Is the Tullow Oil share price cheap enough to buy?

July 5, 2021 | |Post a Comment

first_img Our 6 ‘Best Buys Now’ Shares See all posts by Karl Loomes I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Image source: Getty Images. “This Stock Could Be Like Buying Amazon in 1997” Is the Tullow Oil share price cheap enough to buy? Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.center_img Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Karl Loomes | Tuesday, 28th January, 2020 | More on: TLW Simply click below to discover how you can take advantage of this. It’s been a tough few months for investors in Tullow Oil (LSE: TLW), its share price standing at about a quarter of the value it held in November. In December its shares plummeted 70% after it reduced its production outlook and announced the departure of both its CEO and Head of Exploration.January has not seen any improvement, kicking the year off with news that drilling results for an offshore well in South America found less crude than expected, making it unlikely to be commercialised. And mid-month, Tullow was forced to downgrade its crude price assumptions and cut its reserves estimates, leading to a $1.5bn write-down.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…In numbers we trustBut Tullow has now begun to suffer a problem far worse for its shares than write-downs and changes to production estimates – falling confidence. Investors are reliant on a company’s financial reports to try to gauge its fair value as an investment. When estimates shift by such huge percentages, it raises questions.At first glance, the major question arising from these kinds of things is “was management overoptimistic?” But of course, it is the nature of estimates, as well as accounting practices, that even when adhering to all standards and realistic beliefs, they rarely prove to be perfect.The fact is, these kinds of changes to numbers are more of a problem because they show us how the ‘sausage’ is made. Oil companies need to make predictions not just for reporting purposes, but also as an entire base for their businesses. Sometimes these predictions will prove wrong.Tullow’s $1.5bn write-down was the result of a $10 a barrel reduction in its long-term price forecast, not because the actually price of crude dropped $10. Even the 70% drop in its shares in December was caused by a reduction in its expected production, not what it was currently producing — a technicality I know, but still…Oil companies are not alone in having to make such forecasts of course, but to a certain extent, one could argue the forecasts themselves will have a more fundamental impact on an oil firm than other industries.How soon we forgetThe good news for investors and oil companies is that human beings soon forget the past, at least selectively. Investors and analysts have no real choice but to use and rely on the financial information that companies provide them with – that’s a key component of how the stock market works (along with technical analysis and market psychology).I think in the case of Tullow Oil, this means that any scepticism investors have over its estimates in recent months, will fade back to a normal level if the company isn’t forced to make any similar downgrades in the future. Taken in this context, Tullow’s current share price could be seen as a bargain.Production estimates may have been cut, for example, but this year’s levels are still expected to sit between 70,000 and 80,000 barrels per day. Likewise, its profit expectations may be 35% lower than in 2018, but this is still a staggering £700m. I haven’t been too optimistic on Tullow’s future generally speaking, but I may be starting to see things in a different light. Karl Loomes and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Enter Your Email Addresslast_img

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