Tullow Oil was in favour on Monday as optimism rose that the explorer could trade its way out of a cash crunch.
Shares in Tullow bounced 3.8 per cent to 420.2p, having warned last week that it may breach a banking covenant in 2016.
Investors were encouraged that Africa Oil, Tullow’s drill partner in east Africa, last week raised $125m with a private placement to fund its development costs.
Banks will probably waive any breach of Tullow’s existing debt conditions or alter limits ahead of its Ghana project coming online, Macquarie said.
However, the impact of a lower oil price would begin to be felt next month when banks revised their lending limits based on reserves, Macquarie continued. Funding growth projects could therefore require a capital raise or stake sales, the broker said.
The FTSE 100 ended 16.47 points lower at 6,857.05, a 0.2 per cent fall. The US holiday meant daily blue-chip volume at 40 per cent below the recent daily average was the lowest since the turn of the year.
A return of bid speculation meant SABMiller gained 1.9 per cent to £35.24, helped by a report that AB InBev shareholder 3G Capital has been working on a takeover of the South African brewer and Coca-Cola bottler.
3G has also been linked in recent weeks to a break-up of Pepsi, whose deal with AB InBev is due for renewal in 2017.
Silver miner Fresnillo lost 4.4 per cent to 840.5p after Morgan Stanley downgraded on valuation grounds. Fresnillo’s “curse of quality” is that it can keep spending on exploration and development in the face of weak silver prices, the broker said.
A Jefferies downgrade to “hold” meant testing services group Intertek slipped 3.4 per cent to £25.08.
Cuts in oil and gas spending combined with delays, cancellations and pricing pressure were likely to cut consensus earnings forecasts by at least 10 per cent, Jefferies said.
BWin Party rallied 7.7 per cent to 90p as no statement followed Friday’s slump, which came after Dealreporter said talks between the online casino and potential bidders had stalled. Peel Hunt upgraded BWin to “hold”.
“There is no doubt the group faces a number of significant headwinds and the management record doesn’t provide much confidence that BWin can trade its way out. However, there are assets within the group that should be attractive to others in an industry where consolidation will occur,” it said.
Brit, which ended unchanged at 274.2p, was in focus amid rumours the insurer had had a bid approach from a Canadian peer.
Hunting bounced off a 434p session low to close at 520p, up 4.8 per cent, even after a profit warning from the onshore rig services specialist.
Numis Securities called Hunting a suitable takeover target with a valuation that was materially too low based on historical averages.
But Macquarie argued that any re-rating “requires underlying commentary from US shales to improve and this may not occur until the second half”.
RPS, the engineering consultant, slipped 3.1 per cent to 240.6p after about 2 per cent of the company changed hands at 242p.
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