As you probably know by now, I believe strongly that -- despite the rapt attention that's unfailingly paid to the weekly release of energy inventory statistics -- our longer-term oil supply situation is precarious. I therefore recommend that Fools not neglect this all-important sector in their portfolio allocations.

And while I feel that there are some real gems to be found among the independent producers (especially those with a bias toward natural gas) and the smaller oilfield services companies, I also believe that the major integrated producers and the worldwide services companies should be represented in Foolish portfolios. For that reason, I frequently point to ExxonMobil (NYSE:XOM) as an ideal proxy for energy's producing, refining, and chemicals sectors.

It's difficult to ignore that company's return on equity, which tops 35%, along with an enterprise value divided by EBITDA of a little more than 5.5. Throw in a forward dividend yield of about 1.7%, and I believe you have the makings of a good starting point for oilpatch investing.

But even among the integrated companies, ExxonMobil is hardly the only attractive game in town. For instance, I believe that there's real value in the international operations of U.S.-based players ConocoPhillips (NYSE:COP) and Chevron (NYSE:CVX), along with the United Kingdom's much-maligned BP (NYSE:BP). I must confess that ConocoPhillips is high on my list of favorites, so I hope you'll join me as I examine the company and its far-flung operations.

Let's begin with some pretty compelling numbers for the company: First, based on its $77.30 close on Tuesday and expectations that it will generate about $8.78 in per-share earnings this year, its forward P/E is near just 8.6. Its PEG, based on 2007 estimates and five-year analyst earnings growth estimates, stands at 1.26; its enterprise value-to-EBITDA is less than 4.0; and its forward dividend yield is a compelling 2.2%.

A Utah-Oklahoma heredity
ConocoPhillips was formed from a couple of colorful companies. One part, Continental Oil and Transportation, was born in Utah back in 1875, three decades before brothers Frank and L.E. Phillips hit a string of 81 productive oil and gas wells and formed Phillips Petroleum Co. in eastern Oklahoma. The two companies operated separately until 2002, when their merger was considered a big-time event in the world of energy.

But where does ConocoPhillips operate and make its money? Recall that, as oil and gas prices ebb and flow, those companies that are most integrated likely will be best able to smooth out their earnings patterns. For its part, ConocoPhillips is involved in all phases of the energy business and in most of the world's major producing horizons. Its nearly 40,000 employees are in 40 countries, and its annual report has been printed in six languages, including Bahasa -- the national language of the Republic of Indonesia.

Its upstream, or exploration and production, operations in North America make it the largest oil and gas operator in Alaska, and it is neighboring Canada's third-largest oil and gas producer, with a host of operations in three provinces. In Alberta, it is both a conventional oil and gas producer and an operator of oil sands mining and extraction projects.

In the U.S. lower 48, it's busy in many of the key producing areas, from the onshore and offshore Gulf Coast to most of the continent's other major oil and gas horizons. Last year, its acquisition of Burlington Resources, a major independent U.S. producer it bought for $35.6 billion, gave a big boost to its U.S. presence.

A roving producer
Conoco also can be found in most of the international energy hot spots, including the North Sea and on the other side of England in the East Irish Sea. In Africa, it has operations or acreage all along the Mediterranean, and in the Middle East, it can be found primarily in Qatar and Dubai. In China, it's working in several key offshore fields, as well as onshore in Sichuan province.

In South America, ConocoPhillips is one of several major producers parrying with Venezuela's President Hugo Chavez as he employs his nationalization plan in the Orinoco basin, and it also operates on that continent from Colombia south to Peru.

Doubling back to the Middle East, Fools who now recognize the increasing prominence of Russia in the world's energy picture may be interested to know that ConocoPhillips and Russia's Lukoil are involved in a production-sharing agreement to develop the West Qurna field in Iraq. This agreement is an offshoot of ConocoPhillips having acquired 20% of Lukoil. Indeed, because of that holding, Conoco shareholders automatically become indirect investors in the Russian oil giant. 

Downstream (in refining and marketing activities), Conoco owns a dozen refineries in North America, making it the second-largest refiner in the U.S., and also owns or has interests in six refineries in Europe and one in Malaysia. It markets its gasoline and distillates through thousands of branded outlets in the U.S., Europe, and Asia.

The company also participates in natural gas gathering, processing, and transportation through its 50% interest with Spectra Energy (NYSE:SE) in Denver-based DCP Midstream, and in the chemicals sector through a 50-50 joint venture with Chevron in the creatively named Chevron Phillips Chemical Co. LLC. And it's invested in several emerging businesses, including technology solutions, gas to liquids, power generation, and emerging technologies.

So there you have it. In my opinion, given its extremely attractive metrics and the international scope of its operations -- and perhaps a little sweetener in the form of its Lukoil investment -- ConocoPhillips represents a player that Fools with an interest in energy should watch ever so carefully.

For related Foolishness:

Spectra Energy is an Income Investor selection. Want to get paid to invest? Analyst James Early can show you how with a free trial of the newsletter service.

Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool has a disclosure policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.