Oil service co's may lose tax haven (NBL, RIG, GSF, WFT)
Noble Exec: Anti-Tax Haven Bill 'Will' Pass In 07
HOUSTON (Dow Jones)--The U.S. Congress is all but certain to pass legislation this year addressing the tax status of U.S. corporations that have based themselves in countries with low or non-existent income taxes, Noble Corp. (NE) Vice President of Investor Relations and Planning Lee Ahlstrom said Thursday.
"We expect legislation to be passed affecting our status at some point in 2007," he said, in response to an analyst's question about tax rates during a conference call tied to the offshore driller's fourth-quarter earnings.
Noble, the third-largest publicly traded driller, is based in the Cayman Islands, which does not levy income taxes on corporations. In practice the company operates out of Sugar Land, Texas. But a nominal presence in the Caymans allows the driller to pay nothing on foreign income.
The oil-field services sector is second only to insurers in embracing so-called tax havens. Noble competitors Transocean Inc. (RIG) and GlobalSantaFe Corp. (GSF), the first- and second-largest offshore drillers, have also fled to the Caymans. Nabors Industries Ltd. (NBR), the world's biggest land driller, and Weatherford International (WFT) are based in Bermuda.
Congress has since 2002 periodically threatened to strip companies of their foreign status. The Senate Finance Committee unanimously approved a bill last year that would have re-classified companies such as Noble as U.S. corporations for tax purposes. But the legislation never received a full Senate vote.
With both houses of Congress now in Democratic hands, the bill's chances have increased, though a presidential veto could still block its passage, Poe Fratt, an analyst with AG Edwards in St. Louis, said earlier this month.
Previous versions of the anti-tax haven bill would also have forced companies to retroactively pay taxes on income earned since moving headquarters offshore. But Ahlstrom said he believes upcoming legislation will not be so strict. "Any change would not be retroactive," he said.
Noble would be among the hardest-hit should the Cayman Islands lose its tax-haven status. The company said 77% of its fourth-quarter revenue in 2006 was international, and Noble has moved much of its fleet out of the U.S. Gulf of Mexico since the 2005 hurricane season.
In the fourth quarter of 2006, Noble's net income rose 97% to $199.7 million, or $1.47 a share, on operating revenue of $558.8 million. Income topped analysts' consensus prediction by a penny, but the company's stock ended the day down nearly 4%, to $71.90.
-By Brian Baskin, Dow Jones Newswires; 713-547-9202; brian.baskin@dowjones.com |
