Market Report: Premier Oil soars again on talk of bidding war

Anyone lucky enough to have owned a handful of shares in Premier Oil four years ago should be grinning from ear to ear. The shares have risen almost 500 per cent since January 2002, a level of out-performance that few London listed stocks can match.

Mid-cap oil stocks have rarely found such favour with investors and if market rumours are to be believed Premier has caught the eye of more than one of the oil majors. The word in the market is that a bidding war could be likely for the group, which has production operations in Europe, Africa and the Indian subcontinent, with Shell and Pemex, the Mexican national producer, going head to head. Traders said a fight for Premier Oil could start at 1,250p per share as the stock climbed another 18p to 1,030p.

An early rumour that the German utility RWE is considering launching a takeover bid for ScottishPower was rebutted by most traders, who pointed out that RWE is still heavily involved in its attempts to find a buyer for Thames Water. That did not stop ScottishPower surging to 638p in the morning session, a six-year high. A dose of reality kicked in by mid-afternoon and profit-taking sent the shares down to close 5p worse at 620.5p.

Investors in Carnival, the cruise ship operator, might be feeling a little seasick as the shares have fallen more than 33 per cent from the 3,397p they peaked at in January. Morgan Stanley cut its price target for the stock to 2,750p from 3,200p yesterday, but the stock bounced 63p to close at 2,253p as the investment bank also concluded that the bad news is in the price.

In the wider market, uninspiring results from the drinks giant Diageo were made worse by declining Guinness sales in Ireland, sending the stock 24p lower to 935p. Weaker mining stocks dragged the rest of the market down, despite strength in oils, as the FTSE 100 closed off 23.2 at 5,906.1.

Cairn Energy, up 65p to 2,132p, was helped by an upgrade from UBS, which reiterated its target price of 2,600p before results next week. BP also bounced, 5p better at 597p, helped off recent lows by a stronger oil price.

Word that Carphone Warehouse is on the verge of announcing a significant acquisition got stronger, sending the shares 8p firmer to 281.25p. According to some investors, the company has failed to capitalise on its first mover advantage in the free home broadband market, and the word is it will make an earnings-enhancing acquisition to try to appease the doubters.

It has been a rough couple of weeks for Interserve investors, after the company suspended six senior managers and told the market it would re-state profits for the past three years. Citigroup shone some light on the gloom yesterday by upping its recommendation on the company to "buy" on valuation grounds, saying the recent selling has made the stock attractive. The investment bank set a new target of 350p for the shares as the stock bounced 11.5p to 289.5p.

In the small caps, there was grim news for investors in Asia Energy as the company requested suspension of its shares in the wake of news from Bangladesh that the government may pull the plug on its Phulbari coal mine. The project is thought to be one of the largest deposits in the world, but six protesters died in weekend riots. By the time trading was suspended, the shares had already lost 166.5p to 117.5p, a fall of 59 per cent.

Another disaster for small-cap investors is Netservices. The network service provider listed on AIM in March at 80p but has been in freefall practically ever since. The shares were marked down more than 50 per cent to 13p yesterday as dealers tried to tempt some buyers, but an after-close profits warning will probably create more selling pressure today.

Nettec resumed trading on AIM as the cash shell asked shareholders to approve the acquisition of the holiday resort developer Newfound for up to £95m. Once approved by shareholders, the company will resume trading on AIM as Newfound with an expected market value of £80m. The shares closed a penny better at 14p.

Secure Design, the first Japanese company to list on AIM, continues to attract support despite opening yesterday at a 245 per cent premium to the 14 July placing price of 47p. The stock rallied another 45p to 207.5p.

Prince Catering & Management got off to a steady if unspectacular start as it began trading on AIM. The Chinese luxury brand restaurant group raised £427,900 through a placing at 9.25p per share organised by WH Ireland; the shares closed 0.63p better at 9.87p.