Oil Rules
Posted: Oct 28, 2009 11:36 AM by Eric Fox

After many years of taking a back seat to natural gas development, oil is starting to regain its prominence in the exploration and production industry. This is probably due to the strong price of oil relative to natural gas.

Production On the Rise
Occidental Petroleum (NYSE:OXY) announced the discovery of a huge new field in the middle of one of the most mature oil producing areas of the U.S. last quarter and is not wasting any time developing this asset. The company is also seeking to develop the oil zones it believes are prominent in the field.

Occidental's California production has nearly quadrupled from 7,700 barrels oil equivalent (BOE) per day in the first quarter of 2009, to 26,000 BOE per day in the third quarter of 2009. Management attributed most of the increase to the new field in Kern County.

During the conference call, the management of Occidental Petroleum provided some tantalizing bits of information on the future of developing its California assets. The company has drilled 34 exploration wells over the last year targeting "non-traditional hydrocarbon zones" in the state. This does not include wells to develop the Kern County discovery. Eleven of the 34 were commercial and 10 more are under evaluation. The company plans seven more this year.

Occidental is also going to try to orient the development of the Kern County discovery more toward oil.

"During 2009, we expect to drill additional 11 wells. In the next two quarters, the focus of our drilling will be on oil wells as we seek to further define the oil zone," said Steve Jason, the President of Occidental Petroleum.