Lundin Oil's peer group - U.K.'s Lasmo and Cairn Jump as Oil Prices Stay Above $30/Bbl
By Brian Gorman
London, Aug. 30 (Bloomberg) -- Shares surged in U.K. oil exploration companies such as Cairn Energy Plc and Lasmo Plc as oil prices remained above $30 a barrel, increasing the companies' profitability.
Oil prices have more than tripled in the last 18 months, partly as a result of a shortage of heating oil in the U.S., the world's biggest energy consumer. While bigger companies such as the Royal Dutch/Shell Group and Total Fina Elf SA have gained this year, smaller companies are now also beginning to benefit.
Lasmo, the U.K.'s second-biggest exploration company after Enterprise Oil Plc, rose 6.75 pence, or 4.7 percent to 151.25 pence, the highest since Sept. 14. Cairn rose 17 pence, or 8.2 percent, to 223.5 pence, its highest since August 1998.
``There's an element of playing catch-up,'' said Andrew Kelly, who helps manage more than 750 million pounds ($1.1 billion) for Scottish Value Management. ``And people were looking to see when the oil price would come down. Now it looks as if it will stay strong.''
Enterprise rose 11 pence, or 2 percent, to 550 pence, close to its highest in more than two years.
This month Lasmo reported profit from operations of 126 million pounds for the first half, topping the previous full-year record. Enterprise and Cairn may also beat their previous full- year record when they report first-half earnings on Wednesday and Thursday respectively, say analysts.
Oil Price
The rise in oil prices has come even as the Organization of Petroleum Exporting Countries has boosted production twice this year. OPEC has increased production by a total 2 million barrels a day, or 2.7 percent of the world's daily output.
Still, inventories of both crude oil and heating oil are both below what is required to meet demand, analysts said. Heating oil inventories are 40 percent below last year, as winter approaches in the Northern Hemisphere.
Brent crude for October delivery was recently at $30.99 a barrel. While this is down more than 1 percent on the day, it is up more than 45 percent in the last year.
Enterprise shares have gained 29 percent since the start of the year, while Lasmo has gained 26 percent in the same period. The FTSE-250 has gained 8.6 percent.
Enterprise is valued at 2.7 billion pounds on the London Stock Exchange, while Lasmo is valued at 2 billion pounds.
Cairn Energy, valued at 320 million pounds, has spent about 33 million pounds buying back about 14 percent of its own stock in the last year. The shares have gained 64 percent since the start of the year.
``It's unusual for a company to be willing to shrink its empire,'' said Kelly. ``But it shows they'd rather buy stock they believe to be undervalued than increase spending and go back into the boom-bust cycle. If everyone else is doing the same, That could lead to higher production and lower prices. ''
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