exiting Argentina

SAN FRANCISCO (BestGrowthStock) – Occidental Petroleum Corp (OXY.N: ) is selling out of Argentina and spending $3.2 billion at home, adding to a string of deals in which well-capitalized energy players snap up U.S. natural gas assets amid a gas price slump.

After a tumultuous year for the fourth-largest U.S. oil company, Occidental also rewarded shareholders on Friday with a 21 percent increase in the dividend, sending its stock higher.

The sale of Argentine assets for $2.5 billion to Sinopec Corp (0386.HK: ) parent China Petrochemical Corp, announced earlier in China, includes stakes in 23 production and exploration concessions, and is the Chinese company’s first foray into the country.

Oxy’s $1.8 billion purchase of Texas gas properties lines up with its strategy of growing where it is already strong. It also comes after the acquisition of natural gas firm Atlas Energy (ATLS.O: ) announced last month by Chevron Corp (CVX.N: ), which itself followed Exxon Mobil Corp’s (XOM.N: ) big XTO deal.

The betting is that a growing share of U.S. electricity will be generated by gas-fired plants in the years ahead, which should eliminate the current glut weighing down prices.

“I like the idea of buying properties in the United States,” said Fred Burke, investment head at Sandy Spring Bank near Washington D.C., seeing the gas purchases as far-sighted.

“Five years from now … everybody will wish they had bought these investments that they could have made,” he added.

Occidental spent another $1.4 billion on North Dakota acreage, meanwhile, as it makes a serious move into an oil-rich region that mirrors other energy companies’ response to the strength of crude prices.

Occidental will also raise its stake in the general partner of Plains All-American (PAA.N: ) to 35 percent from 22 percent, and buy the 50 percent of the Elk Hills power plant it did not own from Sempra Energy (SRE.N: ). Elk Hills is where Oxy in 2009 made California’s biggest hydrocarbon discovery in 35 years.

Burke respected the management at Occidental, which saw its board bow to pressure from shareholders two months ago to spell out a succession plan and cut executive pay.

STRIKES IN ARGENTINA

Stephen Chazen, chief operating officer and CEO-in-waiting, said the Sinopec sale had been in the works for two years. While ultimately driven by price, he said it was appealing to get out of a market with a strike-prone labor force while the other deals add interests with more certainty, nearer home.

“They replace something I had a little less control over with something I have better control over, offering better returns,” Chazen said in a telephone interview.

Oxy expects the new U.S. assets, along with properties nearby, eventually to produce 50,000 barrels of oil equivalent per day (boepd), compared with the 44,000 boepd now out of Argentina.

Oxy spent $1.1 billion on acquisitions last quarter, and $300 million early this quarter. Plus, the Los Angeles-based company just added 380,000 acres in California, lifting its total to 1.6 million acres.

With no more California purchases expected, Chazen said Oxy is still buying acreage in West Texas. He also anticipates more Middle East contract opportunities over the next two years.

Occidental will pay $1.8 billion to Royal Dutch Shell Plc (RDSa.L: ) for fields in South Texas that produce about 200 million cubic feet of gas per day from more than 550 wells.

Shell said the deal in South Texas, where it’s been active for more than 50 years, was part of its effort to raise up to $8 billion in order to reduce debt to pay for heavy investments in recent years. Shell shares rose 1 percent to 2,051 pence.

Chazen said Occidental, unlike smaller players, had the luxury of waiting for natural gas prices to recover before really expanding the South Texas properties. “There’s a lot of potential there. You can time your drilling with the price.”

In North Dakota, Oxy will buy 180,000 net acres in the Bakken and Three Forks areas. The company previously only had a “toe-hold” in the Bakken, Chazen said.

Finally, Occidental is raising its quarterly dividend to 46 cents per share. Its shares rose 1.5 percent to $92.40, having already touched their highest level since mid-2008 this week.

(Reporting by Matt Daily and Braden Reddall, additional reporting by Sarah Young in London, editing by Gerald E. McCormick, Dave Zimmerman and Matthew Lewis)

Occidental bulks up in U.S. while exiting Argentina