Most U.K. Stocks Climb, Led by BG, Tullow Oil; HSBC, RBS Drop

By Sarah Jones

Oct. 21 (Bloomberg) -- Most U.K. stocks rose, led by oil companies after Cazenove recommended shares of BG Group Plc and Tullow Oil Plc reported ``success'' at a Uganda exploration well.

Gains on the benchmark FTSE 100 were limited as banks, including HSBC Holdings Plc and Royal Bank of Scotland Group Plc, retreated.

The FTSE 100 Index added 1.98, or less than 0.1 percent, to 4,284.65 at 8.36 a.m. in London as 64 shares increased and 36 dropped. The FTSE All-Share Index climbed 0.2 percent and Ireland's ISEQ Index increased 3.7 percent.

BG Group, the U.K.'s third-biggest oil and natural-gas producer, increased 5.8 percent to 817 pence. Cazenove said the shares were `` perfectly mis-priced'' after falling 45 percent from a record high of 1,394 pence in May.

``BG Group's share price has not de-rated with fundamentals, it has de--rated in anticipation of much weaker fundamentals which are assumed never to improve,'' London-based analyst Fred Lucas wrote in a note to clients. ``An M&A event could shake the market's entrenched and extreme pessimism.''

Cazenove rates BG Group shares ``outperform.''

Tullow Oil jumped 5.5 percent to 526 pence after the U.K. explorer with the most licenses in Africa said drilling at the Warthog-1 exploration well in Uganda was successful.

Operations at Warthog-1 began on Sept. 27 and drilling was done to a depth of 911 meters (2,990 feet).

HSBC, Europe's biggest bank by market value, declined 4.2 percent to 8.05 pence, snapping two days of gains. Royal Bank of Scotland, the U.K.'s fourth-largest bank, lost 6 percent to 79.4 pence, erasing some of yesterday's 23 percent advance.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.