MARKET REPORT: £1.2billion writedown clobbers troubled Tullow Oil

Tullow Oil’s shares are so easily rattled these days that a trading update with few real surprises sent it plunging into the red.

Scrapped exploration projects, a lower assumption about what oil prices will be in the long term and a re-evaluation of how much oil is at some of its sites in Ghana mean it will take a one-off hit of £1.2billion in its 2019 results.

It has also had to suspend a pilot project in Kenya because heavy rain at the end of the year destroyed roads that led up to it.

Scrapped projects, a lower assumption about what oil prices will be in the long term and a re-evaluation of how much oil is at some of its sites in Ghana mean Tullow will take a hit of £1.2bn

The £1.2billion blow comes after a horrific year for Tullow, when its shares lost almost two-thirds of their value, a vaunted discovery off the coast of South America turned out to be a dud and chief executive Paul McDade made a hasty exit. 

But, as Bank of America put it, this was an update with ‘no new shocks’.

After a choppy day of trading, which saw Tullow shares rise initially, they closed down 15.7 per cent, or 9.3p, to finish at 49.88p.

SP Angel analysts believe the £1.2billion write-down ‘will have been expected’, but that the massive drop in its share price could now make it a takeover target.

Stock Watch – Ironridge Resources 

Top-notch results from early tests of a gold project in the Ivory Coast sent shares in Ironridge Resources up 10.6 per cent, or 1.12p, to 11.75p.

The AIM-listed exploration firm, which is based in Australia, said the ‘exceptional’ data from the Zaranou site indicates a lot of high-quality gold. 

The area borders Ghana and is close to several other mines run by companies such as Newmont Mining.

Ironridge plans to do more drilling when it has reviewed the results in more detail.

Doorstep lender Provident Financial also made a sharp move after putting out an update that leaves the bigger picture little changed.

It traded in line with its own forecasts in the three months to December and still expects full-year profits to be the same – as a strong performance in its credit card subsidiary Vanquis was cancelled out by impairments at its car finance division Moneybarn.

In the wake of the reassuring update, the Provvy’s stock rose 7 per cent, or 29.4p, to 451.3p.

Fellow mid-capper Aston Martin managed to shake off a downbeat broker note from analysts at Jefferies, who said the luxury car maker will need to raise ‘at least’ £400million of new cash. 

Aston’s shares cruised 1 per cent higher, or 4.8p, to 465p.

Goldman Sachs took a shine to Capita, adding it to its ‘Conviction List’ and raising its price target to 240p from 200p. 

Capita’s shares rose 1.4 per cent, or 2.45p, to 172.45p, as analysts at the US investment bank said the risk has been taken out of the outsourcer since Boris Johnson’s landslide election victory last month.

Royal Bank of Scotland, on the other hand, fell 2.5 per cent, or 5.8p, to 224.9p, after Barclays brokers downgraded their rating on its stock to ‘underweight’ and warned the restructuring of its Natwest Markets and Ulster arms will require patience from investors.

Elsewhere on the Footsie, SSE shares lit up as the energy giant completed the £500million sale of its household division to Ovo. Its stock added 1.9 per cent, or 28p, to close at 1486.5p.

Mining behemoth Glencore tipped into the red – falling 0.5 per cent, or 1.3p, to 241.35p – after reports it is in talks to supply the battery metal cobalt to Tesla’s new factory in Shanghai.

The wider FTSE 100 rose 0.27 per cent, or 20.45 points, to 7642.80, aided by the US and China signing the first stage of a trade deal, while the FTSE 250 fell by 0.2 per cent, or 42.94 points, to 21713.11.

It was a good day for leisure firms, with both Revolution Bars and Ten Entertainment climbing in the wake of upbeat results.

Revolution rose 5.4 per cent, or 4.6p, to 89.1p after it reported its seventh year in a row of record Christmas trading. On average, each of its 74 bars brought in £65,000 a week in the four weeks leading up to New Year’s Day.

And shares in Ten Entertainment, the UK’s second-largest tenpin bowling group, rose by a more modest 0.3 per cent, or 1p, to 311p after it said revenues jumped 10 per cent to £84million in the year to December 29.


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