Occidental Petroleum Raises Dividend, Re-arranges Assets (OXY, RDS-A, SRE)

One fairly short press release from Occidental Petroleum Corp. (NYSE: OXY) announces some big changes to the company’s asset base. Oxy has agreed to sell its oil and gas operations in Argentina to China Petrochemical Corp., or Sinopec, for an after-tax gain of about $2.5 billion. At the same time, the company will buy $3.2 billion of oil and gas properties in North Dakota’s Bakken shale region and gas-producing assets from Royal Dutch Shell plc (NYSE: RDS-A) in south Texas.

 
But wait — there’s more. Oxy also announced that it would purchase an additional 13% of the general partner of Plains All American Pipeline, LP (NYSE: PAA), bringing its total stake in the general partner to 35%. Oxy will also acquire from a subsidiary of Sempra Energy (NYSE: SRE) Sempra’s 50% stake in a joint-venture gas-fired power plant in southern California. Finally, the company will boost its dividend by 21%, from $0.38 to $0.46 per quarter, beginning with the April 2011 payment. Whew!

 
The sale of the Argentine assets, coupled with the purchase of the North Dakota and south Texas properties is expected to add a net 6,000 barrels of oil equivalent/day (boepd) to Oxy’s production. Oxy noted that it is giving up about 44,000 boepd by selling the Argentine assets, but eventually gain 50,000 boepd from the acquisitions.

 
The North Dakota properties currently produce about 5,500 boepd, which the company will add to more than 6,000 boepd it produces from other properties in the Bakken’s Williston Basin. Oxy expects to raise production in the Bakken play to “at least” 30,000 boepd in the next five years.

 
The south Texas properties currently produce about 200 million cubic feet per day of natural gas equivalent. Oxy did not say what growth it expected from these properties, but did say that they include “an excellent inventory of drilling opportunities.”
The primary driver for this re-arrangement has got to be Oxy’s effort to boost its reserves and its production growth. The company’s chairman/CEO noted that the acquisitions, combined with others the company has made earlier in the year, will help Oxy meet production growth projections of 5%-8%.

 
According to the company’s 2009 annual report, Oxy added just 92 million barrels of oil equivalent of proved reserves in 2009, mainly in southern California, through new discoveries. Total production in 2009 was 643 million barrels of oil equivalent. Total reserves additions summed to 483 million barrels of oil equivalent. That ratio had to change, and these deals will help do that.
Oxy’s share price is up about 2% in early trading today, at $92.90/share. The stock set a new 52-week high earlier this week when crude prices topped $90/barrel.

 
Paul Ausick