With an emphasis on oil over natural gas, Los Angeles-based Occidental Petroleum Corp. (Oxy) continued to shatter company production records in barrels of oil equivalent (boe) globally and domestically, Oxy senior executives said Thursday. At 755,000 boe Oxy’s daily oil/gas production was the highest in its history; and its U.S. totals of 455,000 boe set a record for the sixth straight quarter.

Calling the 1Q2012 results “strong,” Oxy CEO Stephen Chazen told financial analysts during a conference call that cash flow from operations hit $2.8 billion with an annualized return on equity of 16%. Net income was $1.6 billion ($1.92/share), compared with $1.5 billion ($1.90/share), for the first quarter last year. Chazen said Oxy is now the largest liquids producer in the Lower 48, adding that the company increased its U.S. liquids production by 6,000 b/d in 1Q2012, compared to 4Q2011.

While stressing that Oxy is principally an oil company, Chazen explained what the company is not doing regarding natural gas because of sub-$2/MMBtu prices. At one point, he said the mid-sized global exploration and production (E&P) company could be the nation’s leading natural gas producer if prices were high enough to warrant a production push.

Chazen said even if U.S. gas prices get back to the $3 range, Oxy probably will still be reluctant to step up its gas production. He said it is “wasteful” to drill for natural gas at prices below $2, although Oxy will be bringing on line in the third quarter a key gas processing plant at its Elk Hills holdings in California where he said the company is sitting on “a sizable inventory of gas to drill” when prices rebound.

Noting that he expects the company’s gas production to be “flatish” this year, Chazen said an “overwhelming majority” of Oxy’s gas production now is associated with oil production. “We could have a huge increase in gas production as a company if we decided to drill wells, but at $2 basically that is just not going to happen…or $2.50…or even at $3,” Chazen said. “We could have a very, very large increase in gas production if the prices were sensible. You ought to expect that all of the growth will come out of the oil business [in 2012].”

Among the three areas for oil or gas where Oxy has substantial interests — California, the Permian Basin and the Bakken Shale — Chazen is bullish on California and Permian but lukewarm on the Bakken because of various constraints. However, he said the company has no intention of exiting the Bakken; it is just cutting back there for the immediate future.

“If you look at where the oil is in the Lower 48 states, it is in California, the Permian and the Bakken, and the latter right now has labor issues because the boom has basically overwhelmed a small place with all the drilling activity. We’re frankly looking, at the right price, to add to our position there and build it out as a long-term resource, but right now, given the other two [U.S.] resource areas, it is just not effective for us, although it might be effective for someone else to compete for capital. It is not effective for us to compete for capital [in the Bakken] and that’s why I am slowing it down. That money is much better used in California or West Texas.”

Over time, Chazen said, Oxy intends to be in the Bakken because the company is “fundamentally a domestic oil producer.”

In California, Chazen said Oxy is producing “a modest amount” of natural gas liquids (NGL) because pricing for the liquids in California “is fundamentally better than the rest of the United States.”

Regarding the new gas plant in Elk Hills, Chazen said when the facility was planned two years ago, Oxy was intending to step up its gas drilling in the state. That all has changed now, so while if the company drilled all of its gas acreage it could “easily fill up the new plant,” but that is not going to happen any time soon, he said.

“We’ll have to defer that [gas drilling] some,” Chazen said. “What we hope to do longer term is get a little more NGLs and a lot more reliable gas production out of the new plant. What exactly it will be able to do, we’ll be able to see in the third quarter [when it starts operating].”