MARKET REPORT: A black day for Heritage after shares slip to 52-week low

Shareholders of Heritage Oil have been in a state of shock since the Jersey-based oil and gas explorer crashed 28pc to 310p in one traumatic session last month.

The collapse occurred after the company announced the discovery of the biggest gas field in Iraq for more than 30 years.

Bulls had pinned their hopes on black gold being found and so a gas find, however big, sparked a hefty sell-off.

A large computerised display of the British FTSE 100 index

Broker UBS made matters worse by saying the find significantly lowers the likelihood of a bid materialising for Heritage from the Chinese or Korean National oil companies, who seek oil rather than gas assets.

The stock yesterday succumbed to renewed early selling pressure and slipped to a 52-week low of 280p before late afternoon rumours of a £1.3bn or 450p a share cash bid from OMV, one of the largest integrated oil and gas groups in Central Europe, did the rounds. Punters piled in and the shares touched 309p before closing 5.3p better at 300.85p.

Heritage's chief financial officer Paul Atherton was flabbergasted when the shares tanked on the Iraqi gas find. He said the group would be able to sell gas to energy hungry Turkey and other European countries, with exports likely to begin by 2015.

Any cash offer for Heritage would have to be agreed by chief executive Tony Buckingham, who sits on 29.7pc of the equity. Last August he trousered £84.5m after announcing a £1-a-share special dividend following the sale of the group's 50pc stake in a series of oil exploration assets in Uganda to Tullow Oil, 13p cheaper at 1426.5p.

OMV runs over 2,500 gas stations in Central Europe and owns brands such as OMV, Avanti, Stroh and Petrom. It was widely rumoured to be in the frame to buy Dana Petroleum last year, but has been alerted by the oversold look of the Heritage share price.

Centrica closed flat at 339.65p but Citigroup expects the group to report its best annual profit performance since 2007 on February 24. Rising prices, two cold winters in a row, and squeezed household incomes, are unlikely to let Centrica enjoy record profits without widespread media criticism. BG Group relinquished 5.5p to 1513.75p, well shy of HSBC's target price of 1835p.

BP gushed 6.2p to 485.9p after hedge fund manager David Einhorn's Greenlight Capital revealed it has bought 3.3m shares in the oil giant. Einhorn made a name for himself by making a small fortune selling Lehman Bros stock before its collapse in 2008.

Confirmation-that UK inflation rose to 4pc in January was counter-balanced by better-than-expected annual profits from banking heavyweight Barclays, 18p better at 328.275p. The Footsie dug its heels in for long periods before drifting on nervous selling ahead of today's Bank of England Inflation Report to close 23.01 points off at 6,037.08.

The Bank is expected to revise its inflation forecast upwards for the fifth consecutive time with economists suggesting that the Consumer Prices Index could rise to 4.5pc or even 5pc before retreating later in the year.

Wall Street traded 30 points lower at the outset following weak January US retail sales.

It was a bad day for technology stocks. Dog of the day was Micro Focus which plummeted 104p to 291.2p on yet another shock profits warning. Chipmaker Arm Holdings fell 28.5p to 623.5p after directors sold shed-loads of stock at 631p.

Autonomy lost 10p to 1589p despite announcing the second biggest contract in its history, a £31m humdinger with a major US based bank.

Mining stocks took a turn for the worse after news that Chinese inflation accelerated in January, sparking fears of another rise in interest rates. Consumer prices rose 4.9pc in January from a year earlier, following a 4.6pc leap in December. Antofagasta fell 58p to 1428p, Anglo American 130.5p to 3306.5p, Fresnillo 42p to 1447p and Rio Tinto 132p to 4550p.

BHP Billiton, the world's largest miner, shed 55p to 2500.75p ahead of today's half-year results. Analysts forecast a hefty dividend hike and pre-tax profits of more than £9bn. Chief executive Marius Kloppers is also expected to reveal plans to spend another £3.5bn on buying back shares.

Supermarket giant J Sainsbury held firm at 389.1p despite chief executive Justin King trousering around £1.9m by selling 50,000 shares at 390.15p a pop.

Drug discovery firm e-Therapeutics jumped 2.5p to 28p after raising £17.6m in an institutional placing. Funds raised will be used to develop four lead drug candidates through clinical trials and to find more prospects using the firm's drug discovery platform.

Bus-builder Optare held at 2.25p while broker Cenkos Securities raised £7.4m, placing up to 370m shares at 2p a pop.

Cash raised will be used to help relocate the company's Leeds factory, provide working capital and reduce borrowings. The order book has risen from £24.4m in September to £43m in February 2011.

In October it won a £8.1m contract to manufacture 65 buses for independent operator, Trent Barton, in Nottinghamshire.