The Australian government has announced a new resources super profit tax which amounts to a 40% levy on all profits, the tax is scheduled to come into force on 1st July 2012. The government has said that it will be making a 40% contribution towards the cost of projects because companies are allowed to deduct the cost of projects from the resource tax.
As a result of this fairly alarming new tax, coal seam gas projects have seen shares plunge in value. Some AUS$ 2 billion has been wiped from the value of the coal seam gas sector. "A resource super profits tax could have a material impact on the economic viability of proposed CSG to LNG projects," Deutsche Bank analyst John Hirjee said.
Origin stocks have fallen 3.5% after falling 1.5% on Monday, and Santos dropped 2.6%, on top of a 4.6% drop on Monday. Eastern Star’s shares plummeted by 14%, while Bow Energy’s share price also fell by a large margin of 12%.
“The underlying value of the assets is still there - the value compared to our market cap is enormous.” Said David Casey, managing director of Eastern Star. The reason for this large drop in share prices could be because investors have been betting on further takeovers of coal seam gas producing companies, especially in the case of Eastern Star, where investors have been betting on a takeover bid from Santos; the resource tax is leading investors to reassess their options.
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/05052010/australian_coal_seam_gas_stocks_fall/