TULLOW OIL, IS THIS THE TIME FOR OIL EXPLORERS?

INTRODUCTION

Tullow Oil is a company based out of Tullow Ireland, and it focuses on both oil and gas exploration on a global level. The company has an extensive infrastructure that enables exploration at scale, and finds itself in a very friendly oil price environment at the moment. WTI Crude oil price are trading around $85 a barrel, their highest level since October 2022. With the major energy agencies suggesting that record demand for crude oil in 2024 is expected, exploration companies such as Tullow Oil could have an opportunity to exploit the environment. Tullow Oil could be an interesting micro strategy stock on the basis of these factors.

TULLOW’S RECOVERY IN MOTION

Tullow Oil has seen a price decline from its 5-year highs, with the company having initially faced debt problems and excessive costs. The company has restructured its debt, while also paying down around $300m in debt outstanding, or about 16%. The company has made it clear that debt management is a priority. According to Reuters, the company is also expecting to generate around $600m free cash flow over the next two years, which would mean the company would hit its $800m target set from 2023 – 2025. The share price rose around 9% on that news, and Tullow shares are currently up 30.98% on the month.

OIL PRICES CONTINUE RISING, WHICH COULD BE A KEY CATALYST

Crude oil prices have risen sharply in 2024, around 18% since the beginning of the year. Continuing tensions in the Middle East, robust demand expected by all the major agencies and continuing production cuts from OPEC+ have created an environment in which crude oil prices could continue to rise. The rise of crude oil prices could enable Tullow to sell its oil at a higher premium, and it could help improve the financial performance of the company throughout 2024. In combination with the recent positive price momentum, sentiment around Tullow’s performance could continue improving.

PUTTING IT ALL TOGETHER

Tullow Oil is a company that has had its share of both successes and challenges, seeing strong performance in the mid 2000’s before being challenged by large debt holdings. However, the company has stated its intent to improve its standing, and has done so by paying down its debt and committed itself to improving its free cash flow over the next two years, which it seems to be on track for. Macro factors, such as rising oil prices, could also facilitate an improvement in the company’s performance in the future. Tullow Oil could be one of the more intriguing ways to buy into shares.