I'd happily sell Tullow Oil to buy this 6% yielder

Tullow Oil's (LSE: TLW) shares may be back on an upward charge, but I remain happy to sit on the sidelines.

The fossil fuel giant is now trading at its highest since last March above 235p per share, investor appetite still igniting on the back of resurgent crude values. The Brent benchmark was last trading through the $75 per barrel marker and at levels not seen since the dying embers of 2014.

Oil values have gained additional traction as, in tandem with existing supply fears in the wake of recent military action in Syria, market makers are also considering the prospect of fresh US sanctions being imposed on Iran and the possibility of extra disruption to supplies.

In this climate it would be foolish to rule out additional crude price strength. However, I remain unconvinced by the outlook for oil prices further down the line.

US pumping away

OPEC and Russia have of course given energy prices terrific support since the start of 2017 via their pumping cap. However, concern is mounting that, with oil prices continuing to charge as the market surplus declines, the cartel and its partners in Moscow may be tempted to turn the taps up again when the current agreement runs out later this year.

This could prove a disaster for oil prices, particularly as US shale producers continue to boost output at a stratospheric rate. The enormous political and commercial implications of this mean that OPEC will likely have limits on how long it will sit back and watch US output quickly accelerate before joining the party. UAE oil minister Suhail Mohammed Faraj Al Mazrou recently urged more nations to join the supply accord in an interview with German newspaper Handelsblatt.

Too much risk?

Against this backcloth I believe investing in Tullow Oil is a very risky proposition. While the African driller has worked hard to pull down its colossal debt pile, it is still mountainous enough to potentially leave it in a tough position should crude values stage a reversal from current levels.

Despite surging energy values and Tullow's improving production outlook, earnings at the business are still set to fall 42% and 5% in 2018 and 2019 respectively, or so says City consensus.

When you throw an uninspiring forward P/E ratio of 16.6 times into the mix, I see little reason to invest in the FTSE 250 driller today.

The 6% yielder

I'd be much happier to sell out of Tullow Oil and to splash the cash on Randall & Quilter (LSE: RQIH) instead.

While the insurance specialist is expected to endure an 11% earnings reversal in 2018, it is expected to flip back into growth with a 21% advance next year as its decision to hive off non-essential operations and double down on its core operations begins to bear fruit.

Further to this, 2018's anticipated bottom-line reversal still leaves the company dealing on a rock bottom forward P/E ratio of 10.8 times.

And income chasers will cheer news that this expected blip is not predicted to hamper further dividend expansion either -- an anticipated reward of 8.8p per share for last year is expected to stomp to 9p and 9.3p per share for 2018 and 2019, figures that produce vast yields of 6% and 6.2% respectively.

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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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