Credit Suisse lowers price target on Tullow Oil

20th May 2014 10:22

In a research note issued on Tuesday analysts at Credit Suisse lowered their price target on shares of oil exploration group Tullow Oil despite the lower-risk drilling plan on which the company is embarking on this year and next.Amongst the factors which motivated its decision are the recent appreciation in sterling (to 1.65 from 1.60), a string of unsuccessful well results (Emong and Ekunyuk in Kenya, Tapender in Mauritania, Butch East in the North Sea) and changes to future drilling plans (in Mauritania).The above will only be partially offset by positive changes to its macroeconomic forecasts, for the 2014 price of Brent oil more particularly. The Swiss broker also modified its estimates for the company beyond this year to reflect recently announced disposal plans. On the plus side of things, Credit Suisse highlighted that the drilling plan which had been programed for this year and the first half of 2015 looks to be lower risk (fewer expensive frontier offshore wells), the fact that it also targets various play types in the offshore (eg Gabon) in more tax-advantaged areas for exploration (eg Norway) and perhaps a more cost conscious approach and/or simply a reflection of the disappointing drilling track-record in the Late Cretaceous of late. Regarding moves by the firm to reshape its portfolio of assets, the intention to monetise its North Sea assets makes sense to these analysts. However, it would be better if the sale of its stake in the TEN development were carried out in whole with its other shareholders, if possible, instead of separately. The price target on the stock was lowered to 945p from 1,000p, and the 'neutral' recommendation maintained. AB