Since January, Tullow Oil plc (LON: TLW) shares are up 75.8%, fueled by rising global crude oil prices and a return to profitability for the Africa-focused oil company.
The impressive gains notched by the company have many investors asking whether its shares can rally much higher from their current trading price.
To answer this question, we have to look at several factors that could influence the oil company’s share price in the future.
Firstly, a quick look at Tullow Oil’s price chart shows that it traded as high as 66p in mid-June and March this year. Hence, there is a high likelihood that the stock could make it back up there in the future.
Looking at Tullow Oil’s long-term charts, I can see that the shares traded at an all-time high of 1374p in February 2012, indicating that the stock has significant rallying potential if it keeps firing on all cylinders.
The next step is to look at Tullow Oil’s fundamentals, which involves an analysis of its operations to determine whether it is on a growth path and its market environment to determine if it is conducive to future growth.
The oil company released its half-year earnings results on 15 September 2021, where it swung to a $93 million profit compared to the $1.33 billion loss reported in a similar period last year. Investors cheered the announcement, which fueled its latest rally phase.
Still, investors were worried about Tullow planned maintenance shutdowns stretching into 2022, which could affect its daily oil output, currently pegged at between 58,000 and 61,000 barrels of oil equivalent daily.
Long-term investors are also concerned about the oil firm’s significant debt pile, which stood at $2.29 billion at the end of H1, compared to $3.02 billion in a similar period last year.
A look at market factors reveals a significant global shortage of crude oil as many oil companies cut production due to the pandemic, which has led to rising oil prices. Oil prices are expected to remain high into the foreseeable future.
Given that the fundamental picture looks promising, as does the technical picture, Tullow Oil shares are likely to keep rising in future. Tullow Oil shares are also trading above a support level that could trigger a rally if it holds.
*This is not investment advice.
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