Tullow Oil surges on Moller-Maersk's African expansion

Shares in oil exploration and production company Tullow Oil surged on Monday after Copenhagen-based A.P. Moeller-Maersk A/S agreed to buy half of Africa Oil Corp.’s shares in licenses in Kenya and Ethiopia, where Tullow operates some blocks.

“The news for Tullow is very positive and has brought buyers back today,” said Atif Latif, director of trading at Guardian Stockbrokers, adding that it gives more potential upside to Tullow’s assets in the region.

He said the Maersk Oil /Africa Oil deal shows there remain vastly discounted assets that are still to be fairly valued.

“We see Tullow as one of the material undervalued names in the oil space that has been weak due to the commodity weakness over the last year,” said Latif.

Moeller-Maersk has agreed to buy half of Africa Oil’s oil assets for as much as $845m (£561m) to boost its energy unit, which is struggling in the face of declining output in the North Sea.

Maersk Oil will purchase shares in three onshore exploration licenses in Kenya and two in Ethiopia.