Should You Play The Oil Price Recovery By Buying Tullow Oil plc, Ophir Energy Plc Or Rockhopper Exploration plc?

Oil prices have bounced off lows and are beginning to rise again — does this indicate that it is time to invest in oil stocks? Here are three stocks that may well be the best performers if oil prices continue to rise. 

Tullow Oil

Tullow Oil (LSE: TLW) has been hammered since 2012, down a whopping 85%. The recent news that lenders have agreed to hold the current credit facility at $3.7bn is extremely important and cannot be underestimated. It gives the company breathing space to spend money on further development of the TEN field. When TEN comes online, production will nearly double, which will enhance cash flows and allow for repayment of debt, thus improving the balance sheet. The share price has performed terribly but market sentiment with stock seems to be changing, and now could be a good time to buy as it will definitely be a top performer in the sector if oil prices recover. 

Rockhopper Exploration

Rockhopper Exploration (LSE: RKH) burst onto the international E&P scene when it discovered the Sea Lion field in the Falklands. Shares rocketed up and peaked close to 500p but have now retreated back to 41p, which may represent a buying opportunity for investors with a higher risk profile. The company had a successful start to the current exploration campaign in the Falklands, and if oil prices recover then Sea Lion development could well push Rockhopper back towards 500p. Sea Lion will cost close to $2bn but if Rockhopper and partners do get to first oil then it will transform the company and the region. Companies like Falkland Oil & Gas will also be boosted if Sea Lion gets to first oil, as it will illustrate to the world that the region is worth exploring. 

Ophir Energy

Ophir Energy (LSE: OPHR) has gone under much change in the last year having made a very clever acquisition. The company recently acquired Salamander Energy to create a fully integrated oil and gas company instead of a pure exploration company. This has heavily decreased the risk profile of the stock as now it is producing close to 15,000 boepd and has 59 mmboe of 2P reserves on its books. It has a net cash balance of over $393 million, a market cap of only $980 million and a book value of 160p a share, which illustrates how undervalued the stock is. Operating primarily in SE Asia, Ophir is able to receive material higher prices for its oil and gas than elsewhere in the world. It looks like that demand for energy will grow exponentially in the next decade, and Ophir is well placed to capitalise on this demand. 

All three companies here offer good returns if the oil price increases back to previous levels, and I would expect all three to at least double. The sector has been so unloved in the last few years that it’s hard to see that changing, but for a brave investor, now may be the time to start building positions in companies like the three mentioned above.

If you're looking for something to help you get ahead in the markets then this is a must-read report, provided for free by the Motley Fool: 7 Steps To Make You Seriously Rich. It's been written for investors just like you, containing many steps to help make you a better investor and make you money. It's an extremely informative guide available for free and all you have to do is click here!

Jack Dingwall 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.