£1.2 billion writedown clobbers troubled Tullow
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 £1.2bn 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.
The £1.2bn 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 15.7pc, or 9.3p, to finish at 49.88p.
SP Angel analysts believe the £1.2bn write-down ‘will have been expected’, but that the massive drop in its share price could now make it a takeover target. 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 fullyear 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 7pc, 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’ £400m of new cash. Aston’s shares cruised 1pc 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 1.4pc, 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 2.5pc, 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 £500m sale of its household division to Ovo. Its stock added 1.9pc, or 28p, to close at 1486.5p.
Mining behemoth Glencore tipped into the red – falling 0.5pc, 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 0.27pc, 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 0.2pc, 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 5.4pc, 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 0.3pc, or 1p, to 311p after it said revenues jumped 10pc to £84m in the year to December 29.