Should You Buy Tullow Oil plc And Enquest Plc After They Soar 9%?


Shares in Enquest (LSE: ENQ) are up by as much as 9% today after the company announced that it has withdrawn from its investment in the Didon oil field and Zarat permit in Tunisia.

This investment had originally come about in May 2013 when Enquest agreed to buy interests in the two prospects from PA Resources, with the total amount for the Didon field ($23m) being held in escrow until such a time as the Tunisian authorities had approved the deal. However, the deadline for this has now passed, and so the money has been returned to Enquest and the stake returned to PA Resources.

The development means that Enquest’s full year production is set to be 372 bopd lower than previously anticipated, although this makes only a small difference since Enquest’s production is around 28,000 bopd. It is still forecast to make a loss in the current year and, even though its share price is up 9% today, it is 71% down in the last year, with a weaker oil price hurting investor sentiment significantly.

Looking ahead, Enquest is expected to return to profitability next year, although with it trading on a forward price to earnings (P/E) ratio of 21.2, much of this turnaround seems to be priced in. As such, it could be worth waiting for a keener valuation before buying a slice of the business.

Tullow Oil

Shares in Tullow Oil (LSE: TLW) are also up 9% today after rumours emerged that oil major, Shell, may be mulling over a bid for its smaller rival. Clearly, there is no proof that this is the case: it is merely a rumour, but Tullow does seem to be somewhat appealing at its current price level.

For example, it currently trades on a price to earnings growth (PEG) ratio of just 0.2, which indicates that it offers growth at a reasonable price. And, although it has shifted its strategy somewhat and is now more focused on production as opposed to exploration that it was in the past, it remains a more nimble and adaptable entity than Shell, which could prove to be an attractive attribute for its larger peer.

And, even if a bid doesn’t materialise, Tullow Oil still seems to be an attractive play. Certainly, its future depends to a large extent upon the price of oil, but its strategic shift and impressive forecasts make it a company that could see its share price rise significantly after a twelve-month period when it has slumped by almost 50%.

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