Is it possible that, in an era of growing hysteria over Peak Oil, the industry could actually find a new oil and gas field in a so-called "mature" area of the U.S., where oil and gas exploration and development has been ongoing for nearly 100 years? (For a primer on the oil industry, refer to our Oil and Gas Industry Primer.)

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Occidental Petroleum (NYSE:OXY) did just that last week when it announced the discovery of a new oil and gas field in Central California. The company said that the field contains anywhere from 150-250 million barrels of reserves. The field is in Kern County, California, and is two-thirds natural gas.

The new field is also classified as a conventional resource, and is not the typical shale field that gets a lot of publicity in the media. If the company does not need to use hydraulic fracturing to develop this field, it will make development cheaper, and easier both operationally and on a regulatory basis.

The company estimated the reserves based on six wells drilled, and strongly hinted that there are future additional reserves coming out of the "small producing area" where the six wells are, according to Steve Chazen, the President and CFO of the company.

Occidental Petroleum holds 1.1 million acres in the state, and believes a similar find may be present in its acreage outside Kern County as well. Dr. Ray Irani, the CEO of Occidental Petroleum said, "We believe it to be probable that there are additional reserves outside the outlined area."

Analysts were clearly excited during the conference call that Occidental Petroleum held, and peppered management with questions on the find. The company did not give out many details due to competitive issues. However, some details did come out. Occidental Petroleum believes its finding and development costs will be less than $10 a barrel.

Investors should look at this news in the context of the industry as a whole. If Occidental Petroleum could discover a huge field in a mature area that has been picked over for 100 years old, how many unknown fields do you think there are in Saudi Arabia or Iraq?

There are several other publicly traded oil producers in California that bear investigation to see if they have exposure to this play:

December 2008 Oil Production

Aera Energy LLC - 164,627 barrels per day
Berry Petroleum (NYSE:BRY) - 14,668 barrels per day
Chevron (NYSE:CVX) - 185,124 barrels per day
Plains Exploration and Production (NYSE:PXP) - 36,471 barrels per day
Venoco (NYSE:VQ) - 4,763 barrels per day

Aera Energy LLC is jointly owned by Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS.A)

Occidental Petroleum seemingly did the impossible last week, and announced the finding of a new conventional oil and gas field in California. Although the total reserves are just a pittance compared to the energy needs of the U.S., this find must have been just a little discomforting to those who preach the peak oil mantra.

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Tickers in this Article: OXY, CVX, XOM, VQ, PXP, RDS.A

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