Energy stocks are in favour today but it is Woodside Petroleum Limited (ASX: WPL) that is leading the charge after it released its March quarter production report.
Shares in Woodside jumped 1.9% to $35.91 in early trade compared with a 1.4% gain in the S&P/ASX 200 Energy Index (Index: ^AXEJ) (ASX: XEJ) as its peers Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH) opened 1% higher at $7.77 and 0.8% stronger at $8.10, respectively.
Even Origin Energy Ltd's (ASX: ORG) 1.7% gain to $12.33 is trailing Woodside, despite Origin announcing a positive update on the Irwin-1 exploration well that is located in the onshore Perth Basin in Western Australia.
A rally in the oil price for the fifth consecutive trading session is buoying the sector. The West Texas Intermediate (WTI) crude oil benchmark gained 0.5% to $US53.55 a barrel in overnight trade.
The market also liked the fact that Woodside is sticking to its full year production guidance even though cyclone activity curbed liquefied natural gas (LNG) and oil volumes earlier this year.
While production in the first three months of calendar year 2015 fell 5.2% to 21.8 million barrels of oil equivalent (MMboe) compared to the same time last year, management only adjusted its full year production numbers down slightly to 86 to 94 MMboe from 87 to 95 MMboe.
The downward adjustment is solely related to Woodside's acquisition of Apache Corporation's assets for $US2.75 billion.
My favorite oil and gas exposure is Oil Search due to the anticipated step change in its cash flow in 2015-16, but I believe Woodside looks attractive on a longer-term basis with its strong balance sheet putting the company in the box seat to grow via acquisitions at a time when asset prices are depressed.
Also, as I highlighted a week ago following Royal Dutch Shell's $US46 billion acquisition of BG Gas, I believe low oil and gas prices will force a number of energy companies to the wall as we are seeing in the iron ore market. This leaves companies like Woodside and Oil Search in a much stronger market position after the dust has settled.
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