Costs and margins
Tullow Oil is up 4.5% at 883p this morning, as takeover rumours circulate on trading floors.
The rise has been fuelled by speculation that Norwegian company Statoil will make a bid for the Irish firm. Tullow Oil’s share price is currently at its lowest level since April 2009, as the exploration company has suffered a number of setbacks in the past few years with unsuccessful wells that had to be abandoned.
Tullow Oil is a zero-to-hero story. The company started out in the 1980s, exploring for oil in regions where there was a lower success rate. In the late 1990s the share price was less than £1. However, it was promoted to the FTSE 100 in September 2007, and by early 2012 the stock was trading above the £16 mark.
Operating an exploration company is a high-risk business, as Tullow Oil has proved: the share price can grow rapidly but it can decline just as fast. It is not unusual for a company to become a takeover target when the stock has dropped over 40% in less than two years.
The stock is in a clear downtrend, and if a takeover is ruled out we could see it fall further. Conversely, if bid talk keeps circulating it is possible the stock will rally.
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