Stepped-up activity in unconventional plays in both the Permian Basin and California are at the heart of growth plans for Los Angeles-based Occidental Petroleum Corp. (Oxy) as outlined by senior executives Tuesday during a 3Q2013 earnings conference call in which they reported increased profits.

Oxy's 3Q2013 net income was $1.6 billion ($1.96/share) compared to $1.4 billion ($1.69/share) for the same period in 2012, according to CEO Stephen Chazen. Year-to-date, Oxy has reduced its overall drilling costs by 22% to an average for oil/natural gas overall of $14.33/boe, he said.

While noting that Oxy intends to increase its capital spending in California by $500 million to an estimated $2.1 billion and more than double its Permian drilling rigs from seven to 16 next year, Chazen added color to the company's recent announcement that its board has authorized pursuit of selected asset sales, including potentially some overseas and Midcontinent assets, along with a portion of a general partner interest in Plains All American Pipeline (PAAP) (see Shale Daily,Oct. 22).

Chazen said longer term, Oxy will sell all of its interest in the PAAP pipeline, and decisions regarding the Permian and California will be made after the company has a clearer picture on the overall sales at the end of this year. He expects the asset sales agreements to be made final in the first quarter next year.

Chazen reiterated that the prospective asset sales are part of a long-term strategy review that estimates potential pre-tax net proceeds from the sales of $1.4 billion. "These are the first formal steps in our efforts to streamline the business, focus on areas where we have depth and scale, and improve overall profitability with a goal of becoming a somewhat smaller company with more manageable exposure to political risk [internationally]," he said.

The company expects to use the vast majority of the proceeds to repurchase stock, said Chazen, adding that he also anticipates paying down some of the company's overall $7 billion in debt and to invest some of the proceeds in "high-return growth opportunities," including California and Permian assets.

As the largest oil/gas property owner in California with 2.1 million net acres, Chazen said Oxy owns a "diverse portfolio of opportunities" in which the company has reduced its overall operating costs by more than $4/boe and expects to average under $19/boe for all of 2013.

With the combination of efficiency gains in its drilling and "more favorable permitting" in California, Oxy plans to invest more than $2 billion in the state in 2014, mostly in unconventional drilling opportunities where he said the company holds more than 1 million net prospective acres.

In the Permian Basin, Oxy holds a similarly large net acreage total, currently totaling about 1.7 million net acres, covering both "relatively established and emerging plays," according to Chazen, who said the plays are "anchored by core, high cash flow-generating CO2 [carbon dioxide] reservoirs."

In both the Permian and California, Chazen and Vicki Hollub, executive vice president for U.S. oil/gas operations, said Oxy plans to greatly accelerate its activities next year. The company plans to continue expanding its horizontal drilling programs while reducing per-well costs, they said. An additional $500 million in capital will be invested in the Permian next year.

Oxy's unconventional rig team in the Permian was lauded by Hollub.

"We're now being a lot more aggressive with our piece of the Permian because we now understand it a little better," she said. "Our exploitation theme [internally] is to get us into a position where we are more entrepreneurial and much more aggressive to go after other opportunities in the Permian."

Hollub said the plan is to accelerate the opportunities that are two to three years out in the company's typical development schedules. This will also depend on more aggressive technical support to determine horizontal drilling directions and spacing, she said.