The recent uptick in the price of oil has left many investors wondering if now is the right time to buy oil stocks. After all, the outlook for oil in the long run is positive, since demand from the emerging world in particular is likely to gradually rise, and this could help to offset the supply/demand imbalance which has caused prices to tumble in recent years.

Somewhat brighter

Certainly, a more stable oil price has caused LGO Energy (LSE: LGO) to attempt to ramp-up production at its key Goudron field in Trinidad. In fact, it is aiming to increase production by around 200 barrels of oil per day (bopd) through two separate programmes. The first involves the restoration of production from a number of existing wells, which it is anticipated will increase production by 100 bopd within the next few weeks.  The second involves several well recompletions, and will cost around $150,000, but should also increase production by around 100 bopd.

This is clearly encouraging news for LGO’s investors, with the cost of the work set to be funded from existing cash resources. But while its future may now be somewhat brighter than a number of weeks ago (as reflected in a share price which is up by 35% in the last month), with the wider sector being cheap there appear to be better options available elsewhere.

Positive news

Also rising recently have been shares in Nighthawk Energy (LSE: HAWK). They are up by 169% in the last month, largely due to positive news flow. In fact, Nighthawk’s application for its planned Arikaree water flood enhanced oil recovery project was approved just last week by the Colorado Oil & Gas Conservation Commission. It is, of course, subject to Nighthawk obtaining 80% approval of the non-working interest owners within the next six months, which the company believes will be successfully obtained within the next few months.

This was positive news for the company and once the project is completed, it has the potential to significantly increase production as well as boost field reserve levels. Although Nighthawk remains a relatively high risk play, its shares could continue to rise and it may therefore be of interest to less risk averse investors.

Highly leveraged

Meanwhile, shares in Xcite Energy (LSE: XEL) have fallen by 26% in the last week, as doubts surrounding its financial viability continue to surface. While Xcite Energy has a strong asset base, with the Bentley field in the North Sea having long term profit potential, the company’s balance sheet remains relatively highly leveraged.

For example, it has around $134m of debt on its balance sheet which is due to be repaid in June of this year. With the company having no revenue, it is apparently seeking a financial partner but has been unsuccessful in doing so thus far. As such, investors appear to be concerned about its near-term prospects. With a number of other opportunities within the oil and gas space, it seems prudent to watch, rather than buy, Xcite Energy due to the relatively high degree of uncertainty surrounding it at the present time.

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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.