Tullow Oil shares: Heavily shorted stock crosses 200 EMA

Tullow OIl (LON: TLW) share price has staged a comeback in the past three months even as short interest in the company rose. The stock ended last week at 35.68p, the highest level since March 6. It has soared by over 60% from its lowest point this year.

Crude oil prices rebound

Tullow Oil is a small oil and gas producer that has operations in countries like Ghana, Kenya, and Ivory Coast. It is a highly leveraged company that is going through major headwinds, especially in its Kenyan operations. These challenges explain why Tullow is one of the most shorted companies in the UK.


Despite these challenges, Tullow Oil has two important tailwinds that will help its recovery. First, crude oil prices have staged a strong comeback in the past few months. After falling to below $70 per barrel, Brent is now approaching $90. 

As I wrote hereoil prices are rising as investors react to the decision by Saudi Arabia to continue its supply cuts through September. Saudi and the OPEC+ cartel have been slashing oil production in the past few months. Tullow, like other oil and gas companies, benefits when prices are rising. 

Oil prices also rose after Ukraine stepped up attacks on Russia’s energy infrastructure following the collapse of the grain deal. Therefore, Tullow Oil will likely earn higher revenues if these oil trends continue.

Tullow Oil has also made a lot of progress in its Jubilee location. Recent data shows that the company is now producing in excess of 100k barrels per day. This output will likely continue rising as the company plans two more wells this year. As such, the firm believes that it will reach an EBITDA of over $800 million by 2025.

The most recent results showed that Tullow Oil’s revenue came in at $800 million in the first half of the year. Capital expenditure was $200 million while its free cash flow was negative $100 million. It also reduced its debt by over $266 million during the period. Most importantly, insiders bought over 1 million shares in the first half of the year.

Tullow Oil share price forecast

Tullow OIl
  • Save

The daily chart shows that the Tullow stock price has been in a strong bullish trend in the past few months. It recently moved above the 200-day exponential moving average (EMA), signaling that bulls are in control. The shares also flipped the resistance point at 34.20p into a support level.

Therefore, the outlook for the stock is mildly bullish, with the next level to watch being at 40p. The stop-loss of this trade is at 32p.


source: https://invezz.com/