FT.com / Companies / Oil & Gas - Tax bill wipes out Statoil Hydro profits.
StatoilHydro, Norway’s national oil company, saw its net profits wiped out in the second quarter by an unusually high tax charge, but said its underlying earnings had fallen by less than for most other large international oil groups.
Reported net income was zero for the second quarter, down from NKr18.9bn in the equivalent period of 2008, as the tax rate rose to 99.9 per cent.
As Reuters note:
Statoil's draconian tax rate was the result of the company introducing the U.S. dollar as a functional currency this year, a move designed to reduce currency effects on financial income.
The switch boosted taxes on currency gains and meant that "taxable income exceeded consolidated accounting income before tax by approximately 3.6 billion crowns" in the quarter, in line with previous guidance.
"Management considers this tax rate not to be reflective of the underlying tax exposure," StatoilHydro ASA said.
Don't let the financial income wag the dog is the message I take from that. You're an oil company Statoil: not a bank.
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Richard,
don’t you think that Statoil made a very sound move? Any company whose income (and a lot of its expenses) is dominated in US dollars should switch to dollars as an accounting currency to avoid quarter-by-quarter accounting surprises distorting its balance sheet. And, if you have switched to another currency, of course you need to revalue all your positions, meaning either a one-off loss or gain. Again, sound move for Statoil.