BG GROUP yesterday disappointed investors with a 25 per cent year-on-year drop in quarterly earnings, after taking a $265m (£162m) hit from the North Sea tax hike and reporting a five per cent production drop.
Chief executive Frank Chapman was scathing about the government’s surprise levy on energy, which taxes gas firms on the same tariff as oil explorers: “I have no reason to be confident today that a compromise will reached. We will continue to make our point… but I don’t think the government will change their approach in this matter.”
Chapman said that current work in the North Sea would go ahead as planned, but new projects “are placed on a rank list of global opportunities… That the UK tax burden has increased unsurprisingly moves these projects further down our list.”
Production levels fell by 4.5m barrels in the last quarter due to planned stoppages and civil unrest disrupting plants in Tunisia and Egypt, while pre-tax profit fell 28 per cent to $1.45bn on higher costs.
BG Group’s shares closed down 1.6 per cent yesterday.
BG’s warning came as law firm McGrigors said George Osborne’s tax raid on oil companies had wiped out confidence within the UK oil and gas sector.
A survey sponsored by McGrigors said it had found “the first empirical data... to demonstrate the very tangible damage” done by the levy.
MUTINY IN THE NORTH SEA: ENERGY FIRMS’ IRE
“Oil firms make long-term investment decisions on a stable and predictable tax regime. This is not helpful.” Steve Jenkins, Nautical CEO and Oil and Gas Independents’ Association, 23 March
"We believed that we were able to develop [oil fields with £6.2bn investment] but with these proposed tax increases we need to reconsider the project.” Statoil, 30 March
“[The tax] will reduce investment, put further pressure on oil and gas supply in the UK and ultimately could drive oil prices up further”. Valiant, 31 March
“We are assessing the impact of the proposed tax increase on all of our operations and projects that we have in our plan and that [a] £700m investment.” Centrica, 4 April
“It was very disappointing. It was done without consultation with the industry. It’s the third tax hike in 10 years, making the UK one of the more unstable investment climates for our business” Chevron chairman and chief executive John Watson, 18 April
“The coalition government has provided yet another unfortunate example of UK political instability to the international investor community. The prospects for all long term energy investment in this country are harmed by this.” Oil & Gas UK, 10 May