Occidental Petroleum (NYSE:OXY) is an oil and gas exploration and production giant. The company reported second-quarter earnings on July 3, posting results that demonstrate its strength. Earnings per share and production grew last quarter, as well as over the first half of the year, driven by its oil fields in California and in the Permian Basin.

Here is a rundown of Occidental's earnings, and why it remains a well-run, highly performing company.

First, the results
Occidental's revenue and diluted earnings per share rose 5% and 11%, respectively, last quarter. Performance was led by its domestic oil operations. Over the first six months of the year, diluted earnings per share are up 7%.

Production of oil in the United States rose 8% last quarter and reached 278,000 barrels per day, which is a company record. Not surprisingly, Occidental's Permian Basin accounted for a lot of the growth.

Occidental is the largest operator and largest producer of oil in the Permian Basin. According to the company, Occidental accounts for 15% of all oil produced there. Occidental's Permian Resources segment grew production by 21% last quarter.

The company is also very active in California, another premier oil-producing area of the country. Oil production there rose 10% last quarter, to 97,000 barrels per day.

Oil is becoming an increasingly important part of Occidental's business, and going forward, the company will be heavily reliant on domestic oil. Here are the initiatives Occidental is pursuing, and why the decisions should pay off when the company reports future earnings results.

Future earnings to be driven by domestic oil focus
Importantly, Occidental's core strategy is to focus mostly on oil production in the United States. Whereas some competitors have a diversified business that is fairly evenly split between oil and natural gas, Occidental is betting heavily on oil instead of natural gas. Over the past year, it's made some drastic strategic decisions that will shape its future.

Earlier this year, the company separated its California natural gas business. Occidental Petroleum plans to separate its California assets into a separate, independently traded company. The new California company will be headquartered there and will be the state's largest natural gas producer. And, Occidental separately struck a deal to sell its natural gas assets at the Hugoton Field for $1.4 billion.

The strategy is already having a significant effect. Oil accounted for 63% of Occidental's first-quarter total production, with gas making up 26% of production and natural gas liquids the remaining 11%. Between its geographic split, domestic oil now represents 61% of total production, with 39% of production coming from international markets.

One of the reasons for this is that Occidental sees the potential for significant cost improvement in its domestic fields. Supply disruptions continue to weigh on international production in international markets, such as Libya, that are getting riskier with each passing quarter. By contrast, improvements in drilling technology and other operational efficiencies are driving significant cost savings here at home. Occidental saved $900 million in capital last year as a result of efficiency moves.

Not surprisingly, then, Occidental plans to focus the vast majority of future investment on oil production in the United States. Management states that nearly all of the $1.4 billion increase in capital investment this year versus 2013 will go to oil projects.

The bottom line
Occidental Petroleum is making big moves that will make the future company much different than the Occidental of the past. It's unloading considerable natural gas assets to focus almost entirely on domestic oil production. This makes a lot of sense, since oil production in the United States is reaching levels not seen in several decades.

The strategy is already working, as production and profits are heading in the right direction. The end result is that Occidental's earnings report last quarter prove what a strong company it is.