Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

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

No one likes getting left behind. In the case of a company, though, getting left behind can potentially mean closing up shop. This past quarter, several exploration and production companies boasted higher domestic production, but Occidental Petroleum Corporation (NYSE:OXY) got left behind as it’s domestic numbers dropped by 8,000 barrels of oil equivalent per day. Let’s take a look at what happened at Occidental Petroleum Corporation (NYSE:OXY) and see if it can catch up to its peers.

Source: Chesapeake Energy Media Relations

The power of price

Looking at the discrepancies in Occidental Petroleum Corporation (NYSE:OXY)’s domestic production, you can see that 5,000 of that drop was actually from natural gas production. Like many other companies in the domestic and production business, the dip in gas prices have had a significant impact on capital expenditure decisions. 47% of Occidental Petroleum Corporation (NYSE:OXY)’s domestic gas production comes from its assets in the Hugoton, Piceance, and Williston basins.

Conversely, these regions only represent 10% of domestic oil production. As gas prices sank, the company decided to dedicate more of its capital spending program in its more liquid strong assets in both California and the Permian Basin. In both of these regions, year over year production increased by 13,000 barrels per day.

In fact, this trend of lower gas to raise oil and NGL volumes was pretty consistent across Occidental Petroleum Corporation (NYSE:OXY)’s peers. Devon Energy Corp (NYSE:DVN) and EOG Resources Inc (NYSE:EOG) both saw natural gas volumes drop at the expense of increasing oil and NGL production. The one distinct difference is that these companies saw much larger production increases for oil and NGL.

Company Domestic Oil and NGL production (in thousand barrels per day) Change year-over-year Domestic Natural gas production (in million cubic feet per day  Change year-over-year
Occidental Petroleum 338 4.9% 792 (6%)
Devon Energy 188.4 28.9% 1,969 (4.1%)
EOG Resources 270.2 31% 928 (15%)
Apache (NYSE:APA) 214 37.1% 860 1.8%
Anadarko Petroleum (NYSE:APC) 246 5.5% 2,647 4%

Source: Quarterly earnings press releases, authors calculations

One note to consider with these numbers is that Apache Corporation (NYSE:APA) completed the acquisition of private oil company Cordillera in April, which booted domestic oil production by 18,000 barrels per day. Adjusted for the acquistion the company raised liquids production by 25%.

Location, Location, Location

One of the biggest reasons for the discrepencies in production growth is from the location of each company’s assets. Both Devon Energy Corp (NYSE:DVN) and EOG Resources Inc (NYSE:EOG) assets are in regions with higher initial production rates. EOG gets 42% of all US production from the Eagle Ford formation, and Devon Energy Corp (NYSE:DVN) has 47% of the company’s entire portfolio in the mid-continent region such as the Anadakro basin and the Woodford shale plays.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.