I suspect many Fools with a taste for energy agree with my conviction that ExxonMobil (NYSE: XOM ) constitutes a sensible investment in this important sector. A similar case can be made for many of the so-called majors, but it's not necessary to descend too far in size to hit upon another oil and gas producer that merits Foolish attention.
I'm referring to Occidental Petroleum (NYSE: OXY ) , our country's fourth-largest oil company and the biggest crude producer in the continental U.S. Occidental reported its quarterly results Wednesday, and while it's becoming more difficult for companies to overwhelm investors, Occidental's results seemed more positive than the market's reaction indicated.
The California company reported $1.2 billion, or $1.49 per share, in earnings, compared with $938 million, or $1.15 per share, in the year-ago quarter. But if you back out special items, it earned $1.3 billion, or $1.58 per share. Revenue was up 16% to $5.06 billion. The Wall Streeters who follow Occidental expected $1.51 in per-share earnings on revenues of $5.2 billion.
The quarter's profit increase was primarily attributable to gains from the company's Phibro LLC trading operation -- which it acquired from Citigroup in 2009 -- along with higher oil prices and somewhat increased oil production. In the quarter just past, Occidental's output averaged 753,000 barrels of oil equivalent (BOE) per day, versus 717,000 BOE a year ago.
Oil and gas core earnings after items were $1.9 billion, while the chemical segment earned $111 million, and the midstream and marketing unit (Phibro, pipelines, and gas processing facilities) added another $202 million to the total.
Occidental's oil and gas operations are conducted largely in the U.S., Latin America, and the Middle East/North Africa. Domestically, its primary activities occur in Texas and California. In South America, it works in Argentina, Bolivia, and Columbia, although it recently announced the sale of its Argentine operations to China Petroleum & Chemical Corp. (NYSE: SNP ) , aka Sinopec, for $2.5 billion. At about the same time, it added to its Texas and California holdings.
The Middle East/North Africa operations include work in Qatar, Oman, Yemen, Libya, and Bahrain. In Qatar, where the likes of Royal Dutch Shell (NYSE: RDS-A ) , Exxon, and Total (NYSE: TOT ) are active, Occidental operates a 230-mile subsea pipeline that transports natural gas from offshore wells to Oman and the United Arab Emirates. Just last week Occidental agreed to partner with the Abu Dhabi National Oil Co. by taking a 40% stake in the $10 billion Shah sour-gas field development from which ConocoPhillips (NYSE: COP ) withdrew last spring.
Digging into Occidental can lead Fools to even more positives on the company. The effort would be worthwhile.