As I argued (somewhat successfully, I hope) in the article "Can Oil Still Power Portfolios?", high oil prices are going to be with us for the foreseeable future. This scenario seems to be gaining traction, as Morgan Stanley just raised its forecast for oil to $57.50/barrel in 2006 and $55/barrel in 2007 (upping its estimates 15% and 22%, respectively), while the Energy Information Agency (EIA) went even further, projecting oil at $65/barrel and $61/barrel over the same time period.

Crudely put, Wall Street estimates for the oil patch in 2006 look to be low, especially for the major oils, and that represents a golden (black gold, that is) opportunity for investors.

Sounds like a bold assertion, right? No, not really, given that the $65/barrel estimate for 2006 represents a 16% increase over the $56/barrel average in 2005. Also consider that many of the (hopefully) one-time disruptions (hurricanes Rita and Katrina, BP's Texas refinery explosion, labor strikes at Motley Fool Income Investor pick Total SA's (NYSE:TOT) Normandy refinery, etc.) that affected various companies are easing and that production growth among the major oils is expected to accelerate.

In plain English, the major integrated oils will produce more oil and realize higher prices than in 2005, not to mention the fact that, according to Morgan Stanley, refining margins should also improve from the $6.20/barrel they averaged over the past five years to approximately $11/barrel in both 2006 and 2007.

So what's the retail investor to do? In my humble opinion, I would suggest looking among the major oil companies for ones that boast renewed production growth and superior reserve replacement rates. Also look for companies with significant exposure to refining and ample cash flow that can be used for expanded share buybacks and increased dividends.

While a number of companies meet these criteria in the current environment, two of my favorites are ExxonMobil (NYSE:XOM) and BP (NYSE:BP).

The patriarch of the major oil clan, ExxonMobil has been around for 123 years, remains the largest publicly traded integrated oil company in the world with a market cap in excess of $372 billion, has paid dividends for over a century, and has managed to increase its divided payouts for 23 consecutive years. It's also the most diversified major company, operating in 200 countries and having interests in more than 46 refineries around the world.

That's some pedigree, isn't it? Yet for all its history, ExxonMobil never put together a year quite like the one it treated investors to in 2005.

For fiscal 2005, ExxonMobil recorded revenues of $371 billion and earnings (excluding one-time items) of $33.8 billion, representing increases of 24% and 31%, respectively, over 2004. Incidentally, these figures reflect the highest results ever posted by a company.

The company generated operating cash flow (excluding crude payables) of $44.6 billion for the year, which enabled it to spend $17.7 billion on capital expenditures, while also returning $25.3 billion to shareholders in the form of $7.1 billion in dividends and $18.2 billion in share buybacks. Despite this largesse, the company still ended the year with $33 billion in cash and a mere $8 billion in debt. These results are all the more impressive because ExxonMobil's production actually fell 1% (excluding one-time items) during the year and its refining margins were hurt in the fourth quarter because of the residual effects of hurricanes Rita and Katrina.

Not too shabby, huh? Well, neither was ExxonMobil's reserve replacement rate. According the company, it was able to replace 112% of its reserves in 2005, including property sales (129% if you exclude the sales), and ended the year with 22.4 billion barrels of oil equivalents. Approximately 73% of the reserve replacement came from the politically stable Gulf country Qatar. This marked the 12th consecutive year that the company was able to replace more than 100% of its production.

Enough with the history lesson. Let's look at ExxonMobil's prospects in 2006. Unlike the 1% decline in overall production recorded in 2005, the company is expected to register production growth of 4% to 5% in 2006, and hopefully, its refining margins will not be affected by hurricane issues. In addition, ExxonMobil should be able to realize oil prices in the low- to mid-$60/barrel range, compared with the low-$50/barrel range average in 2005 and gas prices in the low $9 range versus the $8.58 average posted last year.

These improvements are expected to drive revenue to a new record of more than $430 billion and earnings in excess of $40 billion. Oppenheimer estimates that these results will enable ExxonMobil to generate over $51 billion in cash flow, which, based on historical metrics, will allow the company to buy back $20 billion worth of shares, pay out more than $8 billion in dividends, and easily fund $20 billion in capital expenditures.

You have to admit those are impressive numbers. Also, let's not forget that ExxonMobil is the industry leader in terms of return on capital employed (29%) and boasts the sector's lowest debt/capital ratio, at a mere 7%. Furthermore, the shares trade at a mere 11 times extremely conservative estimates of $5.77 (remember production growth acceleration, higher oil price realization, and the share buybacks?), with an implied growth rate of 8% (plus a minimum yield of 2.1%).

This makes the company the best play, in my Foolish opinion, for those risk-averse investors seeking to profit from the continued strength in the oil patch.

To be continued with a look at BP ... coming soon to a computer near you.

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Fool contributor Will Frankenhoff welcomes your feedback at Will does not own shares in any of the companies mentioned above. The Fool has an ironclad disclosure policy.