The Two Most Profitable Oil Plays In The World

Two companies are dwarfing “big oil” in profit margins and reserves. They’re about to hand investors a double in the short run…

No one knows if the price of oil will continue breaking records - but one thing is certain:

The biggest oil companies are hardly the best oil investments.

Four of the six “majors”- Royal Dutch Shell (RDS-B), BP (BP), Chevron (CVX) and ConocoPhillips (COP) - have profit margins that fall below the S&P energy-stock average of 9.7%.

And of those four, Chevron and ConocoPhillips are the only ones whose shares are actually higher than they were a year ago.

The fact is that companies outside of the “Big 6″ are handing investors the best returns.

Two in particular stand out as potential triple-digit plays. The first is China’s largest producer of offshore crude and natural gas. It not only supplies the mainland’s thirst for energy, but it has a whopping with 2.6 billion barrels in reserves.

Its huge reserves are growing in value with every up tick in oil prices. Add in a dividend of $1.13, and this company’s prospects sing to both short- and long-term investors.

It also has one of the highest profit margins in the industry - with translates to stock appreciation, as you’ll see in a moment.

The second high-profit play is in Europe, with operations expanding throughout the globe. It’s the world’s leader in deepwater exploration technology, which means it spends significantly less time and money finding oil than its competitors.

That’s a major advantage - and it shows. It just trounced Wall Street estimates by 34.29% for the first quarter. And it pumps out a healthy 2% dividend.

This exclusive report gives the details on both and shows why they are two of the best oil plays available in this time of soaring prices.

The Most Profitable Oil Company… Period

No other oil company is nearly as profitable as Hong Kong-based CNOOC Ltd (CEO). The offshore oil and natural gas explorer has a jaw-dropping profit margin of 34.45%, more than quadrupling those of four supermajors - ConocoPhillips (6.75%), Royal Dutch Shell (8.35%), BP (8.40%) and Chevron (8.61%).

CNOOC has four oil production areas offshore China, as well as offshore oil facilities in Indonesia and certain upstream assets in regions, such as Africa and Australia.

As of December 31, 2007, it had about 2.6 billion barrels of reserves. And CNOOC’s proximity to mainland China and other emerging economies ensures that its oil doesn’t stay in the barrel very long.

You see, all it takes is a stroll down the street in China to see that demand for oil and gasoline is going to increase far faster than most U.S.-based analysts would ever believe - or understand.

“Nowhere is that more evident than China where I’m traveling now,” Money Morning Investment Director Keith Fitz-Gerald said recently while leading an investor’s tour of the Red Dragon. “Beijing alone is adding 1,500 cars a day. Across China, the number is obviously higher. The same is true in India, but to a lesser degree.”

According to Fitz-Gerald, every investor must have a China strategy. And that especially holds true for the energy sector.

And CNOOC Ltd. is a prime candidate to fulfill both the “China” and “energy” portions of your investment portfolio.

Because let’s face it: China isn’t going to stop growing anytime soon. Incomes are rising and all the major automobile makers are setting up billion-dollar plants there.

Patient investors may be handsomely rewarded in the long-term, as CNOOC is uniquely positioned to capitalize on China’s thirst for oil for decades.

And given the weak dollar, CNOOC could also be on the prowl for acquisitions, which would further boost its earnings potential.

Going Deep on Petro Profits

A company can make all the money in the world, but it won’t turn a profit if it drains its wallet in the process - especially as oil prices climb.

Norway-based StatoilHydro ASA (STO) is an integrated company that’s involved in nearly every element of the oil and natural gas industries - a business model that saves hundreds of millions in outsourcing costs and adds just as much from multiple income streams.

Specifically, it produces, transports, refines, markets and sells oil and natural gas - both regionally and worldwide.

And that’s a major reason why StatoilHydro saw its year-over-year net income rocket 62% in the first quarter. The company also bested Wall Street’s first-quarter estimates by 34.29%, serving investors a 94-cents-per-share profit compared to its 70-cent forecast.

All totaled, Statoil has 7,000 kilometers of pipeline from the Norwegian continental shelf to Europe.

It’s now the world’s largest energy operator in waters more than 100 meters deep, producing an average of 1.7 million barrels of oil equivalent per day. It has proven reserves of more than 6 billion barrels of oil, has operations in 40 countries and is expanding aggressively to diversify internationally.

Statoil’s front-end operations are ubiquitous in northern Europe, where its network consists of about 2,000 Statoil-branded service stations, 470 tanker trucks and 99 depots spanning eight countries.

But more pertinent in the face of an energy crisis, StatoilHydro sends out one-third of its total daily output - about 600,000 barrels of crude and other fuels - to the United States.

In March, the company announced plans to spend as much as $2.1 billion on operations in Brazil and the Gulf of Mexico. It bought the 50% stake it didn’t already own in Peregrino, a heavy oil field in Brazil, and 25% of the deep water Kaskida discovery in the Gulf of Mexico, from the Texas-based Anadarko Petroleum Corp.

Statoil’s cost-effective operations are maximizing the record revenues it’s seeing from high oil prices. And its globally integrated operations ensure the company will generate more revenue streams and better returns for investors.

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Comment by sherry

2008-12-25 07:08:22

We seriously need to get on with becoming energy independent. Utilizing alternative energy sources would not only lessen our dependence on foreign oil it would create cheap, clean energy, as well as create millions of badly needed new green collar jobs. This past year the high cost of fuel seriously damaged our economy and society. It destroyed every imaginable budget from national to state to the local school. While some are foolish enough to be doing the happy dance around the lower prices at the pumps they are totally missing out on the news that OPEC is planning to cut production and raise the price per barrel back up to between 75-100 bucks again. I just read Jeff Wilson’s new book The Manhattan Project of 2009 Energy Independence Now. you can see it @ http://www.themanhattanprojectof2009.com It would cost the equivalent of 60 cents per gallon to charge and drive an electric vehicle. The electricity to charge the vehicle could come partially or totally from electricity generated by wind or solar. One of the most fascinating facts in the book is that …If all gasoline cars, trucks, and suv’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. Why don’t we use some of the billions in bail out money to bail us out of our dependence on foreign oil? We must move forward as nation towards energy independence. Oil is finite, it will run out one day in the not too distant future.

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Comment by kenneth

2008-12-25 16:18:35

this sounds great. but the problem is that everyone wants the party to keep on as it is. though days are over, most likely forever. people will just have to face the facts that we will be facing a sharply reduced standard of living. nothing will adequately replace oil in it’s myriad of uses, it’s ease of distribution, energy density, and energy return on energy invested. it sounds so easy to retrofit over 200,000,000 vehicles in the u.s., a load that great would in all probability would bring down our approaching third world electrical grid. wind, solar, nuclear, while all are technologies that must be explored do not address the fact that this is a liquid fuels problem. the iea just released it’s annual energy outlook, where it stated that the producing oil fields of the world will begin declining at a rate of 9.1% a year, if trillions of investment in the oil infrastructure is not implemented soon. in today’s economic climate i don’t know where that’s coming from. so look at the dilemma we face, with declining oil prices, we get less exploration, which will lead to less supply exactly when we need to grow world economies. but if you have declining production, little investment, at the same time you are trying to spur economic growth, while trying to switch to alternatives, you just won’t have the supplies to accomplish all of this. because to develop any type of alternative energy infrastructure will require vasts amount of cheap, easily accessible oil. those days may be gone.

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