FTSE in-depth: Whispers cause Hardy's to gush

By Geoff Foster for MailOnline
Updated: 04:57 EDT, 30 March 2011

Late whispers that shareholders of Hardy Oil & Gas could soon strike it lucky left shares of the India-focused oil and gas explorer 15p, or 9%, higher at 181p.

Foster: The Footsie continued its impressive recovery.

Punters piled in amid rumours of a bid approach from one of the oil majors.

Ever since BP announced it was taking a 30% stake in 23 of Reliance Industries' oil and gas blocks in India covering approximately 270,000 sq km in the deepwater Krishna-Godavan Basin, industry experts have said that Hardy's days of independence could now be numbered.

BP's deal confirms the attractions of the basin, which hosts the D3 and D9 blocks at the heart of Hardy's exploration portfolio. Hardy holds a 10% interest in these blocks and along with Reliance last year drilled the fourth consecutive natural gas discovery on D3.

Hardy's chief executive Yogeshwar Sharma expects to drill two further exploration wells on Krishna Godavan this year, at a cost of £4.5m.

Sharma, who sits on 6% of Hardy's equity, recently fuelled speculation about a possible takeover when he said that he had 'an open mind' about a potential bid.

In a recent buy note, broker Arden Partners waxed lyrical about Hardy's stakes in two potentially world-class licences in India's KG basin. Its current target price is more than double the current share price at 375p.

BP, meanwhile, slumped 10.55p to 466.55p as persistent selling swelled turnover to 54mplus.

Broker Collins Stewart downgraded to sell from hold, while a report suggested that US federal prosecutors are considering whether to pursue manslaughter charges against BP managers for decisions made before the Gulf of Mexico oil rig explosion last year that killed 11 workers and caused a massive oil spill.

The Footsie, up a further 27.68 points to 5,932.17, continued its impressive (6%) recovery from the 5,595 level it fell to immediately after the catastrophic earthquake and tsunami in Japan.

It has been helped by a steady stream of pleasing blue chip corporate results with plumbing giant Wolseley (65p better at 2154p) yesterday helping its cause. It reported a 64% rise in profits to £275m for the first half of the year to the end of January and a return to the dividend list. Wall Street rallied from 8 down to 24 up in the early stages.

Miners reflected higher metal prices with Vedanta Resources closing 62p higher at 2238p and Lonmin 44p dearer at 1703p.

BHP Billiton, the world's largest miner, added 51p to 2414p amid continuing speculation that chief executive Marius Kloppers is about to dig deep and buy Royal Dutch Shell's (13p up at 2250p) remaining unwanted 24% stake in Woodside Petroleum, the Australian petroleum and exploration group.

Banks were subdued after Italy's number five lender, UBI Banca, surprised markets by announcing a €1bn capital increase to boost its Tier 1 capital ratio ahead of European stress tests. Fears this could spark further cash calls by other European banks left Barclays 6.45p down at 285.95p and part-nationalised Royal Bank of Scotland 0.53p to 41.88p.

Cautious comments from JP Morgan Cazenove ahead of tomorrow's trading update left Mothercare 25.2p off at 452p. The broker reckons like-for-like sales would have weakened in the fourth quarter, not helped by snowy weather conditions.

Revived Wal-Mart takeover gossip lifted struggling Argos-to-Homebase retailer Home Retail 4p to 201.4p. The shares have fallen 8% over the last month following a recent profits warning and are 30% down over the past year.

Acquisition news attracted buyers to Charter International, 20p to the good at 795p. The engineer has bought Thomassen for '100m in cash.

Analysts at Altium Securities say it is complimentary with Howden and specialises in hydrogen compression and will diversify further Howden's end market exposure of oil and gas. The deal is expected to be immediately earnings enhancing.

Technology hardware group IQE edged up 50p to 50.50p after good annual results. Broker Espirito Santo increased its fair value price to 64p from 60p, believing the outlook remains positive driven by continued growth in wireless, new opportunities in optoelectronics and continued operational leverage supporting margin expansion.

Augean, the hazardous waste treatment group, closed flat at 27p following full year results. Profits fell to £0.4m from £1.3m in 2009, while net debt was reduced to £3.9m from £6m.

Eruma firmed 0.75p to 6p after the provider of counter terrorism products announced it has won contracts valued in excess of £170,000 through its intelligent lighting division, Illuminex.