The Motley Fool

Tullow Oil’s share price rises, despite slashing production guidance

Image source: Getty Images.

It’s been a bumpy ride for the Tullow Oil (LSE: TLW) share price. The UK oil share has risen 68% during the last 12 months, amid the fightback against Covid-19.

But fears over an uneven global economic rebound — allied with concerns over the company’s stretched balance sheet and some disappointing news on the exploration front — have prompted bouts of choppiness for the share price.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

But that price moved higher on Wednesday following a positive reception to latest trading numbers. At 52.30p per share, the FTSE 250 firm is currently 2% higher on the day.

Tullow Oil cuts production estimates

In a mixed trading update, Tullow Oil said it now expects full-year output of between 55,000 and 61,000 barrels of oil per day. This is down from the UK oil share’s previous estimate of between 60,000 and 66,000 barrels for 2020.

Tullow said that this lower forecast “reflects the sales of the Equatorial Guinea assets and the Dussafu Marin permit and first half delivery.”  The company produced 61,200 barrels of the black stuff between January and June.

First-half revenues are expected to come in at $700m, reflecting a realised oil price of $58 per barrel. This includes hedging costs of around $50m.

Positive cashflow news

Despite this setback, Tullow Oil’s share price has risen, thanks to positive news concerning its balance sheet. The UK oil share said it expects to record underlying operating cashflow of $600m for 2021. This assumes that crude prices will average $60 per barrel for the remainder of the year.

Cashflow will be boosted by $50m should oil prices average $70 for the remainder of 2021, Tullow added. The Brent benchmark was recently trading around $76.

First-half underlying operating cash flow is also expected at around $200m, while net debt is predicted at $2.3bn.

Not out of the woods yet!

Rahul Dhir, chief executive at Tullow, praised the “excellent operational and financial progress” the company had made in the first half of 2021.

“Our producing fields in West Africa are performing well and we have successfully started our drilling programme in Ghana,” Dhir added. “Tullow now has a strong financial footing and we are making very good progress in delivering on our highly cash generative business plan and continuing to reduce our debt.”

The company also issued $1.8bn worth of bonds in May as part of a huge refinancing package.

Analyst Sophie Lund-Yates at Hargreaves Lansdown was less enthusiastic about the UK oil shares outlook however. She said that “the refinancing of Tullow’s debt was a necessity, and to see this come to fruition is an important milestone.”

But she added that the business “still has issues to contend with.” And Lund-Yates singled out “the rising demand for renewable energy” as a particular worry.

Tullow’s fortunes are largely out of its control, and if the market sours again, it will quickly find itself swimming against the tide,” the analyst said.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.