Occidental trading range belies underlying balance sheet gains. (Investments & Finance).

WITH rebels in Colombia holding three Pentagon contractors hostage last week, Occidental Petroleum Corp. again finds itself entangled in one of the world's geopolitical hotspots.

Last month, the 470-mile pipeline that transports oil from Occidental's Cano Limon field was shut down for four days due to a bomb attack. The pipeline was bombed 40 times in 2002 and 170 times in 2001, and has been under attack off and on since the field was discovered in 1983.

Despite these problems, Los Angeles-based Occidental earns a healthy profit from its Colombia operations, which pump 100,000 barrels of crude a day.

The pipeline is operated and majority-controlled by Ecopetrol, the state oil company. Occidental has a 44 percent stake, although 85 cents of every dollar generated by the pipeline and the field goes to the Colombian government and the oil-rich eastern state of Arauca.

Occidental receives a "good return" on its Colombia operations, enough to stay in the region, said Larry Meriage, an Occidental spokesman and former college history professor, who spoke last week from his hotel in Bogota, Colombia, where he was meeting with human rights advocates.

"People would have you believe that this situation is all about oil," Meriage said. "But it's really about money, arms and control of the area, which has largely been neglected by the Colombian government for the last two years."

For several years, Chairman and Chief Executive Ray Irani has been trying to invest in more stable production areas, with a particular concentration on the United States, where Oxy draws 65 percent of its production.

The shift is aimed at averting problems that can crop up in unstable regions of the world - an important concern with the U.S. and its allies on the brink of war with Iraq. (About 20 percent of the company's production still comes from the Middle East, primarily Oman, Qatar and Yemen.)

For alt the attention focused on its Colombian operations, Cano Limon produced just 7 percent of the company's total oil output last year.

Oil royalties appear to be a factor in the battle between the National Liberation Army, or ELN, and the Revolutionary Armed Forces of Colombia, or FARC, which are battling for control of the region, Meriage said. Both groups are on the State Department's terrorist list.

U.S. Special Forces are in the region to train Colombia soldiers to protect the pipeline.

Earlier this month, Colombian President Alvaro Uribe suspended payment of oil royalties to the region and froze $40 million in funds after acknowledging that oil money was being channeled to rebels.

"The guerillas claim they are attacking Yankee imperialists who are ripping off their progeny," Men age said. "But they never attack the field enough to shut down production because they want the royalty monies."

Colombia aside, Occidental appears to be firing on all cylinders elsewhere. Fourth-quarter net income was $322 million (84 cents a share), compared with a loss of $247 million (66 cents) for the like period a year ago, which included a $240 million charge related to the sale of Occidental's interest in Equistar Chemicals LP. Fourth-quarter sales rose 43 percent to $2 billion, after accounting for the asset disposals.

With U.S. light crude oil trading at $37 a barrel last week - nearing the all-time high of $41.15 set during the build-up to the 1990-1991 Gulf War- the profit outlook remains strong. In California, gasoline prices averaged $1.92 a gallon last week, according to the Lundberg Survey.

The increase in oil prices, along with rising production and a successful restructuring five years ago, has strengthened Occidental's balance sheet. The debt-to-equity ratio has been pared to 43 percent at Dec. 31 from 46 percent at the end of 2001.

Nevertheless, Occidental stock has been unable to push through the $30-a-share threshold - instead stuck in a narrow trading range of $27 to $29 a share over the past year, as investors have ignored much of the positive news.

In February, company insiders sold $22.7 million worth of stock - the highest amount of selling in five months, according to data supplied by Thomson Financial, a financial research firm. Irani alone sold $19.3 million in stock.

"This is certainly not the norm, but the stock is trading near a three-year high so it's not necessarily a terrible sign' said Thomson Financial analyst Kevin Schwenger, who noted that much of the selling was options-related.

"If the stock comes down and selling continues, I'd be concerned" Schwenger said.

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Occidental Petroleum Corp.

YEAR (Dec. 31)                   2002     2001

Revenue (millions)             $7,338  $13,985
Operating Expenses (millions)   5,356   11,318
Operating Income (millions)     1,982    2,667
Net Income (millions)             989    1,154
Earnings Per Share              $2.61    $3.09

Summary

Business: Oil and gas exploration

Headquarters: Los Angeles

CEO: Ray R. Irani

Market Cap: $11 billion

Dividend Yield: 3.6%

Total Liabilities: $4.1 billion

P/E Ratio: 9.4

Long-Term Debt: $9.6 billion