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 especially 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.


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