Report

Tullow Oil | Initiation: Deleveraging targets well within sight

Tullow operates the Jubilee and TEN oil fields offshore Ghana and has just announced the sale of its Gabonese assets for US$300m. Current production and reserves are a substantial c55kboed and 165mmboe, including Gabon. Following a disciplined re-focusing of the business and the sale of its Gabonese assets, the company's de-leveraging targets of net debt under US$1bn and leverage under 1x are well within sight with further options to accelerate the process. Tullow has now returned to sustained profitability from 2024, we forecast. We calculate a risked NAV10 valuation of 56p/share of which core NAV represents 49p/share which compares with the current share price of 14p while, on consensus forecasts, Tullow is trading at a 22% discount to the average for peers on EV/EBITDA and a 21% discount on EV/NCG for 2025.
Underlyings
Tullow Oil plc

Tullow Oil is an independent oil and gas exploration and production company. Co.'s focus is on finding oil in Africa and South America. Co.'s primary activities include targeted exploration and appraisal, selective development projects and growing its production. As of Dec 31 2017, Co.'s portfolio included 90 licences in 16 countries. Co.'s operations are organized into three business delivery teams: West Africa; East Africa; and New Ventures. As of Dec 31 2017, on a working interest basis, Co. had commercial reserves of 245.7 million barrels of oil, 268.90 billion cubic feet of gas, and 290.5 million barrels of oil equivalent (petroleum).

TULLOW OIL PLC

Provider
Capital Access Group
Capital Access Group

Capital Access Group advises companies on effective engagement with investors. Our experienced team offers market-leading access with hard-to-reach investors, including smaller institutions, pension funds and private client fund managers. These under-serviced investors are located not only in London but across the regions of the UK and Europe. We have an unrivalled knowledge of this extensive audience, to whom our published research is distributed, as well as to larger institutions. We offer this service as part of an integrated investor communications strategy to promote a company’s investment story.

Our clients, ranging from AIM to FTSE 100 companies, benefit from our professional, long-term relationships with investors. Not only do we identify and target investors, we contact them directly and relay their views back to clients with analysis, interpretation and advice. This ensures that our clients are in control of their investor engagement. The objective is to improve the reach and engagement with investors, which in turn strengthens the share price.

Analysts
Colin Smith

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