Broker snap: Credit Suisse cuts target price for Tullow Oil

5th Dec 2012 10:46

Credit Suisse has cut its target price for Tullow Oil from 1,650p to 1,550p following Tuesday's news that the no commercial hydrocarbons were found at the Zaedyus-2 appraisal well, offshore French Guiana.The broker explained: "RDS - the operator since the initial discovery well - opted to drill up-dip towards the apex of the fan, which in the success case would have allowed for a shallower development. This is not TLW's preferred approach. "What TLW experienced with this play is that there is an opportunity to get thicker and better developed reservoir down-dip, and this will be the focus for the drilling programme going forward."Credit Suisse said that this well update on its own affects its risked net asset value estimate estimate by around 20p per share.Nevertheless, the broker maintained its 'outperform' rating on the stock, saying that it continued to back Tullow given its long standing track record in exploration.However, analysts said that the market is likely to adjust the implied risk weighting for its portfolio "especially following a period of relatively less successful drilling since mid-2012 and the lack of material newsflow in the near term."The broker said: "Positive well updates are needed, and in our view the market looked for Zaedyus appraisal as an easy win."BC