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Financial Times: Premier Oil explores lofty territory amid talk of Royal Dutch Shell bid

By Neil Hume and Robert Orr
Published: August 24 2006 03:00 | Last updated: August 24 2006 03:00

A 5 per cent advance by Premier Oil set tongues wagging in the Square Mile yesterday.

Traders had expected the FTSE 250 exploration group to trade lower following news that the Chinguetti oilfield in Mauritania, west Africa, holds significantly less oil than originally believed. Premier owns an 8.1 per cent stake in the field.

However, after heavy trading, Premier shares closed 5.7 per cent higher at £10.42 amid talk it has received a £1bn, or £13-a-share, cash offer from Royal Dutch Shell, down 0.7 per cent to £19.34.

Sector watchers said the rumours made sense given that Shell needs to find new reserves and Premier has an exciting exploration portfolio. This year and next, Premier expects to drill 22 wells in Vietnam, Indonesia, Pakistan and west Africa.

In the wider market, leading shares suffered a nasty fall after weaker-than-expected US housing data.

With traders reporting heavy selling of index futures, the FTSE 100 slid 42.6 points, or 0.7 per cent, to end at 5,860. Additional downside pressure came from BHP Billiton, which fell 4 per cent to £10.14 after annual results disappointed. Several stocks also traded ex-dividend. These included Anglo American, down3.6 per cent to £23.80, and Pearson, 3 per cent weaker at 737½p.

Elsewhere, the FTSE 250 shed 38.9 points, or 0.4 per cent, to 9,454.2.

Brambles Industries managed to defy the market’s downward trend, however. Its shares climbed 4.7 per cent to 447¼p after annual results impressed and the Anglo-Australian pallet hire company said it expected robust growth in its US operations.

Sage, the accountancy software developer, also finished higher, rising 1.8 per cent to 233½p in the wake of better-than-expected fourth- quarter results from Intuit, its main US rival.

But Rexam, the world’s leading drinks can manufacturer, eased 1.5 per cent to 511p on short selling ahead of results today. The talk in the market yesterday was that the figures could disappoint, with Rexam blaming high aluminium costs in Europe and weak prices in the US for its woes.

If the results do disappoint and the shares fall sharply, traders think there is a chance that Rexam will lose its place in the FTSE 100 at next month’s quarterly review.

Elsewhere, Vodafone closed unchanged at 110½p in spite of rumours that it might be tempted to acquire the UK business of Hutchison Whampoa’s 3.

Xstrata bucked the weak trend in the mining sector, rising 0.7 per cent to £22.65 amid talk that it might not need a huge rights issue to held fund its $16bn acquisition of Canadian nickel miner Falconbridge.

According to reports out of Canada yesterday, Teck Cominco is interested in buying Falconbridge assets worth $7bn.

Lower down the corporate ladder, PayPoint, which operates bill paying terminals for British Gas and the TV Licensing authority, topped the FTSE 250 performance table. Its shares advanced 12 per cent to 560p after UBS upgraded the stock to a “buy”.

Analyst Alex Hugh said the 23 per cent fall in PayPoint’s share price over the past three months had created an excellent buying opportunity as the company continued to trade strongly with user numbers rising.

Taylor Nelson Sofres, the market research group, enjoyed further gains. Its shares added 5.5 per cent to 190p on takeover hopes and talk that next month’s figures will show the company getting to grips with its problems in the US.

Debenhams slipped 1.8 per cent to 179½p amid talk of poor clothing sales at the department stores group.

Nikanor, the London market’s biggest play on the huge copper reserves of the Democratic Republic of Congo, improved 3.6 per cent to 611½p after Cazenove started coverage with an “outperform” rating and said the shares could be worth more than £14 by 2010.

Bradford & Bingley, down 1.3 per cent to 437¼p, was in focus on hopes that it could rejoin the FTSE 100 before next week’s month quarterly index review.

Due to its takeover by Germany’s Linde, industrial gases group BOC, unchanged at £16.10, is expected to be deleted from the FTSE 100 on September 4. It will be replaced by the biggest company on the reserve list after the close of trading on August 27.

At the moment, that company is B&B, which lost its blue-chip status after the September 2004 review.

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