Alberta royalty move prompts muted market reaction
CALGARY, Alberta, Oct 26 (Reuters) - Canadian oil and gas shares fell only slightly on Friday despite some fears in the industry that Alberta's new royalty structure might put a major crimp on returns and spending.
The Toronto Stock Exchange oil and gas subindex .SPTTEN, which includes the shares of producers, integrated oil companies, energy trusts and oil field service providers, dipped less than 1 point, or 0.3 percent, to 351.15 after the open. It also crossed into positive territory at times.
The broad Toronto market was up 82.24 points at 14,207.18.
The oil index is a few points higher than the day after Alberta's royalty review panel issued its report on the province's royalties in late September.
Among big names, EnCana Corp (ECA.TO) was up 8 Canadian cents at C$64.49, Canadian Natural Resources Ltd (CNQ.TO) slipped 7 Canadian cents to C$76.10, and Imperial Oil Ltd (IMO.TO) rose 51 Canadian cents to C$49.20.
Alberta Premier Ed Stelmach said on Thursday he will increase oil and gas royalties, but he backed away from some of the more contentious recommendations in his review panel's report.
Under the new measures, Alberta's take from the oil and gas industry will increase by C$1.4 billion ($1.45 billion), or 20 percent above projected 2010 revenues.
The revamped system is largely sensitive to commodity price movements, and will mean smaller increases in natural gas and oil sands royalties than envisaged by the panel.
Stelmach rejected the panel's proposed new tax on oil sands production.
In a research report, analysts at UBS Securities said the new framework appeared to be an improvement from its view of the panel's report. UBS said the impact on corporate cash flow was expected to be modest.
"Based on our estimates of Alberta-based production, we estimate that corporate royalty rates will rise only modestly (less than 5 percent)," UBS analysts wrote.
"For senior producers and integrateds, our 2009 cash flow estimates decline by 1 percent, while trusts benefit from low well productivity, resulting in essentially no change to our cash flows. We expect junior producers to be harder hit, declining by 10 percent."
($1=.96 Canadian)
