Should you pile into 88 Energy Ltd, down 50% in 9 months?

Today I'm looking at two oil stocks which have proved tricky to time correctly over the last couple of years.

The first of these is Alaskan oil explorer 88 Energy (LSE: 88E). Delays in flow testing the Icewine #2 well have caused this £91m firm to lose more than 50% of its value since peaking in June 2017. But the shares have doubled since October, suggesting strong buying ahead of the 2018 season.

88 Energy recently raised $8.1m from option investors and started work on a new 3D seismic survey. Working on the Western Margin of the North Slope of Alaska, the company hopes to gather data for prospective drilling opportunities.

The survey started on 7 February and will cover around 460 square kilometres. It was expected to take 45 days, so should be completed very soon.

Buy ahead of news?

Along with the 3D seismic results, investors will be looking forward to flow testing results from Icewine #2. Testing of this well began last July, but was suspended to allow pressure to build. When testing resumed on 31 August, the rapid approach of the Arctic winter soon caused the company to suspend testing again, until April or May 2018.

The results which were reported last year showed Icewine #2 producing only fracking fluid and "minor hydrocarbon indications", including a small amount of gas. Oil may flow when testing is resumed later this year, but the results so far don't seem very encouraging to me.

With no revenue and limited cash, the high-risk nature of this business means that I would rate the shares as a sell.

A contrarian opportunity?

Dubai-based offshore jackup rig-builder Lamprell(LSE: LAM) has had a difficult time since the oil market slump started in mid-2014. Today's full-year results make it clear that as expected, it's likely to be at least 2019 before improved market conditions translate into higher revenue.

Luckily, Lamprell went into the energy market downturn with a full order book. As these rigs have been completed, this order book has been converted into cash. Today's figures show that while revenue fell by almost 50% to $370.4m last year, Lamprell ended the year with a net cash balance of $257m.

Indeed, it would have been a fairly good year if the company hadn't run into problems on its first major renewables project, the East Anglia ONE offshore windfarm. This resulted in the group reporting an overall loss for the year, thanks to "significant additional costs" for staffing, equipment and shipping.

It seems clear that this project wasn't properly understood or priced. But I'm fairly sure lessons have been learned. Future renewables work should be more profitable.

This could be a turning point

In the meantime, the group's order pipeline has risen from $2.5bn to $3.6bn over the last year. Chief executive Christopher McDonald expects some of these orders to be awarded later this year. If Lamprell can rebuild its order book for 2019 onwards, the shares could be a contrarian buy at under 70p.

However, this situation isn't without risk. Net cash will fall by more than $100m this year, due to existing commitments. Failure to secure some decent orders for 2019 could leave the firm in a much more vulnerable position. With very little visibility on progress for outside shareholders, I'd avoid this stock for now.

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Roland Head 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.