From Davey Research today.15 Dec 2023 17:55
Pause for thought
When the oil price went negative during the panic lows in COVID-19 in March 2020, Tullow’s share price declined to only 7.5p. The market cap was $131m and net debt was $2.4bn, giving an enterprise value (EV) of $2.5bn. Today, the EV is even lower at only $2.3bn. This is despite a significant reduction in net debt and the company’s risk profile, as well as record demand for oil and a recovery in the oil price. In May 2023, its 2025 bond had a yield to maturity of 51%. That has proven to have been absurd, as bondholders now expect par. Meanwhile, the group’s EV today is less than it was when the oil price was negative, in the depths of COVID-19.