Occidental Petroleum (OXY - Get Report) is having a good run right now. Year-to-date, shares of the $85 billion oil exploration and production firm have rallied nearly 13%, besting the broad market by a wide margin. And it's managed to turn out that performance by going against the grain with its growth strategy.
Unlike supermajors Exxon, Chevron, and ConocoPhillips, Occidental is a pure play on oil and gas production. The firm doesn't own refinery assets, and it doesn't own gas stations. But in many ways, that's a good thing -- refining and retail are lower-margin components of the business for integrated supermajors. By focusing on the big money part of the oil business, Occidental enjoys dramatically larger margins than the other three stocks.Much of OXY's growth comes from squeezing every last drop out of oil and gas wells that are approaching the far end of the production curve. While those alternative oil recovery strategies are costlier than traditional approaches, they're paying off in spades for Occidental's projects right now. By buying older wells cheaply in places like California, Occidental should be able to capture more cost-effective oil in the near- to mid-term. And for oil companies, recovery cost is king. Occidental Petroleum ranks as the fifth-largest energy position in institutional portfolios right now, thanks in part to a $13.6 billion increase in value in the fourth quarter. ( SAC Capital added 1.2 million shares.) Occidental shows up on a list of 5 Oil & Gas Stocks Headed Higehr in 2012. To see these stocks in action, check out the Institutional Energy Sector Buys portfolio on Stockpickr. -- Written by Jonas Elmerraji in Baltimore.
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