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$50 oil drives Falcon Oil & Gas Limited, Petrofac Limited and Weir Group plc in different directions

Oil has hit a seven-month high, with Brent crude closing above $50 a barrel for the first time since 3 November. The latest hop was driven by a decline in US crude supply, which offset OPEC’s latest failure to set a production ceiling. The recovery has been a blast for oil investors, with most stocks in the sector flying. Most, but not all.

Falcon soars

On 27 January, in the middle of the oil stock rout, I said that Falcon Oil And Gas (LSE: FOG) looked tempting for those who are bullish on the oil price recovery, concluding that: “There’s a strong bull case to be made, but only for speculative investors.” I hope you speculated. At the time, it traded at 5.5p. Today you pay 8.5p, a rise of 55%.

I admired Falcon for its high-quality assets, fully-funded Australian drilling programme, and debt-free balance sheet, which also boasted $9.8m in cash. Rather than drilling through its cash pile, like many other explorers, Falcon has been adding to it and it totalled $12.7m at year-end. Costs are under control, helped by a successful campaign of slashing administrative expenses, which fell 38% last year from $4m dollars to $2.5m. All this and $50 oil too! If you believe oil is due another leg up, Falcon could be a safer way to play it.

Petro flops

Oil services specialist Petrofac (LSE: PFC) is a rare damp squib in a sector that has been on fire lately, so what went wrong? Scandals never help, and Petrofac has been embroiled in a global bribery scandal, following claims a former executive paid $2m to clinch a major oil deal in Kuwait. It was also hit by results in March showing a sharp drop in annual profits due to delays and cost overruns at its Laggan-Tormore plant.

Last year, it booked a huge $430m charge on the project and last month announced a further charge of £70m, but at least this is a final settlement and should draw a line under the saga (at a total cost of $800m). With a strong order book, valuation of around nine times earnings and yield of 5.74%, Petrofac looks poised to start playing catch-up.

Here Weir goes

Glasgow-based pump maker Weir Group (LSE: WEIR) hit a low 807p in January, but today trades at 1,185p, a rise of 47% for those who bought at the very bottom. This offers much-needed relief as the company had been through a torrid time due to falling demand from US shale clients, which also knocked its supposedly resilient after-sales market. US rig count is now down from a peak of more 2,000 to around 300, so the future still looks challenging.

Everybody is waiting to see what will happen to shale if the oil price climbs higher. Will flexible drillers swing back into action? If so, Weir could fly even higher. HSBC recently upgraded the stock to buy saying it’s particularly sensitive to the oil price, and will do particularly well if the oil price continues to climb. Trading at 13.7 times earnings Weir is no longer that cheap, but the yield compensates at 4.97%.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Petrofac. The Motley Fool UK has recommended Weir. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.