Fewer places to explore

But there's something else driving the price of Bakken and other potential production plays. Looking at the world, oil companies see a scarcity of promising areas for exploration and production. In their estimation -- especially when you factor in potential reserves that are off-limits because they're controlled by a national oil company in Saudi Arabia or Mexico or Venezuela -- there just aren't a lot of places to look for oil if you need to replace, let alone expand, reserves.

And that has produced a kind of global bidding war among oil companies eager to secure potential resources.

As an investor I think the strategy with the most potential profit in it is to think long term -- like a global oil company -- and buy what you think might be on their list of targets.

Invest in big oil's targets

In the United States I think that strategy means considering unconventional producers such as Pioneer Natural Resources (PXD, news) in the liquids-rich Eagle Ford shale formation. (That's the same formation where Petrohawk did business.) It's also worth considering other plays in the Bakken shale that operate next to Brigham Exploration.

Two stocks that I'd bring to your attention are Oasis Petroleum (OAS, news) and Whiting Petroleum (WLL, news). Oasis holds leases on about 303,000 acres in the 200,000 square-mile formation. Whiting has leases on 579,000 acres, mostly in the southern part of the basin. To date, most production has come from western North Dakota. The U.S. Geological Survey estimated in 2008 that the Bakken formation, the largest contiguous oil deposit in the United States, could contain 4.3 billion barrels of recoverable oil.

Outside the United States I'd be looking at Talisman Energy (TLM, news) (TLM.CN in Toronto) and Tullow Oil (TUWLF, news) (TLW.LN in London).

Here the game is big, new offshore discoveries that might be tempting to the international majors or to national oil companies looking to lock up future sources of supply. Talisman holds unconventional natural gas and oil leases in the U.S. Eagle Ford and Marcellus plays, but a bigger attraction is the company's 14.6-million-undeveloped-acre position in Southeast Asia. In 2011 Talisman has increased production in Indonesia and Vietnam and started new development projects in those countries and in Papua New Guinea. Talisman projects that production in Southeast Asia will grow at an average annual rate of 8% to 10% through 2015. Tullow's Jubilee field in Ghana is a major extension of the exploration horizon in western Africa -- it's not just about Nigeria anymore.

As acquisitions, both Talisman and Tullow would be bigger mouthfuls than an Oasis or a Whiting. But with cash so cheap, oil prices down and oil companies casting worried looks at the future, I don't think they're outside the current deal envelope.

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And at the worst, you'd be buying stock in oil companies that are themselves expanding production and that can expect the future price of oil to be higher than it is in today's soft global economy.

At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this column in his personal portfolio. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. The fund did own shares of Brigham Exploration and Oasis Petroleum as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund's portfolio here.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

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