News: Range Resources set to benefit from new Trinidad tax breaks

Range Resources (ASX:RRS) will enjoy new fiscal incentives in Trinidad and Tobago after its Government approved and adopted proposed budget incentives for oil and gas companies.

The new incentives reward companies with accelerated development and exploration program.

This is expected to have a significant positive impact on the company’s cash flows and returns from its ongoing production growth.

“Range is fully committed to growing its business in Trinidad and we are therefore delighted with the ratification of these new positive fiscal incentives,” chief executive officer Rory Scott Russell.

“Operating in a favourable economic environment will bring significant benefits to the Company as we continue to increase production and unlock value from our core development assets in Trinidad.”

The changes are effective from 1 January 2014.

Key Changes

The key changes that impact Range are that excess investment tax credit may be carried forward and offset in arriving at the Special Petroleum Tax liability for the year immediately following the financial year in which the credit were generated.

This compares to it previously being able to be claimed in the year expenditure was incurred.

In addition, companies will be able to recover 100% of their exploration costs during the first year from 2014 to 2017.

From 2018, they will be able to recover 50% of their exploration costs in the first year, 30% in the second and 20% in the third.

This compares with the previous initial allowance of 20% for tangible and 10% for intangible assets and annual allowance of 20% of cost less IA for tangible and 20% of residual for intangible assets.

For development work, the incentives allow for 50% recovery of cost in the first year, 30% in the second and 20% in the third compared to the current system which mirrors recovery for exploration costs.

Companies will also be able to recover all of their costs for workovers and qualifying sidetracks during the first year.