Broker snap: Nomura ups Tullow valuation

22nd Sep 2009 11:42

Nomura Securities has upgraded its net asset based valuation of Irish oil firm Tullow Oil following the oil company's recent discoveries in Sierra Leone and Uganda.Nomura now values Tullow at 1341p per share, up from 1160p previously. 'In addition, we have incorporated further potential from its West African portfolio (Sierra Leone and Liberia), which could be targeted next year following the encouraging Venus well result,' Nomura analyst Michael Alsford said.The broker believes that the sector as a whole is undervalued. 'The sector is trading at a 20% discount to its implied base case NAV [net asset value] assuming the forward curve. In other words, the UK sector is discounting a flat oil price of around US$68 per barrel, which is 10% below our forecasts but more significantly around 16% below the 2012 futures strip (US$81 per barrel).'The broker has also made minor changes in its price targets for other major players in the sector to reflect its revised macro and currency assumptions for 2009 and 2010. Price target changes are as follows: Premier (1,535p to 1,457p), Heritage (685p to 637p), Soco (1,515p to 1,485p), Dana (1,530p to 1,470p) and Cairn (2,855p to 2,736p).US bank Morgan Stanley is also a fan of Tullow Oil and has raised its target price to 1500p, while suggesting that if Tullow's run of luck with exploration continues with its west African prospects then a 2000p level is not out of the question.