Ashland Oil Co. makes no bones about the business it is in -- producing cash, not oil.

And in pursuit of cash in the last two years, Ashland has done an extraordinary thing for a major oil company. As part of a "redeployment" strategy, it has sold off many of its oil wells and all but scrapped its research for new ones.

With the $1.2 billion it received for its oil properties, Ashland happily doubled its dividends, repurchased 15.5 million shares of its own common stock from the public, paid off part of its debt and, as of Sept. 30, had more than $400 million left with which it intends to buy some cash-rich non-oil company.

Yet Ashland also very much intends to remain in the oil business as refiner and marketer.

It is counting on the U.S. government to force other oil companies to sell it the crude oil it needs if it should run short. So far, it has succeeded.

Just the other day, a U.S. District Court upheld a government order that nine other large oil companies, ranging from Exxon down to Marathon, which is smaller than Ashland, sell the company 80,000 barrels of crude oil a day to replace most of the 100,000 barrels a day it lost in embargoed imports of oil from Iran.

"They sold off their assets in the North Sea, in Canada and the United States," complains a bitter executive with one of the nine, "while saying the government would take care of them if they got in a bind.

"Ashland is putting itself in position to be the first nationalized oil company," he continued. "I think it is the pits."

What enrages the other oil companies is that Ashland, in addition to realizing great amounts of cash, has neatly rid itself of the costs and risks of finding new wells and, in fact, has shifted these burdens onto its competitors.

With the success of its petition for an allocation of crude from other companies, Chairman Orin Atkins could write in the company's just-released 1979 annual report, "Ashland Petroleum Company, with its recently expanded refining capacity remains in an excellent competitive position despite the uncertainties of foreign crude oil supplies and prices."

Company executives were confident the government would come through because Ashland -- with $6.7 billion in sales and revenues last year, less than one-tenth the size of Exxon -- has operations concentrated in an arc running through the Ohio and upper Mississippi river valleys. A sharp cutback in operations at Ashland's seven refineries, which have a combined capacity of 475,000 barrels a day, could severely hurt that part of the country.

As its chief operating officer, John Hall, put in the annual report, "In light of the possibility of future petroleum product storages, our position is strengthened by the regional locations of our refineries; in some instances they are the only facilities capable of serving important markets."

When it appealed to the government late in November for an allocation of crude from other companies, Ashland never claimed that it could not replace the lost oil, only that it would cost $40 or more a barrel to do so on the spot market when it had been paying only $23.50 for Iranian light.

In fact, Ashland officials testified before the Office of Hearings and Appeals of the Economic Regulatory Administration, a part of the Department of Energy, that the company had lost 35,000 barrels a day of crude from Abu Dhabi not long ago strictly because of price.

Abu Dhabi, the largest Arab emirate, told Ashland it could still buy the 35,000 barrels a day but would have to pay spot market prices instead of the $21.56 it had been paying. Ashland declined to buy, Hall testified.

Ashland argued for the DOE crude oil allocation "to relieve the extreme hardship, gross inequity and unfair distribution of burdens which will be inflicted upon Ashland, its customers, and its marketing areas as a result of the unilateral action of the president of the United States in terminating the import of Iranian crude oil into the United States."

The "major integrated multinational" oil companies that would have to provide the oil could replace it either through exchanges with foreign oil companies still able to use Iranian crude or through spot market purchases, spreading the added cost to all their customers, or not replace it, spreading the resulting shortfall to all their customers, Ashland said.

In other words, the added economic burden ought to be shifted to the other companies, Ashland said, because they were bigger and had more crude and therefore they and their customers could absorb the losses more easily.

The sharpest rejoinder came from Marathon Oil Co., which ultimately was ordered to supply more than 10 percent of the 80,000 barrels a day.

"This is a case where one company simply does not want to pay spot market prices for replacement crude oil," the Marathon brief said. "Ashland simply doesn't want to invest in obtaining oil when it can rely on the government to force its competitors, who have undertaken those investments, to share their oil with it."

Marathon's total revenues in 1978 were slightly less than $5 billion, smaller than Ashland's but substantially more of it came from crude oil production. Marathon is the operator for the Brae field in the North Sea, in which Ashland sold its own interest this year.

Nine months ago, when Ashland was completing its deals, William Hartl, its director of financial communications, explained the sale this way to Oil and Gas Journal:

"We feel the profits have been taken from the oil and gas exploration production business through price controls and regulations. Most of the easy stuff has been found, and it's going to take increasing amounts of capital to find incremental amounts" of oil and gas.

"We're confident that we'll be able to purchase enough crude on the market to service our capacity. And if we can't, the government will step in and allocate."

Other Ashland executives argue it is good that Ashland sold the oil properties because its luck at finding oil has been poor.

But furious officials in other oil companies point angrily to Atkins' desire "to maximize cash generation" as the real reason for the sales. He has, for instance, explained sale of Ashland's Canadian wells on grounds that, while they were earning $20 million a year, that was not enough to pay for an aggressive exploration program and still contribute a fair share toward dividend payments.

It often takes a long time for exploration and development expenses to pay off. But cutting such expenses helps the bottom line immediately. Ashland's exploration and dry hole costs dropped from $66.2 million to $26.5 million in a single year.

Atkins' basic strategy, aside from generating more cash, has been to sell assets at full market value and use part of the proceeds to buy up Ashland shares whose price did not reflect the full value of the assets being disposed of. Both parts of the strategy give a great lift to per-share earnings, as the balance sheet shows.

Earnings per share shot up from $5.52 in 1978 to $15.55 in 1979. The return on stockholder equity nearly doubled, from 28.6 percent in 1978 to 54.9 percent this year. And the stock price jumped from a low of 20 1/4 last year to 41 1/8 this year, after adjustment for a three-for-two stock split.

Meanwhile, the government is left with a dilemma. What do you do it a refiner decides the best strategy these days is to have no crudes at all?

Energy Secretary Charles Duncan said, "We are in a very complicated situation respecting the cost of erude oil," which until the recent OPEC price increases ran between $18 and $51 a barrel on world markets.

"You have to consider what is reasonable and equitable," Duncan said of the effects of the embargo on Iranian imports. "To do nothing would cause gross inequities to appear between companies . . . We have a responsibility, where it is appropriate, to get into these kinds of situations."

Of Ashland, he said, "I think that, with the spirit of equity and fairness, the decision made was the right decision."

The nine oil companies now providing Ashland with that 80,000 barrels a day, however, vehemently contend that the decision significantly changed their competitive situation. In parts of Ashland's marketing area, they are in competition with Ashland. In those areas, Ashland is better off because of the crude oil allocation and they are worse off, they say.

In fact, Ashland's need for crude oil is increasing. Last April it completed a major expansion of its Catlettsburg refinery, and it has been seeking new customers.

One of Ashland's backers at the crude oil allocation hearing was fledgling Midway Airlines, which began operating DC9 commuter services out of Chicago's Midway Airport Nov. 1. A key to commencing operations was finding a contract for jet fuel, a precondition the new line's financial backers insisted upon. Ashland was the only company willing to sign such a contract, Midway officials said.

Another backer was Union Oil Co., which itself has since succeeded in an appeal to the government for other companies with lower crude oil costs somehow to compensate it for costs well above average.

Just before Christmas, the government ordered 14 large oil companies to sell Union 75,000 barrels a day of crude for December, 71,000 in January and 59,000 in February. As a result, Union will be able to cut its purchases of crude at high spot prices and so cut its average costs.The 14 companies will sell to Union at a price equal to the average cost of all their foreign crude purchases during November and December destined for the United States, plus transportation costs and a $1.50-a-barrel profit.

There are some significant differences in the Ashland and Union situations, even though the two companies' refinery capacity is about the same. sUnion produces more than one-third of its refineries' needs from U.S. wells and has smaller amounts of production abroad. This year it planned to spend more than $1 billion on capital investments, about three-fourths of it earmarked for exploration and development, a Union spokeman said.

So long as there is a wide divergence in world crude costs, with different companies affected in sharply different ways, the Ashland and Union problems will remain. And they can recur with every significant interruption of world oil production.

"The problem is how to maintain the incentive for a company to keep seeking crude supplies in this situation," said a top administration policymaker who had no answer to suggest.

This problem poses a challenge for critics who would like to see the oil industry broken up into companies producing crude, others refining it, and still others marketing the products.

Meanwhile, Orin Atkins' strategy is working beautifully, for Ashland, under almost just those circumstances.