TransAtlantic Petroleum Ltd (NYSEMKT:TAT) is edging higher in the market after receiving positive ratings from brokerage firms. TD securities upgraded the stock from a ‘hold’ to a speculative ‘Buy’. The firm has also increased its share price target from $1.20 a share to $2.20. The bullish tone around the stock comes on the company posting better than expected second quarter earnings. The company is also fresh from signing two new credit agreements.
Revenue Growth
If the second quarter performance is anything to go by, then TransAtlantic Petroleum appears to be on a recovery patch as oil prices stabilize above the $40 a barrel mark. Revenues in the first quarter were up by 13.6% to highs of $17.7 million. Even though the company posted an overall net loss of $6.5 million, the same included a $3.2 million loss from commodity derivatives.
TransAtlantic Petroleum should be able to generate more revenues going forward on oil prices stabilizing above the $40 a barrel mark. Prices rising above the $50 a barrel mark should spark investments in the energy sector, which has until now grappled with investment cuts as companies look for ways to trim expenditure. Given that the company is engaged in exploration, development, and production of oil and natural gas, it should be able to benefit from increased investments in the sector going forward.
Loan Financing
While it was initially feared that the attempted coup in Turkey would affect TransAtlantic Petroleum operations, Chief executive officer, Malone Mitchell, has moved to quash the concerns. The company’s Turkish subsidiary has already entered into a general credit agreement with DenziBank consequently signing of a $30 million term loan agreement.
The credit agreement provides the company with access to much needed financial support as it resumes the development of Turkish and regional oil and gas assets. During the second quarter, TransAtlantic Petroleum ramped up its development activities by re-testing the Catak-1 Well and consequently enlisting it as a Bedinan producer.
TransAtlantic Petroleum Ltd (NYSEMKT:TAT) prospects can only improve on oil prices rallying from current levels. However, the company’s sentiments on the street also faces the risk of coming under pressure on the Fed hiking interest rates this month, a move that could significantly hurt oil prices.
