I was waiting for some expert analysis to weigh in on the new royalties scheme. I think the 20% number commonly tossed around is misleading given the tiered nature of the increases.
UBS analyst Grant Hofer said Friday that while “still imperfect” the new royalty rates are “significantly better” than the royalty panel's original recommendations. According to his estimates, corporate royalty rates will rise less than 5 per cent.
“Although fundamentally we believe that the royalty impact is modest, we would not be surprised to see stocks sell off slightly as the market digests the impact of these changes,” Mr. Hofer said. “We would view such weakness as a buying opportunity.”
I think that 5% is why you're seeing stock prices staying where they are. 5% doesn't seem like that much to me.
And the one of the 1st companies to level a Threat? Here's their take on how the new scheme will affect them.
Crescent Point Energy Trust, a small energy trust that had threatened not to spend any money in Alberta next year amid the uncertainty of potential higher royalties, said Friday an initial evaluation had led them to believe the royalty changes will have a “minimal” impact on its production and operations.
Scott Saxberg, Crescent Point chief executive officer, said the changes will affect its corporate royalty rates on existing production by approximately 1 per cent. “While the impact on existing production is minor, the trust will study the royalty announcement in more detail before committing future capital to the province.”
Sounds like a whole lot of handwringing on their behalf for nothing. Although since the vast majority of their production was already in Sask it was probably this way all along.
I hate to defend Stelmach, but if CAPP is pissed at the new royalty plan and so is the Pembina Institute, shouldn't this be considered a good compromise by Stelmach?
