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​​FTSE 100: Tullow Oil shares recoup all of their losses following Gabon’s military coup


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How to trade Tullow Oil’s first half results?

Tullow OilSource: Bloomberg
 

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 05 September 2023 15:37

What impact will Gabon’s military coup and the selling of Tullow Oil’s majority stake in Guyana have on its share price?

Tullow Oil (TLW.L) has finalised an agreement to sell its majority stake in the unexploited fields located off the coast of Guyana to its minority partner, Eco Atlantic. The transaction is valued at $700,000 in cash. If a commercial discovery is made, Eco will pay Tullow an additional $4 million with a further $10 million due if Guyana grants a production license and royalty payments on future production.

The deal will raise Eco's stake in the Orinduik field to 75%, making it the project's operator. TotalEnergies holds a 25% stake in this field.

This strategic shift by Tullow aligns with its 2020 announcement to concentrate the majority of its spending on its existing infrastructure in West Africa, primarily in Ghana.

However, Tullow Oil faced a significant setback in late August when its shares fell by around 12% following the declaration of a coup by military officers in Gabon, a country where Tullow has interests in several onshore and offshore fields.

Despite this, the company has stated that its operations in Gabon remain unaffected by the ongoing political activity, and that production continues as usual.

Gabon is the largest non-operated contributor to Tullow's oil production, with partners including Anglo-French oil and gas group Perenco and Paris-listed Maurel & Prom operating the fields.

In conclusion, these developments underscore the company's ability to navigate geopolitical challenges while staying committed to its strategic goals, leading to a swift recovery in its share price since last week.

How to trade Tullow Oil’s first half results?

On Wednesday 13 September Tullow Oil is expected to publish its first half results which will likely impact its share price.

Expectations for the upcoming results are as follows:

Revenue of $704 million : -20% year-on-year (YoY)

Earnings per Share (EPS) : $0.11: -38% (YoY)

The company’s share price, which has risen year-to-date by nearly 5% and is thus outperforming the FTSE 100 index by around 6%, remains on an upward trajectory.

Tullow Oil/FTSE 100 year-to-date comparison chart

Tullow Oil FTSE100 comparisonSource: Google Finance

It has to be said, though, that Tullow Oil’s share price is far more volatile than the FTSE 100 with it having slid by nearly 40% earlier this year before regaining all of its losses and rising to this week’s high at 39 pence.

Tullow Oil Daily Candlesticks Chart

Tullow Oil daily chartSource: Tradingview

Tullow Oil’s share price is benefitting from the recent near 10% surge in the oil price on supply tightness to do with Russia agreeing with its OPEC partners on continued export curbs while Saudi Arabia aims to maintain its voluntary 1 million barrel per day output cut into October.

The company’s share price is currently trying to overcome its August peak at 38.20p, a daily chart close above which needs to be made, for the next higher late-December 2022 and January highs at 39.70p to 40.20p to be in the frame.

If overcome as well, there is nothing technically stopping the Tullow Oil share from heading back up towards its November 2022 49.48p high and the psychological 50p mark.

Tullow Oil Weekly Candlesticks Chart

Tullow Oil weekly chartSource: Tradingview

The fact that Tullow Oil’s share price has broken through its 2022-to-2023 downtrend line at 35.00p and then revisited that breached trendline with last week’s bullish Hammer formation low on the weekly chart, points towards further upside towards the 200-week simple moving average (SMA) at 41.86 and higher being on the cards. This bullish chart pattern will be confirmed if this week’s Friday close is made above last week’s high at 37.50p.

The medium-term bullish technical view will remain valid while last week’s low at 31.66p underpins on a weekly chart closing basis.

Unexpected failure at 31.66p would probably indicate the resumption of Tullow Oil’s long-term downtrend.

Analysts recommendations and IG sentiment

Fundamental analysts are torn between ‘hold’ and ‘buy’ with Refinitiv data showing 3 strong buys, 2 buy, 3 hold, 1 sell and 1 strong sell - with the median of estimates suggesting a long-term price target of 47.50 pence for the share, around 24% higher than the current share price (as of 05/09/2023).

Tullow Oil analystsSource: Refinitiv

IG sentiment data shows that 95% of clients with open positions on the share (as of 5 September 2023) expect the price to rise over the near term, while 5% of clients expect the price to fall whereas trading activity over the last week shows 81% of sells and this month 60% of sells.

IG Tullow Oil SentimentSource: IG

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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