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I've been long oil and gas companies for a while. Getting ready to pair my positions back a bit though. Oil just missed $120 this week and though it might go higher it is pretty difficult to bet on that. I would look for individual oil and gas companies that appear to be undervalued based on their reserves. Gazprom and Lukoil are interesting since they seem to be priced well based on their reserves but there is probably a risk penalty associated with their being Russian companies.
Learn everything you can about energy companies. Read as many SEC annual reports as you can. Learn about crack spreads (refining margins) and what % of revenues for various companies typically come from refining. Oil is selling at a fantastic price right now but gas at the pump isn't high compared to the normal ratio so refiners are getting hurt. Also the higher the oil prices are the more companies want to drill so the cost of renting drilling equipment goes up squeezing profits some. There are just so many things to understand so do so.
Oil and Gas Journal is worth the subscription. Buy the book "Twilight in the Desert". Whether you agree or not with the premise you should understand the thesis. Also Boone Pickens book is pretty decent and he has a new one coming out. There's an old book by Kurt Wolff that you can still find that is very good as he details how to value oil and gas companies by discounting their reserves over a number of years. I think it is a late 80s book or something like that but still some good insights.
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