After today's 15% drop, is this momentum stock worth selling to buy Tullow Oil plc?

Tullow Oil(LSE: TLW) shares have been making a tentative comeback, gaining nearly 60% since the beginning of 2016 as crude oil has been strengthening.

But after the price of a barrel has fallen back from $70 to around $63, the shares have retrenched. Is that a buying opportunity?

Last week, Tullow reported its first operating profit in three years. It was only a modest one at $22m, and hefty finance costs helped push that down to a bottom-line loss. But, crucially, we learned of free cash flow of $543m, and that will hopefully leave Tullow's lenders feeling a little less twitchy over the oil firm's big debts.

After refinancing in November, that debt level still stood at $3.47bn (£2.5bn) at year-end, which is a bit above the company's current market capitalisation of £2.45bn.

Debt falling

But gearing was "significantly reduced" and is actually not far above the company's targeted level. And there's still headroom (including cash) of $1.1bn. I see the chances of a collapse very much receding now, and I don't think the short sellers are going to win this one.

The prospects for Tullow's drilling programme are looking good for boosting production over the next few years -- Kenya is expected to produce first oil in the early 2020s. Although oil is down a bit, I can see it regaining $70 or higher before too long -- and I reckon Tullow Oil shares should do well in 2018, on a forward P/E of 12.

A big crash

Looking at its share price, you could be forgiven for thinking Amur Minerals Corporation(LSE: AMC) is on the ropes. At one stage on Tuesday the price dipped by more than 15%, though as I write it's come back a little and is 10.4% down at 5.8p.

The price has actually fallen by 55% over the past 12 months, but what lies behind the latest drop?

The company, which delves for nickel-copper sulphide in Russia's eastern regions, revealed it has taken on a new convertible loan facility to the tune of up to $10m, with an initial $4m to be drawn straight away. Two other drawdowns will be taken, one at 121 days and one at 240 days.

Amur sounds happy with the deal, but the terms of the repayment will surely be behind the market's weak sentiment in response. Each cash advance is to be repaid in 12 monthly instalments, but if Amur elects not to pay any individual instalment, the lenders can convert that amount into new ordinary shares at any time.

Dilution?

With Amur currently lossmaking, how many of those repayments it will elect to make is an open question. And though the deal is flexible for it, we now have the uncertainty of how much dilution of shareholders' interests we'll see. Amur's market capitalisation is currently around £40m, and the total $10m loan could represent up to around 20% of that.

The share price momentum is not in Amur's its right now, but what should you do? Buy for a potential recovery or sell and use the cash to buy some Tullow shares?

Well, I wouldn't buy a tiny 'jam tomorrow' stock like Amur anyway, and I already own some Premier Oil shares as my risky hydrocarbon pick -- so it's a choice I can happily ignore.

But Amur Minerals could go either way, and I reckon 2018 could be a crucial year.

Balanced risk

Investing in depressed shares like these for recovery is not without excitement, and one possible way to calm things is to pair risky investments with ones that look safer at more sustainable price levels.

The company selected in our Top Growth Share From The Motley Fool report has already provided handsome rewards, our analysts think it has a lot more to give, and it looks a safe pick to me.

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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.

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