Share of the week: Tullow Oil - the go-to stock

London-listed miners stole the spotlight this week as the weak dollar made commodity stocks more attractive. Investors rushed to square-off short positions, sending share prices through the roof. But there was more to cheer at African explorer Tullow Oil, too.

Having hit an 11-year low recently, Tullow shares bounced from 152p on Wednesday to a high of 192p Friday, up 26%. With oil prices looking stronger - still above $34 a barrel - and the City pricing in around 60% upside to the share price, investors think this could be the beginning of a meaningful turnaround.

And it's been a good couple of weeks for the Africa-focused oil company. Just a fortnight ago, brave investors could have picked the shares up for 116p a pop.

That, however, will be small relief for loyal investors who've stuck by Tullow since the peak in 2012 when the shares were worth around £16. They began falling way before oil prices started their plunge summer 2014 (see chart below).

But a mid-January update proved reassuring, with confirmation that its TEN development in Ghana is on track and first oil planned for July-August. The project is over 80% complete and on budget. The field is tipped to contribute 11,000 barrels a day (b/d) to 2016 net production, currently at 78-87,000b/d. They have hit the pause button the Kenyan exploration project, though.

Financially, management believe they are on track to meet 2016 guidance and reckon they can reduce debt. Even though it started 2016 with $1.9 billion (£1.3 billion) of undrawn facilities, cutting costs is still a priority - as it is across the sector. Tullow's $1.1 billion capital expenditure budget for 2016 is unchanged and we will see how much was spent last year when it publishes results on 10 February.

"While the magnitude of Tullow’s debt position remains a focus for investors, we believe the company has the financial flexibility in place to fund its capital commitments, while its substantial hedging position should ensure 2016E operating cash flow remains robust through this period of ~$30/bbl oil," said Barclays analyst James Hosie at the time.

Falling in to the low $20s at the start of the year, the price of a barrel of Brent crude has gyrated wildly this year, although futures contracts are changing hands for $34.44/bbl Friday. Still, this is a long way off the $100-plus seen in 2014, and it's widely accepted that any meaningful recovery is a long way off.

However, an optimistic Hosie still thinks the shares are worth 300p:

"Beyond the oil price, the two key concerns for Tullow in 2016 are timely completion of the TEN development and retaining the support of its lending syndicate. These two issues are interlinked to a degree, and we believe steady progress on both can drive a re-rating of the stock. We remain 'overweight' with a 300p price target."

Richard Griffith at Canaccord is also a fan. "After four difficult years, we believe the shares are finally about see to a turnaround in fortunes," he says. "In the event that oil prices recover faster than we anticipate, we see Tullow's size, liquidity and oil price leverage as making it the go-to stock among explorers and producers when sentiment on the sector finally turns."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.