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Tullow Declines After Investec Says Sell Shares on Delays

Tullow Oil Plc fell the most in four weeks in London after Investec Bank Plc recommended investors sell the shares because of project delays in Uganda and Ghana.

Tullow slid 3.6 percent to 1,225 pence in the steepest one-day decline since Dec. 11. The stock lost 10 percent last year.

Peak production at Tullow’s Jubilee field in Ghana has been delayed for more than a year. The lack of an agreement with the government of Uganda over a plan to develop a refinery and export-pipeline have held up the start of output from the East African nation.

“The delays across the production portfolio will in our view put upward pressure on Tullow’s net debt and highlight the risk of further slippage,” Brian Gallagher, a London-based analyst at Investec, wrote in a report. He cut his recommendation on the stock to sell from hold and reduced the share-price forecast to 1,000 pence from 1,399 pence.

“We estimate a current capital expenditure bill in excess of $18 billion out to 2020,” Gallagher wrote. “As a result, progress on disposals at Tweneboa-Enyenra-Ntomme (TEN) and possibly Uganda is required to help meet” funding needs.

Tullow is expected to produce 70,000 barrels of oil equivalent a day this year, down from its guidance of 95,000 barrels, after asset sales in the North Sea and Asia, Anish Kapadia, an analyst at Tudor Pickering Holt & Co. in London, wrote in an e-mailed report. He reiterated his Trim recommendation on Tullow shares.

“The main issue for Tullow now, given its size, is that it is increasingly difficult for exploration to be impactful,” Kapadia wrote. “We believe that execution risk is high for development already seen with the Jubilee issues last year.”

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