I’ve been digging through the numbers, and I think I’ve found two stocks that are simply too cheap at current levels. Although there are no guarantees — both companies face turnaround challenges — I reckon that buying these shares for my portfolio today could deliver big profits over the coming years.

UK share #1: US oil opportunity

The long-term future of the oil industry may be uncertain. But global oil production stands at around 100m barrels per day at the moment. About 11.3m of these daily barrels come from the US. This region is the main market for equipment provider Hunting (LSE: HTG), my first pick.

Hunting manufactures and supplies wellbore products — equipment used ‘downhole’ when oil and gas wells are being drilled and prepared for production. Demand slumped after last year’s oil price crash, but things are starting to look up.

Sales of $244m during the first half of this year were broadly in line with sales during the second half of 2020. Analysts expect revenue to rise to around $350m during the second half of 2021.

Although Hunting reported an operating loss of $23m for the first half of this year, the interim dividend was increased. This suggests to me that management are confident of a continued recovery.

3 reasons why I’d buy

There are other oil and gas equipment providers out there hoping for a recovery. So why have I chosen Hunting? There are three reasons.

The first is that this business has a very solid balance sheet, but is trading below its net asset value. Hunting’s latest balance sheet shows net assets of £670m, or around 406p per share. This compares to a current share price of 209p.

That seems cheap to me, especially as the company ended the first half of the year with a net cash position of around $67m. I reckon this valuation provides a decent margin of safety if trading remains tough.

Another reason why I like Hunting is that it designs and manufactures its products, so owns the intellectual property. This is also a valuable asset.

Finally, I think there’s a catalyst in sight for this UK share to go higher. Hunting is planning to start listing its shares on the US market as well later this year. Most of the company’s revenue comes from North America, and most of its rivals are listed on the US market. This move will open Hunting stock up to a new pool of US investors. I think this could help the stock re-rate to a higher valuation.

Admittedly, Hunting still has some problems. A rebound in oil and gas drilling activity is not guaranteed. Hunting is expected to report a $15m loss in 2021, before returning to profitability in 2022. Even then, broker forecasts for a profit of $18m mean that Hunting shares already trade on 25 times earnings.

We have to look at 2023 before forecasts suggest Hunting’s profits will justify its net asset value. However, I’m not too concerned about this. Value stocks often look ugly when they’re cheap — I’d be happy to buy Hunting today.

UK share #2: a cheap property stock that could yield 6%+

As a general rule, I only buy property stocks when they’re trading at a discount to their net asset value. The reason for this is simple enough.

If a company that owns property is trading above the book value of its assets, then any further share price growth is likely to depend on rising property prices. Although this happens — a lot, recently — I don’t like to bet on a rising property market when I’m investing.

One property stock that’s caught my eye recently is urban regeneration specialist U and I Group (LSE: UAI). This £100m small cap specialises in creating mixed-use developments in London, Manchester, and Dublin. U+I shares currently trade at a 50% discount to their book value, as the group is emerging from a difficult period.

However, while the dividend yield this year is expected to be a modest 2.4%, broker forecasts suggest the yield on this UK share could rise to 6.9% in 2022/23, as profits start to recover.

U+I’s turnaround is in the hands of chief executive Richard Upton. Upton was the CEO and founder of Cathedral Group, which U+I acquired in 2014. He worked his way up through the ranks at U+I and took the top job in January 2021.

Refreshingly, Upton still seems to have a founder’s confidence in his company. Unlike many chief executives, he has been a regular buyer of U+I shares in recent years. Upton now owns 3.4% of U+I, giving him a holding that’s worth about £3.5m. In my view, Upton’s sizeable investment should mean that his interests are well aligned with those of private investors.

U+I: a bumpy road?

As I write, U+I shares are trading at around 82p. That’s a 50% discount to the company’s March 2021 net asset value of 163p per share.

I reckon this could be a bargain. But it’s certainly not a sure thing. To close the valuation gap and bring U+I’s share price closer to book value, Upton will have to prove that he can find and deliver new projects successfully. He’ll also have to show that he can do this profitably enough to justify a higher valuation.

U+I has already faced one unexpected setback this year. In June, the company was refused planning permission for a proposed project on the Albert Embarkment in Lambeth, London. This project is a joint venture with the London Fire Brigade and was expected to have a development value of £500m.

The company may yet find a solution and gain planning approval. But U+I shares have fallen by 15% since this news became public. U+I is quite a small business and doesn’t have too many other big projects on the back burner. If this project fails to go ahead, profits in future years could be lower than expected.

Despite this risk, I think U+I shares offer an attractive balance of risk and reward at current levels. I’d be happy to buy and hold this UK share as part of a diversified portfolio over the next few years.

Caspian is plummeting after announcing a hefty pre-tax loss for 2020 thanks to a $2.6m impairment charge. Full-year losses clocked in at $1.7m, the oil producer swinging from a profit of $941,000 the year before.

This offset an 18% year-on-year revenues improvement in 2020, Caspian said. Income jumped to $14.3m as production increased almost 8% from 2019 levels to 545,667 barrels. Higher output at Caspian’s flagship MJF structure helped to offset the loss of its South Yelemes structure, which has been shuttered since May due to “a slow moving licence upgrade application.”

Finally, Caspian said it had cash of just $300,000 on its books as of December, down from $4.1m a year earlier. As a consequence it warned investors that “the financial outlook has improved when compared to the position 12 months ago but not yet to the point where the material uncertainty in respect of going concern… has fully receded”.

Hunting also dives

Hunting’s (LSE: HTG) share price has also slumped on Tuesday. At 238p per share the engineering stock’s 3% dip is less marked than the drop endured by Caspian Sunrise today. Though the company had dipped to its cheapest since early February at around 217p earlier.

Investors headed for the exits after Hunting predicted a “modest loss” for the first half of 2021. It said that “Hunting Titan and the group’s onshore businesses have traded ahead of expectations” in the six months to June. But it added that “this has been more than offset by a lower performance from Hunting’s offshore and international businesses”.

As a consequence, the business — which manufactures tools to help oil companies extract the commodity — thinks that full-year earnings before interest, tax, depreciation and amortisation (EBITDA) will fall short of expectations. Hunting added, however, that earnings should beat the $26.1m result punched in 2020.

UK share tips imminent recovery

Hunting said that “while there has been an increasing onshore rig count across North America, operators continue to demonstrate strong capital discipline”. This led to drilling expenditures “remaining subdued” in H1. And the pricing environment was deflationary across all product lines in the oilfield services sector due to market oversupply.

Still, Hunting believes trading will begin to improve in the second half of 2021. It says that improved oil prices per barrel should bolster capital expenditure levels among its clients and mean better demand for its services.

“With the oil price firmly above $70 per barrel, along with the production discipline seen within the OPEC group and the improving global economic outlook, management expect a gradual improvement in hydrocarbon demand in the short-to-medium term,” it noted.

Hunting’s financial outlook

Hunting manufactures hydrocarbon extraction tools. It provides the world’s leading oil and gas companies with premium products and associated services for sale or hire. It’s a global enterprise based in multiple locations.

In the past three months, the Hunting share price has risen 34%. Looking at the wider picture, it’s down 18% in five years. But at around £2.62 a share, it remains a far cry from its 2018 peak of £9.30 a share. So, at today’s price, with Covid-19 still hampering progress, does Hunting look like a good investment for me for the next five years?

Hunting has a £437m market cap, earnings per share are negative, and it offers shareholders a 2.4% dividend yield.

For Hunting, FY20 revenue came in at $626m, which was down from $960m in 2019. Earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 81% from $139.7m in 2019 to $26.1m in 2020. Despite this, the group still felt confident enough to declare a final dividend.

What’s the long-term outlook for Hunting?

Hunting relies on industry capital expenditure to survive and with clients cutting their capex across the board, this led it to lose orders. But despite the dire backdrop, the company managed to show resilience. Its strong balance sheet shows it’s in better shape than some of its competitors and it ruthlessly cut jobs and distribution centres to make that happen.

In February 2020, Hunting bought Enpro Subsea, this helped it to increase its revenue from subsea products by 57% in FY20. Then last month, it invested $2.5m in drilling analytics company Well Data Labs. This gives the company a foothold in big data and analytics in drilling, which I think is a wise move in this tech-driven world.

The company has also been diversifying slightly with advanced manufacturing orders in aviation, space, defence, military, medical and geothermal. Elon Musk’s Space X and Jeff Bezos’s Blue Horizon have placed orders in the past year for aerospace related high-precision products. While its non-oil and gas revenue only account for 6% overall, these are big clients that could open doors.

Risk vs reward

Raw materials prices, such as steel, are rising, which means Hunting has to increase its prices to keep pace. Inflation is a concern if the companies are not bringing in enough revenue to cover the rising prices. However, the success of this industry correlates tightly with the price of oil, so if it strengthens, Hunting should thrive.

As I remain bullish on the long-term outlook for the oil industry, I’d happily buy shares in Hunting and hold for the next five years. It obviously comes with cyclical and external risks, and recovery could well be slow initially. But the world still needs oil, and Hunting is a company offering quality products in drilling and other vital sectors of the market. I also like the fact it’s happy to conduct share buybacks and protect the dividend, making shareholders a priority.

Some companies in the oil industry have been hit even harder than Shell. For instance, oil services firm Hunting (LSE: HTG). Its share price plummeted so rapidly it was demoted from the FTSE 250 to the small-cap index in March. Could this be another candidate for a spectacular recovery?

Shell share price vs Hunting share price

Looking at the year-to-date performance, the Shell share price is down 54%. Meanwhile, Hunting’s shares have dropped a dizzying 64% from over £4 to not much above £1.50.

Of course, the price of oil has also slumped in the grip of the coronavirus pandemic. Having started the year at over $60 a barrel, WTI crude is currently around the $40 mark.

Furthermore, the near-term outlook isn’t great. Both the IEA and OPEC have recently downgraded their demand forecasts for 2020. The former expects a contraction of 8.4m barrels a day from last year, and the latter 9.5m.

The IEA also said it sees a “treacherous” path ahead, and OPEC suggested risks would remain “elevated and skewed to the downside” for the first half of 2021.

Creditable performances in unprecedented times

Shell posted adjusted earnings of $638m during this year’s extremely challenging April-June quarter (down 82% on the same period last year). Cash flow was also positive.

However, the company reported a statutory loss of over $18bn. This was due to non-cash impairment charges on revised assumptions about the outlook for the oil price and refining margins.

It was a similar story over at Hunting. A statutory loss due to hefty impairment charges, but the company telling us it traded at or near to break-even at the EBITDA level through the April-June quarter.

As such, I’d say both businesses performed creditably in a period that saw an unprecedented drop in global oil demand.

The Hunting and Shell share prices are cheap

It could take some time for the oil market to rebalance after the huge stocks build-up earlier this year. However, in the medium term, I can see the oil price migrating back to the pre-pandemic $60-a-barrel level. And a recovery in the Shell and Hunting share prices.

The market’s currently valuing Shell at 6.5 times its pre-pandemic earnings. It also offers a prospective 4.8% dividend yield, even after this year’s rebasing of the payout. Meanwhile, Hunting is trading at just 4.5 times its pre-pandemic earnings with a prospective yield of 2.5%.

I’d be happy to buy Shell and Hunting today for a medium-term recovery in the oil price. I reckon Shell’s shares could get back to £20, and Hunting’s to £4.

What of the long term?

Looking further ahead — by which I mean decades — the world is transitioning away from hydrocarbons towards cleaner fuels.

My colleague Rupert Hargreaves has recently written about Shell’s plans to become a global electricity supplier. He believes the shares could be a good bet for the long term.

I think a case can also be made for long-term ownership of Hunting’s shares. This is because it’s successfully metamorphosed a number of times since it was founded in 1870.

It’s not just the crude producers that need to worry, of course. Suppliers of key oilfield services like Hunting (LSE: HTG) also find themselves in huge peril. But don’t just take my word for it: a report just released by the International Energy Agency reveals the weak profits picture for these engineers.

The body’s latest World Energy Investment report that’s just been released suggests that capex spend across the oil and gas sector will plunge 32% in 2020 to just above $250bn. Lockdown measures have hampered investment activity, sure. But this is not the main reason why spending is likely to tank, it says. Instead, “planned 2020 investments in upstream oil and gas have been slashed under pressure from the collapse in oil prices and demand”.

Under pressure

It’s a phenomenon that’s already delivering a body blow to small-cap Hunting and its peers. In mid-April, it advised that “the impact of the oil price decline has affected demand within the Group’s segments focused on US onshore completions since the end of March 2020.”

But this was not all. It added that “other segments are likely to see declines towards the end of quarter two, given that orders are continuing to be completed across all of [our] operating regions for a variety of offshore and international projects.” With work drying up, Hunting yanked its full-year guidance and pulled the dividend at the same time.

An oil play to avoid?

Glass-half-full investors might think that this is as bad as things will get for Hunting. Energy demand is likely to pick up again as lockdown measures are eased. And this should consequently drive oil prices and profits amongst crude producers higher again.

But I’m not convinced that values of the liquid commodity will continue to recover. Whilst off-take is indeed improving, supplies remain quite abundant and keep topping expectations. Latest data from the American Petroleum Institute showed US stockpiles up by 8.7m barrels when a 1.9m-barrel reduction had been tipped.

Investors need to consider how far oil prices can continue their recent recovery, given that the world is on the cusp of a painful (and possibly prolonged) economic downturn. The profits outlook for Hunting remains pretty murky not just for the near term.

City forecasts seem to be in agreement. They suggest that the small-cap will follow a 77% fall in annual profits in 2020 with a 27% drop next year. Investors need to be concerned about the state of Hunting’s balance sheet as well. In March it had just $22.3m of net cash on its books. This was down almost $100m from a year earlier.

The risks to Hunting are considerable. And yet it trades on a fatty forward P/E ratio above 20 times. I find it hard to envisage any reason why investors would want to buy today. I’d avoid it like the plague.

NMC Health (LSE: NMC) was the only riser in the blue-chip FTSE 100 index, up 9.7%. Hunting (LSE: HTG) and Plus500 (LSE: PLUS) were the two FTSE 250 risers. They posted gains of 4.3% and 14.1% respectively. Should investors snap up these crash-defying stocks?

Very muddy waters

Unfortunately, in the case of NMC Health, the term ‘blue-chip’ can only be used loosely. Investors in the UAE-based hospitals business have been on a roller-coaster since influential short-seller Muddy Waters published a scathing report on the company in December.

Despite a subsequent extraordinary string of developments at NMC, and admissions by it, the share price was enjoying a mini-rally, while markets were crashing last week. It was up 9.7% by the close of day on Wednesday.

However, the company released an after-hours statement at 5.17pm. This has been discussed in detail by my colleague Karl Loomes. My short conclusion is that, due to unapproved activities by its recently-resigned directors, and discrepancies and inconsistencies in bank statements and ledger entries, NMC currently has no idea of its true financial position.

Before the market opened on Thursday, the Financial Conduct Authority agreed to the company’s request for a temporary suspension of its shares while it seeks to clarify its financial position. The situation looks grim to me. Never mind the 938p of the temporarily suspended shares, I’d sell at almost any price.

Highly undervalued

There are fears the spread of the coronavirus could trigger a broad economic downturn. Alongside crashing stock markets, the price of oil slumped. The shares of oil and oil-related companies may not have been the heaviest fallers, but they did worse than the overall market’s 11% drop.

Oil equipment and services firm Hunting was heading the same way as its peers early in the week. However, its shares jumped higher when it released its annual results on Thursday. This was despite it saying “the outlook for 2020 remains uncertain.”

Hunting has an experienced management team and a strong balance sheet. It’s announced a share buyback programme for the first time in its history as “the board considers the current share price highly undervalues the group.” I agree, and rate the stock a ‘buy’ on 10.7 times forward earnings at a current price of 318p.

Attractive on the face of it

Plus500’s shares soared on the back of a trading update released on Friday. The company’s online platforms enable retail speculators to bet on rising or falling prices — in things such as shares, commodities and crypto-currencies — by trading contracts for difference.

Plus500 said that “following the recent period of heightened volumes of trading across global financial markets,” it had seen “a significant increase in levels of customer trading activity.”

The idea of investing in a company that thrives when markets are volatile — and your other shares may be falling — is attractive on the face of it. As is a rating of 10 times forward earnings at a share price of 950p. However, due to my longstanding concerns about the company’s business model, and regulatory risk, I’ll continue to avoid the stock.

Well, latest data from UK Finance seems to suggest so. It said earlier this week that just one in 10 retail transactions in Britain is made using cash nowadays. And it predicts that the country will be “virtually cashless” by the middle of the 2030s.

Don’t bank on a comeback

This is a trend that mirrors changing consumer habits around the whole world. It’s a phenomenon that has unsurprisingly buried De La Rue (LSE: DLAR). The money printer’s share price has fallen around 85% over the past three years as cash usage has moved into terminal decline.

Latest results from De La Rue don’t suggest that it’ll rise like the proverbial phoenix from the flames either. Revenues from its Currency unit tanked by almost a third year-on-year between April and September as volumes and prices of its banknotes slipped.

So City analysts expect the FTSE 250 firm’s earnings to plummet again in the current fiscal year (to March 2020). A 76% bottom-line drop is currently being predicted. If  proven correct it won’t be the first time annual profits have tanked in recent years. But it could be one of the last, the business saying that there is “significant doubt” over its ability to continue trading due to its high debt levels just three months ago.

So forget about De La Rue’s low forward price-to-earnings (or P/E) ratio of 9.8 times. Not even these levels of cheapness are enough to tempt me to invest today.

Hunting’s headaches

For bargain hunters, buying shares in Hunting (LSE: HTG) might seem a more sensible option. This is a company that also trades on a rock-bottom forward P/E ratio of around 10 times. And unlike De La Rue it also offers a dividend for the current year, one which creates a chubby 2.8% yield.

In my book, though, this is another share that’s loaded with an alarming amount of risk. Freshest trading details in December underlined the huge troubles at the energy services provider as North American shale activity decelerated. It said that the pace of decline is actually accelerating and particularly so in the US onshore segment.

It’s possible that the rig count will keep on falling too, what with key macroeconomic issues (like trade wars, Europe’s lurch towards recession, and Brexit) lingering on in the background. Moreover, the recent coronavirus outbreak threatens to keep oil prices under pressure as well.

A 3% annual earnings drop in 2020 is currently forecast for Hunting by City analysts. I wouldn’t be surprised if its bottom-line troubles extend beyond the current year though, given the alarming shrinkage in the company’s highly-competitive marketplace. This is another share I would say is to be avoided all costs.

Report after report shows how, broadly speaking, shareholder payouts are still on the up, despite rising geopolitical and macroeconomic concerns, expansion that is still driving yields to significant highs. But as we enter the New Year, it clearly pays to be a bit more cautious when it comes to filling up with income stocks.

Take Hunting (LSE: HTG), for example. City analysts expect the business to raise a predicted 7.9p per share full-year dividend for the outgoing period to 9.4p in 2020, a meaty hike that’s built on expectations of a 6% profits rebound next year. Such predictions look to be built on extremely sandy foundations, though, as news flow this week proves.

Business is bludgeoned

Hunting, which provides equipment for the upstream oil sector, said in a year-end market update that “activity levels within the North American oil and gas industry continue to slow” and that “the pace of decline [is] increasing, particularly within the US onshore market.”

The FTSE 250 firm noted that crumpled capital budgets and seasonal factors have smacked business in Q4, and that a number of its customers in the US onshore segment have shuttered facilities in response to recent weakness.

In better news, Hunting kept its full-year EBITDA expectations on hold, though the pace at which trade is worsening suggests that a poor December could be in the offing, putting in jeopardy those current expectations.

At its Hunting Titan unit — its single biggest division by profit and one responsible for more than 75% of underlying profits — both revenues and profits were below the monthly run rate of the third quarter in both October and November. Hunting said that the situation here “remains highly competitive and continues to decline in line with activity levels and rig counts,” despite the introduction of new product ranges.

Hold on tight!

Plenty for its investors to fret over as we move into 2020, then. Hunting has fallen 14% in value during 2019, and it’s not difficult to foresee a year of heavy (if not heavier) weakness next year.

As this article goes to print, latest Baker Hughes oil rig data showed that there were 667 units in operation as of December 13, down from 873 a year earlier. The number of rigs has fallen in seven out of the past eight weeks, and as the clouds gather for the global economy I fully expect the number to keep falling in 2020.

It doesn’t matter that Hunting’s forward P/E ratio of 12.4 times and handy 2.3% dividend yield make it look cheap on paper. Given the pace at which market conditions are worsening, it’s a share that I think should be avoided at all costs.

Hunting a bargain

Hunting today reported a 15% increase in first-half revenue to $509m, despite “the general market uncertainty within the oil and gas industry.” It saw growth in most of its bigger geographies, and product and service segments, with the exception of its large Hunting Titan business, where “challenging US onshore markets” adversely impacted revenue and margins.

Group pre-tax profit increased 4% to $54.6m, but a higher tax charge saw the bottom-line slip lower, feeding into a 6% dip in earnings per share (EPS) to 24.6 cents. The company has maintained a strong balance sheet — net cash of $33.4m at the period end — and the board confidently increased the interim dividend 25% to 5 cents.

For the full year, I’m looking for EPS of around 50 cents (41p at current exchange rates), and a dividend of maybe 12 cents (9.8p). With the shares at 445p, as I’m writing, this would give a forward price-to-earnings (P/E) ratio of 10.9 and prospective dividend yield of 2.2%.

I rate the stock a ‘buy’ at this valuation, because I’m expecting a strong earnings performance next year, with management continuing to deliver on its strategy of “focused growth based on proprietary technology and ongoing lean manufacturing initiatives.” For example, a recent $12.5m bolt-on acquisition has added a strong product suite to the group’s offshore technology portfolio and gives it access to leading global deep-water projects.

Evolving Shell

Shell is another stock where we can expect a subdued earnings performance this year, followed by strong EPS growth next year. This will be helped by continuing share buybacks. Indeed analysts at Bank of America-Merrill Lynch reckon the company will crank up buybacks towards $12bn a year in the coming years, with potentially 30% of its shares repurchased by 2025.

As my colleague Roland Head commented in his review of the oil giant’s half-year results earlier this month: “Shell’s management is actively taking steps to position the company for a future when oil consumption is lower.” Share buybacks are part of this, protecting shareholder value, as management shrinks the business with lower investment in new oil assets.

At the same time, it’s developing its liquid natural gas, chemicals and marketing businesses, as well as new energies like biofuels and low-carbon electricity. In my opinion, it’s well positioned to evolve in the coming decades, as well as attractively valued on current earnings forecasts.

At a share price of 2,300p, City consensus expectations put the stock on a P/E of 11.7, with a prospective 6.7% dividend yield. Income seekers will love the yield, but with forecast EPS growth of 25% next year, there’s a growth story here too. The price-to-earnings growth (PEG) ratio for 2020 is 0.4, suggesting plenty of scope for the shares to re-rate higher. As such, I’d be happy to buy a slice of the business today.

In fact, its 2% annualised growth since 2015 could indicate that it is now undervalued relative to other major indices. That’s especially the case since it has a dividend yield of 3.2%, which is historically high for the index.

With that in mind, here are two FTSE 250 shares that could be worth buying now within a Stocks and Shares ISA.

Hunting

International energy services company Hunting (LSE: HTG) released an encouraging trading update on Thursday for the first half of its financial year. It has traded in line with management expectations, with the US onshore completions market showing signs of improvement during the period. There have also been increased activity levels in the North Sea and Middle East, which suggests that improved operating and financial performance may be ahead.

The company expects to report a rise in revenue versus the same period of the previous year, with EBITDA (earnings before interest, tax, depreciation and amortisation) also due to be up on the comparable figure from the prior year.

Although the energy services industry faces an uncertain period, Hunting appears to have an improving outlook. The company is forecast to post a rise in earnings of 23% in the next financial year. Since it trades on a price-to-earnings growth (PEG) ratio of just 0.5, it seems to offer a wide margin of safety. As such, it could be worth buying on a long-term outlook, with there being the potential for volatility due to it being an uncertain period for the oil price.

Tullow Oil

A volatile oil price could also affect the financial prospects for Tullow Oil (LSE: TLW). The company’s recent operational update showed that it is making significant progress in Kenya as it prepares to reach a Final Investment Decision (FID). It is also expecting to commence its drilling campaign in Guyana later in the month, with the spud of the first of three wells planned for 2019.

It remains on track to produce between 90,000 and 98,000 barrels of oil per day (bopd) for the full year. It expects free cash flow to be $550m for the full year, which could help to reduce debt and strengthen its balance sheet.

Of course, should the oil price come under pressure, the company’s financial outlook is likely to suffer. However, at the present time, Tullow Oil is expected to report a rise in earnings of 9% in the next financial year. Since it trades on a PEG ratio of 1.2, it appears to be fairly priced.

As with all oil and gas companies, Tullow Oil is susceptible to a rapidly changing operating environment. But with strong recent performance and a low valuation, its risk/reward ratio could be enticing.