US Companies Say Tax Reform Brings Positive Implications

Reaction from US oil and gas producers – and those investing in US producers – to president Donald Trump’s tax reform legislation is beginning to trickle out, with most saying the implications are positive.

Royal Dutch Shell, in a December 27 statement, said it expects the potential impact of the new legislation, which takes effect January 1, 2018, will be favourable to its US operations, primarily due to the future reduction in the federal corporate income tax rate to 21% from 35%.

“Shell intends to determine and announce the actual impact including any fourth quarter movements, and balance sheet adjustments, as part of its fourth quarter 2017 results,” the company said. “However, on the basis of the third quarter 2017 financial statements, Shell would have incurred an estimated charge to earnings of $2bn to $2.5bn primarily driven by a re-measurement of its deferred tax position to reflect the lower corporate income tax rate.”

Kayne Anderson MLP Investment and Kayne Anderson Energy Development, meanwhile, said the new tax rules will positively impact net asset value (NAV) per share.

Kayne Anderson MLP said NAV per share on December 22 was calculated at $18.57, which included an increase of $1.84, or 11%, as a result of the tax reform bill. Kayne Anderson Energy, meanwhile, said its NAV per share on December 22 was calculated at $17.87, representing an increase of 5.8%, which it also attributed to the enactment of the tax reform bill.

Both Kayne Anderson companies are closed-end investment companies, investing primarily in energy-related master limited partnerships and midstream and upstream energy operators.