What More Can Occidental Petroleum Do?

If you want to be a value guy or gal, you've got to accept the fact that you're going to run contrary to the herd. You're going to like things the herd doesn't like, you're going to dislike its favorites, and you're going to take flak for both. That leads me to my biggest problem with Occidental Petroleum (NYSE: OXY). I love this near-major oil and gas company, but so does everybody else -- analysts (17 buys out of 21 ratings), Jim Cramer, and so on.

That's not to say that the results aren't good, because they are. Revenue was up 38% in the first quarter as the oil/gas business posted 49% top-line growth and chemicals grew 17%. And though operating costs are creeping up, overall segment earnings still grew 44% this quarter. All in all, then, plenty to like, right?

Production statistics were also solid for the quarter. Occidental Petroleum produced about 13% more oil and gas on a per-barrel basis, with about half of that coming from the acquisition of Vintage. And projects in the Middle East and North Africa continue to make progress and will certainly play a role in what should be above-market production growth for the next few years.

Of course, it's not all champagne and roses. The government of Ecuador is making some noise about international energy companies making too much money off of the country's energy and seems to be trying to unilaterally rewrite contracts. If that goes through, that could cut Occidental's profits from the area by half. The company is also considering getting into the refining business, and while I can understand the attraction, there could be higher-than-expected costs.

I like Occidental. I like it a lot. It's slated for good production growth and already produces very good profit margins. It's quite efficient, quite good at replacing reserves, and has pretty attractive finding costs. The hitch, though, is price. I also happen to really like Apache (NYSE: APA), XTOEnergy (NYSE: XTO), and Houston Exploration (NYSE: THX), and those all seem to have more upside at today's prices, even factoring in the different risk profiles.

Click for more Foolish ideas from the energy sector:

• Cash-Rich Growth From Occidental
• Apache Sticks to Its Knitting
• Does XTO Mark the Spot?

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).