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Bullish broker powers BG’s performance

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Bullish broker powers BG’s performance

  • The Guardian, 
  • Friday June 20, 2008

BG Group bucked a falling market yesterday on a combination of vague takeover talk and an upbeat broker note. The gas producer closed up 9p at £12.43 as traders heard a revival of rumours that Royal Dutch Shell, whose A shares fell 29p to £19.88, may be interested in it.

More concretely, analysts at Bernstein Research upgraded the company from market perform to outperform, with a £14.68 target. They believe liquefied natural gas (LNG) prices will be higher than the market expects, which will benefit BG’s second-quarter earnings.

“Given BG’s recent poor share price performance following the bid for [Australian group] Origin, we believe this is a good entry point into the game ahead of the quarter,” said Bernstein. “While there is a risk that BG increases it bid price for Origin over the coming months, we believe the LNG earnings and further information around [exploration in] Brazil will offset any potential further downside.”

Meanwhile Centrica – the British Gas owner which demerged from BG almost 11 years ago – added 6.25p to 312p after a reassuring trading statement.

As for Shell, its fall was partly down to a $4 drop in the crude price. This followed news that China planned to raise petrol and diesel prices in an attempt to curb demand. Oil shares had been sharply higher after an upbeat note on the sector from Goldman Sachs, in which the bank raised its oil price target from $108 to $117 a barrel for this year. But the Chinese move sent them into reverse, with BP down 9.5p to 570.25p and exploration group Cairn Energy closed 4p lower at £32.18 having touched £33.53.

In its note, Goldman said: “We continue to have a positive stance on exploration and production companies due to good visibility on revenue growth and merger potential. We remain more cautious on the refiners, in particular the simple refineries exposed to weak gasoline margins.”

The dip in oil companies and a poor performance from the financial sector pushed the FTSE 100 48.5 points lower to 5708.4.

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Market Forces Live at: blogs.guardian.co.uk/markets

http://www.guardian.co.uk/business/2008/jun/20/marketforces.stockmarkets

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