Tullow Oil shares rally after Goldman Sachs boosts stock to 'buy'

Shares in oil and gas exploration company Tullow Oil rose 2.3% early Wednesday after the stock had its rating promoted to ‘buy’ from ‘neutral’ by US investment banking titan Goldman Sachs who called it a “source of opportunity.”

“We believe the stock offers exposure to a strategic asset base, given its materiality, oil-phase and positioning towards the bottom of the cost curve in Western and Eastern Africa,” said the bank.

It noted that year-to-date, Tullow shares are down 18% versus the FTSE World Europe which is up 12% during the period.

“In our view, Tullow’s full-cycle portfolio offers diversification and a cash flow uplift driven by the ‘TEN’ project developments in Ghana (due on-stream in mid-2016); on our estimates, Tullow will turn FCF positive from 2017,” Goldman added.

The bank adjusts its target price on the stock lower by 5p to 411p as it assumes a long-run oil price of $70 per barrel.

On the whole, “we continue to believe that Tullow is fully funded for this development, particularly given its successful credit facilities renegotiation where $450mn of additional capacity was secured, thus improving near-term financial flexibility,” noted Goldman.