The oil price has been hovering agonisingly below the $50 a barrel mark and investors in oil stocks will be desperately hoping it can climb higher. A rising oil price eases the pressure on balance sheets but many companies continue to face an uphill struggle as falling revenues bring underlying problems bubbling to the surface.

High energy stakes

Kurdistan-based oil explorer Genel Energy (LSE: GENL) would have its hands full at the best of times but these have very much been the worst of times. A double whammy of $27 oil and the rise of Islamic State have made this one of the biggest risks around and the rewards remain uncertain. The biggest problem is still the cash-strapped Kurdistan Regional Government (KRG), which has been struggling to pay for oil shipments after being starved of cash by the central government in Baghdad.

Regular payments have started flowing and there was further good news on this front earlier this week, with four separate sums announced. Genel’s share of two payments for its Taq Taq field was $12.35m, while it also receives a pro-rate share of $32.3m from its Tawke co-venture with DNO. The share price spike was short lived, however, as investor attention returned to Genel’s long-term challenges.

Hairy Genel

One year ago, its stock traded at 549p. I hope you didn’t buy then because today it is worth just 127p, a drop of almost 77%. It is hard to hail this as a buying opportunity, given the challenges ahead. As if war, terror and cheap oil wasn’t enough, Genel also downgraded its Taq Taq reserves, hitting investor faith and potential returns.

A record £1bn impairment this year will hurt, although it could return to profitability in 2017. If you can face such high stakes, the company’s strong-ish balance sheet and a recovering oil price (big assumption! ) could make this a gamble worth taking.

Hedge your bets

At today’s 230p, oil explorer Tullow Oil (LSE: TLW) has seen its share price almost double since the lows of mid-January, despite retreating in recent weeks. That is a far more dramatic climb than Genel, as investors see the company faces fewer mortal threats. Tullow has actually hedged 52% of 2016 production at $75 a barrel before tax, some 50% above today’s spot price, but rising oil would brighten the outlook beyond that.

While Genel’s production forecasts have been pared back, production at Tullow should now start rising, with Project TEN in Ghana set to start pumping 10,000 barrels a day. Supportive lenders have also allowed it to extend its credit facilities and improve its liquidity position, and this has just persuaded Standard & Poor’s to remove Tullow from its CreditWatch list of corporate debt instruments facing immediate risk of a debt downgrade.

Imperfect TEN

However, S&P cautioned that the oil explorer was still facing operational risks at its two key projects in Ghana, and held its outlook at negative due to the risk of setbacks at its TEN project and Jubilee field. 

Investors are banking on a return to positive cash flows next year which should help Tullow tackle its debts, but it could do with another leap in the oil price to be sure. Both these stocks have enjoyed better news of late but remain at the mercy of whatever Opec does next. 

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Harvey Jones 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.