A hot growth stock I'd always buy over Tullow Oil plc

I have long been fearful over the investment outlook for Tullow Oil(LSE: TLW) given the large and long-running supply imbalance in the energy market.

And latest production data from the Energy Information Administration this week has done little to soothe my concerns. These showed production in the US hit 9.95m barrels per day in September, the highest level since July 2015. Exports of 1.98m barrels per day was the highest total on record.

Rig count numbers from Baker Hughes suggest that these levels could well keep on climbing too. The information gatherer announced that the number of oil rigs operating Stateside rose by six in the last reporting week, to 750, underlining how comfortable shale producers still are in operating at current price levels.

In the meantime, OPEC and Russia continue beavering away to address the glut, and so far talk is positive that the group's current supply agreement could be extended into 2018 at next month's meeting. But the oil cartel is clearly no longer the only game in town, and this threatens to keep crude prices depressed.

Risky business

So what does this mean for Tullow Oil? Well, plenty, as one would naturally expect. Indeed, the FTSE 250 driller suffered impairments to the tune of $642m between January and July, resulting in a pre-tax operating loss of $300m, as it chopped down its own price forecasts.

Of course, the prospect of energy prices also looms large over the company's ability to pay down its colossal debt pile, which rang in at $3.8bn as of June, even if Tullow Oil continues to scale back capital expenditure and embark on further cost-cutting.

And although production has started gushing from Tullow Oil's TEN project off the coast of Ghana, brokers are continuing to slash their profits forecasts for the business. It is now expected to endure another full-year loss in 2017, of 0.7 US cents per share, while anticipated earnings of 12.5 for 2018 are also down from prior estimates.

Bet on red

While I reckon those investing in Tullow Oil may be playing with fire, I cannot say the same for those currently splashing the cash on Redcentric (LSE: RCN).

Trading at the IT services provider has been pretty difficult over the past year, but it continues to boast a healthy sales pipeline for both new and existing customers. And in a reassuring update on Thursday it announced trading during the six months to September remains in line with expectations. Meanwhile, the appointment of telecoms exec Chris Jagusz as chief executive today places the North Yorkshire business in pretty safe hands, in my opinion.

And earnings forecasts are certainly a lot sunnier over at Redcentric than at Tullow Oil. The number crunchers expect the bottom line to swell 10% in the year to March 2018, and by a further 17% in fiscal 2019.

While a consequent forward P/E ratio of 16.6 times may not be compelling on paper, I reckon the prospect of additional electrifying earnings growth in the year ahead makes the business exceptional value at current prices.

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Royston Wild has no position in any of the 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.

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