Here’s why the Tullow Oil (TLW) share price is soaring

Tullow Group (LON: TLW) share price has become one of the top performers in the FTSE 250 index this week as it revealed a buyback plan. The stock has risen for three straight days and is now hovering at the highest point in more than a week. It has also jumped by about 60% from its lowest point this year.

Tullow Oil financial results

Tullow Oil made two important announcements on Wednesday. First, it revealed its forward guidance for the current financial year. The oil company said that it expects its free cash flow will be about $150 million this year, higher than the previous guidance of $100 million.

The company attributed this performance to the relatively higher oil prices and volumes. It has been ramping up its Gabon production in the past few months. In addition, the company expects to end the year with a net debt of $16 billion. It will also deliver a free cash flow of about $800 million.

The other important announcement was a deal with Glencore, one of the biggest mining and trading companies in the world. In this agreement, Glencore will tap into a $400 million debt facility that will help it improve its finances. 

As part of the agreement, Tullow Oil will also buy $300 million of its senior notes that are due in 2025 and $100 million senior secured bonds maturing in 2026. By retiring its debt early, the company hopes to reduce its interest expense now that interest rates are rising. In a statement, Rahul Dhir, the company’s CEO said:

“The $400 million debt facility agreed with Glencore is a material step in our refinancing strategy and demonstrates Tullow’s continued ability to access long-term capital. With Jubilee South East onstream, our portfolio is generating increased free cash flow.”

Tullow Oil and other energy companies have done modestly well now that the price of crude has remained quite steady this year. It has consistently remained above $80, which Tullow has based its forward guidance on.

The industry has also seen several mergers and acquisitions. The most notable ones were ExxonMobil’s buyout of Pioneer Natural Resources and Chevron’s acquisition of Hess. Energy Transfer also acquired Crestwood in a $7.1 billion deal.

Tullow Oil share price analysis

TLW chart by TradingView

The daily chart shows that the Tullow Oil stock price has bounced back in the past few days. In this period, the stock has moved back to the Andrews pitchfork tool and the 50-day and 100-day Exponential Moving Averages (EMA). 

The stock has formed an inverted head and shoulders (H&S) pattern, which is usually a bullish sign. It has also formed the three white soldiers pattern. Therefore, the outlook for the stock is bullish, with the next resistance level to watch being at 39.95p, the highest point on September 6th.