Market report: Thursday close

 

THE speculative buying that drove explorer Premier Oil more than 5% higher on bid hopes soon boiled over today, the shares dipping back below 1000p with a fall of 44p to 998p.

Premier accelerated in late trading yesterday on talk that Royal Dutch Shell had made a 1300p-a-share offer for it, valuing the group at £1bn. But a spokesman for the company said: 'We know nothing about any bid.'

Brokers had earlier expressed surprise at Premier's performance. As highlighted in this column yesterday, the shares recovered from an opening fall despite news that reserves at the Chinguetti project in Mauritania would have to be downgraded by between 25% and 50%.

Premier has an 8% stake in the field, which contains an estimated 123m barrels of crude and produces between 32,000 and 40,000 barrels a day.

Shell, up 1p at 1935p, has made no secret of the fact that it is looking for ways to boost its reserves, which had to be written down by more than 20% several years ago, leading to an overhaul of the group's structure and management.

Premier is not short of reserves and has extensive drilling programmes under way in Pakistan, Indonesia and Vietnam as well as west Africa.

BP fell 2½p to 607½p after production at its Prudhoe Bay oilfield in Alaska suffered a further setback. Capacity of the pipeline connecting the field to the main network was cut by half earlier this month because of corrosion. Output has been cut by 90,000 barrels in the past few days after the failure of a natural gas compressor.

Share prices generally traded within a narrow range after rallying from opening falls. The FTSE 100 index rose 9.1 to 5869.1 after being almost 28 points lower at the outset. On Wall Street this afternoon the Dow rose 20.70 to 11,318.60.

BHP Billiton slipped 25p to 989p as investors continued to reflect upon yesterday's numbers. Record profits were boosted by the soaring price of metals but the mining giant's generosity towards shareholders failed to impress.

US broker Morgan Stanley slashed its target price from 1600p to 1450p to take account of concerns about production levels and rising costs. Other losers included Anglo American, down 38p at 2342p, and Lonmin, off 82p at 2740p.

Disappointing trading news from Rentokil Initial added to the gloom among investors and left the shares nursing a fall of 7½p to 152¼p. Broker Evolution responded by cutting its estimate of pre-tax profits by £10m to £248m for the current year and by about £30m to £270m for 2007. Rival broker UBS has repeated its reduce rating on Rentokil.

British Energy continued to lose ground, dropping 7p to 655½p, to make it one of the biggest casualties among blue-chips. The price has fallen by almost 100p since the company produced first-quarter numbers 10 days ago.

The jump in profits from £118m to £289m beat City expectations and more than offset subsequent outages. But the generator subsequently warned that power output for the full year would fall below its previous targets.

Takeover speculation about Lloyds TSB continued to bubble away lifting the price 1½p to 523p. It was again being tipped as a target for Bank of America or Wells Fargo earlier this week. City speculators insist it is only a matter of time before the UK's fifth-largest bank gets an approach. But broker Credit Suisse is not so sure and has lowered its sights from 520p to 480p.

Property developer Minerva, which owns the Croydon shopping centre and Walbrook project in the City, jumped 13¾p to 280p. Broker Merrill Lynch has raised its rating on the shares from neutral to buy with a target of 360p.

It expects Minerva to 'provide further comfort for investors on a number of issues', including the fact that new management is being much more pragmatic in its approach and moving forward key discussions and negotiations.

The shares have been volatile as investors await further clarification in the figures. Despite this, the broker reckons there is still scope for improvement in the share price.

Broker comment also provided a boost for Carphone Warehouse, up 6¼p at 268¼p. Morgan Stanley has raised its stance on the shares from equal-weight to overweight because it reckons they are looking cheap following recent weakness.

Aim-listed Quintessentially English resumed trading after the group announced plans to buy Omega Diagnostics, which will result in a reverse takeover. The shares, frozen at 7p, restarted at 3p before slipping to 2.87p.

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