RBC Capital Markets lowers target price on Tullow Oil

RBC Capital Markets stated Tullow's trading update included details of a positive end to 2021 but also came with "a cautious view" on 2022.

The Canadian bank said in-line production of 59,000 barrels per day generated post-hedge revenues of $1.3bn and as continued focus on costs and favourable working-capital movements that lead to cash flow being stronger than predicted, Tullow ended the year with net debt of around $2.1bn.

However, RBC said 2022 production guidance had been "clouded slightly" by Occidental's recent sale of stakes in two Ghanaian fields and also noted that production was budgeted to average 55,000-61,000 barrels per day for Tullow's yet-to-be-completed acquisition of additional small stakes in its Jubilee and TEN assets.

The analysts also noted that 2022 capex and abex guidance of $350.0m and $100.0m was ahead of their forecasts and said the increased year-on-year spending in Ghana was primarily due to investment in the Jubilee North East and South East areas.

On the other hand, RBC added that the impact of lower output from TEN had been offset slightly by a positive outlook for Tullow's non-operated operations.