Crude oil price
The Tullow Oil share price held steady as the price of crude oil jumped to the highest level in more than 7 years. The stock is trading at 55p, which is almost double where it started the year. It is also about 18% below the highest point this year.
Tullow Oil has become one of the best performing oil companies in London. The shares have risen by more than 93% this year. As such, it has outperformed the overall price of oil that has jumped by more than 54%.
Most importantly, it has done better than oil majors like BP and Shell, whose shares have risen by less than 30%. As shown below, it has also done better than the Vanguard Energy ETF, which tracks the biggest companies in the industry.
This performance has been helped by the fact that Tullow is a relatively small oil company. Its market capitalization is less than 1 billion pounds. At the same time, its business is relatively volatile and that it depends on the prices of oil.
Therefore, the surging oil prices have pushed investors to believe that it will keep doing well. The price of Brent jumped to $84, the highest level in more than 7 years. The West Texas Intermediate (WTI) price has risen to more than $80.
The company has also done well. Its recent results showed that its revenue and profitability grew in the first half of the year. In a recent note, analysts at Jefferies wrote that the stock could jump to 70p, which is about 28% above the current price.
“In our $70/b oil price scenario, Tullow’s Total net asset value increases 61% to 93p and 2022 – 2025 free cash flow yield increases to 33%.”
The daily chart shows that the Tullow share price made a bullish breakout above the key resistance at 50p a few days ago. The stock had struggled to move above this level several times before. The shares also moved above the 25-day and 50-day moving averages. It also moved above the neckline of the inverted head and shoulders pattern.
Therefore, the shares will likely keep rising as bulls target the next key resistance at 65p in the near term. On the flip side, a drop below 50p will invalidate this view.