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Will Asset Sales Boost Occidental's Stock?

NEW YORK ( TheStreet) -- Occidental Petroleum (OXY) is looking to sell about 40% of its assets in the Middle East and North Africa, perhaps in the hope that a sale will help lift its stock, the way asset sales boosted the stock of Apache (APA - Get Report), another U.S.-based energy company.

Despite the asset sales, the two companies will continue to go after growth in the Middle East. Occidental will spend an additional $300 million in its core markets in the Middle East while Apache has applied for additional leases in Egypt.

Apache's officials have repeatedly said that the unrest in Egypt hasn't hurt the company's operations. But the crisis is not making operating in the Middle East more attractive. Last August, markets cheered when Apache announced the sale of Egyptian assets. The shares -- which traded recently at $82.79, up 70 cents -- rose 9% on the day after the company announced it was selling one-third of its assets in Egypt to China's Sinopec(SHI).

Shares of Occidental's shares, meanwhile, have risen by 13% during the last 12 months. They were recently trading at $94.38, up 1%.

The company was looking to sell assets to a consortium of state-owned enterprises from Oman, the United Arab Emirates and Qatar. According to Bloomberg, however, the company could not secure the deal because of the political rift between Qatar and other Arab countries. Unlike its peers, Qatar has been supporting the Muslim Brotherhood in Egypt.

As a result, Occidental is considering breaking up its assets instead of selling it to a single investor group.

Occidental has exposure to the Middle East with operations in Bahrain, Iraq, Libya, Oman, Qatar, U.A.E. and Yemen. It has more than 15 million acres of oil and gas assets in the Middle East that account for more than a third of its global oil and gas production.

The company is the second biggest oil producer at offshore Qatar and one of the largest oil producers in Oman. In Bahrain, Occidental is redeveloping the country's first oil field that was discovered back in 1930s. In Iraq, Occidental is developing the giant Zubair oil field, located in the southwest region.

Occidental's plans to sell its assets in the Middle East are part of the larger drive by major oil companies looking to sell overseas assets and refocus on North America.

Apache is also looking to divest in the Middle East. However, unlike Occidental, Apache is a major player in Egypt. In the final quarter of 2013, Apache got 22% of its output from Egypt, the biggest source of its production behind North America.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Sarfaraz A. Khan is an independent capital market analyst and a finance writer. Khan earned an MBA from the University of Aberdeen in the U.K. His specialty is energy stocks. He also covers consumer goods, services sector, technology stocks, emerging markets and ETFs.

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