this certainly doesn't help...hsb
Energy Summary for Aug. 5, 2014
2014-08-05 18:47 ET - Market Summary
by Stockwatch Business Reporter
Another company facing a possible tax overhaul is Keith Hill's Africa Oil Corp. (AOI), down 29 cents to $6.26. Yesterday, Bloomberg reported that Kenya "will impose capital gains and windfall taxes on oil, gas and mining companies within months," according to President Uhuru Kenyatta. He said that in "a couple of months we should have all these laws firmly in place." Africa Oil and Tullow Oil are exploring several basins in Kenya, with the farthest along being Lokichar, where Tullow has said production may start as early as this year. (Africa Oil is less optimistic.) In an ideal world, the new laws would make Kenya more predictable and attractive to investors, and an unaffected Africa Oil would be able to defend the clauses in its existing production-sharing contracts. Of course, things do not always work out ideally, as joint venturer Tullow knows well. It is still involved in a legal brouhaha that began after it acquired Ugandan assets from Heritage Oil in 2010. A tax law was enacted just before the sale, and the Ugandan government used that law to argue that Heritage should pay capital gains taxes on the sale proceeds; Heritage said it should not have to because its 2004 production-sharing deal stated that subsequent law changes would not affect its tax liabilities. Tullow says it was forced to pay Heritage's tax bill or Uganda would not release the assets. The parties then launched legal actions against each other. Separately, Tullow is challenging a capital gains tax assessment on a sale it made in 2012, saying the assessment "ignores a contractual term signed by a government minister in Uganda." Kenyan President Kenyatta says he plans to avoid the Ugandan experience. Still, Africa Oil's investors seem antsy. The company hopes to soothe its shareholders with a Lokichar resource update expected at the end of the month or in early September, incorporating results from four new discoveries since the previous report. (Tullow said on July 30 that resources are currently over 600 million barrels and could be increased to one billion barrels.) Africa Oil is also scheduled to release its second quarter results on Aug. 8.
