LONDON MARKET MIDDAY: Loss-Making BP Leads Oil And Mining Stocks Rout

LONDON (Alliance News) - Resource stocks weighed heavily on London equities indices midday Tuesday, after BP reported disappointing 2015 results and oil prices fell back from an aborted rally.

BP shares fell 8.3%, making it the worst blue-chip performer, after the oil and gas major reported more than a USD5.00 billion loss in 2015, as its upstream division was hit by lower oil prices and it booked large charges related to the oil spill in the Gulf of Mexico in 2010.

BP reported an underlying replacement cost profit that was way below analysts expectations for the last quarter of 2015, causing its underlying profit for the full year to more than halve, with large amounts of items causing BP to swing to an overall replacement cost loss for the year.

BP said it made an underlying cost replacement profit of USD196.0 million in the fourth quarter of 2015, way below the USD730.0 million analysts were expecting, according to a market consensus provided by BP. Replacement cost profit is a standard measure used in the oil industry that takes into account the price of oil, and the underlying result is adjusted for non-operating items and fair value accounting effects.

Nevertheless, the company, as expected, maintained its dividend for the year, announcing an interim dividend for the final quarter of the year of 10.0 cents per share.

Helal Miah, investment research analyst at The Share Centre, said the results just confirmed the punishment BP took as a result of low world oil prices.

"These numbers should not come as too much of a surprise to investors who will have been prepared to ride the storm knowing that oil prices have plunged by 70% since summer 2014. This stock remains a contrarian play on the oil price for investors seeking a balanced return and willing to accept a medium to higher level of risk," Miah said.

The oil price continued its downward course on Tuesday, after a brief rebound. Brent oil was quoted at USD33.10 a barrel, compared to USD34.73 at the London stock market close on Monday.

The low oil price and weak BP earnings also meant the Royal Dutch Shell, which reports full-year results on Thursday, was amongst the biggest fallers in the FTSE 100, with 'B' shares down 4.0% and 'A' shares down 3.6%.

Mining stocks weighed further on large-cap index, with BHP Billiton down 7.1%, Anglo American, down 6.9% and Rio Tinto down 5.7%.

The FTSE 100 index was down 1.7% at 5,959.75 points, while the FTSE 250 was down 0.5% at 16,401.84 and the AIM All-Share was down 0.1% at 695.50.

In Europe, the French CAC 40 was down 1.9% and the DAX 30 down 1.1%. This was despite the unemployment rate in the eurozone being reported to have fallen to its lowest level in more than four years.

Eurostat said the jobless rate dropped to 10.4% in December from 10.5% in November, the lowest since September 2011.

Earlier, data from the German Federal Labor Agency showed German unemployment declined by more than expected in January. The number of people out of work decreased 20,000, much bigger than an expected decrease of 8,000. The jobless rate fell to a record 6.2% from 6.3% in December. It was forecast to remain unchanged at 6.3% in January.

In the US, futures pointed Wall Street to a lower open. The DJIA was indicated down 0.6%, while the S&P 500 and the Nasdaq 100 were both pointed down 0.7%.

Elsewhere in the London market, J Sainsbury traded up 1.2% as the supermarket chain reached an agreement on the terms of a possible offer for Home Retail Group, the Argos and Homebase owner.

The possible offer and proposed capital returns together imply a value of around 161.3 pence per Home Retail share and a value of approximately GBP1.3 billion for Home Retail's share capital. Under the terms of the offer, Home Retail shareholders will own approximately 12% of the combined group.

Home Retail's market capitalisation stands at GBP1.24 billion, and its shares were trading down 0.6% at 152.00p at midday.

TalkTalk Telecom Group was one of the biggest gainers in the FTSE 250, up 6.5% after the telephone and broadband provider said trading conditions have returned to normal following the cyber attack on the company in late 2015, with the group registering customer growth in January.

TalkTalk said its revenue growth for the third quarter to the end of December hit 1.8% year-on-year, though it said it saw a total net loss of customers of 101,000, with 95,000 of those attributed to the cyber attack which hit the group in October.

The group said the cyber attack resulted in a negative trading impact of around GBP15.0 million and said it will book exceptional costs related to the attack of GBP40.0 million to GBP45.0 million.

UDG Healthcare said its trading for the three months to December 31 was well ahead of the prior year, on the back of a strong performance in the US and Europe.

The healthcare provider said operating profit was up across divisions for the first quarter and said, in light of the figures, it expects a good underlying cashflow performance for the year.

The group reiterated its dividend guidance for the full year 2016, ending September 30, of an increase of 11 cents per share. It said it expected constant currency adjusted diluted earnings per share to be between 6.0% and 8.0% ahead of last year's earnings per share of 27.40 cents. The company was one of the best performers in the mid-cap index up 2.3%.

Still ahead in the economic calendar, is the US Redbook index at 1355 GMT, the ISM New York index at 1445 GMT and the American Petroleum Institute's crude oil stocks at 2130 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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