Oil producer Tullow Oil (TLW), once a constituent of the FTSE 100, is set to announce its full year results on 7 February and there could be bad news for investors, if speculation proves correct.
Usually the full year results event each year is a more detailed rehash of January’s pre-close update but this time there is something more substantial for investors. Tullow is expected to announce a resource update on its Kenyan assets.
Canaccord Genuity analyst Charlie Sharp, who has cut his recommendation from ‘buy’ to ‘hold’ and price target from 250p to 220p, sees the risk of a negative surprise when the company updates on Kenya next week.
Sharp highlights press reports in Kenya which imply the figure could be lower than Tullow’s current estimated ‘mean’ discovered resources in the South Lokichar basin of 750m barrels of oil.
Sharp goes into a detailed discussion of the finer details of resource classification before concluding ‘given the recent press reports, we see potential for an updated Kenyan 2C/best case resource figure that is below Tullow's current 750 mmbbls (million barrels) mean estimate’.
If true, a waning recovery in the share price driven by higher oil prices and an improving balance sheet could be further derailed. The shares currently trade at 202p.
