The UK government's raising of taxes on North Sea oil production helped to cut Taqa's first-quarter profit almost in half.
Comment: In oil and gas, risks at every turn
Tamsin Carlisle // Sharply divergent profit paths for Taqa and the Austrian petroleum group OMV show that oil and gas producers face political risks in developed countries that can be at least as high as in emerging economies.
OMV, which is 20 per cent owned by Abu Dhabi’s International Petroleum Investment Company, yesterday posted a 5 per cent increase in first-quarter profit to €365 million (Dh1.93 billion), despite the loss of most of its Libyan oil output.
Taqa, which said its operations in the Middle East and North Africa were virtually unaffected by unrest, suffered a net fall in profit of 47 per cent because of an unexpected increase in UK taxes on oil and gas production.
“The first quarter of 2011 proved to be a very difficult one, where a strong operating performance was overshadowed by political turmoil in North Africa and the Middle East,” said Gerhard Roiss, the OMV chief executive.
The markets will judge which company performed better last quarter and which had the greater risk exposure.
First-quarter profit for the oil, gas and power group controlled by the Government of Abu Dhabi fell to Dh152 million (US$41.3m) for the first three months of this year. That was 47 per cent lower than in the first quarter of last year. Revenue rose 15 per cent to Dh5.5 billion.
Yesterday, shares of Taqa, also known as Abu Dhabi National Energy Company, fell 1.43 per cent to Dh1.38 - their eighth consecutive trading decline. The stock has lost 6.7 per cent so far this year.
In mid-March, the UK government increased taxes on North Sea oil and gas operations by 12 per cent, backdated to January 1.
"This contributed to a 53 per cent year-on-year increase in tax, negatively affecting net profit," Taqa said.
The tax change reduced the company's earnings for the quarter by Dh150m, Doug Fraser, the chief financial officer, estimated. "It will continue to impact our results."
Under the new tax regime, Taqa pays more than 70 per cent of its pre-tax income from UK North Sea oil and gas production to Westminster.
"We didn't see this coming," Mr Fraser said. "We were aware of the fact that the UK government was a bit stressed [and] so would be looking for ways to raise revenue, but we were certainly surprised."
For the moment, Taqa remains committed to its previously budgeted $500m investment programme in the UK North Sea this year, but the plan could be reviewed.
"We're a global business with a capital budget of $2bn this year, all from internally generated cash flow," Mr Fraser said. "We can discuss where to deploy our capital. It's safe to say that the UK government has made the investment environment less attractive. Regarding our ongoing spending, we will evaluate this business compared to the attractiveness of other areas."
Taqa was participating in UK oil industry lobbying efforts to persuade the government to reverse the tax increase.
In their latest monthly oil market report, released yesterday, Opec analysts predicted that UK oil supply would decline by 60,000 barrels per day (bpd) this year to an average of 1.41 million bpd. That was a 10,000 bpd downward revision from their forecast last month, reflecting a 25 per cent drop in first-quarter drilling activity.
"The increased tax on producers has pushed some firms to delay their investment in the UK," Opec said.
Taqa's first-quarter profit before tax rose 11 per cent to Dh961m, despite foreign exchange losses.
The company attributed the rise to increased oil and gas output and higher power and water revenues after the start-up of the Fujairah-2 electricity and desalination plant in the UAE. The integrated power and water development, the second largest of its kind in the world, was inaugurated on Tuesday after a three-month commissioning period.
tcarlisle@thenational.ae
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
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UAE currency: the story behind the money in your pockets
THE SPECS
Engine: 1.5-litre, four-cylinder turbo
Transmission: seven-speed dual clutch automatic
Power: 169bhp
Torque: 250Nm
Price: Dh54,500
On sale: now
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
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A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
When is VAR used?
• Goals
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• Direct red-card incidents
• Mistaken identity
Company%C2%A0profile
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Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
What are NFTs?
Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.
You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”
However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.
This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”
This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.
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The National will broadcast live from the IMF on Friday October 13 at 7pm UAE time (3pm GMT) as our Editor-in-Chief Mina Al-Oraibi moderates a panel on how technology can help growth in MENA.
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Fuel consumption, combined: 7.0L / 100km
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