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Rick D

Rick D
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  • Total: Story Remains One Of The Most Compelling In The European Sector [View article]

    My Total dividends are subject to only 15% French tax per the US-France tax treaty. Perhaps your broker isn't filing the proper paperwork on your behalf to get the lower treaty rate. If so, that's the broker's fault, not a problem with Total.
    Oct 21 04:26 PM | Likes Like |Link to Comment
  • Royal Dutch Shell: Patience Is Paying Big Dividends [View article]

    This is a common question. The two share classes represent identical interests in Shell but are domiciled in different countries and have different tax consequences. Please see this comment I made on another article:

    This should give you some useful guidance on whether A shares or B shares are more appropriate for your situation.
    Oct 20 11:47 AM | Likes Like |Link to Comment
  • What Does The Agreement With Naftogaz Mean For Statoil? [View article]
    "learnt" is British English for "learned". No big deal.

    Interesting article, ABC. Thanks for writing it!
    Oct 18 04:38 PM | 1 Like Like |Link to Comment
  • Statoil: Near-Term Headwinds Make The Story Less Compelling [View article]
    I guess my time horizon is different than yours.

    I agree that near-term headwinds are likely to keep the share price depressed in the short to medium term. However, that doesn't make the story less compelling to me, because I'm willing to wait and collect dividends in the meantime. In a way, it makes it more compelling, as I have more time to accumulate shares.

    Thanks for writing.
    Oct 14 02:27 AM | Likes Like |Link to Comment
  • Statoil: Near-Term Headwinds Make The Story Less Compelling [View article]
    This article seems to take a fairly short-term view of things. There is no mention of the huge finds Statoil has made over the last couple of years: Bay du Nord, offshore Tanzania, and Johan Sverdrup. Granted, these won't be producing for several years, but the value is there for those with a 5+ year time horizon.

    The dividend is well covered by earnings. The balance sheet is solid; leverage is fairly low. I don't really care if short-term free cash flow doesn't cover the dividend due to exploration and development expenditures; the company is in no danger of going broke anytime soon and the money is well spent. I believe Statoil has the best exploration team in the business. They've had some setbacks recently but their overall track record is excellent.

    At today's prices the stock is ridiculously cheap. Statoil is my single largest stockholding in the energy sector and at these prices I'm considering adding more. I believe Statoil has a really bright future, and I'm getting paid a very nice dividend while I wait.
    Oct 13 11:00 AM | 3 Likes Like |Link to Comment
  • Unilever: The Cheap Global Heavyweight Poised For Growth [View article]
    One minor correction to RSRinehart's comment: you CAN claim more than $300/$600 of foreign withholding back from the IRS via the Foreign Tax Credit, you just have to use Form 1116 to do it, and the calculations on that form may or may not limit your recovery.
    Oct 13 10:20 AM | 1 Like Like |Link to Comment
  • Unilever: The Cheap Global Heavyweight Poised For Growth [View article]

    UN dividends will be subject to 15% Dutch tax withholding. Depending on individual circumstances, all or part of this may be recoverable in a taxable account via the Foreign Tax Credit.

    UL dividends are sourced from the United Kingdom and per the US-UK tax treaty there is no foreign withholding. Sounds great, but there's a catch: UL shares cost about 5% more than UN shares, so you'll get roughly 5% fewer shares for the same money.

    The bottom line is, with a 5% share price differential, you are better off with UN if you can recover 2/3 or more of the Dutch withholding via the Foreign Tax Credit. If your recovery would be less than 2/3, you would be better off with UL.

    Most taxpayers with less than $300 of foreign taxes paid from all sources (not just UN) can recover 100% of foreign taxes withheld in taxable accounts very simply via a single line entry on Form 1040. (This limit is raised to $600 if married filing jointly.) There are a few other conditions attached to this simplified 100% recovery. Please read the IRS instructions for the Foreign Tax Credit line of Form 1040 to make sure you qualify. If you qualify for this simplified 100% recovery you should own UN in a taxable account, not UL.

    If you have more than $300/$600 in foreign taxes or you otherwise don't qualify for the simplified method above, you will have to complete Form 1116 to determine how much of the Dutch tax you would get back. If you can recover more than 2/3, go with UN; if your recovery is less, go with UL.

    I hope this provides you with some useful guidance. If your tax situation is complex and you are making a large investment in UL/UN, you might want to review your individual situation with a good tax advisor.
    Oct 12 07:48 PM | 2 Likes Like |Link to Comment
  • Is Total A Decent Long-Term Bet? [View article]
    Just a quick update on the French tax withholding:

    I bought a very small amount of TOT in my Vanguard brokerage account just before the ex-dividend date specifically to find out what the withholding would be. Yesterday the dividend hit my account, less 15% for withholding and minus half a cent per share for the ADR fee.

    I did nothing special to get the 15% rate. Vanguard took care of everything for me.

    Given the amount the stock has gone down the past couple of weeks, I'm glad I waited to take on a "real" position! I will most likely be buying more soon.
    Oct 11 11:39 PM | Likes Like |Link to Comment
  • Large Stocks Are Widely Mispriced [View article]
    A very interesting article which explains much of what I've observed with apparent mispricing of quite a few large-cap stocks. I've usually ascribed such mispricing to Wall Street myopia but sentiment seems to be a pretty big factor as well.

    I've always done my own analyses and not been afraid to take on large positions in large-cap stocks that I thought were severely underpriced. This article gives me confidence that I'm on the right track, that maybe I'm not crazy after all! Thank you for writing it.
    Sep 30 09:22 PM | 1 Like Like |Link to Comment
  • Royal Dutch Shell Is A Buy [View article]
    People new to the oil and gas business commonly confuse LNG and NGLs. They are very different things.

    LNG = liquefied natural gas. This is natural gas (mostly methane) that has been converted to liquid form by cooling it to approximately minus 260 degrees Fahrenheit. This reduces its volume by a factor of over 600, making it practicable for ocean transport via specialized LNG tankers.

    NGLs = natural gas liquids: ethane, propane, normal butane, isobutane, and so-called "natural gasoline" (mostly pentanes and hexanes). These are gases at the high temperatures and pressures found at the bottom of a gas well. As the gas stream reaches the surface, it cools but remains under high pressure, and the NGLs condense out of the gas stream. (The methane in the gas stream remains as a gas.) NGLs are usually much more valuable than methane because of their physical and chemical properties. Many petrochemicals and plastics are made from NGLs. This is why "wet gas" with a lot of NGLs in it is more valuable than "dry gas" which is almost pure methane.

    Don't even get me started on "shale oil" vs. "oil shale"!
    Sep 29 03:22 AM | 1 Like Like |Link to Comment
  • Royal Dutch Shell Is A Buy [View article]

    You were most likely formerly enrolled in Shell's Scrip Dividend Programme which exempted you from the Dutch withholding. Shell discontinued this program effective with the most recent quarter's dividend, so your broker is either now paying your dividends in cash or has enrolled you in their own DRIP.

    If you own RDS.A in a tax-deferred or tax-exempt account such as an IRA you should switch share classes. In a taxable account the question is not so simple. Please see my post below for some general guidance. Also, please be aware that changing share classes in a taxable account is a taxable event. You will most likely have to pay capital gains taxes on your gain to date, plus you will reset the clock for long-term capital gains treatment.
    Sep 29 02:53 AM | Likes Like |Link to Comment
  • Royal Dutch Shell Is A Buy [View article]
    RDS.A vs. RDS.B:

    A shares are Netherlands-based. Per the US-Dutch tax treaty, 15% Dutch withholding is applied to RDS.A dividends.

    B shares are UK-based. Per the US-UK tax treaty there is no foreign withholding on RDS.B dividends.

    Investors in taxable accounts can usually recover some or all of the Dutch withholding on RDS.A dividends via the Foreign Tax Credit.

    Investors in tax-deferred and tax-exempt accounts such as IRAs should own B shares since there is no practical way of recovering Dutch withholding tax in these account types.

    Most small investors in taxable accounts can easily fully recover all the Dutch withholding tax on A shares via a single line entry on the Foreign Tax Credit line of Form 1040. To be eligible for this simplified 100% recovery, investors must have $300 or less of foreign taxes paid from all sources ($600 if married filing jointly). There are a few other conditions applicable to this simplified method. These can be found in the IRS instructions for the Foreign Tax Credit line of Form 1040. Investors in taxable accounts who qualify for this simplified 100% recovery should own A shares since they are cheaper.

    Investors in taxable accounts who do not qualify for the simplified method above will need to complete Form 1116 to determine the amount of foreign tax recovery. If the recovery is at or near 100%, investors should own A shares. If the recovery is substantially less than 100%, B shares may be the better choice. With a 5% differential in cost between A and B shares, investors who can recover more than 2/3 of the Dutch tax should own A shares; those whose recovery is less than 2/3 should own B shares.

    Shell used to have an optional dividend reinvestment program called the Scrip Dividend Programme that paid dividends in A shares instead of cash. Investors receiving these scrip dividends were exempt from Dutch withholding tax. Due to some arcane provisions of Dutch tax law, Shell could only issue A shares under this program, but could only repurchase B shares to offset the dilution. As the differential in share class pricing rose to over 9%, this became a very expensive proposition for Shell, so as of last quarter they discontinued this program. Because they cancelled the SDP, Shell can now repurchase A shares, which they do because they are cheaper than B shares.

    It is my understanding that Shell's current buyback program is to offset past dilution from the former Scrip Dividend Programme.

    I hope this provides useful answers and guidance regarding Shell's dual share class structure.
    Sep 29 02:37 AM | 1 Like Like |Link to Comment
  • Statoil makes "play opener" gas discovery in unexplored Barents Sea area [View news story]

    The Norwegian government does not vote its shares, presumably to give the company a significant degree of independence from the government. The situation is not like that of, say, PBR.

    Long STO.
    Sep 26 04:16 PM | Likes Like |Link to Comment
  • Report: U.S. crude could fall $30 below international prices without exports [View news story]
    "The limiting factor in US domestic oil production is not lack of sufficient profit but a lack of transportation facilities for the oil, a lack of refinery capacity to process the oil and a lack of skilled labor to solve the first two issues."

    The transportation issue is real, and it's why North Dakota and West Texas prices are significantly lower than the Cushing, OK WTI price. But WTI and Louisiana Light Sweet prices are still lower than Brent. That's an export ban issue. Refinery capacity is not an issue at all. We've got plenty of that; enough so that we can import Middle East oil, refine it, and export the refined products (which is legal under present law). In fact, refined petroleum products are one of our biggest exports today. Labor constraints are an issue, but I believe political issues are a much greater constraint to construction of new pipelines.

    "Lower net imports would not further decouple us. Higher domestic supply vs demand decouple us."

    Higher domestic supply vs. demand would result in lower net imports.

    "You even admit that the export restrictions would be helpful in the event of your hypothetical but reimposing ban in the event of a shock is unnecessary if the ban were not removed."

    The export ban would only make sense if a supply shock occurred that the Strategic Petroleum Reserve was insufficient to handle. I can't think of any time in the last 20 years that a ban would have been necessary. Applying it all the time reduces domestic prices and reduces the incentive to explore and drill new wells. Applying it only temporarily in a true emergency would not reduce the incentive to drill new wells. We can't rapidly drill wells and bring them on line in an emergency situation. We can rapidly impose a temporary export ban.

    "And there is no data so far indicating that production is being reduced or even deferred by any price based constraint."

    To my knowledge, production from existing wells isn't being reduced by existing pricing, but exploration and development of new wells is most definitely being impacted, which will negatively affect future production. Removing the export ban would spur additional domestic exploration and development.

    The Jones Act is a real issue, but a relatively minor one for crude oil transport. (It's a much bigger issue for refined products.) The big domestic transportation bottlenecks are from West Texas and North Dakota to Cushing, and we can't solve those with ships.
    Sep 26 03:49 AM | Likes Like |Link to Comment
  • Report: U.S. crude could fall $30 below international prices without exports [View news story]
    Cynical Rhino,

    Part of my argument that I didn't emphasize enough is that we could re-impose export restrictions temporarily during a market shock. The export ban was imposed in the immediate aftermath of the OPEC oil embargo of the 1970s. It made sense then, but the ban wasn't dropped when the oil markets subsequently normalized. The result today is that we have artificially low prices for oil in the US.

    Artificially low prices tend to result in waste, decreasing our energy security. I don't think filling our freeways with Hummers running on cheap gasoline will improve our energy security. Gas-guzzling vehicles can't instantaneously be replaced with econoboxes in the event of a supply shock. It would take a couple of decades to turn the vehicle fleet over.

    "Under your hypothetical of an OPEC embargo, the US would be much better off with the higher barrier for export since the US would be more decoupled from the market shock that such an embargo would cause."

    Not true. With higher US production and lower US consumption resulting from the elimination of the export ban, we'd have lower NET imports (imports - exports). Lower net imports would mean we are more decoupled from the market shock, given that we could temporarily restrict exports.

    "Opening up exports would certainly make US domestic production companies more money but would likely increase US oil imports as US oil and global oil prices would tend to equalize and marginal preferences for types of oil and overhead costs would dominate the decision and increase demand for imported oil."

    Again, while imports would increase, they would be more than offset by exports. NET imports (imports - exports) would decrease, not increase.
    Sep 25 03:27 PM | Likes Like |Link to Comment