Berenberg ups Tullow Oil to 'buy' after Guyana discovery

Berenberg bumped its rating on Tullow Oil up to 'buy' from 'hold' on Monday after the oil and gas exploration group said it had made a "substantial and high value" oil discovery in Guyana.

The bank, which lifted its price target on the stock to 240p from 230p, said the discovery at the Jethro field offshore Guyana and the subsequent de-risking of exploration potential in the Orinduik block address one of the key problems of Tullow Oil’s investment thesis - portfolio depth.

"Moreover, the de-risking of future exploration potential in the Orinduik block may allow Tullow to monetise part of its 60% stake in the block, which would subsequently address its balance sheet problems once and for all," it said.

"We estimate that selling half of its stake could raise circa $1bn, a substantial amount relative to its net debt of $2.9bn."

Berenberg pointed out that success in Guyana comes amid disappointment in East Africa, where progress on a farm-out agreement seems to have stalled.

At 1300 BST, the shares were up 17% at 210.10p.