UK MIDDAY BRIEFING: Oil Majors Report Declining Profits

LONDON (Alliance News) - Oil majors BP and BG Group both reported a deterioration in the fourth quarter Thursday, with BG swinging to a loss, but their shares headed in different directions after BG previously flagged the downturn while the extent of its rival's profit decline was more unexpected.

BP is one of the biggest fallers in the FTSE100 after it reported a 58% decline in its fourth-quarter pretax profit as it was hit by the latest asset sales, weaker refining margins, and higher depreciation and exploration write-offs as the group brought new projects online and increased its investment in exploration.

BG Group, meanwhile, is one of the top gainers on the blue-chip index even though it said it swung to a loss in the fourth quarter, as expected. The big difference was that BG had already flagged that it would disappoint after last month warning that it was bring hit by the political instability in Egypt and a writedown on some of its US shale gas assets.

However, chip design company ARM Holdings was the biggest faller on the FTSE100 after it reported slowing growth in its royalty revenues, which missed expectations after sales of chips for high-end smartphones such as the Apple iPhone slowed in the second half of the year. Royalties per unit delivered declined sharply to 4.5 US cents in the fourth quarter as a result.

"This is the lowest royalty per unit that ARM has reported since the fourth quarter 2011 and reflects the on-going slowdown in the high-end smart phone and tablet makets, and market share gains in micro-controllers and smartcards," Liberum said.

Ocado is a big faller on the FTSE250 after it reported yet another annual loss. Large investments in the business prevented it breaking even for the first time ever. Its pretax loss widened to GBP12.5 million in 2013, from a loss of just GBP0.6 million in 2012. On top of that, co-founder Jason Gissing will retire in May.

Still, Chief Executive Officer Tim Steiner told journalists that 2014 will be the year for the company, which has just started delivering for Wm Morrison Supermarkets. "We should break into profit this year. We were forecast to, even before the Morrison deal," Steiner said.

There have been a large number of top executive changes among London-listed companies Thursday. Premier Oil's chief executive will step down once a replacement is found, the chief financial officer of Mobile Streams has resigned, the Low & Bonar CEO is to retire in the second half of the year, while the Chairman of Tangiers Petroleum has resigned after he lost the support of shareholders.

In political news, the Syrian government will take part in the next round of peace talks with the opposition in Switzerland, a senior Russian official said. "We expect that a (Syrian) government delegation will take part in the second round of the international talks in Geneva," Deputy Foreign Minister Mikhail Bogdanov was quoted as saying by Russian agencies.

Leaders of moderate rebel groups also are expected to participate in the talks in Geneva peace talks scheduled to start February 10. A first round of talks ended Friday without progress.

A key faction of Ukrainian anti-government protesters have said they will vacate occupied territory in Kiev in exchange for the release of detained activists. The offer came two days after a law granting amnesty to rally participants after they vacate administrative buildings was passed by Ukraine's parliament in an attempt to defuse two months of political chaos and civil unrest. The amnesty, which has a 15-day deadline, has yet to be implemented.

Meanwhile, International Monetary Fund Managing Director Christine Lagarde has warned global central banks to display greater cooperation and be aware of the potential impact of their policies on other economies.

Lagarde's comments come a few days after Reserve Bank of India Governor Raghuram Rajan said that international monetary cooperation had "broken down." His criticism was apparently aimed at central banks in advanced economies, particularly the Federal Reserve.

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FTSE 100: down 0.5% at 6,433.58

FTSE 250: down 0.4% at 15,491.75

AIM ALL-SHARE: down 0.3% at 853.95

GBP-USD: 1.6326

EUR-USD: 1.3526

GOLD: USD1,253.30 an ounce

OIL (Brent): USD105.64 a barrel

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KEY UK CORPORATE NEWS:

FTSE 250: TalkTalk Telecom says it's on track to meet its full-year guidance after revenues rose 5.1% in the fiscal third quarter. Its Post Office deal is paying off, with total net additions of 110,000 including 103,000 Post Office customers, while it added 175,000 television customers, bringing its total TV customer base to 732,000. Premier Oil Chief Executive Simon Lockett is to step down, but will hang on until a successor is found. Victrex said its first quarter performance was in line with its expectations, with sales up 6%, while the second quarter is off to a good start after a "much stronger" January. St Modwen Properties reported a 56% rise in pretax profit for its last financial year, buoyed by revaluation gains and higher realised property profits, and said it wants to further expand its portfolio of residential and commercial properties. African Barrick Gold has completed the transfer of the Tulawaka gold mine and certain exploration licences to STAMICO, the Tanzanian state mining company. Electrocomponents said sales trends improved in all of its regions, with the exception of North America, in the fourth months to the end of January. Underlying sales were up 2%, with 4% international growth partly offset by a 2% decline in the UK. Balfour Beatty and Carillion are two of the four contractors appointed as framework suppliers by Network Rail for its GBP2 billion National Electrification Programme. Balfour estimates its contract is worth more than GBP75 million. UDG Healthcare said its first quarter profits were lower than last year, as it expected, hit by incremental costs associated with its private debt placement last September and costs for rebranding one of its business units, but it predicted underlying earnings growth for the whole of the year.

AIM: Transense Technologies is a big gainer after it narrowed its pretax loss as it saw revenue more than double in the half-year to end-December. Quindell is also doing well after it said it expects technology revenues to beat expectations in 2014 after it booked over GBP200 million of new, fully contracted, busines. It also confirmed that it had given formal notice to exercise its option to acquire over 75% of software developer Himax. GoldBridges Global Resources is up after gold production during its fourth quarter more than doubled at its wholly-owned Sekisovskoye mine. Production in 2013 was up 37% on the year and 12% above the company's own guidance. Tangiers Petroleum was a big faller after Eve Howell resigned as executive chairman, citing a loss of support from major shareholders. Trading in the stock has now been been suspended pending the appointment of new directors. Mobile Streams is down after Chief Financial Officer Gaston Cerf resigned with immediate effect. The company said interviews have already been arranged with potential candidates for the position. Coms is also down after it said it was "not aware of any specific reason" for the recent rise of its share price, but said it was in advanced discussions over a potential acquisition for which it would need to raise funds. RapidCloud International is another big faller even though it said it will meet its expectations for 2013 and said it will launch its next software product in the first quarter of 2014. The product already has its first client.

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AFTERNOON WATCHLIST: US Redbook Index, US ISM New York Index, US Factory Orders

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Wednesday's Key UK Corporate Events

Daily Mail and General Trust Interim Management Statement

Homeserve Interim Management Statement

Quintain Estates & Development Interim Management Statement

Wolfson Microelectronics Full Year Results

Glaxosmithkline Q4 Results

Hargreaves Lansdown Half Year Results

ICAP Interim Management Statement

S&U Trading statement

GW Pharmaceuticals Q1 Results

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Wednesday's Key Economic Events

00:01 UK BRC Shop Price Index

08:43 Italy Markit Services PMI

08:48 France Markit Services PMI

08:53 Germany Markit Services PMI

08:58 EU Markit Services PMI

08:58 EU Markit PMI Composite

09:28 UK Markit Services PMI

10:00 EU Retail Sales

12:00 US MBA Mortgage Applications

13:15 US ADP Employment Change

13:58 US Markit Services PMI

15:00 US ISM Non-Manufacturing PMI

15:30 US EIA Crude Oil Stocks change

17:30 US Philadelphia Fed's Plosser speech

18:40 US Fed's Lockhart speech

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By Steve McGrath; steve.mcgrath@alliancenews.com; @stevemcgrath1

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