Market Report: Strong surge at Shell Oil fuels a reappraisal

A DRAMATIC revival at Shell Oil, the US offshoot of the Anglo-Dutch Royal Shell group, is intriguing the stock market.

Yesterday shares of Shell Transport & Trading, which owns 40 per cent of the Shell empire, rose 9p to 546p, a new high for the year, as executives of the US operation started a two-day briefing programme embracing nearly 20 investment houses.

Stockbroker Panmure Gordon was the first port of call. It was so impressed by the strength of the US group's revival and Shell's prospects that it sharply increased its profit and dividend forecasts.

For this year it lifted its profit expectations from pounds 2.6bn to pounds 2.8bn and its dividend forecast from 21.7p to 22.8p.

Next year's profit figure is now pounds 3.28bn with a 23.7p dividend pencilled in.

Shell Oil's prospects are being helped by higher natural gas sales and its more long-term exploration prospects are enhanced by its involvement in the Gulf of Mexico.

British Petroleum, which has attracted considerable US support because of its Gulf and Colombian operations, improved 4p to 218.5p.

The rest of the stock market was captivated by the dawn raid on Trafalgar House and hopes the Germans will relent and reduce their interest rates today. A US cut is also regarded as a possibility. But another poor performance by the pound tended to lower the interest rate enthusiasm towards the close.

The emergence of Hongkong Land as a near 15 per cent Trafalgar shareholder following a classic raid, by SG Warburg, stirred hopes of a revival in corporate activity which has dwindled to a trickle since the HSBC takeover of Midland Bank.

Helped by the Hongkong Land activity turnover jumped to 823 million shares with Trafalgar House claiming 212 million. Trafalgar's shares surged 29p to 89.5p and the 'A' shares 28.5p to 86p. In after-hours trading the ordinary shares were quoted between 84p and 87p.

The FT-SE share index ended 19.3 points up at 2,572.3. At one time it was 34.3 higher.

Utilities tended to miss out. Waters took a shower as the industry's Ofwat watchdog suggested lower prices and said it would examine dividend payments. Thames fell 13p to 440p and Wessex 22p to 502p. The water worries dulled power shares with the distributors and generators pulling back.

Profit downgradings continued to ruffle sentiment. BICC, the cable and building group, fell 12p to 260p. Kleinwort Benson reduced by pounds 10m to pounds 100m for this year and from pounds 145m to pounds 110m for next.

BET, the business services operation, ended 6p down at 102p as another downgrading appeared - this time from Smith New Court. The investment house is now looking for pounds 88m this year. It also took the axe to Pilkington, cutting from pounds 55m to pounds 45m. The shares fell 4p to 83p.

Hanson, for a time suspected to be the Trafalgar attacker, tumbled 5.5p to 209.5p. Its stockbroker, Hoare Govett, lowered its forecast for the year just started by pounds 50m to pounds 1.125bn. Redland, on dividend cut worries, lost 19p to 343p.

Property group MEPC gained 12p to 285p, partly on interest rate hopes. There have been suggestions this week it had been selected as the Hongkong Land target. The shares could, therefore, sink back today. Other properties gained strength from the cheaper money expectations.

TI Group, weak on Wednesday, recovered 12p to 282p as the Dowty Group provisions came in below worst fears. Eurotunnel improved 15p to 435p on the latest twitch in its long-running despute with the tunnel contractors.

Forte rose 14p to 149p on its interim results and what was seen as a more encouraging outlook. Hard-pressed Buckingham International, which has hotels in Florida, held at 3.5p. Two institutions have sold nearly 10 million shares but a concern called Jemma Trust has emerged with 8.79 per cent.

Asda, the supermarket chain, improved 1.5p to 35p. It has raised pounds 57m by selling two development sites and a store. The cash will reduce debt. It cut its debt pile to pounds 600m by the sale of its 25 per cent stake in MFI, the flatpack furniture chain, in the summer.

Ranks Hovis McDougall gained 9p to 168p on talk of higher flour prices and just a sprinkling of bid speculation. Allied-Lyons ended 2p down at 605p despite the long-awaited approval of its pubs deal with Brent Walker.

Newcomer Tepnel, a start-up medical group, continued to attract support, gaining another 17p to 190p. The shares were placed at 120p. Trading started on Wednesday.

Shares failed to hold their best levels yesterday, with the FT-SE index ending 19.3 points higher at 2,572.3. At one time it was up 34.3. The FT 30-share index finished 13.8 stronger at 1,874.4. Turnover reached 823 million shares with 25,704 trades. Government stocks fell by up to pounds 3/4.

Mining & Allied Supplies seems set to make more UK acquisitions following its pounds 1.9m take-over of Anti-Friction Components, a power components distributor. It has spent much of the past five years developing its Canadian distribution business, now quoted in Toronto with the dominant M&A stake worth more than pounds 7m. M&A shares held at 18.5p yesterday.

Shares of Proteus International, the drug design group, advanced 17p to 357p, a two-day gain of 27p. The company has placed 123,000 shares with institutional investors at 325p to buy out a joint venture with Peptide Technology for research into Aids /HIV products. The partnership was established in May 1990. Proteus has moved between 148p and 505p this year.