Tullow extends winning streak on M&A speculation

Tullow Oil's rebound continued on Wednesday after Goldman Sachs named the Africa-focused explorer as a likely takeover target.

Goldman's "buy" advice sent Tullow 8.7 per cent higher to 400.8p. Having started April at a nine-year low, the stock has rallied for nine consecutive sessions for a gain of 41 per cent.

"We expect well-funded majors and national oil companies to scrap high-cost, high-complexity projects and focus on gaining exposure to low-cost projects via M&A," Goldman said. Tullow offers "exposure to strategic assets which sit low on the cost curve".

Jefferies analysts were not convinced, saying Tullow was "just too expensive".

A valuation of $22 a barrel for Tullow's proven and probable reserves already stands far above the sector's average M&A price of $15 to $17 a barrel, meaning much of the value is contingent on east African prospects that are unlikely to convert to reserves anytime soon, Jefferies argued.

Retailers lifted the wider market, edging the FTSE 100 higher by 0.3 per cent or 21.52 points to 7,096.78.

Sports Direct added 3.8 per cent to 670p, with Merrill Lynch repeating "buy" advice.

The launch of click and collect across all Sports Direct stores should help boost online sales, which had stagnated in the previous half as Sports Direct prioritised defending margins, Merrill said. The broker also noted that Sports Direct's options over stakes in Debenhams and Tesco were in profit.

A JPMorgan Cazenove upgrade helped Next rose 2.5 per cent to £72.85.

AstraZeneca hit a record high, up 1.2 per cent to £48.58, after the US health regulator voted that its Onglyza diabetes medication was safe enough to remain on the market with an updated safety warning on the label. After the close, SocGen started coverage of AstraZeneca with a £66 target price.

Vesuvius, the ceramics engineer formerly known as Cookson, lost 6 per cent to 470.4p. Four leading brokers cut earnings forecasts, all citing weak US steel production data.

Steel flow control and refractory products account for 68 per cent of Vesuvius's sales, more than a third of which are to the Americas, Credit Suisse said. North American sales are also at a better margin than the group average, the broker added.

Al Noor Hospitals edged 0.7 per cent higher at 911p, having dropped on Tuesday after Ithmar Capital sold its 20 per cent stake. Deutsche Bank, which had put a 925p minimum price on the share sale, was rumoured to be left with the rump of the placing having failed to attract enough buyers.

Zoopla dropped 4 per cent to 195.8p after key rival Rightmove said it had been taking market share.

In a briefing to Morgan Stanley's sales force, Rightmove said its property portal had been attracting nearly 70 per cent of visits, up from about 60 per cent in January, with the reverse happening to Zoopla sites. Rightmove, flat at £31.61, also said agents defecting to challenger website OnTheMarket had reduced to "a trickle", with just as many returning.

Virgin Money lost 5.2 per cent to 399.9p after Wilbur Ross, the bank's second-biggest shareholder, and Stanhope Investments sold 60m shares at 400p apiece.

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