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Oil sands stocks skid after Alberta royalty report
7 C7 W" {* ]1 E9 ^+ k- cWed Sep 19, 11:30 AM. N, R/ \6 B. J- D
By Jeffrey Jones
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CALGARY, Alberta (Reuters) - Shares in Canadian oil sands developers skidded on Wednesday as investors weighed the possible impact of a top-level Alberta report recommending the industry fork over higher royalties and taxes.
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2 J# U7 U/ Q5 |' J9 w( Z5 G; H" yAn expert panel appointed by Conservative Premier Ed Stelmach has urged the government to change the fiscal regime, arguing residents are not getting their fair share from booming energy activity, including oil sands development.
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9 @* \( k6 Y, Y3 m8 oThe panel's report recommended higher royalties for oil sands projects once their development costs are paid out, as well as a new tax on oil sands production that is based on benchmark oil prices.
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) l5 V# P# @: O EThe report also urged such changes as a cut in royalties for low-productivity conventional oil and gas wells and an increase for more prolific ones." d: K/ h% K! J
6 ?: r) w/ V) `! J F$ `2 r* U"But it's the oil sands guys that are feeling the brunt of the impact," said Jill Angevine, an analyst at FirstEnergy Capital Corp.
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Angevine estimated the changes to the royalty structure could cut oil sands projects' net present value by 7 percent to 10 percent.
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7 s' u! j, y# z8 JAmong big oil sands developers listed on the Toronto Stock Exchange, shares in Canadian Natural Resources Ltd fell more than 4 percent to C$76.24, Nexen Inc slid 2 percent to C$30.74 and Suncor Energy Inc dropped nearly 4 percent to C$97.29.
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Small players were hit harder. Synenco Energy Inc skidded 13 percent to C$11 and UTS Energy Corp sank nearly 8 percent to C$5.72.
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; J9 ~) \1 R/ t. q- c5 y5 `Energy stocks may get hit again in about a month when the Alberta government issues its reaction to the report, she said.
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c. Y3 S# x; a4 n# C6 z# iThe 104-page report by the expert panel drew swift and harsh criticism from the oil industry and some brokerages, which had been warning that companies are already struggling with surging costs for labor and materials and cannot withstand a hike in royalties and taxes.
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But panel chairman Bill Hunter said on Tuesday that Albertans get a smaller share of oil and gas rewards than residents of most other major producing regions. He said making the changes would not harm Alberta's attractiveness as a place for energy investment." c3 O8 h$ T- A; Z; i6 s# q
( R+ I: G, t @; A2 o/ a+ YIn a research report, UBS Securities analyst Andrew Potter said he believed the internal rate of return for oil sands projects would fall to 10.44 percent from 10.47 percent if the government adopted the recommendations.
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8 {5 _/ B' O2 ]"However, because returns are so low to begin with, the impact on (net asset value) is material," he wrote. |
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