Tullow - comment

Capricorn has announced this morning they are not going to pursue the merger with Tullow and instead will merge with NewMed Energy. This is no doubt negative for Tullow, who would have deleveraged substantially from the merger with Capricorn’s cash balances. The issue for Tullow is how does it fund its various opportunities across its portfolio to maintain its production levels.

However, Tullow are projecting to be 1.5x leverage at year-end (assuming $95/bbl oil) from internal free cashflow and no upcoming maturities. With the yields on Tullow bonds at 16% and 24% for Secured and Unsecured respectively it is worthy of another look.