Tullow Oil shares crashed 44% to 11.44p after the company lost an international arbitration over a $196.5 million tax bill in Ghana.
The International Chamber of Commerce tribunal ruled that the Ghana Revenue Authority's assessment did not breach Tullow's petroleum agreements.
It also found that penalties of 100% attached to the bill fall outside the protections in those agreements, which could double Tullow's exposure to around $393 million.
Peel Hunt called the ruling a significant disappointment for shareholders.
The broker said the decision removes a key legal argument Tullow had relied on, namely that its petroleum agreements shielded it from the claim.
The dispute dates back to insurance payouts Tullow received between 2016 and 2019 under its business interruption policy, which covers lost income when operations are disrupted.
The money was paid after production problems at its Ghanaian operations, which centre on the Jubilee and TEN oil fields.
Ghana's tax authority argued the payouts were taxable under local law.
Tullow contended that the claim breached the protections in its agreements governing the two fields.
Peel noted that the Ghanaian government remains very supportive of the country's oil and gas sector, which may give Tullow some room in negotiations.
The company said it was disappointed and would consider its next steps after further talks with the government.
Peel Hunt kept its 'buy' rating and 24p target price, which is now more than double the share price.
The broker's case for a rebound now rests on Accra's goodwill rather than the small print of a contract.
