Despite the fact that hundreds of companies of all sizes populate the oil sector, it always seems like it's the biggest names that get the most attention. If you're researching oil service stocks, it's easy to find news on companies like Halliburton (NYSE: HAL), Schlumberger (NYSE: SLB) and Transocean (NYSE: RIG). And if you're looking at exploration and production companies, names like Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX), the two biggest U.S. oil firms, dominate the headlines.

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That's all well and fine, but given that oil is constantly on the minds of investors and considering the sheer expanse of the industry, dozens of other worthwhile companies are worth looking at in the oil patch. Let's review a few of the less-heralded oil names that may be poised to deliver gushing returns to investors in 2010.
Murphy Oil (NYSE: MUR) - Market cap: $11.1 billion; 2009 performance 10%

Occidental Petroleum (NYSE: OXY) - Market cap $67.2 billion; 2009 performance 35%

Smith International (NYSE: SII) - Market cap $6.1 billion; 2009 performance -1%

Does Murphy's Law Apply Here?
Arkansas-based Murphy Oil is an independent oil and gas explorer with operations in the Gulf of Mexico, Canada, the U.K., Malaysia and Ecuador. Analysts expect Murphy to keep its 2010 capital spending roughly in line with its 2009 level of $2.2 billion to $2.3 billion, with the bulk of that devoted to upstream projects. Murphy is likely to devote $1.5 billion of that sum to development projects and spend a little more on exploration in 2010 than it spent in 2009.

Murphy is targeting 2010 production of 200,000 barrels per day, and its exposure to, shall we say, interesting locales such as the Congo and Malaysia could prove lucrative (or not) this year. Another source of interest could prove to be Murphy's interest in the Eagle Ford Shale of southwest Texas. Shale is hot right now as increasingly more oil firms seek exposure to these unconventional sources of natural gas. Murphy is treading lightly in Eagle Ford with a three-well drilling program currently in operation. The move is interesting for Murphy, considering the company primarily explores offshore. Investors may have to play the waiting game for Eagle Ford to really boost Murphy's bottom line. (For more information on the Eagle Ford Shale, refer to The Eagle Ford Shale Comes Of Age In 2009.)

A Sleeping Giant
With a market cap of over $67 billion, California-based Occidental Petroleum is one big company, and that size enables it to be a global player in the oil business. We recently highlighted a find by Occidental in its home state, but it is worth noting that Occidental is one of just two U.S. companies that won rights to develop Iraqi oil fields in the recent round of auctions there. The company also has a presence in South America.

Occidental was recently on the receiving end of a bullish write-up in Barron's, which noted that 74% of the company's reserves are in oil, compared to an average of 33% for its peer group - something that may serve the company well in 2010. The company has nearly $2 a share in cash and has a long-term debt-to-equity ratio of just 8% compared to an average of 33% for its rivals.

While Occidental isn't a high-yielding stock, the dividend is decent in dollar terms, and Barron's report cited one fund manager that is forecasting a dividend hike in 2010 of 15% to 20%. Even if we don't see a dividend hike, Occidental made an astute acquisition of Citigroup's (NYSE: C) Phibro energy trading unit in 2009 that could prove to be a boon for the shares in 2010. With some analysts saying the stock is under-appreciated at over $80, 2010 could be a big year for this oil giant if the Street wakes up to what is already a compelling oil story.

Is Smith's Slump Over?
Smith International was the laggard of this trio in 2009, but as an oil services company, its stock performance is intimately correlated to the price of crude oil. That makes Smith's 2009 negative return somewhat alarming, but the company did raise $717 million before the end of last year to reduce its debt load and possibly make acquisitions. The new year began well for Smith as the company landed a three-year contract from Brazil's oil giant Petrobras (NYSE: PBR) that could be worth $80 million to $100 million.

Bottom Line: Stick With The Big O
Some investors may be favoring natural gas or the big integrated oil names, but Occidental has the makings of a stock that you don't want to sleep on. A sterling balance sheet, fair valuation and the possibility of a dividend hike are alluring catalysts that could drive Occidental's shares higher in 2010. (Before jumping into this hot sector, learn how these companies make their money in Oil And Gas Industry Primer.)

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Tickers in this Article: SII, MUR, OXY, HAL, SLB, RIG, XOM, CVX, PBR, C

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