Tullow Offers Long Term Value

THE VALUE INVESTOR: Tullow Oil has increased oil reserves from 18 million barrels to 1.8 billion in 10 years - but the stock still has growth to offer long-term investors

Stephen Simko, CFA 1 May, 2014 | 11:16AM
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London-based Tullow Oil is an independent oil and gas producer that targets oil in underexplored areas of the world. The company focuses largely on Africa; its key assets/acreages are in Ghana, Kenya, and Uganda. Beyond Africa, the company is also active in South America and the Norwegian portion of the North and Barents Seas.

Tullow Oil (TLW) published its interim management statement today as well as a small divestment; $76 million for some its U.K. gas interests. While neither is particularly meaningful to the Tullow story, the company did outline its near-term exploration schedule, which should see material well results published during the month of May.

Our view that Tullow is very attractive at current share prices remains unchanged, as does our valuation and moat rating. The company’s shares today are trading in line with where we value its existing resource base – after subtracting out debt and future G&A, meaning investors get any exploration value effectively for free. So long as Tullow creates value from future exploration – and we think the odds are that it will – shares continue to look very attractive.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Tullow Oil PLC54.02 GBX2.08

About Author

Stephen Simko, CFA  is a senior stock analyst at Morningstar.

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