Tullow Oil's risk and rewards 'roughly balanced' says Goldman Sachs

The investment bank sees “risks and rewards roughly balance and do not see a compelling value trade either positive or negative” from the company as it considers Tullow most sensitive to the oil price.

It expects a drawdown in global inventories in the second quarter which should benefit Tullow with an increase in the price of oil.

Since being added to the Pan-Europe Sell list on 5 December 2016, Tullow’s stock is down 38% compared to the Stoxx 600 Oil and Gas index which is up 3% and the FTSE All Shares index which is up 9%.

Goldman Sachs said that Tullow’s guidance in January for the year was “disappointing” as the company announced it had sold a stake in its Ugandan asset and in March announced a $750m rights issue.

The bank thinks this rights issue “will give management the headroom to prevent many negative catalysts from crystalising”, mainly reduced production from its Ten and Jubilee sites from 2018 onwards.

Its lower target price to 200.6p included updates from the rights issue and 32.9p merger and acquisition premium.