Canadian oil stocks hit by UK tax hike

Apparently not all Conservatives are oilpatch friendly—Britain’s Chancellor of the Exchequer, George Osborne, has announced a “windfall tax” on oil companies operating in the North Sea.

According to the UK budget tabled on March 23, the tax rate on production will rise from its current 50% to 62%, sucking up to $3.2 billion per years out of oil producers, including Canadian companies operating in the North Sea.

Several Canadian producers have seen their stock prices hammered, none more so than Nexen, which derives half of its production from the region. The company’s shares have fallen nearly 8% since the budget was tabled.

The industry has warned that tens of thousands of jobs will leave the North Sea as a result of the tax hike, but given triple digit crude prices, the government seems to view this as a bluff.

While $3.2 billion may be a drop in the bucket for the global energy industry, there are fears that other cash-strapped countries could follow the British lead.

In an effort to revive the flagging UK economy, the 1% corporate tax cut slated for April has been doubled to 2%. It will decline by 1% each year for the next three years, to 23%.

Staff

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