Proactive / VSA17 Mar 2017 10:20
Interesting "knock-on" buy rec! :
http://www.proactiveinvestors.co.uk/columns/vsa-capital-market-movers/27327/vsa-morning-flow-test-range-resources-ltd-tullow-oil-plc-27327.html
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Tullow Oil (LON:TLW)
Tullow Oil (TLW) have announced this morning a fully underwritten rights issue to raise approximately £607m through a 25 for 49 rights issue of c467m new shares at a price of 130p per share.
This represents a discount of c45% and c35% to the current share price and TERP respectively. This will allow TLW to lower its gearing ratio to a level it is more comfortable at, its aim is for less than 2.5x net debt/EBITDAX, which had grown to 5.1x at 31 December 2016. Reducing its level of debt will allow TLW to improve both its operational and financial flexibility which will enable it to grow the company in the next 3 to 5 years.
One of the stated use of proceeds made by TLW this morning is to “drill high impact, potentially high return prospects across Tullow's African and South American portfolio”. Therefore, we view this to be particularly positive for TLW’s partners across its licences, in particular Eco (Atlantic) Oil & Gas (ECO)# which has a 40% working interest in the TLW operated Orinduik Block in Guyana, adjacent to the giant Liza and Payara discoveries made by ExxonMobil (XOM). TLW and ECO are about to conduct a 3D seismic survey over the Orinduik Block, which TLW estimates to contain prospective resources of 900mmboe, to refine the targets and scope out new leads. The fact that TLW have stated it plans to drill in the next 3-5 years across this portfolio is extremely positive and is ahead of our estimates.
ECO is also a partner with TLW in Namibia where TLW is contingently carrying ECO for the costs of one well on the Cooper Block. We, therefore, re-iterate our BUY recommendation and 25p TP on ECO.
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