Trump tax cuts boost US fossil fuel sector

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Trump tax cuts are heralded by the oil and gas industry after companies forecast gains of billions of dollars. Phillips 66 photo.

The four biggest refiners in the United States, Phillips 66, Valero, Marathon and Andeavor posted one-time tax gains of $7 billion combined in 2017 Q4, matching their net incomes for all of 2016, according to Bloomberg.  Phillips 66 photo.

Trump tax cuts meant $7 billion in gains for top four oil refiners

Last week, the top four refiners reported $7 billion in gains thanks to rising oil prices and the recent tax overhaul by the Trump administration.

As well, Exxon praised the Trump tax cuts last week when it announced plans to spend $50 billion over five years and triple its Permian basin production.

The oil industry in the United States is poised to reap billions from the Trump tax policy after years of struggle with plummeting crude prices.

“Oil is a resilient industry and it isn’t going away any time soon,” Irving Levine, chief executive officer of Copley Financial Services Group told Bloomberg. “Tax reform, in the long run, only increases their profitability.”

John Eckart, chief financial officer at Murphy Oil Corp., said the Trump tax cuts have made it easier for his company to repatriate foreign cash.  The tax changes will “significantly lower tax in the future” on drilling in the Gulf of Mexico and shale fields in Texas.

“We have great returns with the 21% rate and compete internationally well now,” he told analysts on a conference call. “So it’s a big help for us this tax reform, very positive.”

According to Bloomberg, the four biggest oil refiners, Phillips 66, Valero Energy Corp., Marathon Petroleum Corp., and Andeavor, will find the tax code overhaul to be more profitable to them than their actual business.

The companies posted one-time tax gains of $7 billion combined in the fourth quarter of 2017.  This matched their net incomes for all of 2016, according to Bloomberg data.

As a result, Marathon’s board approved a 15 per cent dividend increase.

Oil and gas explorers in the US could see a $190 billion boost in asset values, according to Wood Mackenzie, compensating for other changes in the law that could limit deductions stemming from past losses or increased fees levied by the states for local production.

“Going forward, of course, it’s very positive,” Ben van Beurden, chief executive officer of Royal Dutch Shell Plc, told Bloomberg TV.  Beurden added that the $10 billion his company plans to spend annually in the United States in the coming few years “is going to be doing well in a much more advantageous tax environment.”

Pipeline companies initially concerned that their tax structures would make them less attractive under the Trump tax cuts, had their fears eased.

Enterprise Products Partners LP said the tax overhaul “appropriately preserves the favourable tax attributes for master limited partnerships and encourages MLPs to continue investing in infrastructure growth opportunities, which contributes to U.S. job and GDP growth.”




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