U.K. Stocks Drop, Led by Energy Companies; BG Group Falls
U.K. stocks dropped, erasing an earlier advance for the benchmark FTSE 100 Index, as energy companies declined after a gas leak at Total SA’s North Sea oil- and-gas rig continued for a third day.
BG Group Plc (BG/) lost 2.9 percent after the gas leak at the French company’s Elgin platform led to the evacuation of other rigs in the area. Resolution Plc and Wolseley Plc both lost more than 2 percent after reporting earnings. Compass Group Plc (CPG) fell as the caterer’s outlook disappointed investors.
The FTSE 100 dropped 33.15, or 0.6 percent, to 5,869.55 at the close in London after earlier rising as much 0.7 percent. The broader FTSE All-Share Index slid 0.5 percent, while Ireland’s ISEQ Index rose 0.1 percent.
“The 180-degree turn by the market proves that there is still a lack of conviction from investors to push the market to new highs for the year,” said Angus Campbell, head of market analysis at Capital Spreads in London. “Energy stocks were one of the main drags on the indices.”
The FTSE 100 rallied yesterday after German business confidence unexpectedly rose and U.S. Federal Reserve Chairman Ben S. Bernanke said continued accommodative monetary policy is still needed. The gauge has gained 5.3 percent so far this year, boosted by the European Central Bank’s 1 trillion euro ($1.3 trillion) loans to the region’s lenders.
North Sea Rigs
BG Group dropped 2.9 percent to 1,475 pence. Total’s Elgin platform leaked gas for a third day in the U.K.’s North Sea, prompting neighboring rigs to be evacuated to guard against the risk of an explosion.
The Elgin-Franklin fields produced a daily average of 61,386 barrels of condensate in November, according to the most recent government data. Shareholders in both fields include BG Group, Eni SpA, EON AG, Exxon Mobil Corp., Chevron Corp, Dyas AS and Summit Petroleum Ltd.
Royal Dutch Shell Group Plc fell 1.2 percent to 2,223 pence as crude declined on reports that the U.S. is considering a release from the Strategic Petroleum Reserve. BP Plc dropped 2.2 percent to 471.35 pence and Cairn Energy Plc slid 2.2 percent to 333.3 pence.
Resolution dropped 2.4 percent to 268.2 pence even after the insurance investment firm more than doubled full-year operating profit to 681 million pounds, topping the median analyst estimate of 559 million pounds.
Analysts at Berenberg said full-year results were “very disappointing” as headline numbers beat consensus only with the help of one-time items.
Resolution also said it may split its Friends Life division into two to allow the company to make an exit from its U.K. life insurance project without finding a buyer.
Wolseley, Compass Group
Wolseley Plc (WOS) slid 3.3 percent to 2,435 pence after the world’s largest supplier of heating and plumbing products reported first-half net income and sales that were in line with analyst estimates. The company said growth trends were slightly lower since the end of the first half.
Compass Group declined 2.5 percent to 651 pence after the world’s largest catering company said the current “economic uncertainty” may continue to put pressure on like-for-like volumes in some regions in the second half.
The company reiterated its full-year expectations but said it expects no improvement in profit margins during the first half of this year.
RBS Stake Sale
Elsewhere, Royal Bank of Scotland Group Plc (RBS) gained 3.3 percent to 28.67 pence after the government was said to have held talks with investors, including Middle Eastern sovereign wealth funds, about a potential stake sale.
Two people with knowledge of the talks said the U.K. had made presentations to investors in countries including Abu Dhabi. Talks are at an early stage and no deal is imminent, said the people, who declined to be identified because the discussions are private.
“Similar rumors have circulated before regarding sovereign-wealth investment in RBS,” said Mike Trippitt, a London-based analyst at Oriel Securities Ltd. “On balance, we see the sale of a smaller stake to sovereign-wealth funds at below the average in-price as a positive for the shares. An investment should provide a floor for the share price.”
RBS trades for little more than half the price the government paid when it bailed out the lender in 2008. The BBC reported yesterday that the Treasury is in talks to sell as much as a third of its 82 percent stake in RBS to Abu Dhabi, without saying where it got the information.
Kazakhmys Plc (KAZ) climbed 2.1 percent to 944.5 pence after the copper producer reported 2011 earnings per share that beat analysts’ estimates and sales that were in line with forecasts.
Afren Plc (AFR) rallied 3.4 percent to 135.5 pence after the oil producer said it plans to reach production of 100,000 barrels of oil equivalent a day by 2017. The target is “easily achievable,” said Chief Executive Officer Osman Shahenshah.
Babcock International Group Plc (BAB) jumped 3.2 percent to 800 pence after the defense and engineering contractor said it was confident in meeting full-year forecasts, saying key markets remain strong.
PZ Cussons Plc dropped 9.8 percent to 301.3 pence after the company said that continuing tension in Nigeria will result in “the group’s overall performance being some way below expectations.” Numis Securities Ltd. downgraded the shares to reduce, the equivalent of a sell rating.
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