Market Report: Oil prices see Numis Securities pour cold water on deal for Falkland drillers


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Analysts at Numis Securities poured cold water on the hopes of investors betting on a deal for the Falkland oil drillers, suggesting it probably won’t happen at current oil prices.

Sanjeev Bahl, Numis’ lead number cruncher, dropped his buy rating on Borders & Southern, down 0.275p at 3.6p, claiming that the Aim-listed company will have trouble securing a partner to fund development with the price of Brent crude languishing at $56 a barrel.

To make matters worse, the broker is forecasting even lower oil prices than before, hinting that oil might still be below $70  in 2016.

Mr Bahl said an attractive farm-out, where the smaller group gives the larger developer a stake in the project in exchange for funding, now looks “less likely” for Borders.

The analyst, however, upgraded another Falkland explorer, Premier Oil, to buy. The company, which has made new discoveries in the Falklands this year, was hailed for its strong production in Vietnam and cost-cutting drive.

The stock leaked 1.4p to 140.3p though, along with the rest of the embattled sector, due to an unexpected rise in US oil inventories last week. The concern is that demand fails to match supply.

It was an even worse story for miners, which were the biggest drag on the FTSE 100, down 101.73 points to 6,667.34. The price of gold fell for a seventh session in eight, while concerns about demand from China, the industrial metal-hungry nation, saw iron ore and copper prices tumble further. Mining giant BHP Billiton, down 71.5p at 1,180p, Anglo American, down 48.2p at 813.5p, and Glencore, down 13.05p at 228p, were among the biggest fallers.

iPhone chip designer Arm Holdings, down 69p at 970p, was the biggest loser after a hint of slowing smartphone sales from Apple in the third quarter.

Augustin Eden, at Accendo Markets, said it is “ridiculous to assume that Arm relies on Apple”, reminding investors that the group also licences chips to other smartphone giants.

On Aim, Gemfields sparkled 2.75p higher at 61p after consultants estimated its Mozambique ruby mine contains 432 million carats.