Occidental Petroleum Corp., Los Angeles, (NYSE: OXY) plans to acquire oil and gas assets from Plains E&P Co., Houston, (NYSE: PXP) for $865 million in cash. The properties are adjacent to Occidental's existing operations in California and the Permian Basin in West Texas and will add proved reserves of approximately 56 million BOE.

The transaction will be financed from cash on hand. Lehman Brothers and Randall & Dewey, a division of Jefferies & Co., assisted PXP in the sale process. Closing is expected in October.

The sale encompasses the entirety of PXP's previously announced divestment program including interests in the Asphalto, Buena Vista and Mount Poso fields in the San Joaquin Valley; the Sansinena Field in the Los Angeles Basin; the Pakenham Field in West Texas; and various minor properties. The properties currently generate sales volumes, net of exchange-related gas volumes, of approximately 7,200 BOE per day.

Jim Flores, PXP chairman, president and chief executive, says, "This quickly executed divestment allows us to accelerate our realignment of personnel and management responsibilities on our remaining properties that have growth potential for the next several years...We intend to use the proceeds for debt reduction and to continue repurchasing shares."

Ray R. Irani, chairman, president and CEO of Occidental, says, "This transaction is consistent with our U.S. strategy of focusing on our core geographic areas in California and Texas. We plan to apply the techniques we have used successfully to enhance production in our other U.S. operations. We expect to substantially increase the current production rate of 8,900 net BOE per day within the next few years.''

Standard & Poor's says the acquisition will not affect Occidental's credit ratings (A-/Stable/A-2). "The acquisition comes on the heels of a large dividend increase and expansion of the company's share-repurchase program, the loss of 7% of its production through termination of its operating contract in Ecuador, and its $3.8-billion acquisition of Vintage Petroleum earlier this year," S&P reports.

"Although none of these events is credit-friendly and they are a departure from several years of fiscal restraint, core operations remain strong and expected robust near-term oil prices should allow Occidental to fund these actions from cash flow while comfortably maintaining a financial profile consistent with the ratings."



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