Quote:
Originally Posted by the_only_turek_fan
Now onto the other issue.
http://www.cnrl.com/upload/media_ele...rim-report.pdf
Canadian Natural’s Chief Financial Officer, Corey Bieber, continued, “The Company has proactively reduced its
development programs in the context of lower commodity prices and lower cash flow. Liquidity remains strong at
$3.3 billion. During the second quarter, absent the impact of the $579 million charge due to the 20% increase in Alberta
corporate income tax rates, our earnings would have been $174 million. This charge effectively translates into lower
future cash flows and therefore, lowers reinvestment in the business. Based upon third party research, this lower future
capital reinvestment likely equates to about 4,100 fewer person years of direct, indirect and induced employment, with
follow-on impact of higher income taxes on future income streams.”
Help me dissect this thing.
I understand that you can't pay tax if you don't make a profit.
The Company incurred a net loss in Q2/15 of $405 million, compared to net earnings of $1,070 million in Q2/14 and
a net loss of $252 million in Q1/15. The net loss in Q2/15 was primarily a result of the 20% increase in the Alberta
provincial corporate income tax rate from 10% to 12%, increasing Canadian Natural’s deferred income tax liability
by $579 million. Adjusted net earnings from operations for Q2/15 were $178 million, compared to adjusted net
earnings of $1,150 million in Q2/14 and $21 million in Q1/15. Changes in adjusted net earnings largely reflect the
changes in cash flow.
This is a confusing statement.
If they lost $405M, shouldn't they pay 0 tax. Can't pay tax on a loss right?
Did they make $178M or lose $405M?
If your net earnings are $178M should you not pay the tax on $178?
Or are they going to use this loss to offset it against a gain in the future?
At the end of the day, I stand by my OP. The next 4 years is going to be a horror movie that is going to have a tragic ending for all of us. The uncertainty of the royalty review and taking money out of companies cash flows (now or later) is the absolute wrong policy right now and we are worst off because of them. |
First off, remember that he answers to his shareholders and not to citizens of the province but, he wants to win the Hearts and Minds ™ of Albertans to pressure the government to benefit his owners at the citizen’s expense.
Frankly, I wish I could parse what he is trying to say but a tax accountant would be a much better choice to try and make sense of it. Do I believe that the tax change caused an increase in his deferred tax position, absolutely. Do I think that all 579mm was due to it, not a chance (or at least I’m very skeptical). The change is only 2% of his earnings before taxes so if that 2% is equal to $579mm that means that somewhere there is nearly $30B of profits sheltered, and if so, that $579 is then really quite immaterial.
I’d like to see these guys put their money where their mouth is. Tell me, as a citizen, how much extra you will invest in AB next year if we let you pay 10% instead of 12%. Tell me how many employees you will hire back (and let us audit it). The truth IMHO is that those numbers will be embarrassingly small. They are not investing (and laying off staff) because of commodity prices not because of a piddly change to provincial corporate tax rate. However railing at the international commodity trading community isn’t going to score him the points that pissing at the government will. Again, I’ve reviewed the projects at my firm and getting that 2% back will not give any of them a green light (I’d pay 15% provincial tax if they could get me $4 aeco and $65 WTI ;-).
How can you pay taxes when you have zero profits? Easy, let’s go back to our Personal Tax example… you’ve now retired and have no income so you withdraw 100K from your RRSP’s on which you pay $25k in 'income taxes' (even though your income is zero). Remember in corporate accounting there is a big difference between ‘cash basis’ and ‘accrued basis’ and that is what the deferred tax line is trying to bridge.
As for your 4-year paranoia… government’s get far too much credit when things go well and far too much blame when things go poorly. AB’s fiscal position in 4 yrs will be 95% dependent on the commodity markets and 5% on government action so start directing your fear in the proper direction so you can deal with it properly.
I’m not an uninvolved bystander either. I work in E&P and did not vote NDP in the provincial election. I suspect that my probability of becoming unemployed in the next twelve months is approaching 100%. But I recognized the volatile nature of the industry I was in and took steps to insulate myself from suffering when things inevitably turn bad. You should do the same, you’ll sleep much better.