Canadian energy service firms benefit from British Columbia's LNG tax cut

By REBECCA PENTY
Bloomberg

Calfrac Well Services Ltd. and Precision Drilling Corp. are among Canadian energy service companies that gained on British Columbia’s pledge to halve a tax on liquefied natural gas terminals.

Calfrac, based in Calgary, rose as much as 10% to C$14.80, its biggest gain since February 2012, before closing lower at C$13.87 in Toronto after an oil price decline and a shooting in Ottawa sent stocks slumping across the board.

Precision Drilling, Canyon Services Group and Black Diamond Group also rallied earlier before the rout.

Drillers, well completions companies and work-camp builders may benefit from more work in British Columbia gas fields following the tax change, according to Raymond James analysts in Calgary, led by Chris Cox. Royal Dutch Shell welcomed the pledge by Canada’s westernmost province yesterday to reduce its planned tax.

The tax on profits from LNG terminals in the province will rise to 3.5% from 1.5% after developers recoup the cost of building terminals, the government said. In a February draft, the rate topped out at 7%.

“No doubt beleaguered investors will welcome a more reasonable tax regime than originally vetted in February,” the Raymond James analysts wrote in a note.

Malaysia's Petronas, which has proposed a C$10 billion ($8.9 billion) LNG project in British Columbia, is the most active driller in the province, according to the company. Western Energy Services Corp., Trinidad Drilling Ltd., Calfrac and Canyon have all been working for Petronas, the Malaysian state-owned producer, the Raymond James analysts wrote.

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