Newspaper article The Evening Standard (London, England)

Teather Pours Cold Water on Prospects of Red-Hot BG; MARKET REPORT

Newspaper article The Evening Standard (London, England)

Teather Pours Cold Water on Prospects of Red-Hot BG; MARKET REPORT

Article excerpt


BG, the oil and gas exploration arm of the old British Gas, traded at record highs yesterday despite calls for investors to take profits.

The performance of the shares has been breathtaking in recent weeks, the price soaring from 482 1/2p since 20 October, to a peak - albeit briefly - of 569p yesterday. During the past week alone, it has risen more than 8%, making it one of the best Footsie performers.

Persistent bid speculation and soaring UK gas prices have helped, but broker Teather & Greenwood believes the rise has been overdone and continues to rate the shares a sell. It is urging clients to switch into rival BP, which it regards as better value.

The cold snap and fears of a supply shortage have propelled UK gas prices to an eight-month peak.

Teather says the fears may be well founded if the winter is harsher than usual, but most of BG's production is based on long-term contracts and it will not be a major beneficiary of a higher spot rate.

The broker also says it had not expected the takeover speculation surrounding the shares to reach such a crescendo but, with everyone looking for the next target, BG has featured prominently. Teather does not see a bid materialising for BG in the short term. The broad spread of assets in its liquefied natural gas side might have attracted a bidder a few years back, but not now at the top of the market.

BG is capitalised at almost [pounds sterling]20 billion and, according to Teather, has moved out of the range of almost everyone apart from ExxonMobil, BP and Royal Dutch Shell.

Elsewhere in the sector, Burren Energy was nudging back towards its year's high despite plugging and abandoning its NDE001 oil well on the Nebit Dag East prospect in Turkmenistan. Brokers pointed out the company had already indicated this was one of its riskier prospects and the results were sufficiently positive to merit continued drilling.

The breakdown in bid talks between PartyGaming and Empire Online came as no surprise and brokers appear especially unperturbed about the impact on PartyGaming, the bigger of the two companies. …

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