Investors recommended to ‘buy’ as Tullow Oil reports upbeat update

As Tullow Oil updates the market Helal Miah, investment research analyst at The Share Centre, explains why the company is attractive for investors.
 
"Tullow Oil issued a fairly upbeat trading statement this morning as it saw significant progress in its African exploration projects. There was a substantial upgrade in resource estimates at the South Lokichar Basin in Kenya and the company made an additional discovery at Etuko-1 in Ghana.
 
"Investors will be pleased to hear the company is also making headway in securing future projects. The Ghanaian government approved further development plans at the TEN project and significant progress has been made with the Ugandan government and partners for the development of the Lake Albert Basin.
 
"The group has had a tough time this year following some disappointing testing results. However, these results should not influence the outcome of further drill tests, of which there are still plenty to be made in the second half of the year in Kenya, Ethiopia, French Guiana, Norway and Mauritania in the second half of the year.
 
"Although the drilling success rate has dropped to 60% it is still good by industry standards and it would have been a highly unlikely to maintain the success ratios of the past. We believe the company is capable of delivering good results from its exploration-led growth strategy and continue to recommend high risk investors ‘buy' Tullow Oil."
 
Analysis from Profit Watch UK, the quarterly report by The Share Centre shows:

Oil & Gas Producers - Tullow Oil's sector - saw net profits fall by 29.4% last year, a drop of £11.2bn as lower commodity prices took their toll

Despite the drop in profitability, Oil & Gas Producers generate nearly one pound in every four of the FTSE 350's annual net profits

Revenues among Oil & Gas Producers have seen sluggish growth in the last year, rising by just 1.6% to £559.3bn

30.5% of FTSE 100 revenues are generated by companies in the Oil & Gas industry, and 26.2% of net profits