Market report: Fingers burned as Providence fails to live up to gas strike chatter

Beware market rumours. Small-cap punters who piled in to one doing the rounds last week learnt a harsh lesson today as it turned out to be fake news.

Providence Resources surged 36% on Thursday as speculation on Twitter suggested the Irish oil explorer had hit the mother lode at its Drombeg prospect off Ireland.

Traders pointed to Tweets from a little-known small-cap outfit called Align Research, which claimed to hold shares in Providence, once one of the biggest companies on AIM.

Align wrote: “Speculation in the City this afternoon of imminent RNS on Providence Res. Conjecture they have a strike of gas — hopefully commerical [sic]. #PVR.”

Align denies its Tweet was the source of the rumours as the share price was already on the rise.

“The commentary made via Twitter last Thursday was in reaction to the share price rise and not, as had been erroneously portrayed, as a catalyst for it," the company said.

Speculation of a well success sent small-cap investors into a frenzy and the price rocketing.

But today, the gossip was revealed to be off the mark. Providence, which is run by Tony O’Reilly Junior, the son of the former Independent newspaper owner, said the well was a duster and will be abandoned. The shares duly tanked 2.35p or 30% to 5.4p.

French giant Total had in June signed an exclusive option to take a stake in the well in return for funding, but might now walk away.

North Sea oil tiddler Jersey Oil & Gas suffered a similar fate. It reported two dud wells, sending its shares plummeting 167.1p or 76% to 52.9p.

Blue-chip stocks started the week on a high, with the FTSE 100 up 43.83 points at 7421.43.

Property giant British Land was driven 9.88p higher to 608.88p by an upgrade to Buy from Deutsche Bank as it hailed its increased exposure to the West End, which it said is “less volatile” than the City.

Derwent London, up 70p to 2840p, also got a boost from Deutsche, which lifted the office landlord from Sell to Hold.

It coincided with news it has pre-let most of the remaining space at 80 Charlotte Street to Boston Consulting Group and Arup.

Elsewhere, sports nutrition firm Science in Sport, off 0.25p at 79.25p, renewed its deal to provide Team Sky’s cyclists with its gels and energy bars until 2020.