Oxy anticipates added activity on U.S. terrain.

The acquisition of El Segundo-based Unocal Corp. last week left just one player standing in the local oilman's club: Occidental Petroleum Corp.

But don't count on Oxy to be picked off next.

With a market cap of $29 billion, the Los Angeles-based energy company remains much smaller than the so-called super-majors such as ChevronTexaco Corp., which agreed to acquire Unocal for $16.4 billion. Both Unocal and Atlantic Richfield Co., which was gobbled up by BP Amoco Plc in 1999, have succumbed to a super-major.

Yet Occidental is considered fiercely independent and more likely to buy than be bought.

At a time when the largest oil companies are de-emphasizing their on-shore U.S. assets, Occidental is looking to add to its U.S. portfolio--specially in Texas and California.

"We expect to be expanding our domestic operations," said Occidental spokesman Larry Meriage.

The company has a history of hovering around the merger table for leftovers, picking up the forced divestiture of BP Amoco and Royal Dutch/Shell's West Texas joint venture, Altura Energy, for $3.6 billion in 2000.

Now the largest oil producer in Texas, Occidental may be the one to catch any properties that shake out of the Unocal deal. ChevronTexaco said it expects to sell about $2 billion in assets after the merger, widely believed to involve both companies' holdings in Texas and California.

"Occidental's got a lot of cash, and both Unocal and Chevron are large producers in the Permian Basin," said Bernard Picchi, an analyst with Foresight Research Solutions. The Permian Basin is a massive oil field that stretches from West Texas to New Mexico.

Analysts call it a badly-kept secret that Occidental is about to announce the acquisition of some of ExxonMobil Corp.'s West Texas operations.

Meriage declined to discuss the possible purchase, saying only, "We have stated on a number of occasions that we expect to be an active acquirer in the Permian Basin."

Exploiting older fields

Occidental has been acquiring mature U.S. properties because it found a way to make older fields more profitable, using techniques first developed in the desert fields of Yemen and Oman.

"They've reengineered these fields, applied cutting-edge resource management technology, and, as a result, have been able to produce an incredible amount of oil and gas," Picchi said. He noted that Occidental has realized greater reserves on the U.S. properties than existed at purchase.

One example is Occidental's 1998 purchase of the Elk Hills oil and gas field near Bakersfield from the federal government for $3.5 billion. To extract oil from the porous shale, Occidental used new compression techniques, acid stimulation processes and three-dimensional seismic surveys. By 2001, the company had drilled 1,200 new wells and more than doubled production from the field's shale zone, adding millions of barrels of new reserves and three new gas sales pipelines.

The company also has an international side to its business.

Chief Executive Ray Irani is a Lebanese-born, U.S.-trained chemical engineer fluent in Arabic--and widely perceived to have an advantage over other U.S. oil executives in closing deals in the Middle East.

In January, the company was awarded nine of the 16 exploration blocks available in Libya during the country's first licensing round since the lifting of U.S. sanctions. Of the 66 companies bidding, Occidental came away with the largest share.

"There's a lot of business to be done there if one knows how to do it," said Picchi. "He's been able to strike some interesting deals for the company with some of the moderate governments in the Persian Gulf."

Occidental has significant production in Yemen, Oman and Qatar, plus upcoming projects in Libya and the United Arab Emirates. Almost 20 percent of last year's oil production came from the Middle East.

"They've been operating in Yemen and Oman for a number of years and spent significant time in Qatar. That's unique for a company of their size," said Steve Enger, an oil analyst with Petrie Parkman & Co.

Irani's influence

The company also has partnerships with the governments of the United Arab Emirates and Qatar on a pipeline project that will bring natural gas from Qatar to the UAE. It is the only U.S. company on the project, where both Occidental and French conglomerate Total S.A. each hold a 24.5 percent interest.

Qatar has what's believed to be the largest deposit of natural gas in the world. The pipeline is projected to move 2 billion cubic feet of natural gas per day and is scheduled to be ready in 2006.

The company's transformation started in 1990, once Irani took the helm. At the time, the stock was trading in the low $20s and its business operations were spread out and losing money.

"Everything outside of oil and gas was kind of a dog's breakfast," Picchi said. "From natural gas pipelines to a meatpacking business, there was no industrial logic."

Irani set about restructuring, selling assets and rationalizing. He hired Stephen Chazen as chief financial officer, whom A.G. Edwards Oil Analyst Bruce Lanni called "the best CFO in the oil industry." Over the past 15 years, the company has seen its stock reach the high $70s. Its earnings surpassed $2.5 billion last year, up from $1.5 billion the year before.

While Occidental's Middle Eastern assets, and some in South America, would be attractive to a larger oil company, its heavy concentration of continental U.S. assets make it unpalatable for a super-major. "Occidental is not widely considered a potential takeover target," said Oppenheimer & Co. analyst Fadel Gheit.