The price of oil is falling once again today, extending losses that have cut the price of the worlds most traded commodity in half over the past six months.
At time of writing, Brent crude is trading at $53 per barrel, down around 2% on the day, while the price of WTI has fallen to $43.50 per barrel, 1% lower on the day.
However, even though the price of oil appears to be in free-fall,Xcite(LSE: XEL) andGulf Keystone Petroleum(LSE: GKP) are bucking the trend. Shares of Xcite and Gulf Keystone have gained as much as 10% today.
It seems as if investors are clamouring to get their hands on Xcites shares ahead of George Osbornes budget statement tomorrow.
Indeed, many analysts expect the Chancellor to unveil a wave of tax cuts for North Sea producers in tomorrows statement. It believed that the cuts will be made in an attempt tostimulate exploration and production within the region.
Key to this package is likely to be aheadline cut to the regions supplementarytaxcharge, an additional 30% levy on producers profits paid on top of a 30% corporate tax rate.
For Xcite, this could be a game-chaining announcement.
A cut in the supplementary tax rate would improve the economics of the companys key Bentley heavy oil field. A lower level of tax would mean a higher rate of return from the field, which in turn would make the prospect more attractive to prospective partners.
North Sea operators currently pay in the region of 62% to 81% on profits fromproduction on existing fields so even a small cut in the tax rate could make a big difference and complete change Xcites outlook.
While Xcite rises off the back of budget speculation, Gulf Keystone is pushing higher as traders speculate that the company could be gearing up to restart exports once again.
Gulf Keystoneabandoned exports of oil from Kurdistan at the beginning of February, citingdelays in payment from the regions autonomous government. Since then, there has been little in the way of news from the company regarding the negotiations to restart exports.
Additionally, investors are awaiting news from the company regarding its debt restructuring and possible sale to a larger peer.
Nevertheless, as usual investors should approach Gulf Keystone with caution following todays double-digit gain that has no fundamental support. Even though rumours may suggest that news is just around the corner, these rumours often turn out to have no substance behind them.
With this being the case, its clear that Gulf Keystone is a risky stock. Theres no guarantee that an offer will be made for the company, and as a standalone entityitsfuture is uncertain.So, if you are thinking about buying Gulf Keystone, you need to be prepared for volatility this is a high-risk/high-reward company, not suitable for widows and orphans.
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