RE: Updated FAQs21 Nov 2018 16:03
21/11/2018
I believe that SPT is levied on oil price above $50/barrel. Could the company please give a statement on how the SPT is calculated and what the sweet spot is for profits? For example if the oil price is $49.95 at what price above $60 would profits be the same?
SPT is payable for onshore oilfields in Trinidad at a rate of 18% at the end of each quarter as and when the sales price received during that period exceeded an average price of US$50.00 per barrel. An important factor to note is that the SPT calculation also takes account of allowable capex spent by the producer during that period, with deductions being applied in the SPT calculations accordingly (eg. 20% of capex spent during that quarter can be offset against the SPT amount due and any brought forward offsets from previous quarters can also be applied). This can sometimes mean that no SPT is payable by a company for a quarter if the capex spend offsets are greater than the SPT payments due for that period on sales. This can sometimes lead to a carry forward to the next quarter of "offsets" during periods of high capex payments by a company (eg. during drilling, facility enhancement or water injection campaigns). During periods of high capex spend, SPT may not be payable in cash from one quarter to another.
As for the "sweet spot" for profits, this will depend on various factors, including the level of current and past allowable capex spend, as referred to above. Likewise, it can be difficult to confirm the oil price at which a company would be better-off above US$49.95 given capex offsets. However, as a general rule of thumb, an oil price received around US$61/barrel would be required to obtain the same level of profits from sales at US$49.95 if capex spend is zero for that period.
Columbus regularly meets with Trinidad Government representatives and also liaises with other oil & gas companies operating in Trinidad with a view to improving the tax environment for oil companies operating in-country, in particular with a view to amending the SPT regime to soften the impact on companies once the oil price received exceeds US$50/barrel. This is an ongoing dialogue but like most taxation considerations, there are various other commercial, social and political issues in play which Governments and their advisers need to consider. This generally means that the pace of any changes can be slow. The Company will provide relevant updates via RNS if there are any changes to the current SPT arrangements in Trinidad.
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