Tullow Oil gushes higher on Deutsche Bank upgrade
Shares in Tullow Oil gushed higher on Tuesday as Deutsche Bank upped its stance on the stock to 'buy' from 'hold' and lifted the price target to 330p from 270p, saying the current price offers an attractive entry point.
FTSE 250
20,077.75
12:45 03/05/24
FTSE 350
4,510.26
12:45 03/05/24
FTSE All-Share
4,463.71
12:45 03/05/24
Oil & Gas Producers
9,489.43
12:45 03/05/24
Tullow Oil
36.52p
12:29 03/05/24
DB noted that Tullow has underperformed its peers by around 20% year-to-date.
"If you've been sitting on the fence, we think the current share price offers an attractive entry level to invest in a material and recapitalised bellwether of the European exploration & production sector.
"Tullow offers geared commodity exposure for investors with a constructive outlook on the oil price, as well as long-term optionality and growth in a deflationary international E&P cost environment (unlike the US unconventional space)."
Deutsche said the rights issue allows Tullow to wrestle back control of its free cash flow from the banks and let its equity story take centre stage.
Last week, Tullow announced plans to launch a £607m rights issue at a 45% discount to its current share price as it looks to shrink its debt burden.
"The $724m net proceeds from the rights issue should now free Tullow from the restraints that may have been imposed by its banking syndicate in a flat commodity oil price environment. We also estimate that Tullow will save circa $75m in fees and interest charges over 2017-18, as well as removing the need to stretch covenant waivers," DB said.
At 0840 GMT, the shares were up 3% to 203.50p.