Jefferies downgrades ratings for Tullow Oil and EnQuest

Jefferies has downgraded its ratings for UK-listed oil and gas peers Tullow Oil, EnQuest, Capricorn Energy and Pharos Energy as part of its review of the sector on Thursday.

"Bottom-up review of International E&P operational delivery, shareholder returns, growth strategy and executive management tenure allows us to establish the stocks we see as having the strategic vision, capability and capital to deliver market-beating equity returns in the future," Jefferies said in a research note.

However, the broker has reviewed its recommendations for those stocks where its sees growth and returns as "constrained".

Tullow Oil is now rated 'underperform', while EnQuest, Capricorn Energy and Pharos Energy are rated 'hold', while target prices have been slashed by 20% to 30%.

"EnQuest (cut to 'hold') has delivered production to guidance in both 2022 and 2023 but on declining volumes and, overall the stock is down with no direct shareholder return to offset," Jefferies said.

"Onshore Egypt, growth for both Capricorn Energy and Pharos Energy is restricted by receivables (cut to 'hold') and offshore Ghana, Tullow Oil growth is limited as excess capital is used to deleverage, rather than growth (cut to 'underperform')."

Tullow shares were down 3.7% at 37.36p by 1126 GMT, EnQuest fell 6.2% to 14.43p, Capricorn Energy slipped 1.3% to 165.4p while Pharos declined 1.6% to 21.4p.