Apparently, there is a major hedge fund out there still sitting on a hefty short position in Tullow Oil.
Shares of the Africa-focused exploration and production group have performed abysmally this year and are currently trading 37 per cent below their December 2012 peak of 1371p.
Sellers have ruled the roost for months but several City analysts are now taking the view the fall has been overdone, while industry gossip yet again suggests that timid Tullow is attracting the attention of a couple of cash-rich international bidders who could bid up to £14 a share at the drop of a hard hat. The hedge fund therefore must be getting a little bit twitchy and ready to buy the stock back, so wait for the rally.
Tullow yesterday eased 4p to 865.5p in sympathy with the general dull trend but buyers are ready to pounce should the stock weaken any further. Its extensive drilling campaign in Africa has been successful, especially in Kenya where the Etuko-1 well suggests resources in excess of 300m barrels of oil.
BarCap has a target price of 1525p and says although the group’s overall exploration performance has been less prolific than in the past, the prospectivity of its portfolio remains extremely attractive, particularly its dominant position in onshore East Africa which, given the results so far, has the potential to emerge as a major oil and gas province.
Rival broker Killik is a fan and says Tullow’s ownership of highly prospective assets leaves the group vulnerable to bid speculation.
This time last year speculation was rife that state-controlled PTT Exploration, Thailand’s biggest gas and oil group by market capitalisation, which bought Cove Energy for £1.9bn, and ‘friends’ were considering launching a break-up cash bid for Tullow.