Tullow - comment

Is it time to look at Tullow again? Tullow is in need of direction since the Capricorn merger failed last year, and this update doesn’t really provide any real strategic guidance. Tullow’s trading statement confirms previous guidance from the Company with Net leverage at 1.3x. Actual output of 61k was in line with our model, and although we would have expected a higher guidance, the 58-64,000 boepd is in our range. Tullow hasn’t resolved the outstanding Ghanaian tax bill in the update, nor is there any meaningful update on the Kenyan prospects. On the positive, Tullow has signed an interim Gas sales agreement for 19bcf of Jubilee gas in December, adding a further 7,0000 boepd to production which will commence during the first half. Separately, Tullow outlined they regularly review options to optimise their capital structure and may seek to buy back debt through cash purchases or exchanges. They are able to do this now leverage is below 1.5x. Full-year results are due in early March.