Tax Relief On North Sea Oilers

Good news (apparently) from the Chancellor George Osborne, over and above his new “Antonio Banderas” hairdo. In fact, for cynics such as myself, the new follicular look was actually more bold than the “bold and immediate” action he announced to save the North Sea Oil & Gas explorers.

They must be hurting in a most painful way given the way Crude Oil has fallen by half over the past 6 months. As we all know HM Government has been enjoying the fruits of the fossil fuel lying off the east coast of England and especially Scotland for the best part of 40 years. For instance, it has helped pay for money wasting sacred cows such as the NHS (£100bn plus a year) over the decades since.

The problem now is that the goose laying the golden eggs is starting to look somewhat tarnished, and so to prevent the likes of Xcite Energy (XEL) giving up the ghost we have seen tax cuts. However, I would venture to suggest that Mr Osborne has been a little on the mean side. True, the Supplementary Charge is to be reduced from 30% to 20%, and the Petroleum Revenue Tax on the UK Continental Shelf is down from 50% to 35%. But really only a near term freeze would have set this particular sector on fire.

Speaking of Xcite Energy, which owns the massive Bentley Field, it can be seen that apart from a minor blip, we still very much have a sinking feeling on the daily chart. Indeed, the assumption to make is that at least while there is no end of day close back above the 50 day moving average at 31p we are still very much in bear mode technically at Xcite. This is because it can be seen how the 50 day line has blocked the price action/recovery since as long ago as September. The assumption to make is that the shares will not be finally back on their feet unless or until they have served up a higher low above the 50 day line. This looks to be some time away, even after the Chancellor’s “grand gesture.”

Looking at another North Sea play, Parkmead (PMG), it can be seen that there is a similar malaise in terms of the price action, as is evident at Xcite. The recent past has been dominated by pressure from the 50 day moving average now at 120p since September. All of this gives the impression that at least while there is no weekly close back above this feature, the shares remain a sell into strength. Perhaps even worse, there was hardly a blip for the stock mid week when the tax concessions were announced.

But it may not all be doom and gloom. There is a saying that during a Gold Rush it is those who make the picks and shovels who tend to do best, and this may be the case at least as far as those who help develop fields in the North Sea. One of these is Enquest (ENQ) and on the daily chart we have been treated to a break back above the 50 day moving average at 36p. While this feature is sustained one would be looking to a push back towards the 50p zone, even if this is only an intermediate improvement.