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Tullow Oil shares drop as Numis cuts its rating to sell on valuation grounds

Published: 13:31 07 Dec 2016 GMT

Oil rig
In early afternoon trading, Tullow Oil shares were down 2%, or 6.2p at 304.8p

Tullow Oil plc (LON:TLW) saw its shares drop today as broker Numis Securities cut its rating for the stock to sell on valuation grounds in a review of exploration and production firms.

Leaving the price target for Tullow unchanged at 260p, analysts at Numis said: “Tullow remains (one of) the market’s preferred ways to play the oil price, however, after recent strong performance we believe the shares have run ahead of themselves.”

In early afternoon trading, Tullow shares were down 2%, or 6.2p at 304.8p.

Overall the Numis analysts think that the global oil market is likely “to re-balance during H2 2017, even prior to OPEC’s commitment to reduce production announced last week.”

They said: “Whilst we do not expect compliance with the announced cuts to be high, even a limited degree of compliance should see an acceleration of re-balancing to H1 2017.”

Among the other listed E&Ps, Numis retains a preference for Cairn Energy PLC (LON:CNE), Nostrum Oil & Gas PLC (LON:NOG), and Genel Energy PLC (LON:GENL), repeating buy ratings on all three.

On Cairn, the analysts believe the group’s upcoming drilling program has the “potential to increase resource estimates and de-risk the development.”

With Nostrum, they think the firm will “control the pace of drilling activity/production ramp-up reflecting the prevailing oil price environment.”

And they see the potential for Genel, and its operations in Kurdistan to demonstrate that “the risk profile is not as extreme as the market fears.”

Cairn shares responded to the upbeat comment, adding 5.5p, or 2.6% at 218.3p. But Nostrom and Genel both saw their stock drift lower reflecting a weaker oil price.

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