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MARKET REPORT: BP eyes £600m Petroceltic deal

Rumours that a super-heavyweight industry neighbour in Algeria could soon be knocking on its door before it gets the chance to move from the junior AIM market to a main listing in June helped Ireland-based upstream oil and gas explorer Petroceltic International close 0.45p or 7 per cent higher at 6.875p.

Dealers heard gossip that oil giant BP, 3p better at 468.55p, which has a natural gas facility in Algeria next door to Petroceltic’s world-class Ain Tsila gas project, is ready to ‘mop up’ Petroceltic in a deal which would value it at around £600m – or more than double the current share price.

When Petroceltic merged with Melrose Resources last October, the deal combined the development of its gas field in Algeria with a high-impact exploration programme. The enlarged group plans to drill nine wells in 18 months, two of them in the Kurdistan region of northern Iraq, and are targeting 500m barrels of oil.

Petroceltic recently announced a financing agreement for up to £327m with a syndicate of international banks and the International Finance Corporation. It secured the first direct debt funding for the Ain Tsila field.

Global integrated energy company BG Group jumped 41.5p to 1227p following a positive strategy update from new boss Chris Finlayson, who took over from Sir Frank Chapman as chief executive earlier in the year.

Bulls were also buoyed by news that BG, along with Brazil’s OGX, have won offshore oil and gas exploration blocks in a frontier region of Brazil’s Barreirinhas basin at an auction conducted by regulator ANP.

A £5bn-plus bid approach for Severn Trent from Canada’s Borealis, the Kuwait Investment Authority and the Universities Superannuation Scheme, helped of the UK water giant soar 252p to 2077p. United Utilities gushed 21p to 760.5p and Pennon 29.5p to 695p in sympathy. The burst of corporate activity and the promise of a lot more to come helped the fabulous Footsie sizzle 54.3 points to a five-year high of 6,686.06.

  More... Market report brought to you in association with Killik & Co. For market advice check out killik.com FTSE CLOSE: Severn Trent marches up the table amid £5bn takeover rumours as Footsie roars ahead

Wall Street helped the overall bullish mood with a gain of 123.57 points to 15,215.25. Fund managers in New York responded to comments from widely followed hedge fund boss David Tepper, head of Appaloosa Management. He said that he was ‘definitely bullish’ on stocks and everyone piled in.

Mining stocks failed to participate, though, after JP Morgan Chase cut its growth forecasts for economic powerhouse China, a huge importer of commodities.

The US bank expects China to expand by 7.6 per cent in 2013, down from the previous 7.8 per cent estimate. The latest Bank of America/Merrill Lynch Fund Manager Survey also backed up JP Morgan’s view by revealing that 25 per cent of respondents say that a hard landing in China and a commodity collapse is their number one ‘tail risk’.

Hit by news that it has suspended all  work at its Marikana mine in South Africa, shares of platinum producer Lonmin lost 20.9p to 265.1p.

Vague private equity bid talk lifted babywear retailer Mothercare 22.25p to 347.25p.

Another day and another bullish trading update from Mears. Shares of the social housing and domiciliary care group rose 9.5p to 370.5p on hearing that trading in its two core divisions is solid and in line with expectations. It has won £125m of new contracts since the start of the year. Liberum Capital’s target price is 420p.

DCC, the distribution and support services group, rocketed 178p or 7 per cent to 2708p following better than expected annual results. Set to join the FTSE 250 at the next quarterly review in June, the group also said it expects operating profits to rise by up to 12 per cent in the current year.

A cold winter saw higher demand for volumes of oil in Britain, DCC’s main market for its energy business.

Reflecting disappointment with a first-quarter trading statement which revealed a slow revenue start to 2013, APR Energy shed 32p to 828p.

Espirito Santo remains a seller and has a fair value price of 680p.

AIM-listed Motive TV featured a gain of 9 per cent to 0.03p after declaring it will develop its technology to enable Freeview users in the UK to watch and record television programmes directly on to tablets without the need to connect to the internet.

Marketing company Cello rose 3p to 53p after reporting strong trading so far this year, driven by its health division and a recovery at its consumer unit.

Anglesey Mining firmed 1.12p to 8.12p after its associate Labrador Iron Mines (LIM) entered into a sales agreement with the Iron Ore Company of Canada and an off-take financing agreement with RB Metalloyd under which LIM will receive advance payment of $35m.

Polo Resources jumped 2.5p to 26.75p after Michael Tang became chairman and Mettiz Capital, a Malaysian investment group controlled by him, has become the company’s largest shareholder by acquiring a wad of shares at 40p a pop.

Dealers also say its 48.21 per cent stake in Signet Petroleum could be worth around £200m and it is possible that the company could eventually be floated in Singapore, giving Polo a windfall.

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