Broker snap: Societe sees buying opportunity at Tullow Oil

18th Apr 2013 10:42

Tullow Oil's recent pull-back due to investor uncertainty over its exploration-led strategy has created a buying opportunity, according to Societe Generale, which has upgraded its rating for the shares from 'hold' to 'buy'.The stock has fallen 21% in April alone, the broker explains, as a results of declining oil prices and "inconclusive" updates on two of Tullow's key exploration wells - Sabisa in Ethiopia and Priodontes in French Guinea."For the last few years Tullow has demonstrated a superior exploration track record and liquidity, making it the benchmark E&P play for investors in Europe, in our view. Last summer's de-rating owing to negative operational updates on its developments (higher costs, resource downgrades) has now been followed by a series of disappointing exploration well updates," Societe said. However, analysts pointed out that the recent sell-off has exceeded the value of the two wells (estimated at 25p a share) and even the two countries combined (estimated at 105p a share)."Short-term catalyst-driven investors should now have moved on from the stock, creating an opportunity for longer-term investors to take advantage of the pull-back to add to their positions. In our view, Tullow remains a first-rate explorer."The target price has been cut from 1,340p to 1,200p.The stock was up 3.76% at 1,019.47p by 10:52 on Thursday.BC