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LONDON (ShareCast) - Irish oil explorer Tullow Oil (LSE: TLW.L - news) was the worst performing blue-chip in early trading Wednesday but recovered by mid-morning, helped by positive comment from its house broker Royal Bank of Scotland (LSE: RBS.L - news) .

"While we anticipate some minor changes to forecasts ... we see nothing in the statement to alter the fundamentals of a solid investment case," reckons RBS analyst Phil Corbett.

Tullow Oil said it expects interim revenue will likely fall 23% following a drop in production and lower commodity prices. The company produced 59,000 barrels a day in the first six months of 2009, lower than last year's equivalent due to mixed results from infill wells in the UK, partly offset by higher production in Africa.

"Jubilee remains on track for first oil in the second half of 2010 and a number of potentially significant exploration wells in the second half of 2009 are likely to keep the company in focus against a backdrop of growing industry interest in Ghana's potential," Corbett notes.

Broker Charles Stanley is more ambivalent about Tullow's appeal as an investment, rating it as a "hold".

"In 2011, EPS [earnings per share] should show a more meaningful increase as production increases but at this stage of its development Tullow and other small E&P [exploration and production] companies are valued on a NAV [net asset value] basis. Currently, estimates of Tullow's core NAV are about 700p and potential appraisal and exploration activity could increase this to about 1200p," Charles Stanley analyst Tony Shepard suggests, adding that Tullow's current share price of around 890p puts it on a 25% discount to the higher valuation.

"If further drilling successes confirm the potential, the share price could move closer to this level [1200p] but it also depends on projections of the long-term oil price which is expected to be about $75 a barrel," Shepard said.