Occidental Petroleum Corp., the nation’s fourth-largest oil and gas exploration company, announced agreements for major acquisitions of more than $3.2 billion in crude and natural gas assets in North Dakota and South Texas.

The Westwood-based company also announced a $2.5-billion sale of its operations in Argentina and said it would be increasing its dividends to shareholders. Occidental also said it will buy out Sempra Generation’s 50% in its Elk Hills Power Plant in California, bringing its ownership to 100%, in what may signal a flurry of major oil company interest in building up domestic production.

“There are some good domestic oil reserves out there, but some companies already involved can’t exploit them as much as they would like because they don’t have the cash,” said Brian Youngberg, an oil analyst with Edward Jones and Co. in St. Louis. “Occidental was well positioned to acquire some of that acreage to accelerate development and speed up production.”

For industry observers and investors more accustomed to news about oilfield development in the Middle East and in other parts of the world, Occidental’s plans will bring some less familiar U.S.-based locations to the mix. Part of Occidental’s plans involve the Bakken oilfield in North Dakota, which some experts have claimed could hold more than 3.5 billion barrels of reserves.


The South Texas site will be acquired from Shell, which has owned and operated the property for several years, for about $1.8 billion. Analysts described it as a typical play by Occidental, which has a reputation for taking over older oil and gas fields which look to be long past their prime and managing to extract far more from them than the oilfield’s history would suggest.

“Occidental is very good at exploitation. Occidental and Apache are just about the only two companies that can take out assets and breathe new life into them. They have already done that at their Elk Hills site in California,” said Fadel Gheit, senior energy analyst with Oppenheimer & Co.

Ray R. Irani, chairman and chief executive Occidental who will be handing over the reins of the company to president Stephen I. Chazen next year, said: “These transactions will be immediately accretive to our earnings, return on capital employed and cash flow after capital. With these new acquisitions and without Argentina in our asset mix, achieving both our short-term and long-term average annual production growth outlook of 5-8% will be more certain and will generate higher returns.”

Analysts said that it was only a matter of time before Occidental announced a major acquisition of some kind as it already acquired one of the industry’s most impressive cash flows and low debt ratios, giving it the flexibility of oil companies that are much larger in size and assets.


Even before the company decided to sell its Argentine assets to Sinopec, a subsidiary of China Petrochemical Corp., for after-tax proceeds of about $2.5 billion, Occidental’s cash flow exceeded $7 billion, with $2 billion in cash on hand, analysts said.

“Occidental has a very good management team. Their balance sheet is really strong. They have always had the capacity to do something if they really needed to. Their debt to capital is very low, one of the strongest in the industry,” said Phil Weiss, an analyst at Argus Research, who added: “This is what they do. They acquire fields with an upside that they can exploit, and they bring additional efficiencies to production to make them operate better.”

As part of the same announcement, Occidental said that it had signed an agreement to increase its general partner ownership in Plains All-American to approximately 35%. Plains is one of the largest operators of oil pipelines in North America with operations in Texas, California and North Dakota, among other areas.

Occidental said that it expects all of the transactions to be completed by the end of the first quarter of 2011, subject to regulatory approvals.


The company also announced that it would be increasing its common dividend rate by 21% to 46 cents per quarter, effective April 15.

The South Texas assets Occidental will purchase from Shell produce approximately 200 million cubic feet per day of natural gas equivalent. Occidental is making its $1.4-billion North Dakota purchase from a private seller, involving about 180,000 contiguous acres in North Dakota which produce from the Bakken formation.

Occidental said that it would finance the acquisitions from both existing balance sheet cash and debt financing.

ronald.white@latimes.com