The oil and gas industry has been decimated in recent months by a falling oil price. Looking ahead, there could be more pain to come since a number of industry experts have warned that low oil prices could be here to stay and that the financial outlooks for a number of oil producers and explorers could deteriorate.

Clearly, there is also the potential for a rise in oil price, too. Although it seems improbable in the short run due to the glut of supply which is showing little sign of being cut, demand for black gold is forecast to rise substantially in the long run. Therefore, investing in oil and gas companies now could still yield a highly profitable return, but only in the long run.

Continued decline

That’s a key reason why investors may wish to watch, rather than buy,  Xcite Energy (LSE: XEL). Its shares have fallen by 58% in the last year, partly because of the fall in the oil price, but also because of concerns regarding the company’s financial standing.

As a business which currently generates no revenue, Xcite Energy is under pressure to bring its main asset, the Bentley field, into production as quickly as possible. Progress on this front has been much slower than anticipated and it could remain so while investor appetite for investment in new projects continues to decline. This means that there may be delays ahead and with Xcite Energy being in a financial position which requires debts to be serviced over the medium term, investor sentiment in the stock could continue to decline over the coming months.

Upbeat update

Also posting a share price fall in the last year is Roxi Petroleum (LSE: RXP). Its valuation has tumbled by 13% during that time, although investor sentiment appears to be picking up somewhat in recent weeks, with the company’s share price rising by over 10% in the last week.

Of course, this could be in response to an upbeat operations update which was released last month. Roxi reported that its shallow and deep wells at its flagship BNG project in Kazakhstan have continued to progress, with it recording good flows from its shallow well on the site. And with Roxi remaining optimistic regarding its future prospects, it could be of interest for less risk averse investors.

Increased upside

Meanwhile, Sound Energy (LSE: SOU) has today reported that it has been granted an option to acquire a 55% interest in the Meridja permit in Morocco. It is adjacent to the company’s existing Tendrara licence and is a highly prospective 9,000 km2 area which has the same fundamental geology as Tendrara. As consideration for the licence, Sound Energy will pay Oil & Gas Investment Fund $100,000, as well as the potential for further amounts if the option is exercised .

The deal is in-line with Sound Energy’s aim to build its regional position in Morocco. It will also enable the company to increase its upside potential. should drilling at its Tendrara prospect proceed as expected. As such, it appears to be a logical move for the company to make and as such, it could be a stock to watch following its 70% share price rise over the last year.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.