Broker snap: Morgan Stanley sees medium term boost for Tullow

9th Jul 2009 13:06

Irish oil company Tullow Oil disappointed some in the market on Wednesday when it said interim revenue will likely fall 23% following a drop in production and lower commodity prices, but Morgan Stanley reckons the company's prospects look good over the medium term.The US bank argues that the recent share price weakness merely reflects the slide in the price of crude; Tullow is down more than 7% over the last week.Its exciting discoveries in Uganda and Ghana are set to drive future earnings growth, while the legacy assets in the UK and Gabon are worth 800p per share, Morgan Stanley calculates. The US bank further estimates that the exploration programme over the next half year could add another 800p to the net asset value of the company.Not surprisingly, Morgan Stanley recommends an "overweight" position in the shares and had a price target of 1225p.