Tullow Oil Plc fell to a three-month low in London trading after Investec Plc cut its price estimate for the Africa-focused explorer.

The shares sank as much as 5.8 percent to 279 pence, the lowest intraday price since April 1. They traded at 286.60 pence as of 1:45 p.m., extending their 12-month decline to 64 percent. Investec cut its price estimate for Tullow by 56 percent to 170 pence.

Tullow is “fundamentally mispriced,” Brian Gallagher and Neil Morton, analysts at Investec in London, said in a note, downgrading the stock to sell from hold. “You have to believe in significantly higher oil prices or M&A to own Tullow.”

Tullow’s debt is likely to remain high until 2019, according to Investec, reducing its ability to react to new opportunities and crude prices, which slumped by almost 50 percent in the second half of last year. The company’s net debt climbed 29 percent to $3.6 billion in the year through June while lower oil prices eroded London-based Tullow’s earnings.

Jefferies Group said last month that Tullow was “just too expensive” to be considered as a takeover target. The company, which operates the Jubilee field off Ghana, has a market value of 2.6 billion pounds ($4.1 billion).

Source: www.bloomberg.com

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