I have been searching for companies profiting from oil exploration in difficult environments: far into the ocean, deep under the ground, or locked in the Alberta oil sands. My search recently led me to Spinnaker Exploration (NYSE:SKE) -- a small, independent player that has turned deepwater exploration success into large gains for shareholders.

On Wednesday of this week, Spinnaker announced that it was the apparent high bidder on 16 tracts in the Gulf of Mexico. Thirteen are in deep water, and three are located on the continental shelf, increasing their net acreage by about 10% in the region. The new properties continue the trend of more deepwater drilling, particularly for Spinnaker. Deepwater sources were only 3% of its total production in 2002. In 2005, deepwater production is projected to be 40% of the total.

Spinnaker's success has not gone unnoticed. Shares have more than doubled over the past two years. The current P/E of 25 seems to indicate that future earnings growth is already priced into the shares. The growth estimates are based upon increasing oil production combined with continued high oil prices. The increase in production has already started with the first deepwater site beginning production in December 2004 and with several others entering production in 2005. (The first successful wells were drilled in 2001, but it typically takes three to four years to bring a site into production.)

While Spinnaker has done a great job carving profits out of the Gulf of Mexico, it is not quite what the folks at Motley Fool Hidden Gems are looking for. Spinnaker does not dominate its niche; rather, it competes with much larger exploration companies such as Anadarko (NYSE:APC), Apache (NYSE:APA), and Burlington Resources (NYSE:BR), to name a small few. Insider ownership is less than 1%, and free cash flow remains negative because of huge capital expenditures. While the prevailing tailwind will probably carry Spinnaker along, I'd prefer to stack the odds in my favor in case oil never does get to $100 a barrel.

Read more about the oil exploration companies in the following:

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Fool contributor Robert Aronen does not own shares in any company mentioned but suspects that oil really might get to $100 a barrel.