Not only is Tullow Oil (OTCPK:TUWOY)
the largest independent oil and gas company, it is one of the most
exploration-focused large energy companies out there. The good side of
this heavy exploration focus is that success can bring in millions of
barrels of reserves at low cost, spiking the estimated NAV. The bad side
is that dry holes can quickly whittle away the value of the exploration
NAV and send the stock skidding.
The latter has been the dominant part of the story since I wrote about Tullow
as a Top Idea in the summer of 2013. At that time, Tullow had been
looking back on an average drilling success rate of more than 70% since
2007, well above industry averages for frontier drilling. In 2013,
though, that success rate dropped into the 20%s, and investors had to
come to terms with disappointments in French Guiana, Mozambique, and
Mauritania, among other locales. While recognizing that Tullow is in a
tricky spot between independent and major, explorer and producer, I
continue to believe that Tullow shares are undervalued at this level and
can benefit from further drilling activities in West Africa, East
Africa, and offshore Norway.
Continue reading here:
Tullow Oil Battered And Bruised, But Not Finished
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