Oil and gas exploration and production major Occidental Petroleum (NYSE:OXY) has had a rough past few months. After trading above $100 per share as recently as early September, the stock has collapsed since then all the way to $86 per share. This is all about oil; since the price of oil is down, so is Occidental Petroleum.

The sell-off continued after Occidental provided third-quarter earnings. Occidental suffered last quarter not just from falling oil, but also from rising costs of production. Earnings were down significantly, and the big question for investors now is whether a recovery is on the horizon.

Here is a rundown of why now might be a good time to take a fresh look at Occidental Petroleum.

Production growth outweighed by oil
Occidental Petroleum has a strong asset base that is producing excellent operating results. The company produces oil and gas from some of the premier oil fields in the country, including the Permian Basin. That's how last quarter, Occidental managed to grow domestic oil production for the fifth quarter in a row. In all, domestic production grew 7% last quarter year over year.

Occidental is at the center of the ongoing oil and gas production boom taking place in the United States. But unfortunately, this isn't benefiting the company's bottom line, because oil prices are crashing. The price of crude oil in the United States recently dipped below $80 per barrel, which represents a severe decline considering oil was well over $100 per barrel just a couple of months ago. This, combined with rising costs of production, caused Occidental's earnings per share to fall 20% year over year, to $1.55.

Occidental's strategy has been to keep production ramping up, even in the face of declining oil. Capital expenditures grew 14% last quarter, as the company aggressively expands production in its key areas of development. This would look like a genius move if oil prices were supportive of higher spending, but in fact the opposite is occurring, which calls management's strategy into question. That's especially true since it's likely that further pain is in store. Earnings are likely to continue falling, with oil now well below Occidental's realized price of $94 per barrel last quarter.

Some good news
To be sure, Occidental Petroleum does have a lot to offer. First, the stock is attractively valued. Shares of Occidental trade for 12 times trailing earnings and 13 times forward earnings estimates, which are both significant discounts to the relative valuation of the broader stock market. Investors are clearly not expecting much from Occidental going forward, which means that the drop in oil is priced in. If oil recovers, Occidental will greatly benefit, and its valuation multiples should expand if the company can manage to beat the dour expectations.

Plus, Occidental Petroleum pays a nice 3% dividend yield, which at least serves as some consolation if the stock's declines continue. Occidental also returns cash to shareholders by buying back stock. Occidental repurchased 21 million of its own shares last quarter. This will help boost earnings going forward, and it's wise for management to buy back its own shares when the stock is cheap.

Now looks like a good time to buy
Obviously, the over-arching question regarding Occidental Petroleum's future outlook is the price of oil. As an upstream operator, Occidental's fortunes are almost entirely tied to changes in oil prices. Unfortunately, whether the stock is a clear buy right now is difficult to outright predict, because oil is volatile. Fluctuations in oil prices are based on many factors, including supply and production levels, as well as factors beyond Occidental's control such as a strengthening U.S. dollar.

However, if investors were considering Occidental but were waiting for a pullback before buying in, they got it. Occidental is a profitable company and its operations are strong. The company continues to increase production, making it clear that it isn't deterred by falling oil. The stock is modestly valued and pays a solid 3% dividend yield, so there are margins of safety if oil keeps dropping. The bottom line is that while further downside is absolutely possible, now is a good time to consider Occidental Petroleum.

Bob Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.