For Tullow Oil plc (LON:TLW) and its newly assembled management team this year will be all about project execution, that’s the view of UBS, which has taken a new look at the group’s oil discoveries in Kenya.
Tullow recently reduced the estimated resource for the proposed developments figures in the Lokichar basin, onshore Kenya, and UBS highlights that going forward there will now be lower medium capital spending which will mean better free-cash-flow.
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“This allows more rapid balance sheet strengthening,” analyst Amy Wong said in a note. Some of the improvement has been priced into the Tullow price, she added.
UBS has a ‘neutral’ rating with a 190p price target, reduced from 230p.
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Focusing on the plans for Lokichar, Wong notes two question marks regarding the development – whether Tullow or a third party will cover US$1.1bn capex needed to build a pipeline, and whether or not the project’s second phase will advance.
The analyst also highlighted the potential for the production ramp-up offshore Ghana to add value.