Oil and gas giants Occidental Petroleum (NYSE:OXY) and Anadarko Petroleum (NYSE:APC) are slowly but surely realizing that there's no place like home. In the energy sector, it's a scary world out there. That's particularly true for companies like Occidental and Anadarko that are engaged in exploration and production. Discovery of new resources available for production is a time-consuming, costly effort. Companies simply can't afford to devote investment into risky plays that don't pan out.

That's why Occidental and Anadarko are coming home. Due to the increasingly risky nature of international oil and gas production, both companies are bringing investment in new production back to the United States. Each of them is shedding assets in overseas geographies deemed too risky, and is instead focusing on domestic production.

Banking on black gold
Occidental and Anadarko both turned in solid results last quarter, due mostly to strong U.S. oil production. On the surface, Occidental's total production disappointed. Total production dipped by 18,000 barrels per day, but the primary culprits for this were poor gas production in the U.S., as well as sharply reduced overseas output.

Occidental's total oil production actually increased 4%, but gas production fell by 4,000 barrels per day. Thanks mostly to oil, Occidental's earnings grew 4% in the first quarter.

While the U.S. continues to do well, oil companies are seeing trouble across the globe. Occidental's international operations were hurt significantly by field and port strikes in Libya, and insurgent activity in Yemen. This resulted in a 14,000 barrel-per-day drop in production in the company's Middle East and North Africa segments.

Likewise, Anadarko leaned heavily on its own domestic oil fields in the last quarter. Its U.S. onshore plays boosted production by 12%. Anadarko has a strong foothold in several premier oil fields in the United States such as the Eagle Ford shale and the Delaware Basin, which were the main reasons why the company's U.S. oil production came in 10,000 barrels per day better than expected.

Oil giants getting domesticated
Going forward, both companies will continue to rely on U.S. oil production to fuel the future. Occidental is shying away from natural gas. It's going to separate its California natural gas business, and recently struck a deal to sell its natural gas assets at the Hugoton Field for $1.4 billion.

Anadarko is ramping up major projects in the deepwater Gulf of Mexico. In the last quarter, it completed key installations at its Lucius development and has nearly completed construction on the hull of the Heidelberg development. These two projects are progressing on schedule; Lucius should begin production later this year and Heidelberg is on track to start up in 2016.

At the same time, Anadarko is selling off international assets to help raise cash to finance its domestic initiatives. The company will pursue a divestment of its China assets which should raise $1.075 billion. And, Anadarko recently sold an interest in a Mozambique field for $2.64 billion.

Choosing domestic oil over natural gas and international oil
Occidental Petroleum and Anadarko Petroleum are taking different routes on the road to rising U.S. oil production, but that's where they're both headed. Occidental is gearing up its oil operations, while shying away from natural gas. For its part, Anadarko is shedding billions of dollars worth of international assets and reinvesting the proceeds in its highly productive U.S. assets.

Volatility in natural gas prices and supply disruptions in international operations are proving to be too risky for Occidental Petroleum and Anadarko Petroleum. In response, they're devoting additional investment into U.S. oil, in promising areas such as the Eagle Ford shale and deepwater Gulf of Mexico. With crude oil prices in the U.S. staying supportive, this is likely to be a wise strategy.


Bob Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.