Gushing over Surrey’s Dallas
THE roller coaster ride for the oil and gas stocks involved in the Horse Hill prospect being drilled near Gatwick airport continued after another estimate of the oil in place proved even more bullish than the eyebrow raising assessment in April.
The report by US oil services company Schlumberger estimated that the project could hold 255m barrels of oil per square mile, well above the estimate the companies received in April from Nutech of 158m barrels per square mile.
UK Oil and Gas Investments holds a 30pc stake in Horse Hill Developments – which owns 65pc of the project – while Doriemus, Stellar Resources, Solo Oil and Alba Mineral Resources each own 10pc stakes, and Evocutis holds 2pc.
Trading in the six oil companies’ shares had been suspended on Thursday pending the latest announcement and they initially shot higher once the news had been announced, before coming back down to earth as investors realised that there is still a long way to go until anything starts flowing out of Horse Hill. The companies said the new estimates should not be construed as recoverable resources or reserves.
Having been more than 50pc higher at one stage, shares in UK Oil & Gas ended up 4.7pc at 2.78p, while all the other five players were essentially flat after strong early gains evaporated.
It wasn’t oil, however, but Greece which once again dominated for financial markets, with stocks globally falling after the debtladen country’s government said it would postpone a €300m (£220m) payment due to the International Monetary Fund and instead bundle it together with others due at the end of the month.
The total due in June is €1.6bn (£1.2bn) but as talks between Greece and its creditors have yet to yield agreement on the release of much-needed bailout cash to save the country from running out of money, investors were betting that the country would default and be forced to exit the eurozone.
Such concerns saw the FTSE 100 index close 54.64 points lower at 6,804.60, while European markets saw even bigger falls.
But US stocks managed to turn positive in early trading after a stronger than expected US May payrolls figure provided good news for the economy, while a rise in the jobless rate meant expectations of an imminent Fed rate hike were subdued.
Mobile phone giant Vodafone was one of the biggest UK blue-chip fallers, down 6.05p to 242.05p after dashing bid hopes by saying that while it was in early-stage talks with US cable giant Liberty Media ‘regarding a possible exchange of selected assets’, they were not discussing ‘a combination of the two companies’.
Analysts at Berenberg said a merger would have provided synergies of 30p-40p per share for Vodafone, but a smaller scale asset swap is likely to provide only a third to a half of that figure.
Food retailers were also among the FTSE 100 fallers, reversing recent gains, with Tesco down 2.85p to 205.8p and Morrisons off 4.7p at 173.6p after cautious comments from Deutsche Bank.
Cutting its target for Morrisons to 180p from 210p and for Tesco to 240p from 275p, the broker said: ‘We’ve seen no improvement in UK grocery market growth since the tentative rebound experienced [in] December and January faded.’
Energy shares were in focus as the price of Brent crude fell below $62 a barrel after the latest Opec meeting in Vienna saw the cartel, as expected, stick by its policy of unconstrained output for another six months.
With supply remaining strong but demand seen lower on fragile global growth, blue chip explorer Tullow Oil shed 1.4p at 379.6p, but Royal Dutch Shell rallied 1p up to 1929.5p.
Miners were also among the top-flight stocks that climbed higher reflecting lingering hopes that top metals consumer China could initiate fresh economic stimulus measures following recent weak economic data.
Anglo American was up 10.5p to 1015.5p, with Rio Tinto climbing 2.5p to 2852.5p and BHP Billiton ahead 3.5p to 1327p.
The mood was also glum on the second line, with the FTSE 250 index closing 159.13 points lower at 17,931.29.
Betting exchange group Betfair was a big mid cap casualty, dropping more than 5pc, or 136p, to 2509p after broker Numis Securities cut its rating to ‘sell’ from ‘reduce’ on valuation grounds.
Numis analyst Ivor Jones said he ‘ simply cannot make sense of a share price’ of more than the broker’s updated price target of 2100p, which it had increased from 1620p.