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Tullow Oil share price: what’s the latest after its full-year production downgrade?

The UK-based oil and gas company was forced to downgrade its full-year production guidance last week after drilling at its site in Ghana was suspended, leading analysts to downgrade the stock.

Tullow Oil has seen its shares nosedive nearly 30% after it announced last week that its full-year production is set to come in below its previous guidance.

Full-year 2019 oil production is forecast to average around 87,000 barrels of oil per day. This is slightly below previous guidance primarily due to weaker-than-expected production performance at its operations in Ghana, with drilling suspended at its TEN fields site in July.

‘In West Africa, our non-operated assets continue to perform well,’ Tullow Oil CEO Paul McDade said. ‘However, Ghana production has not met our expectations this year and we are working closely with our Joint Venture Partners to ensure that both fields perform to their potential.’

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JP Morgan and Jefferies downgrade Tullow Oil

This month, after a disappointing trading update last week, analysts at JP Morgan Cazenove downgraded the stock to a ‘neutral’ rating, while Jefferies International lowered its grade from ‘buy’ to ‘hold’.

The pair also downgraded their target price for the stock, with JP Morgan Cazenove and Jefferies issuing a price of 249p and 168p respectively.

Based on Tullow Oil closing at 144p on Monday, despite both banks downgrading the stock, the pair still believes its share price has a potential upside of between 16% and 72%.

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Recent discoveries fail to bear fruit for Tullow Oil

Not only did the company have to downgrade its full-year production guidance, but Tullow Oil also announced that recent discoveries in Guyana contained low quality, heavy, sour oil which have significantly less commercial value.

The oil and gas company remains optimistic about the larger basin in Guyana and its potential to become a driver of profit and source of future cash flows, but even if the site does eventually bear fruit it will take some time for new wells to come online.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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