One to watch

Serica Energy87.25p unchScotsman says BUY

OIL and gas exploration can expose investors to upside potential, but the activity is not without risk; this year investors are likely to experience the gamut of risks (and hopefully rewards) as UK-listed companies drill for oil around the world.

A number of companies are searching for oil and gas closer to home: most notably Serica Energy. Sizeable, undrilled, prospects are hard to uncover in the UK's mature basins; but, when they are identified, the region's benefits come to the fore – ready access to infrastructure and markets.

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Serica has mapped two sizeable prospects that could transform the 160m market cap company, and both are scheduled to spud in the next few months. Fully unrisked, we estimate the two-well campaign could more than double our 114p-per-share sum-of-the-parts valuation.

The proof will be in the drilling but Serica has taken steps to reduce risk and its stock offers an attractive risk/reward combination for shareholders.

• Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact nor should reliance be placed on these views when making investment decisions. Past performance is not a guide to the future.

BG Group

1,166.5p +26p

Broker says BUY

BG GROUP'S share price has dropped towards the bottom of its recent trading range, Killik & Co noted. Head of research Mick Gilligan said the drop could be due to falling gas prices or compliance investigation in Kazakhstan. He added: "We would use this weakness as an opportunity to initiate a position or add to your holding."


357.9p -1.1p

Broker says HOLD

CHARLES Stanley has a "Hold" rating on FirstGroup after the transport giant's trading update "disappointed investors". The broker said: "Although the share price has underperformed its peer group, we do not expect a re-rating because of the high level of net debt."