On a list of the most shareholder-friendly companies in the oil and gas industry, Occidental Petroleum (NYSE: OXY) will definitely figure in there. This company's latest earnings release just confirms that.  

A cursory glance through Occidental's first-quarter results may suggest that it does not warrant an Apple-like attention; in fact, not even close. The bottom line was just about flat compared to last year's first quarter -- nothing flashy. However, digging deeper, there's an unmistakable sign that management has been trying to cut down on unwanted costs, focusing on increasing shareholder value.

Solid fundamental growth
Net income stood at $1.6 billion, or $1.92 per diluted share, compared to $1.5 billion (or $1.90 per share) in the year-ago quarter. Average production, however, rose to a record 755,000 barrels of oil equivalent per day (Boe/d) -- the highest in Occidental's history. Liquids production rose a fantastic 35,000 Boe/d. Domestic production, too, set a record for the sixth consecutive quarter clocking in at 455,000 Boe/d.

Management has focused on developing the company's liquids-rich properties, largely ignoring its natural gas reserves. The result: Operating cash flows increased $600 million to $2.8 billion this quarter compared to the first quarter of 2011. CEO Stephen Chazen says it's a waste to sell natural gas at current prices. Hess (NYSE: HES) missed analyst estimates, and I think it's fair to say that it was due to the company's increased production of natural gas, especially in the U.S.

Cash king
 Again, while small, occasional acquisitions are fine, there isn't any room for splashy acquisitions. Despite having a cash balance of $3.8 billion, Occidental is not on a reckless expansion spree. Competitors such as SandRidge Energy (NYSE: SD) could take some lessons in cash management from Occidental. SandRidge -- with a huge debt load -- has lately been on an aggressive spending spree, acquiring Dynamic Offshore. I believe that wasn't a particularly great move.

Occidental increased its annual dividend by 17%, to $2.16 per share. The increase is commendable. Dividend yield now stands at 2.4%. Annualized return on equity, at 16%, is higher than that of most peers. It doesn't really come as a surprise as to why this company is able to manage a high return on its investments. Because that's what management is looking for.

Foolish bottom line
Occidental is a stock that needs to be held for a long period in order to realize its true potential. With several projects lined up, this company looks well-positioned for growth. Keep abreast of the situation by adding Occidental to your free watchlist.

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