While the broader energy sector stands to benefit from rising oil prices, companies that focus on exploration and production are in the sweetest spot.
Companies like Apache (APA) and Anadarko Petroleum (APC) boast better profit margins because higher oil prices have a stronger correlation with higher revenues, said Colin Moore, chief investment officer at Columbia Management.However, big, integrated oil companies can take a hit on their oil refining business as a result of lofty crude costs.
Increasing oil prices also give exploration and production companies the financial flexibility to consider more expensive exploration projects, such as smaller or remote oil fields, while still turning a profit.
The companies can be captured through the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
Iran, demand, speculators and potential problems at refineries are all responsible for the nearly 50 cent rise in gas prices over the last two months.
