Financial Trading Blog
Stock of the day 10/02/2015 – Tullow Oil PLC
The trends in the Irish oil firm’s 2014 look very familiar; they are the same suffered by most of the major oil companies in the last 12 months. After starting the year at £8.59, Tullow’s share prices quickly hit their 2014 high of £9.20 on the 10th January. A consistent 6 months then saw declines set in around July, as has been the case across the sector; the oil-price-plunge exacerbated the issue, culminating in Tullow Oil reaching £3.50 in mid-December. After opening 2015 at £4.20 the company bested its 2014 low by hitting £3.45 in mid-January when oil began another precipitous slide. A stable rise above £4 in the last week was prompted by the latest oil rally, but a slight decline in the commodity has pushed Tullow to currently trade at £4.09.
The reasons for Tullow’s problems are obvious; the oil price crisis has dragged the entire sector down and no company has escaped unscathed. However, Tullow had already run into issues before the crisis, as several of its well explorations were dry. Yet the price problems have dominated discussions, and dry wells may not be an issue for Tullow Oil this year as it has slashed its exploration budget from $1 billion to a paltry $200 million.
As Tullow looks to cut jobs in the North Sea in a move that is being felt through many of the big oil companies, the budget exploration cut is just the tip of the iceberg. It announced in January it had written off $2.3 billion in assets and exploration work, and revealed its net debt by the end of 2014 was at $3.1 billion. The forecasts for the full year release are just as worrying; analysts are expecting a revenue of $2.29 billion compared $2.64 billion in 2013, whilst the adjusted net profit of $169 million in 2013 has pivoted to a net adjusted loss of $671 million.
These kinds of losses have been felt throughout the sector, and that may be acknowledged by the markets. With BP and ExxonMobil surprising investors by managing their losses better than expected, Tullow Oil’s performance tomorrow may be based on whether it can pull a similar rabbit out of its loss-filled hat.
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