This Oil Stock Will Go a Long Way


When an oil company has a solid business model, geopolitical and other disturbances don't seem to have an effect. Occidental Petroleum (NYS: OXY) is one such company, having registered record profits and increasing daily production, beating analysts' estimates hands down.

A solid beat
The Los Angeles-based company announced third-quarter earnings of $1.8 billion, or $2.17 per diluted share, which is a huge $0.21 more than consensus estimates. What's more, this is a 48% improvement over the corresponding quarter of 2010. Although it did contend with higher oil prices, what impresses me is the production growth. Daily production rose to 739,000 barrels of oil equivalent (Boe) - a 4.6% growth year over year -- despite the various disruptions in various global operations including Libya and the Middle East. This excludes the company's Argentina operations, which it had sold off to Sinopec (NYS: SHI) last December.

A master at its trade
Occidental's core properties in its home state of California have continued to serve the company faithfully. Daily production from these shale regions grew an impressive 6,000 Boe from the previous quarter. I'm not too surprised. In terms of exploitation of resources, Occidental and Apache (NYS: APA) have been leaders. The company is expected to drill at least 47 more wells than indicated at the start of the year. That's a good 25% higher than even management's expectations.

The only possible restraint on further expansion is whether the government is willing to grant more drilling permits. Still, that shouldn't be a deterrent to increasing, and here's why.

Solid strategy for the long term
For a $77 billion company, management has done remarkably well to jump into the hotter shale plays in South Texas and the Williston Basin. Although still in the development phase, it'll only be a matter of time before production should take off. Initial flow tests have been extremely positive, and along with falling inflation costs, management is expected to operate 13 rigs in the fourth quarter. Occidental's growth strategy is impressive.

While mergers and acquisitions are in vogue, Occidental is saving millions of dollars by not taking that appriach. Statoil's (NYS: STO) acquisition of Brigham Exploration (NAS: BEXP) might be the faster way out, but definitely not the cheapest. Clearly, not all companies are going down the acquisition route to get into Williston.

Foolish bottom line
CEO Stephen Chazen's first full quarter since taking over from his predecessor -- the hugely experienced Ray Irani -- has been impressive, with daily sales levels of 744,000 Boe exceeding production levels. Foolish investors should benefit from this stock for a long time to come. We at The Motley Fool can help you to stay up to speed on the top news and analysis on Occidental Petroleum by adding the stock to your Watchlist.

And if you're looking for other great stocks to profit off from the energy boom, check out The Motley Fool's special report, "3 Stocks for $100 Oil." You can download it for free.

At the time thisarticle was published Fool contributor Isac Simon owns no shares of any of the companies mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of Statoil A. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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