Headlines
• Tullow Oil (LON:TLW) – Gabon Resolution Means More Than Just the Economic Benefit: As such, and although the oil price is trading at a depressed level, we believe that the market "worth" of its portfolio is trading at too significant a discount to the value of its underlying portfolio, and as we have seen over the last few months, the Company's management are not the risk to the business that the Afren's demonstrated clearly that they were.
Oil Price Commentary
We have recently seen the oil price strengthen, and it is now trading above ~$50/bbl, and despite a general environment where there is a lot of contradictory economic data that the oil price has found a base is promising.
We believe that today’s low oil prices are inducing an attrition is future supply by delaying or cancelling projects, which when set against the backdrop of a production base that has natural declines of ~5 – 10% per annum, makes the outlook for the relative balance between supply and demand migrate towards supply, which is increasingly exacerbated the further out you look.
News Items
Tullow Oil (LON:TLW) – Gabon Resolution Means More than Just the Economic Benefit
Today's news that the Company has been able to secure the licence boundaries on its Onal licences is a positive, and while the 7.5% interest variation would not have made a significant difference outside of 2015, its successful resolution has a significant impact on the overall comfort that the Company can gain from operating in Gabon.
Just as the Company had a rare run of form with the drillbit a couple of years ago, this news, along with the recently successful RBL redetermination all points towards a company that continues to be on top of its game.
As such, and although the oil price is trading at a depressed level, we believe that the market "worth" of its portfolio is trading at too significant a discount to the value of its underlying portfolio, and as we have seen over the last few months, the Company's management are not the risk to the business that the Afren's demonstrated clearly that they were.