Jefferies upgrades Tullow Oil to 'hold', restarts coverage of Cairn Energy

Jefferies stated that Tullow's debt refinancing following the placing of its $1.8bn, 10.25% senior secured note due 2026 was done "without the equity dilution risk" it feared.

The broker noted that annual interest costs remained roughly $250.0m per year and added that evidence of production support from the first newly drilled production wells at the Jubilee field, due in the third quarter, would be "crucial".

Jefferies also upped its target price on the stock from 38.0p to 50.0p, citing "a supportive oil price" and adjustments for recent asset sales.

However, Jefferies also noted that Tullow had the highest cash breakeven in its coverage of over $50 per barrel of oil which, while covered currently, remained a concern for the analysts.

Jefferies also restarted coverage on Cairn Energy with a 'hold' rating and 145.0p target price following the disposal of UK North Sea production assets and the acquisition of onshore Egyptian production assets from Shell.

The analysts stated that recent transactions meant that Cairn's production will be more than 60% gas from 2022 onwards, underpinned with fixed gas sales prices and that will result in lower volatility to commodity price changes.