The Tullow Oil share price vs the PMO share price: which stock should I buy?

The Tullow Oil share price and PMO share price both have their attractive qualities, but one is a better buy than the other, I feel.

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The price of oil has risen steadily over the past 12 months. It’s now trading closer to its pre-pandemic level than at any point since the beginning of last year. And with that being the case, I’ve recently been reviewing oil shares, which could benefit from rising oil and gas prices. I believe that opportunities such as the Tullow Oil (LSE: TLW) share price and PMO (LSE: PMO) share price may have strong potential as we advance. 

Reviewing the Tullow Oil share price 

The past 12 months have been incredibly challenging for Tullow Oil. The low oil price has wreaked havoc with the group’s profitability and balance sheet.

Management has been working flat out to keep the business alive. So far, it seems as if it has succeeded. The rising oil price may also benefit the firm in discussions with creditors. Those creditors are more likely to give the company breathing space if they can see its profits are forecast to increase. 

Silhouette of an oil rig

If the price of oil continues to increase, Tullow’s future outlook could improve. That’s a big if though. The price of black gold has been incredibly volatile over the past 12 months, and just because it has been rising recently does not mean that it will continue to do so. Therefore, this investment may not be suitable for everyone. Another price decline could cause the Tullow Oil share price to plunge. 

Still, I’m comfortable with the level of risk involved here. That’s why I would buy Tullow Oil as a recovery play

PMO share price risks 

Unfortunately, I’m not as optimistic about the outlook for the PMO share price. 

Unlike its peer, which has a solid track record of exploration and production success, PMO’s track record is a bit weaker. The company has been struggling with high debt levels and production costs for years. 

These issues came to a head in 2020. Luckily, the firm managed to find a buyer. In October, the PMO share price jumped as it unveiled a merger with private equity-backed Chrysaor. Premier will start trading under its new name, Harbour Energy Plc, at the beginning of April. 

This deal has not improved investor sentiment towards the company. The stock has underperformed the Tullow Oil share price by 85% over the past year. 

And while PMO’s outlook is improving, thanks to the rising oil price, I think the business still faces some enormous challenges. The merger will allow the enlarged group to reduce costs and improve its balance sheet, but it will always be held hostage by the oil price. This only adds to the uncertainty. PMO will get a fresh start as Harbour in April, but what happens after that is impossible to tell. 

Therefore, I would avoid the PMO share price for the time being. I think the Tullow Oil share price could be the better option considering the group’s improving outlook. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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