The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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In Telegraph : North Sea oil giant demands windfall tax overhaul after £63m hit
EnQuest faced with 113pc tax rate after raid by Jeremy Hunt
North Sea oil company EnQuest is demanding an overhaul of Jeremy Hunt’s windfall tax after claiming it has been hit by an effective rate equal to 113pc of profits.
The company suffered a £25m loss last year after paying taxes of £63m, according to its annual results.
EnQuest was also hit by other corporation taxes, landing it with a total bill of £207m.
A spokesman for Enquest said: “We believe legislative reform is required to restore confidence in the UK oil and gas sector to protect jobs and deliver energy security and decarbonisation.”
The windfall levy was introduced in 2022 when the Russian invasion of Ukraine triggered surging global energy prices, handing massive profits to oil and gas operators. It meant oil and gas operators faced a nominal taxation rate of 75pc.
However, the tax is ring-fenced, meaning it applies only to the profits from oil and gas extraction. It does not take account of the costs companies may incur in other operations – meaning some can face overall taxation rates in excess of 100pc.
Enquest operates platforms around Scotland including Magnus, the most remote in UK waters more than 100 miles north of Shetland.
The company also operates several key pipelines and other subsea assets that carry oil and gas from offshore platforms to onshore processing facilities such as Sullom Voe in Shetland – meaning its assets are strategically vital to the UK’s energy security.
This gives Enquest a crucial role in the UK’s carbon capture and storage plans, in which CO2 would be pumped deep into subsea rocks for permanent storage. The business has been awarded four carbon capture licences by the UK.
Amjad Bseisu, chief executive, said the company delivered strong performance and reduced net debt “against the backdrop of a challenging UK fiscal environment”.
Sullom Voe, he said, was increasingly focusing on low carbon technologies with facilities that will eventually allow it to take CO2 shipments from power stations and factories in Europe and then pump it into subsea rocks for permanent storage.
EnQuest’s report added: “As expected, the windfall levy has impacted access to capital across the sector, with the most significant on EnQuest being the reduced borrowing base within the group’s reserve bank lending facility.
“Clearly, a volatile fiscal regime imposes significant challenges on any business and the extension of the levy to 2029 announced in the spring Budget represented the fourth amendment to UK sector taxation in the last two years.”
EnQuest’s criticism of the windfall tax echoes similar comments from Harbour Energy and other offshore firms.
Last month Linda Cook, Harbour’s chief executive, said a pioneering net zero project was at risk of becoming uneconomic because of the levy.
Nice one AB! Say it how it is!
Firstly - yes we are a giant if you use the Labour definition of 'oil giant'. What we here consider 'oil giants' left the UKCS some years ago. These are pivotal times and for once our timing is spot-on. I was watching Peston on ITV last night and Labour were trialling a balloon. Gordon Brown (our longest serving Chancellor) was floating the idea of not paying interest on the statutory reserves that the banks have to lodge with the BoE in line with the ECB and the Swiss Central Bank. The amount was between £3-10 bn per year. This means the banks are next in line for robbing and they'll get less support than we did. On top of that the Water Companies are everybody's climate enemy No. 1 thereby taking the top of the leaderboard away from us. There are also changes in the CO2 emissions league because The Cloud now has a greater carbon footprint than the airline industry (shipping now No.3).
I don't think we should go gently into the transition but burn and rave at the injustice and unfairness of persecution. Rage, rage against the dying of the light because that is where we're heading unless the windfall tax is cancelled [apologies to Dylan Thomas]
I don't know how accurate this is https://neweconomics.org/2023/11/government-could-save-55bn-over-next-five-years-by-limiting-bank-of-englands-interest-payments-to-commercial-banks but I think they're [the banks] in Rachel Reeves sights.
Today. Little reaction because everyone had sodded off early for the Easter break. I think it even confused the algos. Wot, no impairments? They did the usual sell on news and found few buyers. Started buying and found no sellers so they went into sleep mode. The buying will have to wait until next week and hopefully a few raised broker recommendations. The O&G sector is entering a new era. ESG nand climate activism is on a downtrend because although it is true that "repeat a lie often enough and people will believe it" [Joseph Goebbels] eventually it ends when payments fall due - and that is happening NOW (where are you Ed?).
"Machines have not won yet. Machines typically do not fare well in a crisis. They are not good at responding to a new paradigm until the rules of the new paradigm are plugged into them by a human." Paul Marshall (Marshall Wace)
Think RR rage against the banks will be well received with Labour voters more worried over £ than the weather . Sadly it’ll unravel in 26/27 as the banks start charging for services blaming labour . Green will go red as the banks (the second oldest industry ) circle the wagons !! Starmer has made his bed … the thorns will dig deep imho
Forgot to say no gold to sell this time . Arkwrights till awaits us all . Be cash rich and life will shine