Statoil has put on hold two oil and gas projects in UK waters worth more than $10bn because of the government’s increased tax on oil production, the Financial Times reports. The Norwegian group said the tax rise, announced by George Osborne, chancellor of the exchequer, in last week’s Budget, was a “substantial setback” to the North Sea oil industry.
“The proposed tax change significantly impacts the economics of these projects.”
Statoil
It would “pause and reflect” on the future of its Mariner and Bressay fields to the south-east of Shetland in light of the decision, Statoil says in a statement: “The proposed tax change significantly impacts the economics of these projects. These are challenging fields, which were already economically marginal, so we need to assess how this tax increase impacts them and consider how to move forward.”
Statoil says it has been close to awarding engineering and design contracts for the Mariner field but this will now be suspended.
Mariner and Bressay hold several hundred million barrels of recoverable oil and Statoil have said erlier that their development would generate more than $10bn of investment.
Mr. Osborne dismissed suggestions that his £2bn tax grab on the oil industry would hit exploration: “Our expectation is it will not damage investment.”
The chancellor defends his plan to take money from the oil industry to keep down prices at the pump and dismiss warnings from MPs on the House of Commons Treasury committee that the move could cost thousands of jobs in the sector.
“With current oil prices, the prospects are for increased investment,” he says. “It’s still very profitable to invest to exploit these resources.”
Mr. Osborne said taxes on oil groups would decrease if the oil price fell to about $75 a barrel and would be recouped by a reintroduction of the fuel duty “escalator”, which progressively increases fuel duty.
The supplementary tax rate levied on oil and gas production has risen from 20 per cent to 32 per cent. This has increased the effective tax rate to at least 62 per cent, with some fields facing 81 per cent.
Statoil is to meet Treasury officials but Mr Osborne says it pays higher taxes in Norway.
Well…technically, yes. However Statoil is in principle, and practice, run by the Norwegian government who also is the major shareholder. There’s lot’s of hidden subsidicies in the Statoil system, so that issue is almost irrelevant.
Related Articles
- Statoil North Sea Oil firm in pullout over George Osborne’s budget tax (dailymail.co.uk)
- Statoil halts North Sea oil development over windfall tax (guardian.co.uk)
- Oil giant puts £10bn North Sea development on hold after Osborne’s tax raid (dailymail.co.uk)
Strategist: Corporate Earnings Are 20% Lower Than Reported
Norway‘s main economic engine, the oil company Statoil, are being accused of dressing up their figures before releasing their quarterly earnings reports, so the earnings looks better than they really are. Equity strategist Peter Hermansrud at the Norwegian brokerage firm, First Securities, says this is common practice among several listed companies.
“If you look at a wide range of publicly traded companies, the adjusted results over time has been 20 percent better than the real accounts.”
Peter Hermansrud
CEO Helge Lund, Statoil ASA
The Norwegian oil giant, Statoil, who yesterday presented the group’s second quarterly earnings report of the year, has for the last two years submitted adjusted earnings numbers that in total is NOK 38 billion better than the real numbers. By doing this, the company’s profit seem to be 95% higher than it really is – compared to the unadjusted figures.
Several Norwegian media are reporting this story, Friday.
Analysts believe both Statoil and other companies are dressing up their reports a bit more than they should.
Looking Good, Man!
Peter Hermanrud
*
In Statoil’s adjusted results, are records of several large losses pruned away, the Norwegian newspaper Dagens Næringsliv writes.
In Thursday’s Q2 report, presented by Statoil’s chief executive Helge Lund, Statoil reported an adjusted profit after tax of NOK 10.6 billion, while the actual figure is 3.1 billion.
Equity strategist Peter Hermanrud First Securities points out that the group may have good arguments to use adjusted figures, but says that several public companies are dressing up too much for the reports.
“If you look at a wide range of publicly traded companies, the adjusted results over time has been 20 percent better than the actual accounts, “ Hermanrud says.
Systematically Overestimates
Over the last two years, Statoil has overstated the real profits by NOK 38 billion.
This quarter, the group wrote down the revenue from the refinery at Mongstad with NOK 3 billion because of rising costs.
Hermanrud believes Statoil systematically overestimate their own exploration projects for oil and gas.
“They regularly adjust the value of both the bought oil fields and their own discoveries. But remember that the group has a direct costs that are equivalent to those billions. This is money they have spent, is gone, and it never appear in the adjusted accounts,” he says.
EBBS – Earnings Before The Bad Stuff?
The PR people at Statoil have had a busy day; calling almost every main media who have reported the story, asking them to correct the non-adjusted figures, back to adjusted.
CEO Helge Lund points out that most analysts use the adjusted figures, and he denies the allegation that the numbers they use should be called EBBS - “Earnings Before the Bad Stuff.”
Analyst John A. Olaisen at Carnegie says it’s changes in the currencies that provides the significant difference between the adjusted and non-adjusted account figures, and have nothing to do with the underlying business.
However, Olaisen believes the company should be criticized for the write-downs related to unsound investments.
Related by the Econotwist:
So, You Thought BP Was An OIL Company?
How To Make A Rat Look Like A Puppy
Statoil May Buy BP Assets, Expert Says
Norway’ Oil Giant Disappoint Investors
Transparency Fading Away In China
Financial Authorities See No Point In Stress Testing Norwegian Banks
Wolfgang Münchau: A Cynically Calibrated Test To Fix The Result
Rosenberg: “Statistical Illusion Of Recovery”
*
Related articles by Zemanta
2 Comments
Filed under International Econnomic Politics, National Economic Politics
Tagged as Business, Energy, Financial Markets, Helge Lund, International Econnomic Politics, Mongstad, Norway, Oil field, Petroleum industry, Public company, Statoil, Statoil ASA The Norwegian, Views, commentaries and opinions