Tullow Oil (LON: TLW) share price remained in a consolidation mode this week after the company published its trading statement. The shares dropped to 46.42p, which was much lower than this month’s high of 49.16p. It is about 30% above the lowest level in October.
Tullow Oil challenges remain
Tullow Oil is a relatively small oil and gas company that focuses on emerging countries like Ghana and Kenya. The firm has a market cap of about 664 million pounds.
Tullow has had an eventful year. It was recently left at the alter after Capricorn, another oil company, terminated its merger agreement. Capricorn decided to merge with NewMed, an Israeli company.
Tullow Oil share price reacted mildly to the company’s trading statement. The report showed that the company will produce between 61,000 to 62,000 barrels per day in 2022. That was a small increase than the previous estimate of between 60,000 to 64,000.
The company also guided that it will have a free cash flow of about $250 million, which will be about 2% above what it produced in 2021. The FCF will be much lower than the $432 million it produced in 2020. Tullow Oil also expects that its capital investment expenditure will be about $360 million, up by 37% from what it spent in 2021.
Tullow Oil is facing additional challenges in Kenya where its business has stalled. The firm is in the process of securing a strategic partner for the development process. They are also seeking an extension of the Field Development Plan review period. It is not clear whether the company will find the partner.
Another risk for Tullow Oil is that crude oil price has remained under pressure recently. Brent, the global benchmark, has dropped to $88 while West Texas Intermediate (WTI) has crashed to $79.
Tullow Oil share price forecast
Tullow Oil stock chart by TradingView
The four-hour chart shows that the TLW stock price has been in a bearish trend in the past few days. It has dropped below the important resistance level at 50p, which was the highest point this week. The stock has moved to the 50-day moving average while the Relative Strength Index (RSI) has continued falling.
Tullow has formed what looks like a double-top pattern whose neckline is at 44.50p. Therefore, there is a likelihood that the shares will continue pulling back in the coming days. If this happens, the next key support level will be at 40p.
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