Occidental Petroleum Corp., the largest onshore crude producer in the continental U.S., agreed to pay $3.2 billion to expand oil and gas holdings in Texas and North Dakota as it announced a separate deal to exit Argentina.
The U.S. purchases, from Royal Dutch Shell and an unnamed seller, eventually will add the equivalent of 100,000 barrels of daily crude production, Los Angeles-based Occidental said in a statement today. China Petrochemical Corp. agreed to buy Occidental’s Argentine oil and natural-gas subsidiary today for $2.45 billion.
“This puts them in a better position to meet their production targets,” said Philip Weiss, an analyst for New York-based Argus Research Corp. who has a buy rating on Occidental’s shares and doesn’t own any. “I’d certainly rather see them own these assets than the ones they’re selling in Argentina.”
The combined purchases in North Dakota and Texas are Occidental’s largest since 2006, when it bought Vintage Petroleum for $4.46 billion, according to data compiled by Bloomberg. Excluding the deals announced today, Occidental Chief Executive Officer Ray Irani has spent more than $10 billion on acquisitions in the past five years that have helped boost production by more than a third.
The company also said today it was adding to its stake in a U.S. oil-pipeline company and becoming the sole owner of a power plant in California.
‘Predominantly Mature’ Fields
As part of its output additions, Occidental agreed to pay $1.8 billion for “predominantly mature” fields in south Texas that currently produce 200 million cubic feet of gas a day, the Hague-based Shell said in a statement.
The North Dakota acquisition, valued at $1.4 billion, involves 180,000 acres owned by an unnamed private seller, Occidental said. Those assets produce about 5,500 barrels of oil equivalent a day from the Bakken formation.
Occidental is exiting Argentina amid price controls on gas that make it harder to earn profits in Latin America’s second- largest economy, Weiss said.
Occidental acquired the Argentine fields when it bought Vintage, along with assets from the Gulf of Mexico to Yemen. The company got 49 percent of its net daily oil production and 58 percent of its gas from the U.S. during the first half of this year, according to company data. Argentina contributed about 5 percent of worldwide output.
It’s the first investment in Argentina’s oil and gas industry for the Chinese refiner, known as Sinopec Group. The fields produced more than 51,000 barrels of oil equivalent a day last year and held 393 million barrels of proven plus probable reserves as of the end of 2009, according to Sinopec.
Irani, who is retiring in May, has more than doubled Occidental’s oil reserves and quadrupled crude and gas production since succeeding Armand Hammer as CEO in 1990. The company’s focus has been on improving output from neglected oil fields in places such as California and Texas.
Occidental also said today it plans to increase its stake in the general partner of pipeline operator Plains All American Pipeline LP to about 35 percent, from 23 percent. It’s adding to its holdings as Vulcan Capital, the investment group for Microsoft Corp. co-founder Paul Allen, sells its share in the general partner.
Plains All American, based in Houston, agreed on Nov. 15 to buy pipelines that gather and ship crude from the Bakken area for $210 million. The Bakken formation, located in North Dakota and Montana, holds an estimated 4.3 billion barrels of technically recoverable oil, according to a 2008 report by the U.S. Geological Survey.
Elk Hills Plant
In addition, Occidental will pay an undisclosed amount to buy the other half of the Elk Hills power plant from Sempra Energy. The gas-fired power plant is located in the middle of an Occidental oil and gas field near Bakersfield, California.
The purchases will contribute to earnings as soon as they are completed, expected to be by the end of March, Occidental said.
Buoyed by an improved outlook for cash flow, Occidental’s board agreed to boost the company’s dividend by 21 percent, to 46 cents a quarter from 38 cents, effective as of the April 15 payment.
Occidental rose $1.84, or 2 percent, to $92.91 at 3:14 p.m. in composite trading on the New York Stock Exchange. The shares have risen 14 percent this year, outpacing gains by Exxon Mobil Corp. and Chevron Corp., the largest U.S. energy companies.
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