Thursday tips round-up: Royal Dutch Shell, Tullow Oil, OGX

4th Jul 2013 06:42

Royal Dutch Shell's announcement of a significant oil discovery in the Gulf of Mexico failed to boost shares but The Telegraph's Questor column believes it a good time to buy into company's 'B' holdings. Europe's shares have fallen by almost 10 per cent due to lower earnings consensus forecasts for this year. But with its latest oil discovery, the shares at good value for money. The group on Wednesday said that an exploratory well at Vicksburg in the deep waters of the Gulf of Mexico revealed potentially recoverable resources of more than 100m barrels of oil equivalent (boe). "This is good news for Shell, as replacing its oil reserves was an issue for the group last year," Questor said. Shell also plans to boost output from 3.3m boe per day in 2012 to 4.0m boe in 2017. It is also expected to increase its dividend 6.0 per cent this year.Analysts have a problem valuing Tullow Oil because while the company has a wealth of reliable producing assets, it also has an ambitious oil exploration side in less proven territories, The Times' Tempus column muses. "Pure exploration companies live and die by their news flow, with updates from every well studied closely by the market, and Tullow's news has been poor of late." So Tullow shares have been marked back from above £16 early last year and are now sitting just above £10. They rose 28p to £10.61 on Thursday after a positive trading update, including good results from wells in Kenya and a third discovery there. Tempus noted that the shares are "at the bottom end of their trading range; no time to get out, if you are an existing investor, and a decent speculative punt, if no more, if you are not."Eike Batista's oil and gas explorer OGX says its only producing wells in the Tubarao Azul field in the Campos, will probably cease production in 2014 because their geology makes further extraction impossible. Shares have taken a hit over the last two years, notes the Financial Times' Lex column. In March 2011 they were trading at 20 Brazilian Real (R$) with a balance sheet of R$4.8bn and no debt. Today shares trade at R$0.4 and the company's debt is at R$2.5bn after bond offerings in 2011 and 2012. A speculative asset - one that is not producing much free cash flow yet - is built or bought, Lex said. "Excitement about the asset escalates and early indications are promising, but a little more investment is needed. Rather than dilute the prescient and patient early equity investors, adding a little debt to the funding mix seems like a good idea."RDPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.