Occidental Petroleum (NYSE:OXY) stock has made a stunning comeback since late 2020 on two major catalysts.

The first was the epic run-up in crude oil and natural gas prices. The second was the accumulation of a large position by Warren Buffett’s company, Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B). The result is that OXY stock has soared by more than four-fold.

After this incredible run, future gains are most likely going to arrive gradually. However, do not take this to mean that “the party’s over” with OXY. Sure, a growing number of stock market commentators are now taking a bearish stance on the stock.  Yet take a look at the details, and it’s clear their pessimism is unfounded.

Put simply, this stock isn’t on the verge of giving back its 2022 gains in 2023. In fact, quite the opposite. Let’s dive in, and find out why Oxy stands to stay a winner.

Debunking the OXY Stock Naysayers

Occidental Petroleum may have a seal of approval from the “Oracle of Omaha,” but that hasn’t stopped the skeptics from laying out a bear case for the stock.

This take on OXY stock is predicated on the view that the global economic slowdown will further soften oil demand. In turn, putting more pressure on oil prices. However, while crude oil and natural gas prices may not be heading back to their respective 2022 highs, that doesn’t mean a full return to 2021 levels is in store.

At least, that’s the takeaway from the latest forecast from the U.S. Energy Information Administration. Per the EIA’s latest short-term energy outlook, crude oil prices are expected to average around $89.33 per barrel in 2023. That’s a price moderately above current levels (around $81.43 per barrel), and well above average prices reported in 2020 and 2021 ($39.17 and $68.21 per barrel, respectively).

Given the prospect of another tightening of supply, and a sooner-than-expected rebound in Chinese demand, this forecast makes sense. If it plays out, Occidental’s earnings could hold steady near expected 2022 levels ($10.03 per share), as opposed to dropping by 22%, as currently anticipated.

Parlaying Record Earnings into Continued Gains

Don’t expect OXY stock to more-than-double in price next year, as shares have done so far this year (up 123.7% since January). That said, while Occidental’s next doubling-up may be several years down the road, there is a path for shares to deliver strong returns in the years ahead.

Why? For starters, the underlying value of each OXY share will likely continue to rise, as the company uses its record-high earnings to repay debt and repurchase shares. This year alone, Occidental has reduced its outstanding debt by $9.6 billion and has spent $2.6 billion on share repurchases.

Besides increasing the value of Occidental’s equity, paying down debt leaves the company in a better position to increase its dividend, perhaps back to its pre-pandemic rate of payout (79 cents per quarter). Bringing back the dividend to or near its high-water mark would provide an additional lift to long-term returns.

Atop the debt reduction and return-of-capital efforts, there is also a growth catalyst at play. As I’ve discussed previously, Occidental Petroleum’s now-nascent direct air capture business could bolster its existing fossil fuel business, and become a profitable segment in its own right.

Bottom Line

If you already own OXY, there’s no need to “take the money and run.”

If you have yet to add it to your portfolio, feel free to do so. Although shares have appreciated substantially over the past two years, you haven’t “missed out” completely on this opportunity.

Current trends remain favorable for oil prices. This will enable the company to maintain high earnings, which it can put to work further increasing shareholder value. Over a longer timeframe, this fossil fuels giant could reap unexpected rewards from the global push for net-zero carbon emissions.

Alongside these catalysts, this stock remains undervalued. Shares trades for less than seven times estimated 2022 earnings.

With a strong chance of delivering solid returns in the years ahead, OXY stock is still one of the best energy stocks out there to buy and hold.

OXY stock earns an A rating in Portfolio Grader.

On the date of publication, Louis Navellier had a long position in OXY. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.