Publication date: Nov 03, 2022 • 6 hours ago • 4 minutes read • 22 comments Finance Minister Chrystia Freeland delivers the Autumn Economic Statement to the House of Commons on Thursday. Blair Gable/Reuters

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Another big day of earnings, dividends and share buybacks in Canada greeted the industry on Thursday, but it was overshadowed by a new development in Ottawa: an incoming federal tax on companies that buy back their shares.

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As part of the fall budget briefing, federal Finance Minister Chrystia Freeland announced plans to introduce a tax on share buybacks by public companies, part of the government’s effort to “encourage them to reinvest their profits in workers and in Canada.” Sign up to receive daily news headlines from the Calgary Herald, a division of Postmedia Network Inc. By clicking the subscribe button you consent to receive the above newsletter from Postmedia Network Inc. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

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The reaction from the business community and the energy sector, where share buybacks have been on the rise for the past two years, has been swift — and scathing. “It’s a really misguided, bad idea and a windfall tax by another name,” said Scott Crockatt of the Business Council of Alberta, noting that energy companies have been among the country’s most active share buybacks. “It’s the epitome of stupidity,” added Eric Nuttall, senior portfolio manager at Ninepoint Partners.

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“This is not going to lead to incremental investment, who are we kidding? And this is a government that clearly doesn’t want incremental investment anyway.” Earlier this year, the new US Inflation Act passed a 1 percent excise tax on corporate stock buybacks starting in 2023. In Canada, the tax will begin to apply at the corporate level in January 2024 at a rate of two percent. It is expected to increase federal revenue by $2.1 billion over five years. Buybacks in the energy sector have grown in popularity as the industry’s profits have risen and companies have tried to return money to investors. Oil producers are also spending more money in Canada — about $33.5 billion this year and an estimated $36 billion in 2023, according to consulting firm Wood Mackenzie — although it’s a smaller percentage of their free cash flow than in the past years.

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The new federal tax “is an acknowledgment that we’re not seeing the investment from oil companies in decarbonizing. So it’s a step in the right direction,” said Jan Gorski, director of the Pembina Institute’s oil and gas program. But instead of pumping more spending into the country, the plan “will further reduce investment in Canada’s energy sector,” said Tristan Goodman, head of the Explorers and Producers Association of Canada (EPAC). “It’s really further animosity towards the business community in Canada.” According to Wood Mackenzie, Canada’s five largest public oil producers bought back $16.4 billion of their shares from the start of 2021 to June this year. These numbers are growing.

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Canadian Natural Resources, the country’s largest oil producer, on Thursday reported third-quarter profit of $2.8 billion, up 28% from a year earlier, as oil and natural gas prices remained high during the period. The company raised its quarterly dividend by 13 percent and said share repurchases in the third quarter reached $1.7 billion — and $5.1 billion for the year. The Calgary-based producer also indicated it expects to pay about $11 billion this year to various levels of government in Canada through income taxes, property taxes and royalties, a 120 percent jump from last year. In an interview before the federal announcement, Canadian Natural president Tim McKay declined to comment on the new tax, but noted the company is investing more this year.

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Canadian Natural expects its capital budget to reach $4.9 billion this year, a 41 percent increase from 2021 levels. And there are barriers to spending even more. Tim McKay, president of Canadian Natural Resources Ltd., says the company is investing more this year. Photo courtesy of CNRL “We increased our budget this year and we couldn’t spend more on projects because you need regulatory permits. You need the supplies,” McKay said in an interview. “It’s always nice to say you could spend more, but physically in this environment, you couldn’t.” McKay pointed to regulatory issues as another challenge to seeing producers spend more. “If Canada actually supported more LNG plants and changed both the fiscal and possibly regulatory environment so that these projects could move forward more quickly, you would see more activity, which creates more jobs and more economic benefit to Canada,” he said. .

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Other companies also posted strong results on Thursday. Tourmaline Oil Corp., the nation’s largest natural gas producer, reported a profit of $2 billion for the quarter, up from $361 million a year earlier. Integrated producer Suncor Energy reported third-quarter operating profit of $2.6 billion, up from $1 billion last year. However, the Calgary-based company reported a net loss of $609 million for the quarter, due in part to a non-cash charge linked to the expansion of its stake in the Fort Hills oil field. Last month, it agreed to buy 21% of Teck Resources Ltd. in Fort Hills for $1 billion, increasing Suncor’s total stake to 75%. However, the deal’s valuation left Suncor with a $2.6 billion after-tax writedown on its existing interest in the operation.

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“It’s a long-duration asset, it has low GHG barrels, and we were able to transact at a very compelling value for our shareholders,” Suncor interim CEO Kris Smith said on a conference call. During the third quarter, Suncor returned about $1.7 billion to shareholders, including $1 billion in share repurchases and $638 million in dividends. Companies in the oilpatch are increasingly turning to share buybacks, in part because share buybacks are a less established way of rewarding investors than through dividend hikes, which are harder to cut, said Laura Lau, chief investment officer to the Brompton Group, which owns shares. in Canadian Natural. “The big thing with share buybacks is flexibility,” he said. Nuttall expects the new tax to prompt energy companies to raise their dividends and special dividends, but he doubts they will spend incrementally more to increase production in the current environment. “This will not increase production by one barrel in Canada,” Nuttall said. “All it does is make our industry feel even more alienated and potentially less competitive.” Chris Varcoe is a columnist for the Calgary Herald. [email protected]

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title: “Varcoe Oilpatch Investors Criticize Ottawa S New Tax On Share Buybacks " ShowToc: true date: “2022-11-14” author: “David Applebury”

Publication date: Nov 03, 2022 • 6 hours ago • 4 minutes read • 23 comments Finance Minister Chrystia Freeland delivers the Autumn Economic Statement to the House of Commons on Thursday. Blair Gable/Reuters

Content of the article

Another big day of earnings, dividends and share buybacks in Canada greeted the industry on Thursday, but it was overshadowed by a new development in Ottawa: an incoming federal tax on companies that buy back their shares.

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Content of the article

As part of the fall budget briefing, federal Finance Minister Chrystia Freeland announced plans to introduce a tax on share buybacks by public companies, part of the government’s effort to “encourage them to reinvest their profits in workers and in Canada.” Sign up to receive daily news headlines from the Calgary Herald, a division of Postmedia Network Inc. By clicking the subscribe button you consent to receive the above newsletter from Postmedia Network Inc. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300

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A welcome email is on its way. If you don’t see it, check your spam folder. The next issue of the Calgary Herald Headline News will be in your inbox soon. We encountered a problem with your registration. PLEASE try again

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The reaction from the business community and the energy sector, where share buybacks have been on the rise for the past two years, has been swift — and scathing. “It’s a really misguided, bad idea and a windfall tax by another name,” said Scott Crockatt of the Business Council of Alberta, noting that energy companies have been among the country’s most active share buybacks. “It’s the epitome of stupidity,” added Eric Nuttall, senior portfolio manager at Ninepoint Partners.

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“This is not going to lead to incremental investment, who are we kidding? And this is a government that clearly doesn’t want incremental investment anyway.” Earlier this year, the new US Inflation Act passed a 1 percent excise tax on corporate stock buybacks starting in 2023. In Canada, the tax will begin to apply at the corporate level in January 2024 at a rate of two percent. It is expected to increase federal revenue by $2.1 billion over five years. Buybacks in the energy sector have grown in popularity as the industry’s profits have risen and companies have tried to return money to investors. Oil producers are also spending more money in Canada — about $33.5 billion this year and an estimated $36 billion in 2023, according to consulting firm Wood Mackenzie — although it’s a smaller percentage of their free cash flow than in the past years.

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The new federal tax “is an acknowledgment that we’re not seeing the investment from oil companies in decarbonizing. So it’s a step in the right direction,” said Jan Gorski, director of the Pembina Institute’s oil and gas program. But instead of pumping more spending into the country, the plan “will further reduce investment in Canada’s energy sector,” said Tristan Goodman, head of the Explorers and Producers Association of Canada (EPAC). “It’s really further animosity towards the business community in Canada.” According to Wood Mackenzie, Canada’s five largest public oil producers bought back $16.4 billion of their shares from the start of 2021 to June this year. These numbers are growing.

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Content of the article

Canadian Natural Resources, the country’s largest oil producer, on Thursday reported third-quarter profit of $2.8 billion, up 28% from a year earlier, as oil and natural gas prices remained high during the period. The company raised its quarterly dividend by 13 percent and said share repurchases in the third quarter reached $1.7 billion — and $5.1 billion for the year. The Calgary-based producer also indicated it expects to pay about $11 billion this year to various levels of government in Canada through income taxes, property taxes and royalties, a 120 percent jump from last year. In an interview before the federal announcement, Canadian Natural president Tim McKay declined to comment on the new tax, but noted the company is investing more this year.

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Canadian Natural expects its capital budget to reach $4.9 billion this year, a 41 percent increase from 2021 levels. And there are barriers to spending even more. Tim McKay, president of Canadian Natural Resources Ltd., says the company is investing more this year. Photo courtesy of CNRL “We increased our budget this year and we couldn’t spend more on projects because you need regulatory permits. You need the supplies,” McKay said in an interview. “It’s always nice to say you could spend more, but physically in this environment, you couldn’t.” McKay pointed to regulatory issues as another challenge to seeing producers spend more. “If Canada actually supported more LNG plants and changed both the fiscal and possibly regulatory environment so that these projects could move forward more quickly, you would see more activity, which creates more jobs and more economic benefit to Canada,” he said. .

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Other companies also posted strong results on Thursday. Tourmaline Oil Corp., the nation’s largest natural gas producer, reported a profit of $2 billion for the quarter, up from $361 million a year earlier. Integrated producer Suncor Energy reported third-quarter operating profit of $2.6 billion, up from $1 billion last year. However, the Calgary-based company reported a net loss of $609 million for the quarter, due in part to a non-cash charge linked to the expansion of its stake in the Fort Hills oil field. Last month, it agreed to buy 21% of Teck Resources Ltd. in Fort Hills for $1 billion, increasing Suncor’s total stake to 75%. However, the deal’s valuation left Suncor with a $2.6 billion after-tax writedown on its existing interest in the operation.

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“It’s a long-duration asset, it has low GHG barrels, and we were able to transact at a very compelling value for our shareholders,” Suncor interim CEO Kris Smith said on a conference call. During the third quarter, Suncor returned about $1.7 billion to shareholders, including $1 billion in share repurchases and $638 million in dividends. Companies in the oilpatch are increasingly turning to share buybacks, in part because share buybacks are a less established way of rewarding investors than through dividend hikes, which are harder to cut, said Laura Lau, chief investment officer to the Brompton Group, which owns shares. in Canadian Natural. “The big thing with share buybacks is flexibility,” he said. Nuttall expects the new tax to prompt energy companies to raise their dividends and special dividends, but he doubts they will spend incrementally more to increase production in the current environment. “This will not increase production by one barrel in Canada,” Nuttall said. “All it does is make our industry feel even more alienated and potentially less competitive.” Chris Varcoe is a columnist for the Calgary Herald. [email protected]

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Postmedia is committed to maintaining a lively but civil forum for discussion and encourages all readers to share their views on our articles.  Comments may take up to an hour for moderation before appearing on the site.  We ask that you keep your comments relevant and respectful.  We’ve enabled email notifications—you’ll now receive an email if you get a reply to your comment, there’s an update on a comment thread you’re following, or if a user follows the comments.  Visit the Community Guidelines for more information and details on how to adjust your email settings.