Broker snap: Credit Suisse downgrades Tullow after recent disappointments

12th Dec 2012 09:10

Credit Suisse has downgraded its rating for oil giant Tullow from 'outperform' to 'neutral', saying that it may take some time for investor confidence to return."The past few weeks have hit investor confidence in TLW shares, especially its ability with the drill bit, and the investment case largely relies on this," the broker said on Wednesday morning."This is particularly relevant for TLW as its long dated exploration track record previously justified a higher risk weighting across its portfolio."Credit Suisse said that the last few well updates had to be seen as a success to end the year on a positive note following a subdued second half.The stock has now fallen by around 19% since the start of the month, including today's fall (down 2.87% at 1,117p). Most recently, the company announced yesterday that its Okure-1 exploration well offshore Ghana had encountered 'low net to gross oil bearing reservoir in a secondary objective'.Tullow also announced that it plans to buy Norwegian exploration group Spring Energy for $372m and dispose of its non-core gas assets in the North Sea. Credit Suisse estimates that these non-core assets are valued at around $800m."While we admire TLW's ability to access acreage and its attractive exploration portfolio, where we see several 'big' opportunities to possibly come to fruition next year (e.g. Mauritania, offshore Mozambique, Norway), it is unlikely until late 1Q13/early 2Q13 (with the Sabisa well) at the earliest that sentiment will turn, in our view."The target price has been slashed from 1,550p to 1,480p.BC