When in doubt, buy 'em out.

Large American independent oil company Occidental (NYSE:OXY) has decided not to futz around with finding oil through exploration and instead announced a $3.8 billion deal to buy Vintage Petroleum (NYSE:VPI) and its 437 million barrels of proven reserves and 421 million barrels of probable and possible reserves.

Occidental is offering $20 per share in cash and 0.42 of its own shares for each Vintage share, as well as assuming the company's $300 million or so in net debt. That deal represented a 33% premium for Vintage shareholders when it was announced last week. Better yet, from the perspective of an Occidental shareholder, the deal is pretty attractive at less than $9 per barrel of proven reserves.

There's nothing too revolutionary about the acquirer's plans in this case. Occidental hopes to significantly increase production -- looking to double production in Argentina and increase production in California by 20% -- and generate better returns per barrel than Vintage was able to achieve. According to Occidental management, this should add to earnings so long as oil stays at $35 per barrel or higher.

What's interesting about this to me is that Vintage was a bit of an odd duck in the oil field. It didn't do a lot of wildcat exploration, but rather looked to buy undervalued assets and then increase the production through workovers, secondary recoveries, and reduced operating costs. In other words, and at the risk of oversimplification, it bought assets that the sellers thought weren't worth so much and then worked hard to get more out of them than the original owners could. And now Occidental seems to be trying the same approach, hoping that it can reap higher production and more efficiencies in operations.

Occidental certainly isn't the only company that has bought oil and gas assets of late. Companies like Chesapeake (NYSE:CHK), NorskHydro (NYSE:NHY), Chevron (NYSE:CVX), and Gazprom have all done likewise this year.

It's a tough spot for many of these companies. High energy prices are leading to cash rolling in, and managers have to decide whether to return that cash to shareholders (through dividends or buybacks) or invest it in exploration or acquisition, or some combination of the two. Time will tell if Occidental made the right choice here, but hey -- what's investing, to say nothing of the oil business, without a little risk?

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).