Another outing for BP bid speculation helped the London market creep higher on Friday.
A comprehensive settlement of liabilities from the 2010 Deepwater Horizon disaster, in combination with low oil prices, make BP a potential takeover target, Oppenheimer analysts said.
“A merger involving BP and one of its peers would create the world’s largest oil producer and could generate more than $10bn annual cost savings.”
Spill liabilities and Russian exposure have made BP the cheapest stock in the sector, with its implied reserve value of $12.60 per oil barrel 55 per cent below the peer average, said Oppenheimer.
The current share price – up 1.2 per cent to 441.3p – discounts a worst-case scenario of more than $60bn in financial penalties, the broker added.
Miners and oil stocks led the wider market higher after a benign US jobs report buoyed commodity prices.
The FTSE 100 rose 0.3 per cent, up 16.09 points, to 6,567.24, as BHP Billiton took on 2.9 per cent to £16.76 and Anglo American added 2.7 per cent to £13.65.
Cairn Energy climbed 3.5 per cent to 157.9p after FAR Energy, its partner at a well being drilled off the coast of Senegal, was granted a trading halt by the Australian Stock Exchange, pending news.
Commercial success in line with pre-drill estimates could be worth around 138p per Cairn share, analysts said.
Afren jumped 12.7 per cent to 82.1p after announcing the resignation of Ennio Sganzerla, who had been a non-executive director at the explorer since 2009.
The departure of Mr Sganzerla, who led Eni’s African M&A push, raised speculation that Afren is being targeted for a takeover by 7.1 per cent shareholder SAPetro of Nigeria.
Other Kurdistan producers gained, with Genel up 3.7 per cent at 754p and Gulf Keystone firmer by 13.2 per cent to 75p, after the Iraqi region said oil exports had increased.
Investors have been buying the sector this week on hopes that Kurdistan’s government can agree an export payments mechanism in time for results from the key producers due on Thursday.