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Occidental Petroleum (NYSE:OXY) is an international oil and gas exploration and production company. It is also involved in chemical manufacturing, power generation, treatment, processing and energy storage. It operates largely onshore in the United States and in nine countries worldwide. As the economic agony in Europe continues and the recovery process at home is almost as painful, Occidental is providing some solid returns and growth in earnings and has done so for the last year and a half. I am looking at the hell ride that is energy prices and wondering if Occidental has what it takes to continue to offer the performance it has been over the last 18 months.

The common shares trade around $79, between a 52 week low of $66.36 and high of $109.08. The price earnings ratio is 9.53, earnings per share are $8.34 and the dividend yield is 2.70%. The market cap is $64.47 billion. It is not the giant killer that Exxon Mobil (NYSE:XOM) is with an almost $400 million market cap, but it is a strong player.

The company has recently received a re-iterated buy recommendation with a ratings score of B from TheStreet. Its growth in earnings per share, increase in net income, revenue growth, cash flow from operations and reasonable debt levels are all given as reasons for this recommendation.

Occidental recently announced it will issue $500 million in 1.5% Senior Notes due in 2018 and $1.25 billion in 2.7% Senior Notes due in 2023. Net proceeds of the offerings will be approximately $1.74 billion and will be used for working capital, acquisitions, retirement of debt and general corporate purposes.

Occidental's first quarter 2012 earnings showed net income of $1.6 billion or $1.92 per share compared with $1.5 billion or $1.90 per share in the first quarter of 2011. The company increased the dividend by 17% to $2.16 per share. The first quarter of 2012 provided the highest barrels of oil equivalent per day production of 750,000 barrels. Domestic production accounted for 455,000 of those barrels per day and a record for the sixth consecutive quarter.

Occidental is the largest natural gas liquids producer in the lower 48 states. Domestic production of liquids in the first quarter was up 6,000 barrels per day from the fourth quarter of 2011 and 35,000 barrels per day from the first quarter of 2011. Oil and gas production was lower in the Middle East/North Africa, Columbia and Long Beach.

The domestic increase reflects the outcome of higher capital expenditure programs. The Middle East/North Africa decline was as a result of the expiration of a field contract in Yemen, impacts on production sharing contracts, and the period of post civil unrest in Libya. Occidental realized worldwide crude prices of $107.98 per barrel in the first quarter of 2012, compared with $92.14 per barrel in the same period of 2011. Natural gas liquids brought $52.51 per barrel in the first quarter of 2012 as opposed to $52.64 per barrel in the same period last year. Domestic natural gas prices were $2.84 per MCF in the first quarter of 2012 compared to $4.21 in the first quarter of 2011.

Its chemical division showed some weakness in the first quarter compared to the same period as last year. Macro-economic conditions leading to low export volumes, higher raw material costs and the warm winter were the culprits behind this decline. Midstream earnings were $131 million in the first quarter up from $114 million in the same period last year. This increase is due to higher income in the pipeline and gas processing businesses.

Occidental debt to equity ratio is impressive at 0.15, especially for a company engaged in exploration activities. Capital expenditures in exploration and development usually see oil and gas companies carrying massive debt loads. Occidental's exploration activities have brought 3,176 million BOE in proven reserves, which is a tremendous return on these expenditures. Its current ratio is 1.48, meaning that Occidental has no problem meeting short term debt obligations as they come due.

The company is gearing its production to onshore activities, which is a wise choice considering the flux in the state of global macro-economic conditions. Its large percentage of onshore production is also a brave move considering the cost of production in North America. Its peers like ConocoPhillips (NYSE:COP) derives 40% of its production from North America, Apache (NYSE:APA) gets 54% of its oil and gas production from North America. EOG Resources (NYSE:EOG) gets 85% of its production from this continent whereas Chevron (NYSE:CVX) gets only 20% of its oil and BOE from the United States. All of these companies are helping the domestic economy become less dependent on foreign energy sources and are creating jobs across many related and unrelated industries by concentrating exploration and production onshore.

The company's book value per share is $47.77. This company has rewarded shareholders in this market with a 17% increase in dividend distributions to $2.16 per share. It has issued debt at low levels at the right time. Oil prices are below $80 per barrel and natural gas prices at around $2.50, while off the lows are not showing a tremendous amount of strength yet. Occidental is most likely going to have to scale back some of its production and it is just as likely it will do this offshore as onshore. With oil behaving like it will test the $75 mark, it is fair to anticipate the Occidental will cut back on capital expenditures and production. Strength in its natural gas, chemicals and transmission businesses will be dictated by weather, raw materials costs and an improvement in domestic growth prospects.

Occidental is behaving like a company that wants to enhance shareholder value, and has made all the right moves at the right times so far. I think it can continue to do so, as it appears to be anticipating a rough oil market with its recent issuance of debt. Currently less than 1% of the float is sold short, which indicates a floor is building for the stock at these levels. One negative on the horizon for this company is oil prices which are causing investors in energy companies a lot of grief. The only other negative and it is a small one is that the percentage of the common share float held by institutions is 82%, it does not have a lot of liquidity for a retail investor. Investors who can deal with some volatility should strongly consider Occidental Petroleum now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.