Tullow Oil shares gain after Liberum reiterates 'buy'

Tullow Oil's share price was rising strongly on Tuesday, supported by a 'buy' call from Liberum,which downplayed the recent sell-off in the shares.

Liberum has cut its target price for the stock from 888p to 720p in light of the recent slump in Brent crude to a four-year low of $86 a barrel, and after Tullow last week significantly reduced its exploration budget.

However, it said that the recent fall in the shares have been overdone.

The broker said that results from two "basin-opening wells" in Kenya should be released in the next three months and would be catalysts for the stock, "but stable oil prices may be required before investor interest returns".

"The share price is consistent with ~$86 Brent forever and no future exploration success - assumptions that we believe are pessimistic," said analysts Andrew Whittock and Jean-Pierre Dmirdjian.

They said that Tullow's reduced exploration spend should ease balance-sheet pressures, while the company continues with activities in low-cost East Africa.

"The focus on low-cost, relatively low-risk opportunities should relieve some pressure on the balance sheet while maintaining prospects for adding more oil resources and value," the analysts said. "It shows Tullow's portfolio is broad enough to offer choices."

The stock was up 3.8% at 476.1p by 12:50, with the wider oil and gas sector tracking the oil price higher after it reached a four-year low last week.

Even after Tuesday's gains, Tullow's stock has still lost a third of its value over the past three months.