Venezuelan tax rate hike to adversely impact global oil companies

Analyst Mark Hume of JP Morgan expects the proposed tax rate hike in Venezuela to adversely impact the cash flow and investment valuations of the global oil companies operating in the country.

In a research note published this morning, the analyst mentions that the Venezuelan government has decided to fully implement the New Hydrogen Law, which was passed in 2002, for all existing and future contracts with global oil companies. This decision, along with the recent announcements by the government, indicates that the Venezuelan government is set to implement significant tax rate hikes for the nation’s upstream industry, JP Morgan says. The highest negative impact on market capitalization from this decision would be for ConocoPhillips at about 3.5%, while Statoil, ChevronTexaco, Total and Repsol are also likely to witness significant impacts, the analyst adds.