Canaccord cuts Tullow Oil to 'hold' from 'buy', questions Kenya resources

Canaccord Genuity revised its stance on Tullow Oil on Wednesday from 'buy' to 'hold', cutting its target price from 250p to 220p following reports the company may not hold quite as much recoverable oil at its Kenyan asset as previously believed.

FTSE 250

20,470.36

13:45 14/11/24

n/a

FTSE 350

4,457.06

13:45 14/11/24

n/a

FTSE All-Share

4,414.57

13:45 14/11/24

n/a

Oil & Gas Producers

7,939.01

13:45 14/11/24

0.88%

69.55

Tullow Oil

21.00p

13:09 14/11/24

1.94%

0.40p

Tullow has for some time estimated gross 'mean' discovered resources at its asset in the South Lokichar Basin, in which it holds a 50% stake, to be around 750m barrels of oil with an estimated basin potential of 1bn barrels.

However, Canaccord said recent reports from Kenya seem to suggest there may be a "downside risk to these figures", citing one article published on Tuesday in Standard Media that claimed there was potentially just 250m barrels of recoverable resources, a figure which would raise doubts over the project's commerciality.

Canaccord said: "Bearing in mind these comments, we revise our base case gross Kenyan recovery to 500mmbbls gross (from 750mmbbls), and given the likely extended timelines we delay our assumed first oil by 12 months to mid-2023."

As a result, the brokerage suggested caution in the run-up to the results announcement next month.

At 1200 GMT, shares in Tullow were flat at 202.40p.