Premier stock still in free fall
INVESTORS looking at former takeover favourite Premier Oil’s demise have for months been asking themselves how they can avoid catching a falling knife in the hope it will rebound. But no time soon.
The stock continues to free-fall in sympathy with the bombed-out oil price and came under severe pressure again yesterday as the price of Brent crude fell to a 12-year low of below $31 a barrel.
Broker Jefferies rubbed salt in by cutting its rating to hold from buy and slashed its target price to 33p from 120p ahead of tomorrow’s trading update.
Amid market gossip that a sizeable discounted rights issue could soon be on the cards, the shares collapsed 9.5p or 33pc further to a low of 19p.
May 2014’s high was 358.6p. Jefferies warned that net debt is expected to rise to £1.83bn in full year 2016 – compared with the current market capitalisation of £115m – and existing production assets are set to decline in 2017 because of the slump in oil prices.
The broker said Premier has ‘similar debt issues’ to Tullow Oil (9.6p cheaper at 123.1p) so the full value for the Sea Lion project in the Falklands upside is ‘questionable’.
The broker believes the short-term outlook for the oil market is bleak as global over-supply continues.
Balance sheet support for the European exploration and production sector is the immediate concern combined with materiality of asset base in a new world order where production concerns are clearly reduced.
The oil price has fallen by more than 12.5pc since the start of the year after the Saudi Arabia-led Opec cartel of exporter nations abandoned a production limit on December 4. Premier’s cause is not helped by Standard Chartered’s oil experts forecast that the price could fall as low as $10 a barrel. Oil giant BP eased 4.95p to 323.1p after announcing plans to cut 5pc of its global workforce as a result of the depressed oil price.
The FTSE 100, 57.41 points higher at 5929.24, shrugged off oil pressure and worries about the Chinese economy with the help of better-than- expected Christmas trading statement from Morrisons, 13.2p up at 165.5p. It prompted a gain of 9.75p to 155.2p in Tesco on hopes it has given its foreign rivals Aldi and Lidl something to think about over the festive period. The FTSE 250 rallied 29.59 points to 16,687.91.
Wall Street gained 117.65 points to 16,516.22 despite investors bracing themselves for a forthcoming fourth-quarter earnings season which analysts believe will not be anything to write home about. Sainsbury’s put on 7.9p to 251.2p ahead of today’s Christmas trading update. Speculation was rife too that the supermarket giant will also announce an increased £1bn-plus bid for Argos owner Home Retail, 2.8p cheaper at 141.9p.
Home Retail’s major shareholders which include Schroders (18.6pc) and Toscafund (5.08pc) were upset they were not consulted when Sainsbury’s had its first approach rebuffed in November and will definitely not sell on the cheap.
UK Mail posted a gain of 31.88p to 277.38p following a positive third- quarter trading update. Parcels delivered volume growth of 8pc, driven largely by growth in internet shopping. The automated hub operated well throughout the peak period with strong customer service levels. Broker Investec upgraded to buy from add.
Social housing and domiciliary care group Mears, which rose 26pc in 2015, climbed 20.5p to 454.25p following an upbeat pre- close trading statement.
Management expect full-year figures to be in line with expectations. The group continues to see a strong performance in its Housing division, which accounts for 80pc of revenues. 2015 was a record year as far as new orders were concerned, with a £1bn contract value of new work since January 1 2015, including Milton Keynes, which is one of the largest single contracts ever awarded to the firm. Liberim Capital’s target price is 515p.
NAHL, the operator of the National Accident Helpline, jumped 20pc or 46.75p to 275p after analysts gave the thumbs up to its £2m acquisition of Searches UK, a leading residential property conveyancing search provider in England and Wales.
Searches UK has over 140 law firm and licences conveyor clients, and recorded pretax profits of £300,000 for its last financial year. NAHL diversified away from personal injury a year ago with its purchase of Fitzalan Partners, which specialises in conveyancing lead generation.
KBC Advanced Technologies rocketed 59.75p or 48pc to 183.75p in response to an agreed £158m or 185p a share cash bid from ATI Global Optimisation, a wholly owned subsidiary of Aspen Technology. KBC is a leading provider of strategic consulting and software to the oil and gas industry.