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RusPetro Jumps Most Since April on Tax Relief on Tight Oil

RusPetro Plc (RPO), a Russian oil producer, jumped the most in almost four months in London trading after saying 97 percent of its oil output could be eligible for tax relief.

The shares rose by as much as 23 percent after the company said a “substantial” reduction in the Russian Mineral Extraction Tax applicable to tight oil will probably be applied to production from September. RusPetro estimates the tax rate will be lowered by 80 percent for about 74 percent of the company’s Jurassic reserves and 97 percent of its current crude production.

President Vladimir Putin is pushing ahead with measures to tap Russia’s tight oil and offshore resources as core Soviet-legacy Siberian deposits decline. The Russian leader signed off on laws offering tax discounts to stimulate hard-to-recover resources on July 23, according to a government website.

“This is a potential gamechanger for RusPetro,” Chief Executive Officer Tom Reed said from Moscow today. “This isn’t just a field or two, it’s for almost everything we’ve got.”

If the tax relief had been in place for first-quarter output, it would have resulted in an almost 400 percent increase in earnings per barrel of production, the company said today in a statement.

The stock is 59 percent lower than at the start of the year after the company missed an output target and concern grew over the availability of funds for development and debt servicing.

“RusPetro will now have more time to finance and ramp up the development of its 1.8 billion barrels of proven and probable reserves,” Reed said.

RusPetro said average oil and condensate production rose 38 percent in the first half to 5,455 barrels a day from the year-earlier period.

“I’ve never had any doubt about the oil, every well we drilled encountered oil,” Reed said. “The challenge we encountered in 2012 was the economics and that just got a whole lot better.”

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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