Doomsayers, take notice! In a world where oil reserves are mostly located in politically unstable areas, oil and gas producer Pogo Producing (NYSE:PPP) has increased its total proven oil and gas reserves in North America by 45%. How? By buyingUnocal's (NYSE:UCL) Canadian Northrock Resources subsidiary for $1.8 billion. Ah, the comfort of having reserves in your own back yard!

Pogo's strategic plan for 2005 may surprise many. As oil and gas companies drill, drill, drill, the limited number of drilling rigs has sent costs spouting upward. Pogo has decided to curtail 2005 discretionary development drilling until either the related costs or the drilling efficiencies improve. Now, that is contrarian thinking!

Another part of the strategic plan is to sell its interests in Thailand and Hungary. The American Jobs Creation Act of 2004 allowed Pogo to reassess the value and strategic fit of its international assets. With energy markets strong, the company decided the one-time tax treatment afforded by the act made these divestitures attractive. Now that makes fiscal sense -- and cents, too.

The small Hungarian operation was sold in early June for $9 million. In mid-June, Pogo announced the $820 million sale of its licenses in Thailand (where it held 608,000 acres in the Gulf of Thailand). At the time of the Thailand sale, the company said it would use the proceeds to fund capital projects and vigorously pursue market opportunities, including acquisitions.

The purchase of Unocal's Northrock Resources subsidiary -- which Unocal acquired in three separate deals during 1999 and 2000 to increase its exposure to North American natural gas -- will cost (based on estimated proven reserves) $2.48 per thousand cubic feet. That sounds high when you consider MDU Resources (NYSE:MDU) bought assets in south Texas recently for $1.85 per thousand cubic feet.

But the deal is sweet to Pogo in two ways. First, the acquisition will be accretive to earnings, cash flow, production, and reserves in 2005 -- and beyond. Second, Pogo has hedged the oil and gas production volumes with the Northrock acquisition to ensure the internally calculated rates of return and cash flow will accommodate drilling on its high-potential drilling sites. This strategy should also facilitate debt reduction.

Pogo's stock, which was trading at 11.4 times 2006 estimated earnings before the acquisition, is up 17.5% over the past 52 weeks. Wall Street is greeting the Northrock purchase with a yawn, sending the stock down 1.3% in midday trading. Contrast that to the stocks of ExxonMobil (NYSE:XOM), Anadarko Petroleum (NYSE:APC), and Occidental Petroleum (NYSE:OXY), which are up 22.3%, 48%, and 65.7%, respectively, over the past 12 months.

Pogo's Northrock acquisition clearly demonstrates the company is becoming more focused on North America, although it still has a leasehold on 1 million acres in New Zealand.

In a troubled world, where oil is increasingly a political weapon, this Foolish observer expects Pogo's stock to start getting more buyer interest as the company's transformation becomes better known among investors.

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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see the Fool's disclosure policy.