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Private equity bought £11.9bn worth of European oil and gas businesses last year as shift to renewable energy left industry assets looking cheap










Private equity funds bought £11.9billion worth of European oil and gas businesses last year as the shift to renewable energy left industry assets looking cheap. 

UK businesses made up five of the 12 deals completed in Europe, totalling around £2.4billion, according to research from law firm Mayer Brown. 

Going cheap: UK businesses made up five of the 12 deals completed in Europe, totalling around £2.4billion

Going cheap: UK businesses made up five of the 12 deals completed in Europe, totalling around £2.4billion

The North Sea was particularly popular for acquisitions. 

Mayer Brown partner Bob Palmer noted that the pandemic, which initially caused crude oil prices to drop sharply, had made riskier assets ‘much more attractive’.

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Major oil stocks sank as rising tensions between Russia and Ukraine threatened international crude supplies.

Brent crude dropped by over 1.1 per cent to just above $88 a barrel as the ongoing build-up of Russian troops on the Ukrainian border drew condemnation from politicians in both the US and Europe. 

There are worries that a Russian invasion of Ukraine will result in sanctions from the US and other countries in retaliation, which could impact supplies of Russian oil and gas to the wider market. 

Concern: Brent crude dropped by over 1.1 per cent to just above $88 a barrel

Concern: Brent crude dropped by over 1.1 per cent to just above $88 a barrel

Such a move would come at a critical time for global oil supplies, which are currently tight as the economy emerges from the pandemic and fuel demand rises while production remains steady. 

It could also imperil projects run by UK oil majors Shell and BP, both of which have operations in Russia. Shell shares dropped 1.7 per cent, or 30.8p, to 1808.4p as crude prices dipped while BP was down 1.8 per cent, or 6.9p, at 382.25p. 

Neil Wilson, chief market analyst at Markets, noted that a full-scale war between Russia and Ukraine would also cause ‘heavy losses’ for global stock markets. 

The oil stock declines helped push the FTSE 100 into negative territory for 2022 so far, ending the week on a sour note. The blue-chip index closed down 1.2 per cent, or 90.88 points, at 7494.13. 

The FTSE 250 was also on the back foot, tumbling almost 2 per cent, or 451.74 points, to 22263.24. 

Markets in Europe and Asia also saw heavy losses yesterday, with Germany’s Dax dropping 1.9 per cent, while Japan’s Nikkei index slumped 0.9 per cent. 

Market sentiment was weighed down by jitters on Wall Street as a sell-off of tech firms continued. It has been especially punishing for Scottish Mortgage Investment Trust, which counts tech giants such as Tesla and Nvidia among its biggest holdings. Shares in the group were down 3.9 per cent, or 44.5p, to 1109.5p. 

It was followed by other US-focused funds, with Baillie Gifford US Growth Trust sliding 6.7 per cent, or 16.5p, to 230.5p while Allianz Technology Trust, which owns a large stake in Google parent Alphabet, tanked 5.5 per cent, or 16p, to 277p. 

Retailers also fell as sales tumbled by almost 4 per cent in December as Plan B restrictions and Omicron infections slammed the brakes on Christmas spending. 

High street giant Next slumped 1 per cent, or 72p, to 7486p while Dunelm dropped 2.9 per cent, or 39p, to 1292p, B&M fell 2 per cent, or 10.8p, to 543p and JD Sports slipped 1 per cent, or 1.95p, to 192.7p. 

The cautious market mood helped push up prices of some ‘defensive’ stocks, ones with slower share price growth but more reliable dividend payments. 

Lucky Strike cigarette maker BAT climbed 0.8 per cent, or 24.5p, to 3138p and rival Imperial Brands rose 0.4 per cent, or 6.5p, to 1731p. 

Promotional merchandise maker 4imprint edged up 1.7 per cent, or 45p, to 2675p after upping its profit forecasts. The FTSE 250 firm expects profits for 2021 to be ‘towards the upper end’ of expectations, while revenues for the period are due to rise 41 per cent year-on-year to £580m.

Mid-cap merchant bank Close Brothers flagged an expected 2.9 per cent rise in its loan book to £8.7billion for the six months to the end of January, boosted by new business in its asset and motor finance divisions. Assets under management also grew to £16.6billion from £15.6billion at the end of July last year. Shares sank 6.1 per cent, or 82p, to 1266p. 

Ladbrokes-owner Entain dropped 5.2 per cent, or 89p, to 1635p after receiving a mixed reception from two investment banks. 

Analysts at Morgan Stanley upped their target price on the stock to 2530p from 2430p previously, while Deutsche Bank cut theirs to 2354p from 2400p.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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ALEX BRUMMER: Uncertainty around Ukraine, interest rates and overheated pandemic valuations are casting a pall over equity markets

  • In the US, the Nasdaq has fallen 10 per cent since the start of the year 
  • There were big pre-weekend falls on Europe’s exchanges
  • The FTSE 100 is less vulnerable than others due to its strong energy component










No one quite knows how the stand-off over Russia’s military build-up in the Ukraine will resolve itself. 

There has been a thundering verbal response from Nato boss Jens Stoltenberg and a muddled, less convincing intervention from Joe Biden. Diplomatic doors are being kept open. 

Britain has upped the ante by dispatching anti-tank weaponry to Kiev. Conflict is invariably beneficial for BAE and the rest of the UK’s leading edge defence and aerospace sector. For a global economy struggling with supply chain problems, the strategic stand-off could hardly be in a worse place or at a worse time. 

Uncertainty: There were big pre-weekend falls on Europe's exchanges with the FTSE 100 less vulnerable than others as a result of its strong energy component

Uncertainty: There were big pre-weekend falls on Europe’s exchanges with the FTSE 100 less vulnerable than others as a result of its strong energy component

Way back after the Yom Kippur war in 1973, and later after the first Iraq war in 1990, the main worry for advanced nations was blockages in the Gulf of Hormuz or a Gulf states oil embargo. As Europe has become less dependent on the Middle East for its energy needs, the flashpoint for security of supply has moved across the Urals to Russia and its control of pipelines. 

Under Angela Merkel’s leadership, Germany allowed itself to become far too dependent on Moscow. When Japan’s Fukushima nuclear plant erupted in 2011, Merkel suspended nuclear output and investment making the country more dependent on imported gas. 

A more recent decision to burn less coal in order to meet carbon emissions objectives, increased that Russian dependency. 

The new Nord Stream pipeline, designed to ease capacity constraints on existing connectors, is in danger of becoming caught up in the Ukraine crisis with swingeing Western sanctions on President Putin’s Russia looming. 

All of this is casting huge uncertainty over the future of energy prices and rapidly changing the inflation outlook. 

As recently as October 2021, the Office for Budget Responsibility forecast that consumer price inflation would be 2.3 per cent in 2021 and 4 per cent this year. The latest data shows annual consumer price inflation hit 5.4 per cent in December and could hit 7 per cent in the spring. 

Forecasting wholesale oil and gas prices can be very tricky. Irrespective of what happens in the Ukraine, the prospects are not encouraging. Brent crude futures rose 50 per cent in 2021 and have already climbed a further 14 per cent since the start of 2022, hitting a seven year high of $89-a-barrel. 

At a moment when inventories are low and geopolitics is affecting production in several parts of the world, investment bankers Goldman Sachs, among others, are projecting an oil price of $100-a-barrel by midyear. Natural gas prices track oil in what is likely to be a profound inflation shock.

There are some signs that the supply bottlenecks which have been a big part of the inflation surge are easing. 

The RSM UK supply chain index showed some improvement in December, but there is no confidence that the adjustment to the post-pandemic era is over. 

The emergence of the Omicron variant in China, where coronavirus started two years ago, is leading to new factory and port closures. This, in turn, could put upward pressure on prices. Finally, central banks are waking up to the idea that the current bout of inflation is anything but temporary. 

The Bank of England led the way among advanced central banks when it raised bank rate from 0.1 per cent to 0.25 per cent in December. 

With inflation now forecast by market analysts to peak at 7 per cent in the spring, the expectation is of a further 0.25 percentage point rise in February and predictions of rates climbing to 1.5 per cent by year end. 

No longer is the Old Lady out on her own. Norway has already raised rates and the Federal Reserve this week hinted at a policy hardening. The European Central Bank finally appears to be listening to its German council member Isabel Schnabel who has been warning for some weeks that swelling energy costs could be persistent and a response may be necessary.

Uncertainty around Ukraine, interest rates and overheated pandemic valuations are casting a pall over equity markets

In the US, the Nasdaq has fallen 10 per cent since the start of the year and former New York stars Netflix, and more severely Peloton, are being punished. There were big pre-weekend falls on Europe’s exchanges with the FTSE 100 less vulnerable than others as a result of its strong energy component. It has less distance to fall because of its chronic under-performance since Brexit. 

We live in turbulent times, but no need to buckle in just yet.  

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Oil majors Shell and BP hit fresh post-pandemic records as crude prices reached their highest levels in just over seven years.

Shell was up 1.5 per cent, or 28.4p, at 1873.8p while BP rose 0.5 per cent, or 2p, to 395.75p – their highest levels since February 2020. 

The gains came as prices of Brent Crude passed $88 a barrel, for the first time since October 2014.

Price boost: Shell was up 1.5 per cent, or 28.4p, at 1873.8p while BP rose 0.5 per cent, or 2p, to 395.75p – their highest levels since February 2020.

Price boost: Shell was up 1.5 per cent, or 28.4p, at 1873.8p while BP rose 0.5 per cent, or 2p, to 395.75p – their highest levels since February 2020.

Another oil benchmark, West Texas Intermediate, was also trading at around a seven-year high close to $86 a barrel.

The latest surge followed an attack by rebels in Yemen against the United Arab Emirates, which raised fears of supply disruption.

Tensions were increased further when neighbouring Saudi Arabia launched air raids in Yemen in retaliation.

Stock Watch – Sanderson Design

Interior design group Sanderson surged to a three-month high as demand for its UK-made fabrics and wallpaper rose following Brexit and disruption to supply chains.

It expects profits for the year to the end of January to be at least £12m, ‘significantly ahead’ of expectations and up from £7.1m last year.

The group also highlighted foreign success, with sales in North America up 40pc year-on-year, where it is enjoying ‘very strong’ orders. Shares rose 21.9pc, or 33.5p, to 187p.

 

Brent’s rally means it has risen around 60 per cent in the last 12 months and over 350 per cent since April 2020, when its value plunged to just under $20 a barrel.

Some analysts, including Goldman Sachs, have predicted that the prices of oil could climb back to $100 a barrel this year as the perceived threat of Omicron diminishes, allowing the global economy to reopen and kick-start demand for fuel.

The world’s oil market is also facing a supply squeeze unless the OPEC+ group of oil-producing countries, such as Russia and Saudi Arabia, decide to open the taps to meet demand at the risk of prices falling back again.

Political instability is adding upward pressure to oil prices, with the Yemen conflict and rising tensions between Russia and Ukraine worrying energy markets.

The FTSE 100 dropped 0.6 per cent, or 47.68 points, to 7563.55 while the FTSE 250 fell 1 per cent, or 218.93 points, to 22,652.71. 

Markets in London were under pressure after rising to a two-year high on Monday, with some traders looking to take profits following the rally.

Miners also weighed on the index amid weaker commodity prices, with Russian group Evraz, which is part-owned by Chelsea owner Roman Abramovich, dropping 2.8 per cent, or 15.8p, to 557.2p while precious metals group Polymetal fell 1.9 per cent, or 21.5p, to 1132.5p.

GlaxoSmithKline shares fell 0.4 per cent, or 6.6p, to 1701.2p, as it emerged that it is in talks with the sovereign wealth funds of Qatar and Singapore to fend off Unilever’s takeover efforts.

Cybersecurity group Darktrace inked a multi-million dollar deal to provide its artificial intelligence technology to one of the world’s largest airlines.

The airline, which operates around a thousand flights each day to over 100 destinations, will use Darktrace tech to protect the business from ‘sophisticated’ threats. Darktrace rose 5 per cent, or 20.6p, to 433.8p.

Mid-cap oil and gas firm Energean jumped by 3.7 per cent, or 33.5p, to 949.5p after a record performance in 2021

The firm noted that record gas prices in Italy, one of its key markets, and better than expected production helped lift its revenues to £364million, up from £247million in 2020.

Telecoms giant BT was up 3.1 per cent, or 5.55p, to 186.6p after analysts at Goldman Sachs added it to their ‘conviction buy’ list and raised their target price on the stock to 270p from 180p.

Stock trading platform Plus 500 bounced up 2.3 per cent, or 32.5p, to 1470p after it was granted a tax cut by the Israeli government.

Its status as a ‘preferred technological enterprise’ has been extended and as a result, its annual corporation tax rate will be lowered to 12 per cent from 23 per cent.

Retirement income and pension specialist Just Group surged 8.2 per cent, or 7.1p, to 93.3p after its sales jumped 25 per cent to £2.7billion during 2021.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Oil and gas supermajor set to hand £4bn back to investors: Shell cashes in as energy prices surge

  • Profits in gas division ‘significantly higher’ in fourth quarter than in third 
  • Analysts believe Shell is on course to post profits of £12billion for 2021 
  • Bumper profits likely to spark backlash when household energy bills are soaring 










Shell has cashed in on spiralling energy prices that are pushing up household bills and driving suppliers to the brink of collapse. 

The FTSE 100 oil major said profits in its gas division will be ‘significantly higher’ in the fourth quarter than in the previous three months following an astonishing jump in wholesale prices. 

With the oil price also on the rise, analysts believe Shell is on course to post profits of £12billion for 2021 following a £16billion loss in 2020 during the depths of the pandemic. 

The bumper profits are likely to spark a backlash at a time when household energy bills are soaring, with critics now calling for a windfall tax to help alleviate pressure on hard-pressed families. 

Astonishing: Shell said profits in its gas division will be 'significantly higher' in the fourth quarter than in the previous three months

Astonishing: Shell said profits in its gas division will be ‘significantly higher’ in the fourth quarter than in the previous three months

Undeterred, Shell also revealed plans to fast-track a scheme to return a further £4bn to shareholders. 

The company said in a trading update that it would continue a stock buyback programme ‘at pace’. Shell has promised to redistribute £5.1bn to investors in total from the sale of its US Permian Basin shale business to Conoco Phillips last year, and has already handed back £1.1billion.

The acceleration of the buyback will be welcomed by savers and pensioners who rely on dividends and other shareholder returns for income. Shell rocked the City when it slashed its dividend by two-thirds in spring 2020 after oil prices tumbled in the pandemic and it needed to save cash

The dividend cut hit millions of ordinary Britons as well as big institutional investors. Shell is due to report its full results for 2021 in early February. 

Its bumper profits will come against a backdrop of a mounting cost of living crisis for millions of households as energy bills soar. It is feared the energy price cap could rise by as much as 50 per cent in April, pushing a typical annual bill up from £1,277 towards £2,000. 

Soaring prices have also led to the collapse of 26 energy suppliers as the price cap means they cannot charge customers enough to cover their costs.

The rally in wholesale gas prices has been caused by a perfect storm of factors including lower supplies from Russia, a lack of wind energy and a shortage of reserves. Shell’s recovery since the worst of the pandemic has seen it overtake Astrazeneca to again be the largest firm on the FTSE100 with a value of £132billion. 

But it is fighting off an attack from activist investment firm Third Point which has built up a substantial stake in Shell and is urging it to split into multiple entities. 

Third Point wants Shell to separate its traditional oil business and its renewables divisions. 

Shell has refused to do this, with boss Ben van Beurden insisting that the only way the company can hit its target to be net zero by 2050 is to use the proceeds from oil and gas to invest in green energy. 

  • Amber Rudd has joined the board of British Gas-owner Centrica. The former Conservative MP was secretary of state for energy and climate change from 2015 to 2016. She later served as home secretary under Theresa May. Centrica chairman Scott Wheway said: ‘Amber was the driving force in the UK’s participation in the Paris Climate Change Agreement, the first legally binding global commitment to reduce national carbon emissions.’ 

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