Emerald Energy sparkles on bid talk

London markets drifted to a two-month low on Friday, but Emerald Energy beat the trend amid takeover speculation.

Shares in the oil explorer jumped 10.1 per cent to 561p on talk of a bid pitched at about 750p a share. That would value Emerald at nearly £500m.

Emerald has previously been mooted as a potential target for Gran Tierra Energy, though the Canadian group would probably be more interested in its Colombian assets than its prospects in Syria.

Traders also noted Emerald’s links to Russia through its largest shareholders, the oil investor Michael Kroupeev and Soyuz­neftegaz, the Russian state-owned oil company.

The FTSE 100 posted a fourth weekly decline, closing the day down 31.49 points, or 0.8 per cent, at 4,127.17. Over the week the benchmark was 2.6 per cent lower.

The insurance sector traded lower for a fifth day amid concerns over solvency requirements and whether Aviva will cut its dividend. Aviva was down 4.9 per cent to 278¼p, taking its loss this week to 19 per cent. Prudential on Friday lost 2.8 per cent to 353p and Legal & General fell 2.7 per cent to 50¾p.

Retailers provided a shelter, with Tesco leading the blue-chip risers on a gain of 2.9 per cent to 357½p. “We expect Tesco to prove to be a formidable entrant to the mainstream financial services market in the UK,” said Cazenove, its house broker. It predicted a gradual expansion rather than major acquisitions, at least in the short term.

“The most obvious and material opportunity lies in mortgages, while the insurance operation can both build market share in its existing categories and extend into life and protection insurance.”

White goods retailers continued their strong run after department store John Lewis reported strong demand for air conditioners and fans during the UK heatwave.

Kingfisher, up 1 per cent to 188¼p and Home Retail Group, 2 per cent firmer at 271¾p, both had spare stock to clear after last year’s damp summer so the John Lewis data were a “significant positive indicator”, said Singer Capital Markets.

BHP Billiton fell 1 per cent to £12.96½ amid renewed speculation it was looking at buying a US potash maker.

Oil stocks were lower, tracking crude below $60 a barrel, and after Chevron warned that a sharp decline in US refining margins would hit its quarterly results.

Royal Dutch Shell’s B shares dropped 1.1 per cent to £14.44, while BP fell 0.8 per cent to 461¾p.

BG Group was off 1.5 per cent to 979½p in spite of an RBS note resurrecting takeover theories.

“We believe that the company will continue to be viewed as an attractive addition to the portfolios of many integrated oil and gas majors,” said RBS, which started coverage of BG with a “buy” rating and £13.50 target.

Venture Production was down 3 per cent to 785p as jitters set in ahead of Monday’s deadline for Centrica to make a firm bid.

After the close, Centrica launched a final cash offer of 845p per share and said it had lifted its stake in Venture to 29 per cent.

A profit warning sent Bodycote tumbling 10.8 per cent to 111¾p. The engineer said weakness in the automotive sector was spreading to its higher-margin aerospace and energy markets.

Fears of slowing demand led Chloride to fall 6.3 per cent to 134p after KBC Peel Hunt cut the power supply maker from its “buy” list.

SThree rose 6.5 per cent to 182p after HSBC recommended buying the recruitment agency for its “safe” dividend yield.

While all staffing companies would suffer as wages declined, SThree was likely to be less affected because it specialised in candidates with high skills who commanded high wages, HSBC said.