Broker snap: Exane BNP Paribas still likes Tullow

29th Jan 2010 09:49

Oil company Tullow Oil's share price got a battering after it announced a £925m placing this week, but Exane BNP Paribas remains a fan of the stock, and sees a bright side to the fund raising.'Reassuringly, the company says the proceeds will be used to fund an accelerated exploration drill-out and cover mechanically higher development expenditure in Uganda, not spiralling capex [capital expenditure] requirements,' the broker said.Exane believes the stock offers a positive risk/reward proposition. 'Admittedly, Tullow does not offer the cheapest exploration upside but our blue-sky scenario offers 89% upside. Moreover our core valuation and the current price imply a mere 35% chance of success, versus a track record in the 70-90% range,' the broker reasons, adding that the possible sale or purchase of assets in Uganda could also be a catalyst for share price movement.The broker has retained its 'outperform' rating for the stock and has a price target of 1300p.