Tullow Oil PLC 

Tullow Oil PLC (LSE: TLW) is an FTSE All-Share index listed self-reliant organization focused on oil and gas exploration and production, publicly traded on the London, Irish, and Ghanaian stock markets. With holdings in more than 30 exploration and production licenses spread across eight nations, the Group is actively involved in this sector. This Report covers the Investment Highlights, Conclusion, and Recommendation on the stock.

Investment Rationale – Sell at GBX 38.00

• Resistance near Current levels: TLW’s stock price almost hit the Resistance (R1) which was stated in the previous report on 15 September 2023, and might witness some sell-off from the current levels. Considering the market conditions and the price action, it is prudent to exit the stock, as the prices might pull back from these levels.
• Sluggish Profitability Margins: In H1 FY23, the Gross margin of TLW was 45.2% against 73.7% in the pcp, and the EBITDA margin declined to 68.1% in the reported period (H1 FY23) as compared to 92.4% in H1 FY22. Also, The net margin slipped to 9.0% in H1 FY23 versus 30.7% in pcp.
• Declining liquidity ratios: The group’s quick ratio for H1 FY23 was reported at 0.73x, which is lower than the industry median of 1.10x. Further, TLW’s current ratio declined to 0.80x during H1 FY23, against the industry median of 1.24x.
• Expensive Valuation: The stock of TLW is currently offered at 1.6x on EV/EBITDA-based relative valuation (NTM) as compared to the industry (Energy) mean of -4.9x. On Price/Cash-flow-based relative valuation (NTM), the stock is valued at 0.7x which is higher than the industry median of -10.0x.

Share Price Chart  

Conclusion

Based on the macroeconomic challenges, and price action stance, a "SELL" recommendation on Tullow Oil PLC (LSE: TLW) has been given at the closing market price of GBX 38.00 (as of 20 November 2023).

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 20 November 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’