Occidental Petroleum Corporation (OXY), Devon Energy Corp (DVN), EOG Resources Inc (EOG): The Power of Price

On the other hand, Occidental Petroleum Corporation (NYSE:OXY) is looking to grow production through its assets in the Permian and California, but these are more mature oil plays that have lower initial production rates. Also, as indicated by Occidental CEO Steven Chazen, the regulatory environment in California means that development plans for California take much longer than other more drilling friendly sates, or as Mr. Chazen put more succinctly “This is not North Dakota”.

The upside of the California region, though, is decline rates are much lower and have a tendency to generate cash for much longer period than the faster, high initial production wells in other shale plays. This is one of he key reasons that Occidental has put so much effort into reducing operational costs. Today, the company spends about $14.17 per barrel of oil equivalent on domestic production, which is a 23% reduction year-over-year.

What a Fool Believes

Occidental has to deal with several issues as the company contemplates spinning off several parts of the company per request of its activist shareholders. One of the issues that it needs to worry less about, though, is its domestic production rates. As the company works through its drilling efficiency program in the Permian and those operational efficiencies spread to other fields, the company should be able to grow at a healthy pace that will support its operations.

As investors, though, it would be misleading to view Occidental through the same lens as some of the fast growing E&P companies in the US today. Occidental’s dividend yield of 2.89% is more than a whole percentage point greater than any of the companies listed above, so there is a greater emphasis on returning capital to shareholders at OXY. Keep in mind that a balance has to be struck between expected production growth and return of capital to shareholders, and your investment decision should bring this into consideration.

The article Why is this Company Losing While Peers are Winning? originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter: @TylerCroweFool. The Motley Fool owns shares of Apache and Devon Energy.

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