Tullow Oil share price: what now after stock down 35% since mid-November?

Tullow Oil’s shares continue to slide after it downgraded its full-year production guidance last month, with the stock down more than 35% since the announcement.

Full-year 2019 oil production is forecast to average around 87,000 barrels of oil per day. This is slightly below previous guidance primarily due to weaker-than-expected production performance at its operations in Ghana, with drilling suspended at its TEN fields site in July.

‘In West Africa, our non-operated assets continue to perform well,’ Tullow Oil CEO Paul McDade said. ‘However, Ghana production has not met our expectations this year and we are working closely with our Joint Venture Partners to ensure that both fields perform to their potential.’

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Not only did the company have to downgrade its full-year production guidance, but Tullow Oil also announced that recent discoveries in Guyana contained low quality, heavy, sour oil which have significantly less commercial value.

The oil and gas company remains optimistic about the larger basin in Guyana and its potential to become a driver of profit and source of future cash flows, but even if the site does eventually bear fruit it will take some time for new wells to come online.

Tullow Oil trading well below analysts’ targets

Analysts at JP Morgan, Peel Hunt, Jefferies and Citgroup all downgraded their rating for Tullow Oil in November, with them issuing target prices of 249p, 211p, 168p and 165p respectively.

As it stands, Tullow Oil is trading well below analysts targets at 133p as of 11:50 GMT on Tuesday.

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Peel Hunt says Tullow Oil stock down but not out

However, despite Tullow Oil suffering a significant sell-off since downgrading its production guidance, analysts at Peel Hunt believe that it has been ‘overdone’, with its target price implying a potential upside of 58% for the stock.

‘Heavy oil is a major blow, but we think the share price reaction is overdone: stripping out Guyana gives a 211p/share Risked NAV,’ Peel Hunt analyst Matt Cooper said in a note.

‘While heavy oil increases risking, for larger discoveries such as Jethro, we think the high quality/temperature/pressure reservoir means a good chance of development.’