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Shareholders of explorer Tullow Oil were treated to a double boost today, sending the shares soaring 77p to 1164p, and making them one of the Footsie 100's best performers.
City speculators got the ball rolling yesterday, claiming Tullow could be the next big takeover target. That spilled over into trading today with Italy's ENI tipped to offer up to 2000p a share — which would value Tullow at more than £15 billion.
Today's gains were later consolidated when Tullow announced it had struck it rich offshore of Sierra Leone.
Panmure Gordon estimates the Venus B well, operated by Texas-based Anadaro Petroleum, could contain up to 250 million barrels of oil. Panmure says this is not a significant find, but has implications for Tullow which could force any potential bidder to cough up more to gain control of the company.
The Venus find also potentially opens up a new 1100km-wide oil frontier in West Africa.
This means ENI may be tempted to offer top dollar should it decide to launch a bid for Tullow. But as the speculators point out, ENI already has a track record of buying UK-based oil explorers.
Two years ago, it paid a generous £1.7 billion for Burren Energy, and is now under pressure from an activist shareholder to split itself up to obtain better value.
Tullow has already risen from a low of 600p this year, boosted by a series of oil finds in Uganda. The group has also been touting around a stake in one of its Ugandan oil fields.
Elsewhere, investors appeared happy to continue pouring cash into the wider market, as leading shares topped the 5100 level for the first time since September 25 last year. The FTSE 100 index responded with a rise of 85.59 points to 5127.72.
Investors have been encouraged by comments from US Federal Reserve chairman Ben Bernanke, who says the recession is over. That is in spite of comments from our own governor of the Bank of England that the recovery will be “slow and protracted”.
They also focused on the better-than-expected profit numbers from fashion retailer Next, which responded with a rise of 101p at 1800p.
Wall Street posted modest gains in early trading this afternoon on the back of firmer commodity prices. Mining shares in London also benefited from dearer raw material prices.
Rio Tinto saw a ris e of 89p at 273p and Eurasian Natural Resources put on 42p at 903p.
Anglo-Swiss mining giant Xstrata rose 39p to 986p after RBS raised its rating on the shares from hold to buy. Xstrata's plan to merge with Anglo American, up 73½p at 2143p, has been rejected, and now City speculators claim it may turn its attention again to Lonmin. Xstrata broke off bid talks with Lonmin, 72p higher at 1822p, last October after its offer of 3300p a share was rejected as too low by the platinum producer.
Since then the Lonmin share price has slumped, and that may be enough to tempt Xstrata to have another go.
Banks also appeared on investors' shopping lists. HSBC rose 28p to 698p following support for shares overnight in Hong Kong. Lloyds Banking Group added 3.7p at 108.4p, despite reports the EU may force it to dispose of all, or part of, its Halifax mortgage lending subsidiary in return for receiving billions of pounds of taxpayer support.
Live music venue operator Mama Group was unmoved at 4¾p after a big shareholding changed hands. Pacific Capital has dropped its holding of 212.5 million shares, or 26%, below the disclosable 3% level. The shares have been picked up by SMS Finance.
UK Coal rose 7½p to 112p despite warning shareholders it needed to raise £100 million to reduce debt. The company plans to issue 142 million shares at a deeply discounted 75p.
Cape responded to an 85% jump in half-year pre-tax profits last year to £27.2 million with a jump of 21p to 229p. The industrial services group said its key end-markets of energy and mineral resources had improved during the year, although the sector is still experiencing uncertainty in the timing of some projects.
Numis continues to rate the shares a buy, and upgraded its earnings forecast for the full year by 3%. It raised its pre-tax profit forecast for the current year from £48.9 million to £56.1 million.
