So suprised this hasn't been posted on here but the legislature just passed a huge tax cut, dividends are going up!!!!! http://www.sfgate.com/news/article/Alaska-Legislature-passes-oil-tax-overhaul-4433543.php
So, here is the math on the taxes, which take effect starting in Q1 2014.
Before, the tax rate would be 25% + .4% per dollar over $30 per bbl of production tax value. In this case I'll use production tax value as WTI less chargeable costs.
If we assume $90 WTI, $30 chargeable costs then we have $60 production tax value. That would put taxes at 37% (25% + 30*.4%). Royalty per BBL would then be $60*(1-0.37) = $37.80
Under the new tax system we have the same profits based tax so tax will again be based on WTI less chargeable costs. The difference is now we have a 35% base tax rate and a sliding scale $/BBL royalty based on production tax value. At $80 production tax value or less we get $8/bbl off our taxes. Every additional $10 of production tax value reduces our credit by $1.00 until the credit goes to nothing and we are just left with the 35% tax rate.
If we use the same assumptions of $90 WTI, $30 chargeable costs then we have the same $60 production tax value. The new royalty per barrel would then be $60*(1-0.35) + $8 (our tax credit in this case) = $47.00
Comparing our new royalty we see an increase of $9.20/BBL or 24% in this example, which is pretty close to current conditions. If you value this trust based on expected future dividends, I think the value just went up and the market has not figured this one out yet. I've already got the exposure I want to this but if I didn't I would definitely still be buying.
The Bears here and yahoo failed to post the story...Sure showed up im the yahoo COP Headlines...
Anyone doing the math? I would but my eyesight isn't working well...I can barely read or post. the muro can
t keep the coenea cleared long enough now for much else.Or I'd do the math.