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, BP, Chevron and ConocoPhillips - 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. 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."

[Editor's note: As the economies of China and India soar, the investment opportunities in each have become staggering... though not all are winners. "The Essential Investor's Playbook" lays out more than a dozen stocks that will best capture profits in both emerging economies.]

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 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.

[Editor's note: A former head of research for Merrill Lynch released a "tell all" document today... detailing how to buy oil for just 25 cents a barrel... and cash it in for an outrageous short-term gain.]

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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