In This Article:
Tullow Oil plc (LON:TLW) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Tullow Oil plc engages in the oil and gas exploration, development, and production activities primarily in Africa and South America. On 31 December 2021, the UK£725m market-cap company posted a loss of US$81m for its most recent financial year. The most pressing concern for investors is Tullow Oil's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
See our latest analysis for Tullow Oil
According to the 11 industry analysts covering Tullow Oil, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2021, before generating positive profits of US$325m in 2022. Therefore, the company is expected to breakeven roughly a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 47%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won’t go into details of Tullow Oil's upcoming projects, however, bear in mind that generally an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
Before we wrap up, there’s one issue worth mentioning. Tullow Oil currently has negative equity on its balance sheet. Accounting methods used to deal with losses accumulated over time can cause this to occur. This is because liabilities are carried forward into the future until it cancels. These losses tend to occur only on paper, however, in other cases it can be forewarning.
Next Steps:
There are key fundamentals of Tullow Oil which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Tullow Oil, take a look at Tullow Oil's company page on Simply Wall St. We've also compiled a list of pertinent factors you should further examine:
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Valuation: What is Tullow Oil worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Tullow Oil is currently mispriced by the market.
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Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Tullow Oil’s board and the CEO’s background.
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Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.