UK Oil & Gas Investments plc isn't the only stock that could double in 2018

Investors in oil exploration companies really haven't had a great time in recent years, but I'm seeing light at the end of the tunnel and a few that could be in for a turnaround year.

In particular, I think long-suffering investors in Pantheon Resources(LSE: PANR) could be in for a bit of respite in 2018, with their shares having slumped from 2016's peak. Years of low oil prices combined with no profits from Pantheon have taken their toll, but that could be about to change with a turn to profitability on the cards for the 12 months to June 2018.

There's been a problem with the company's Polk County production, but an update on Friday offered encouraging news.

Chief executive Jay Cheatham said: "I very much look forward to the frac of VOBM#1 which aims to remediate the known blockages in that well and to ramp up production into the Polk County gas plant. A good result will have very positive ramifications for our play."

Profits almost here

In addition, the VOBM#5 well is "proceeding well and without issue", and a frac plan is in place to minimise the chances of the kind of damage that impacted operations at VOBM#1. If it's successful, work to bring it online would commence immediately.

The only downer is news that work is suspended at VOBM#4 as the site is under water from heavy rain.

Analysts are expecting a very big ramp-up for 2019 which would see EPS soaring to bring the prospective P/E down to 10. And I reckon further evidence to support that rosy outlook could easily see a re-rating of Pantheon shares this year.

Substantial resources

The early excitement over UK Oil & Gas Investments(LSE: UKOG) has died down a bit, but that was pretty much inevitable as it always takes time to progress from a hydrocarbon find to actual profitable production.

I was upbeat in December after the partners in the Horse Hill development north of Gatwick released their latest progress update, and further developments look good.

The latest is February's update from the Broadford Bridge-1 find at the Weald Basin which, in the words of executive chairman Stephen Sanderson, revealed "positive and encouraging initial oil flows from the first-ever Kimmeridge Limestone 5 test."

The well produced 96 hours of oil flow via near-continuous rod-pumping, with fluid return rates of between around 10 and 72 barrels per day. At this stage, with the fluid containing spent acid from an acid-wash programme, something over 30% was oil (with periods of over 50%). No obvious natural water was found in the mix.

Other prospects

That comes after January's Isle of Wight update which told us the firm has let its offshore P1916 licence lapse due to "low geological prospectivity, high environmental sensitivity and consequential high associated drilling costs." The focus will now be on the onshore PEDL331 Arreton oil discovery, in which UK Oil & Gas has a 65% interest.

UK Oil & Gas is still in its cash-burn phase and there are no profits forecast yet, and that makes it a very difficult investment to quantify.

The share price has receded too, dropping from September's excitement-led peak of 10p to less than 2p as I write. That, sadly, is a common phenomenon with growth stocks.

But again, I see potential for an uprating during 2018 if the positive news continues.

Another growth candidate

If you're nervous about the risks of investing in Pantheon Resources or UK Oil & Gas, one approach would be to offset them with a safer growth stock at a sustainable price level.

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Alan Oscroft 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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