Market Report: Oils slide as Tullow team draws a blank
Thursday 18 April 2013
A dry well off the coast of French Guiana left shares in some of the FTSE 100's biggest oil groups looking seriously parched. Tullow Oil sank to the bottom of the blue-chip index, down 9 per cent, while Tullow's partners in the well development – Royal Dutch Shell, France's Total and AIM-listed Northern Petroleum and Wessex Exploration – were all knocked by the news.
The well is part of a four-well project that started last year after a discovery was made nearby in 2011. But this time, the group has not found significant hydrocarbons. Despite the well so far being dry, the team will now look to dig further in the hope of striking it rich in the French territory.
Derek Musgrove, the managing director of Northern, said that despite the lack of hydrocarbons "the oil staining encountered" in the well is "encouraging of the broader active hydrocarbon systems and potential". But the news shocked investors. Tullow lost 97.5p to 982.5p, Shell was 20.5p weaker at 2,147p. Northern declined 7.25p to 32p and Wessex tumbled 1.6p to 1.95p.
The decline of Shell didn't help the FTSE 100, which was already struggling as stocks went ex-dividend.
A gloomy outlook for the UK's economy from the IMF and poor results from supermarkets group Tesco, down 15.1p to 369.75p, pushed the benchmark index into negative territory for the fourth day in a row. The FTSE 100 lost another 60.37 points to 6244.21.
Marks & Spencer got plenty of attention after its director of lingerie, Janie Schaffer, quit suddenly on Tuesday but traders didn't seem too worried and the shares added 3.5p to 395p.
Reports in Germany of activity in the telecoms sector sent Vodafone down 0.65p to 189.25p. US group Liberty Global was rumoured to be interested in German-based Kabel Deutschland. This follows talk that Vodafone had itself been interested in the German group.
Iron ore producer BHP Billiton updated the market on third-quarter production but there were no changes to full-year guidance and shares lost 62.5p to 1,779p.
Fashion favourite Burberry was strutting its stuff towards the top of the table after a healthy second-quarter update, and its shares sashayed up 23p to 1,289p. Over on the mid-tier index, sparkling news from miner Petra Diamonds helped its shares gain 1.1p to 108.8p after it found a 25.5-carat fancy blue diamond at its Cullinan mine in South Africa.
The mine has had a good success rate in the past, and many of the stones in the Crown Jewels came from the mine. The "high-quality gem diamond of top colour" found this week could be similar to a stone sold at Sotheby's for $9.49m (£6.2m). Liberum Capital's analysts think "a similar sale would significantly enhance this year's performance" for Petra.
There was a bid update for Aim-listed, West Africa-focused Afferro Mining. The iron ore miner received an initial approach from investment group IMIC in December, and IMIC said it had approached Afferro with a number of options with an offer for as much as £147m.
Troubled credit-card protection group CPP (Card Protection Plan) has been in refinancing talks, and its founder and majority shareholder Hamish Ogston wants to take the group private. The company announced plans to sell the US business, which will net proceeds of "not less than £20m". That has allowed the group to extend its lending agreements with Barclays, Royal Bank of Scotland and Santander until September.
But news of the £26.1m sale to American insurance group AMT Warranty Corp accompanied a share-price fall of 45.21 per cent – or 3.3p – to 4p. Mr Ogston, who owns 57.15 per cent of the group, made a 1p-a-share bid last month for the remaining capital in the group he floated in March 2010 at 235p.
He said he would consider buying the business if certain new conditions were met. These included a new three-year credit arrangement with lenders. Last year, a proposed offer from US group Affinion was withdrawn.
Meanwhile, Oxford-based drug discovery company Summit reported that it is on target to push forward its two clinical programmes following positive outcomes from a drug trial for Duchenne Muscular Dystrophy. The shares were 0.25p better off at 4.62p.
US onshore-focused oil group Magnolia Petroleum reported a fourfold increase in the value of total net reserves, and the shares gushed up 0.32p to 3.02p.
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