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Tullow oil edges higher on bid speculation

Tullow Oil is up 4.5% at 883p this morning, as takeover rumours circulate on trading floors.

All trading involves risk. Losses can exceed deposits.

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.

Tullow Oil plc chart

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