Market Report: Tullow Oil gushing after find in Africa

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The Independent Online

While traders despaired following news from Egypt, Portugal and China, Kenya was a reason to be cheerful. The East African oil explorer Tullow Oil enticed investors with news of forecast-beating half-year numbers and a new oil discovery.

The group has been under pressure to produce a good update after it disappointed investors with its January trading statement. Yesterday it said oil flow tests at wells in Kenya were better than expected and it had found a new discovery in the country. This was accompanied by already announced news of oil struck in Uganda, gas finds offshore Tanzania and Mozambique, as well as future potential in French Guiana and Mauritania.

Oil experts at Jefferies said they expect "further positive well results" which will turn "negative market sentiment around". They rate it a buy with a 1,500p price target. With the rest of the market in the red, punters piled in and Tullow was top of the leaderboard, up 28p to 1,061p.

However, Investec's oil experts warned that development funding could be an issue for the oil explorer with "net debt moving up again". They rate it a sell with a 930p price target.

The wider market plummeted on a raft of bad news, including new eurozone fears focusing on Portugal, weak China numbers and Egyptian unrest, which all led to a 74.07 points fall to 6,229.87.

Shell hit oil on its latest deepwater drill in the Gulf of Mexico. It said its Vicksburg A discovery holds some 100 million barrels of potentially recoverable oil. But it slipped 28.5p to 2,155p.

Analysts toasted the spirits giant Diageo's new chief executive. Ivan Menezes started in the role this week, and a handful of analysts have issued buy notes on the Smirnoff-to-Guinness owner. The group, which owns brands including Johnnie Walker Blue Label, which hired the model David Gandy as its face, received a "buy" recommendation from Galvan Research and a price target of 2,000p for shares that trickled down 22.5p to 1,897.5p.

The worst performers on the benchmark index were miners and financial stocks hit by the concerns on a slowdown in China. The wooden spoon went to Anglo American, off 73p to 1,207p.

Despite the turmoil in Egypt, the mid-tier gold miner Centamin remained untarnished. It rose more than 1 per cent as worries about the consequences of the Egyptian riots appeared to wane.

Centamin has an ongoing dispute with the country's authorities regarding its licence for the Sukari mines, and has fallen in the past three days thanks to the political uncertainty. It climbed 0.32p to 31.15p. Analysts at Westhouse Securities rated it a buy with a 55p price target.

The blue-chip gas specialist BG Group, 20 per cent of whose gas comes from Egypt, also seemed to have shrugged off fears about the unrest. Analysts at RBC Capital said "Egypt concerns are overplayed". RBC thinks Egypt needs the gas that BG supplies so unrest will not stop production.

More than 50 per cent of BG's production in Egypt goes to the domestic market, and RBC argued that "popular discontent increases the importance to the government to maintain production". They rate the stock a buy with a 1,400p price target, but investors were yet to be convinced, and it dipped 19p to 1,105.5p.

The soapmaker PZ Cussons has scrubbed up nicely in the eyes of analysts at Canaccord Genuity, who gave it a double upgrade to buy. They think the worst of the problems in Nigeria are behind it, and it will see growth in this market and in the UK. They raised their target price by 33 per cent to 440p, and the shares were 16.7p better off at 389.7p.