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Oil slides to weaken BP, Shell, Cairn, Tullow and Petrofac as FTSE 100 sheds 0.5%

Last updated: 06:30 15 Dec 2009 EST, First published: 07:30 15 Dec 2009 EST

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Overview: contrary to pre-trade expectations, the FTSE 100 failed to hold on to yesterday’s gains, giving up 0.5% after the UK inflation update revealed a 1.9% increase in November, eclipsing the projected 1.8% increase as fuel prices rose.

Miners and financial stocks were in retreat today to erase most of their yesterday’s advances. Silver miner Fresnillo (LSE: FRES) and banks Barclays (LSE: BARC) and HSBC (LSE: HSBA) emerged as the three biggest fallers among the blue chips with losses of 3.4%, 2.5% and 2.3%, respectively. Airline British Airways (LSE: BAY) and another bank Standard Chartered (LSE: STAN), which was on of the top risers in the market yesterday, also shed more than 2%.

London Stock Exchange (LSE: LSE), software developer Autonomy Corporation (LSE: AU), fashion house Burberry (LSE: BRBY) and engineering firm AMEC (LSE: AMEC) followed with losses of over 1.5%.

Defensive stocks United Utilities (LSE: UU) and fellow utility company Severn Trent (LSE: SVT) were the only FTSE 100 constituents to gain more than 1%, taking on 1.5% and 1.1% respectively. Pharmaceutical company Shire (LSE: SHP), business services company Serco Group (LSE: SRP), commercial property company Liberty International (LSE: LII) and food manufacturer Unilever (LSE: ULVR) came close with gains of nearly 1%.

Stock index futures in the US slid ahead of a flurry of data that is due out today, including updates on producer prices, industrial production and the New York manufacturing activity as well as Treasury inflow data for October. The Fed’s decision on interest rates is expected on Wednesday.

Futures on the Dow Jones Industrial Average, the broader S&P 500 index and the technology heavy Nasdaq composite declined marginally this morning.

Commodities

Oil prices slid today as January Brent Crude dropped to US$71.73/barrel and US benchmark crude declined to US$69.47/barrel.

With the sole exception of BG Group (LSE: BG), which posted a small gain, all major oil and gas stocks switched to selling mode today.

Supermajors BP (LSE: BP) and Shell (LSE: RDSB) lost 1%, while Petrofac (LSE: PFC) retreated 1.2% and Cairn Energy (LSE: CNE) and Tullow Oil (LSE: TLW) were down 1.7%.

Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG), North America focused oil & gas junior Pantheon Resources (AIM: PANR) and Eastern Europe focused junior Aurelian Oil & Gas (AIM: AUL) moved with the sector, shedding 13%, 7% and 6%, respectively. Ukraine focused gas producer, Regal Petroleum (AIM: RPT) and energy investor Xtract Energy PLC (AIM: XTR) also were in correction, moving down 3%.

Miners decline as gold and silver drop

Precious metals were in decline today, dragging the mining sector down. Gold continued its freefall, slipping to US$1,112/oz, while silver and platinum retreated to US$17.11/oz and US$1,435/oz.

All blue chips in the sector posted losses in the morning. Gold miner Randgold Resources (LSE: RRS) and platinum producer Lonmin (LSE: LMI) declined marginally, while silver miner Fresnillo (LSE: FRES) was down 2.3%.

Specialty chemicals firm Johnson Matthey (LSE: JMAT) also posted a marginal loss.

Midcaps did slightly better as while silver producer Hochschild Mining (LSE: HOC) retreated 1%, gold miner Petropavlovsk (LSE: POG) was flat and Aquarius Platinum outperformed the sector with a 2% advance.

Lesotho operating diamond miner Kopane Diamond Developments (AIM: KDD) erased yesterday’s gains with a 16% decline, while South American based explorer Mariana Resources (AIM: MARL) and Philippines focused gold producer Medusa Mining (AIM&ASX: MML) lost 4% and Western Australia operating Norseman Gold (AIM: NGL) and Africa focused gold miner Pan African Resources (AIM: PAF) were down 3.5%.

Africa operating gold and platinum miner Goldplat (AIM: GDP), which updated the market on its operations in Kenya, South Africa and Ghana today, and UK-registered China operating copper and gold miner Central China Goldfields (AIM: GGG) moved against the tide with gains of 4.5% and 3.5%.

African Diamonds (AIM: AFD) also added5.5%.

Copper, nickel and zinc slide

Base metals also headed south as copper and nickel declined to US$3.11/lb and US$7.48/lb, while zinc moved below US$1.04/lb.

The sector was mixed this morning. BHP Billiton (LSE: BLT), Kazakhmys (LSE: KAZ) and Vedanta Resources (LSE: VED) posted gains of less than 1%, while Rio Tinto (LSE: RIO) lost 1% and Xstrata (LSE: XTA) and Antofagasta (LSE: ANTO) declined marginally.

Anglo American (LSE: AAL) and Eurasian Natural Resources (LSE: ENRC) made little headway.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the sector, sliding 1.6%.

Specialty minerals exploration and development company Thor Mining (AIM: THR) and Tantalum concentrate supplier with assets in Mozambique Noventa (AIM: NVTA) followed, shedding 6% and 4.5% respectively.

Banks, insurance, private equity

Most banking stocks were in decline today with the exception of bailed out banks Lloyds (LSE: LLOY), which was flat, and Royal Bank of Scotland (LSE: RBS), which gained nearly 1%. Barclays (LSE: BARC) and HSBC (LSE: HSBA) were down 2% and Standard Chartered (LSE: STAN) lost 1.8%.

Insurance stocks also headed in different directions, but didn’t show much movement. Admiral Group (LSE: ADM), Legal & General (LSE: LGEN), Old Mutual (LSE: OML) and Standard Life (LSE: SL) added less than 1%, while Aviva (LSE: AV), Prudential (LSE: PRU) and RSA Insurance Group (LSE: RSA) declined marginally.

Private equity group 3i (LSE: III) made little headway.

Small Cap Movers

Other notable movers among the small caps included novel pesticides and plant nutritional products developer Plant Impact (AIM: PIM) with a gain of nearly 8%.

Large and Mid Cap News

Kraft Foods (NYSE: KFT) responded to comments from Cadbury’s (LSE: CRBY) board yesterday, stating that it will maintain a disciplined approach to the possible takeover while questioning the British confectioner’s ability to attain its strategic targets. According to Kraft, the long-term targets are subject to significant risk and uncertainty whilst its offer for Cadbury provides "value certainty and upside potential".

Costa Coffee parent company, Whitbread Plc (LSE: WTB) reached an agreement with Eastern European ‘coffee bar’ operator Coffeeheaven international (AIM: COH), whereby the FTSE100 constituent will acquire the group for 24p per share. The company will be integrated into the Costa Coffee business, providing the growing subsidiary with an established Central and Eastern European platform.

UK Transport operators National Express Group Plc (LSE: NEX) revealed a 90.47% take-up of its fully-underwritten £360 million rights issue. After a failed private equity buy-out earlier this year the FTSE250 constituent decided to issue 357 million shares to reduce its debt obligations and satisfy banking covenants beyond 2009.The company’s new ‘fully paid’ shares began trading on the London Stock Exchange this morning.

Newly re-classified support service company, the VT Group (LSE: VTG) have requested a meeting with the board of Mouchel Parkman (LSE: MCHL) to work towards a recommended offer for its acquisition. The cash-rich former shipbuilder also revealed the second rejected offer represented more than a 55% premium to Mouchel’s share price, at that time. VT Group said it wants to understand the basis of Mouchel’s rejection.

Dragon Oil PLC (LSE: DGO) today updated the market on progress on its flagship project area in Turmenistan, the first time in weeks that the now failed minority buy-out attempt by 51.5 percent shareholder Emirates National Oil Co Ltd LLC (ENOC) was not stealing the limelight.

Small Cap News

Telit Communications (AIM: TLT) has signed a MoU (memorandum of understanding) with Fiat Group’s subsidiary Magneti Marelli in the area of GSM and GPRS modules to be used in telematic devices in the automotive field.

Gulf Keystone Petroleum Ltd (AIM: GKP) said the Bijeel-1 well in the Akri Bijeel block in Iraq’s Kurdistan region was spudded on Friday, December 11. Gulf Keystone holds a 20 percent working interest in the production sharing contract. The block is operated by Kalegran Ltd, a subsidiary of Hungarian Oil and gas group MOL holding 80 percent of the PSC.

Churchill Mining PLC (CHL: AIM) announced the completion of the feasibility study for its flagship project, the 75 percent held East Kutai coal project (EKCP)  in Indonesia,  confirming a preferred 20 million tonne per annum production rate. The company anticipates project construction work at EKCP to start in 2010 and take two years to complete.

Preliminary full-year results from drug development companies are often a drab affair - with no commercial products, there is often little for investors to sink their teeth into. However, results this morning from Renovo Plc (AIM: RNVO), a biopharmaceutical company focused on developing drugs that improve tissue repair and the appearance of scars, made interesting reading.

Africa operating gold and platinum miner Goldplat (AIM: GDP) updated the market on its operations today, reporting that instillation of intensitve cyanidation plants in Ghana and South Africa was set to commence to help cut transport and processing costs, while the company’s wholly own Kilimapesa Gold was one step away from securing the mining lease for the Kilimapesa gold project in Kenya.

US focused junior Empyrean Energy (AIM: EME) has signed a new participation agreement with US-based Krescent Energy Company for 10% of the Aquarius prospect, onshore Texas, which is similar in technical natural and commercial terms to the recently announced deal between the two companies over the Hercules prospect.

Gene therapy developers, Oxford BioMedica (LSE: OXB) announced its StarGen therapy has received orphan treatment designation from the European Medicines Agency (EMEA). As a result the treatment will have ten years of marketing exclusivity and reduced regulatory fees. StarGen’s clinical development is expected to start in 2010, in collaboration with Sanofi-Aventis (NYSE: SNY).

Building services business, Managed Support Services plc (AIM: MSS) has acquired the assets and contracts of Johnson Service Group’s subsidiary, Workplace Engineering, for a total consideration of £300,000. MSS will pay an initial consideration of £200,000, with a further additional £100,000 payable subject to certain contractual negotiations with existing clients. Shares in the specialist service group climbed 3% this morning.

Uruguay Minerals Exploration (UME; AIM: UGY, TSX-V: UME) reported high grade results from the ongoing Arenal Deeps resource definition drilling programme, confirming the projections outlined in the initial resource model, and paving the way for the company to push ahead with its development ambitions.

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