Range Resources (ASX: RRS) is poised to benefit from proposed new fiscal incentives introduced by the Trinidad and Tobago Government that reward companies with accelerated development and exploration programs.
The reforms provide incentives to companies that invest in exploration and production, ensuring the oil and gas upstream sector becomes more competitive with higher activity levels.
"We welcome these further incentives proposed by the Minister, which certainly encourage increased development and exploration activities for the upstream companies operating in Trinidad, and in turn further accelerate the production growth in Trinidad," executive director Peter Landau said.
"Range will be poised to take full advantage of these incentives, as it looks to accelerate both its development and production activities on the existing reserves, along with its exciting intensive exploration programme both internally and in partnership with Niko Resources."
The new incentives allow for further accelerated capital deductions than the past.
Under the proposed incentives, 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 current 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 proposed 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.
In addition to these capital allowance proposals, the investment tax credit (being 20% of capital expenditure) against the Special Petroleum Tax is now able to be carried forward into the subsequent year, where previously it was only able to be claimed in the year expenditure was incurred.
Texas Sale Update
Further to its previous announcements, whilst the purchaser of its Texas assets continues to indicate that it is proceeding to complete settlement of the acquisition, Range is still awaiting receipt of the final consideration for the sale of its Texan assets.
Range has agreed to extend the settlement deadline and will update the market when funds are received.
The proposed incentives could not have come at a better time for Range Resources, which is ramping up its operations to increase production and resources in Trinidad.
It has at least 10 wells planned out on its acreage and is funding the drilling of two onshore wells and a potential appraisal well to earn its 50% stake in Niko's acreage.
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