However, with the oil price having risen significantly in recent months, the prospects for the industry appear to be relatively positive. Certainly, volatility may continue to be high, but there could be capital growth potential on offer. With that in mind, here are two stocks that could be worth buying today.

Improving outlook

Reporting on Monday was Rockhopper Exploration (LSE: RKH). The oil and gas company provided an update on its Greater Mediterranean portfolio, with it delivering improved production from Abu Sennan. Current production is 4,000 barrels of oil equivalent per day (boepd), with the company seeing continued strong realised pricing. It has been able to sell oil from the area at a small discount to Brent.

Looking ahead, the company is set to engage in an active exploration and development drilling programme across both of its licenses in Egypt. It is seeing an improvement in the payment situation in Egypt, with it having reduced receivables significantly. Its historic liabilities to Beach Energy are also now satisfied.

While Rockhopper Exploration continues to be a relatively speculative business which could offer volatile performance, its capital growth potential could be high. If the oil price continues to increase or at least remains close to current levels, then the company’s forecasts may improve. This could lead to impressive future returns for less risk-averse investors.

Return potential

Also offering the potential for improving share price growth over the long run is Soco International (LSE: SIA). The company has experienced a relatively challenging period, with its financial performance coming under severe pressure. The Vietnam-focused company has endured a number of challenges in recent years, with a lower oil price making its trading conditions even more difficult. However, under its current strategy it appears to have the potential to generate improving financial performance.

Encouragingly, the company appears to have a relatively strong balance sheet. This could provide it with a degree of stability in what remains a relatively uncertain industry. And with it having no debt at the present time, it may offer less risk than some of its sector peers.

As mentioned, a higher oil price would be likely to have a positive effect on the oil and gas industry. With Soco in the process of developing its asset base through continued investment, the prospects for the business appear to be relatively bright. As such, and while its share price performance could be relatively volatile, now could be a good time to buy it for the long run.

The post 2 growth stocks I’d buy and hold for 5 years appeared first on The Motley Fool UK.

More reading

• Up 25% YTD! Is this red-hot penny stock still ‘cheap’?

Peter Stephens has no position in any 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.

The company has been slowly chipping away at its debt and although it still stood at $2.7bn at the interim stage, it’s coming down as Premier targets a leverage ratio of three times EBITDA by the end of 2018.

The Catcher project is still on schedule for the delivery of first oil in December, and that should generate more cash for reducing debt further. And total production is expected to meet Premier’s raised target of 75-80 kboepd for the full year.

On top of that, there’s a new agreement signed for the supply of gas to Vietnam, and the sale of the Wytch Farm field to Perenco UK has been finalised for a total value of $275m. 

Shares up

Since a 2017 low in June, Premier shares have regained 59% to 70p, and what’s most likely to be driving that is an uptick in the oil price. After being stubbornly stuck at around the $50 level for a couple of months, it’s pushed up to $58 per barrel as I write, and every uptick should provide a geared-up benefit to Premier Oil.

It’s too soon to assume higher long-term oil prices, and a loosening of OPEC restrictions could possibly lead to a new short-term supply glut. But I’m optimistic we’ll see a price of around double the low point of early 2016 before too much longer — about $65.

There’s still a risky year ahead, but I really see my glass as more than half full now.

A winner too?

If Premier Oil recovers as well as I hope, I can’t help feeling that Rockhopper Exploration (LSE: RKH) could very well share in the success. The much smaller explorer has had its shares battered during the oil price crisis, as have many of its sector compatriots. At 23.4p we’re looking at an 85% fall over five years — and that’s one of the smaller oilies that I thought would do well back then.

Rockhopper is expected to record small losses for this year and next, but first-half results revealed cash resources at 30 June of $62.5m and no debt — with a $337m development carry from Premier for the development of Sea Lion Phase 1 playing a part.

And that’s the big connection — Premier took a 60% interest in the Sea Lion field north of the Falkland Islands in 2012, with Rockhopper retaining the remaining 40%. And Premier is aiming at 2018 for a sanction date for the project.

Relatively safe

Meanwhile, the partners are working on the financing for it, via a proposed $800m senior debt deal.

Rockhopper also has interests in a number of other resources around the world, which should lessen its risk compared to some other smaller explorers for whom a single asset could be make or break.

And, as the oil price has been creeping back up again, so has the Rockhopper share price. Since the middle of August we’ve seen a 29% gain, largely echoing the rise in the price of a barrel of crude from that $50 level to $58.

Could 2018 be the year of the great oil stock comeback? I do hope so.

The post A small-cap growth stock I’d buy alongside Premier Oil plc appeared first on The Motley Fool UK.

More reading

• I’m targeting an £8,299 annual income from £20,000 in this transformed FTSE energy star!

Alan Oscroft owns shares in Premier Oil. 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.

It stated that the company’s offshore Ireland operations have continued to progress. The well penetrating the Paleocene Druid prospect within the pre-drill depth prognosis was safely drilled to its section target depth. However, preliminary analysis indicates that the Druid prospect comprises a porous water-bearing reservoir. This means that the company will now press ahead with an assessment of the deeper Lower Cretaceous Drombeg exploration target. It is situated around 2km beneath Druid, and has a resource potential of around 2m barrels of oil versus Druid’s 3m.

Looking ahead

Clearly, Providence Resources faces a more difficult future after its update. Investors are likely to remain disappointed with the company’s progress regarding the Druid prospect in the short run. This means that there could be further share price falls ahead. That’s particularly the case if its update regarding the Drombeg prospect fails to be positive.

Of course, oil and gas exploration companies such as Providence Resources are by their very nature highly volatile and risky entities. Their share price performance is largely dependent on news flow and the success of their drilling operations. In some cases, this can lead to significant share price growth. However, negative news tends to be received extremely poorly by investors due to smaller exploration companies lacking the diversity of their larger peers.

Sector appeal

Despite today’s share price fall, Providence Resources is still down only 12% in the last year. This is a relatively positive performance compared to some of its sector peers. Clearly, the outlook for the industry is challenging, and a low oil price may remain in the short run.

In the long run though, exploration companies such as Providence Resources and Rockhopper (LSE: RKH) could deliver improved performance. Both stocks could benefit from a rising oil price, with demand from the emerging world in particular expected to increase. At the same time, a reduction in global supply from OPEC and non-OPEC countries may lead to a fall in the supply surplus which has been present in recent years. This may lead to higher industry-wide profits and higher valuations.

Stock potential

Of course, Providence Resources and Rockhopper remain lossmaking at the present time. In the case of Rockhopper though, it has built a range of assets in numerous territories which means that its asset base may be less risky than those of some of its sector peers. Furthermore, its production volumes could increase in future and allow it to directly benefit in a potentially higher-oil-price environment.

With both stocks being relatively small, they are of a high-risk nature. Therefore, they may remain highly volatile in future and may only be worthy of consideration alongside larger, more financially stable, sector peers within a portfolio. However, with high potential rewards, they could be worthy of a closer look for less risk-averse investors.

The post Providence Resources plc slumps 40% on disappointing update appeared first on The Motley Fool UK.

More reading

• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Peter Stephens has no position in any 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.

Retirement products in demand

Specialist retirement company JRP Group (LSE: JRP) released half-year results today, which sent the shares up nearly 20% to 115p. The group was formed through the merger of Just Retirement and Partnership Assurance in April this year. Synergies from the merger have already totalled £15m and the synergy target for the end of 2018 has been increased 13% to £45m. This is obviously a huge saving over the next few years and much higher than initial expectations. 

The company is doing well and reported an operating profit of £51m along with a £226m profit after tax for the first six months of the year. Group CEO Rodney Cook stated that “our new business margin is starting to demonstrate the opportunity we have for potential further improvement as we deliver the cost synergies.” 

The stock received another boost this morning as Numis reiterated its 200p price target on the stock, which indicates that there’s a significant amount of upside from its current 115p valuation. If the business continues to perform well and more synergies can be squeezed out of the merger then the 200p valuation could become a reality. 

Governmental co-operation

Rockhopper Exploration (LSE: RKH) received some great news today that goes a long way in de-risking the Falkland Islands from a political standpoint. The British Government and the Government of Argentina have agreed to an improved relationship through closer co-operation on various matters. The governments “agreed to work toward removing restrictive measures around the oil and gas industry, shipping and fishing affecting the Falkland Islands in the coming months.” This will provide a great boost to the company as hostile rhetoric from the Argentinian government was becoming worrying. 

This news provides a further cause for celebration after Rockhopper’s half-yearly results. Yesterday the company announced that 2C oil resources in the Sea Lion Complex are now thought to be 517 mmbbl. The amount of investment required for first oil has also fallen to US$1.5bn (gross), which in turn has reduced the project’s break-even price to US$45 per barrel. This is good news for Rockhopper and shares are up 9% since the updated figures were released to the market yesterday morning. 

JRP and Rockhopper both seem to be on an upward trend and both have seen a great response to positive news. There’s a lot of upside in the shares and I think that both could be worth buying in the not too distant future. In the case of JRP it may be best to wait for a fall-back after the huge rise today. Rockhopper on the other hand has fallen over the last three months and it may be worth buying the shares if it suits your risk profile. 

The post Should you buy these stocks after today’s news? appeared first on The Motley Fool UK.

More reading

• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Jack Dingwall 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.

This is good news for Sirius Minerals (LSE: SXX), since it’s going to be reliant on funding from investors and lenders in order to get its potash mine in Yorkshire off the ground. Clearly, the project has huge long-term potential. Food production is set to be one of the major growth areas over the coming decades as the world’s population is expected to rise by around a third by 2050. And although modern farming techniques are becoming increasingly efficient, more effective fertiliser could produce higher yields and become invaluable.

Thus far, the potential for Sirius Minerals’ polyhalite fertiliser is strong. Crop studies have been generally positive and there appears to be significant demand. The question mark looks to be around the financing of the project. While raising £1bn-plus following a brighter period for commodity prices may be easier, risk-averse investors may wish to invest in companies that are already profitable given the high degree of uncertainty likely to continue in the commodity sector.

Long-term rewards

Also benefitting from rising commodity prices this year has been Rockhopper (LSE: RKH). The oil price has almost doubled from its February low of $28 per barrel and in the long run there could be more to come. Exploration spend has fallen in recent months as cutbacks have been made across the industry and this means that with demand likely to rise in future as the emerging world becomes increasingly oil-dependent, the oil price could rapidly rise.

This would be good news for Rockhopper and now that it has merged with Falkland Oil & Gas, it has a stronger asset base. This could yield high long-term returns for the company and with its latest update showing that it has $110m of cash on its balance sheet, as well as an increase in production from its Mediterranean assets, Rockhopper appears to be a sound buy for investors seeking small-cap resources plays.

Long road ahead

Meanwhile, shares in Amur Minerals (LSE: AMC) have disappointed in 2016, falling by around 48% year-to-date. That’s despite the company releasing positive news flow regarding its Kun-Manie prospect. In fact, today Amur Minerals said that it has completed almost half of the planned drilling for its 2016 Maly Kurumkon-Flangovy drill programme at the site. It expanded the pipe at its step-out drilling following the receipt of results from its first drill hole last month.

Clearly, Amur has a long way to go before it becomes a profitable business, but the Kun-Manie prospect has considerable potential. However, with investor sentiment being weak (Amur’s shares are down by a further 6% today) and a number of other resources stocks being cheap and highly profitable, there may be better options elsewhere.

The post Are Sirius Minerals plc, Amur Minerals Corporation and Rockhopper Exploration plc the best small-cap resources stocks around? appeared first on The Motley Fool UK.

More reading

• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Peter Stephens 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.

Yorkshire polyhalite

Sirius Minerals (LSE: SXX) is pushing ahead with its polyhalite development in Yorkshire. The company is planning to be a leading producer and sees this project as a world class resource. The headline numbers in the definitive feasibility study are very impressive. The project has a net asset value of £27bn at first production and the internal rate of return (IRR) is 26%. Due to the high margins it will also make between $1bn and $bn of annual EBITDA. The high IRR figure should attract lots of interest from private equity and other investment funds. I believe that the company will be able to raise the initial £2.5bn for development relatively easily. 

City analysts agree that Sirius has huge potential and is undervalued at this point. Some analyst price targets are as high as 50p, which illustrates how undervalued the stock is. The company has been quiet on the news front in the last month or two. I would expect news on stage 1 funding to come soon and in the form of debt and equity. This is the key value lever in the short term and it could cause shares to sharply rerate and move closer to that 50p target. 

Falklands development

Rockhopper Exploration (LSE: RKH) owns part of the Sea Lion discovery near the Falkland Islands. The company discovered the field in 2010 and is currently planning a development with partner Premier Oil. Sea Lion is thought to hold around 1.6bn barrels of oil, of which over 500m barrels are classified as contingent (potentially recoverable).

Unlike many oil companies the company is in a very strong financial position. The management team believes the company will finish 2016 with over $60m in cash after spending around $40m this year. Rockhopper is also carried for phase 1 and 2 of the Sea Lion development, which amounts to over $650m. Some analysts believe Premier doesn’t have the liquidity to pay for this itself so don’t be surprised to see a new partner as Premier farms out some of its stake. Rockhopper is in a great position to create real shareholder value over the long term. The company is obviously relying on the oil price and any increase would be good for the company. If we do see a significant increase in the next year or two then Rockhopper may become a takeover target. 

These two companies have huge potential through the transformational projects each wants to carry out. There are obviously risks involved but brave investors should be richly rewarded if each company sees through its developments efficiently. 

The post Will Sirius Minerals and Rockhopper deliver returns for shareholders? appeared first on The Motley Fool UK.

More reading

• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Jack Dingwall 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.

While Rio Tinto’s future is largely dependent upon the price of commodities, the company has a sound strategy to survive further weakness in this space. For example, it has cut costs and focused on becoming increasingly efficient so that it is now one of the most competitive iron ore miners in the world. Furthermore, it has a sound balance sheet and strong free cash flow which means that it is able to invest in its asset base to ensure that it at least maintains its relatively dominant position within the industry.

With Rio Tinto trading on a price-to-earnings growth (PEG) ratio of 1.4, it seems to offer excellent value for money given the quality of its asset base and its highly efficient business model. As such, and while further commodity price falls cannot be ruled out, it looks set to survive and prosper in the long run which makes now a sound moment to buy a slice of it.

Also adapting successfully to a lower commodity price environment has been Antofagasta (LSE: ANTO). Like Rio Tinto, it has sought to become more efficient and with the sale of non-core assets such as its water business, Antofagasta has strengthened its balance sheet and made its long term future more secure.

While the price of copper has come under pressure, the price of gold has performed well in recent months and this could cause a boost to Antofagasta’s bottom line. In fact, in the next financial year Antofagasta’s earnings are forecast to rise by 68% and with its shares trading on a PEG ratio of 0.8, it seems to offer a very wide margin of safety.

As with Rio Tinto and any other resources company, Antofagasta is highly dependent upon the prices of the commodities it sells. But with greater diversity than many of its peers and an improved financial outlook, it could prove to be a top notch performer.

Meanwhile, Rockhopper Exploration (LSE: RKH) has also sought to strengthen its financial position through the acquisition of Falkland Oil and Gas. This seems to have been a logical move for the company to take since it has resulted in a business with a stronger asset base and with greater growth potential. And with the Falkland Islands in particular having significant potential for long term oil production, Rockhopper remains appealing to less risk averse investors.

Of course, Rockhopper is a relatively small entity and it is highly dependent upon news flow in the short term at least. But with a somewhat diversified asset base and a sound strategy, it could be worth a closer look.

The post Will Rio Tinto plc, Antofagasta plc & Rockhopper Exploration plc ever recover from the commodity crisis? appeared first on The Motley Fool UK.

More reading

• How much does an investor need in an ISA to target £1,500 in monthly passive income?
• £20,000 invested in the FTSE’s Rio Tinto a year ago is now worth…
• How much do I need in a Stocks and Shares ISA to reach a £2,027 monthly passive income?

Peter Stephens owns shares of Rio Tinto. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Big slump

Xcite Energy (LSE: XEL) hasn’t benefited from the oil price rise of late, with its shares down 66% over the past 12 months to 12p, and down 83% over two years — and since the shares’ low on 20 January, we’ve only seen an 11% recovery.

Although rising oil prices should help and Xcite has some interesting North Sea prospects, the North Sea isn’t among the regions of the world with the lowest costs of production. In fact, in its Q1 update from just a week ago, Xcite comfirmed that it had only $14.13m in cash at 31 March, and that it is in negotiations with bondholders over bonds due for repayment on 30 June — they were issued two years ago, and the firm admitted its “current and forecast cash position is insufficient to repay the Bond capital in full by 30 June 2016″.

Another faller

Shares in Rockhopper Exploration (LSE: RKH) have also slipped in the past 12 months, by 53% to 38p, but at least in this case we’ve seen a 54% recovery since their January low. Although Rockhopper really needs the oil price rise to keep on going for quite a bit longer, the Falklands-focused explorer does appear to have enough cash to keep it going at least in the short term.

At the end of last year, Rockhopper was sitting on cash of $110m, and though some of that will surely have gone by now, the prospects for the firm’s Sea Lion field and Isobel complex, reported by an independent audit mid-May, surely boost confidence in the firm’s future. In fact, chief executive Sam Moody said that “In our view this new audit confirms the potential of the North Falklands to be a billion barrel basin“, and that sounds like the kind of thing that would even attract future partners should more funding be needed.

End of the line?

But then, sadly, I turn to Gulf Keystone Petroleum (LSE: GKP), whose shares continue to languish at around 4p apiece — that’s an 88% drop in 12 months, and a 99% loss since they peaked back in the heady optimistic days of 2012 when oil fetched a packet on the market.

Gulf’s problems have been compounded by operations in the Kurdistan region of Iraq, and by the government just not paying for the oil it was taking from the company for export. Regular payments were finally agreed and are ongoing, but there’s been nothing forthcoming towards the arrears yet and there are massive debt repayments needed — of $250m in April 2017 and $325m in October 2017.

There are various standstill arrangements in place, but something drastic needs to happen if Gulf Keystone is to be saved. Unfortunately, all I can see is a deal that results in bondholders getting pretty much the whole company and current shareholders being left with little more than headaches — though I do hope to be proved wrong.

The post Is it make or break for Xcite Energy limited, Rockhopper Exploration plc & Gulf Keystone Petroleum Limited? appeared first on The Motley Fool UK.

More reading

• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Alan Oscroft owns shares of Premier Oil. The Motley Fool UK has recommended BP and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Small-cap oil companies, which once had bright prospects thanks to their impressive reserve bases, are now unable to find the investment or financing required to develop their reserves.

What’s more, as banks attempt to shield their exposure to the sector, many small-cap explorers are losing the support of their banks, which have traditionally provided financing when no investor could be found.

On the edge

Xcite Energy (LSE: XEL) is just one example of this trend. The company has some exciting prospects in the North Sea, but as oil prices have collapsed it looks as if potential partners for the company’s projects have backed away from any potential deal, leaving Xcite in a precarious position.

The company warned at the beginning of this week that it doesn’t believe it can repay bonds falling due at the end of June. With a cash balance of only $14.1m at the end of March, and bonds worth $130m falling due next month, Xcite’s ability to continue as a going concern hangs in the balance unless a white knight appears to save the company.

Management is already in discussions with bondholders and with a market capitalisation of only £36m, shareholders face significant dilution if the company taps the market for additional funds.

Steady progress

As Xcite struggles, Rockhopper Exploration (LSE: RKH) continues to chug along.

At the end of 2015, Rockhopper had cash resources of $110m, enough to keep the lights on for several years. Also, the group is producing oil and gas and has been on an acquisition spree to boost its presence around the world.

When oil prices return to $100 a barrel, the market should recognise these accomplishments and place a premium on Rockhopper’s shares. And the company has enough cash to keep the lights on until such a recovery takes place.

Running out of time

Unfortunately, Gulf Keystone Petroleum (LSE: GKP) is in the same position as Xcite. The company borrowed too much money when times were good, and is now struggling to meet its obligations. Management is already in discussions with bondholders regarding a restructuring of debt, and the company will need another cash infusion to maintain production this year.

All in all, Gulf Keystone needs several hundred million dollars just to keep the lights on over the next few years — that’s even if oil prices recover. The group’s towering debt pile and hefty capital spending bill will consume nearly all cash generated from operations if those prices do recover.

Unless Gulf Keystone pushes bondholders to accept a haircut or restructuring, this is likely to be the case for the foreseeable future. It’s highly probable that shareholders will be asked to foot the bill for the company’s mistakes and pay off bondholders.

The post Are Xcite Energy Limited, Rockhopper Exploration plc and Gulf Keystone Petroleum Limited heading to zero? appeared first on The Motley Fool UK.

More reading

• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Rupert Hargreaves 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.

Certainly, Centrica is set to move away from its oil and gas business interests. It will instead focus on the supply of domestic energy and could therefore become a more stable and robust investment. This would be good news for income-seeking investors who favour a more stable dividend outlook and with Centrica yielding 6.1%, it remains a very appealing dividend stock for the long term.

Clearly, Centrica is undergoing a period of major change at the moment and this brings considerable risk. But with it expected to deliver vast cost savings as well as an improved profit outlook, its price-to-earnings (P/E) ratio of 13.3 indicates that it offers excellent value for money.

Short-term risks

Also falling since the turn of the year have been shares in Genel Energy (LSE: GENL). They’re down by 26% year-to-date and this is largely because of weakness in the oil and gas sector. However, as the price of oil has picked up in recent weeks, shares in Genel have risen as per the rest of the industry, with Genel’s share price up by 5% in the last month alone.

While further gains to Genel’s share price can’t be ruled out if the price of oil rises above $50 per barrel, investors may be able to obtain a superior risk/reward opportunity elsewhere in the sector.

That’s because as well as the risk of losses from a fall in the price of oil, Genel appears to offer less stability than a number of its peers. It faces significant geopolitical risk within the Northern Iraq region, while it will be forced to make major impairments this year due to a reduction in reserves estimates. As such, and while its long-term future may be highly profitable, Genel doesn’t appear to rank as a must-have resources stock at the moment.

Rockhopping

Meanwhile, shares in Rockhopper (LSE: RKH) have surged by 40% since the turn of the year. It has been significantly boosted by an independent audit of reserves at its offshore Falkland Islands operations, with there apparently being much more oil there than was previously thought.

This is excellent news for the company and means that its long-term future is now a little brighter than it previously was. And with it having merged with Falkland Oil & Gas, Rockhopper now appears to be more financially sound and in ownership of a more appealing asset base than was previously the case.

While Rockhopper is a relatively small and therefore higher-risk company, it has significant potential to deliver further capital gains. As such, for less-risk averse investors it could prove to be a sound buy.

The post Are Genel Energy plc, Centrica plc and Rockhopper Exploration plc 3 must-have resources stocks? appeared first on The Motley Fool UK.

More reading

• £15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…
• Are IAG shares the ultimate FTSE 100 volatility play? 
• Will the stock market go off like a rocket on Monday?
• Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…
• How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Peter Stephens owns shares of Centrica. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.