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APA's Unit Ceases Drilling & Cuts Jobs in UK Due to High Taxes

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APA Corporation’s (APA - Free Report) subsidiary Apache announced that it is set to cease North Sea drilling and reduce its British workforce because high taxes have made the operations less competitive in the U.K. However, Apache did not disclose the number of jobs that will be lost as a result of this move. 

The U.K. imposed a windfall profit tax on oil and gas companies in May 2022. In November, the U.K.’s prime minister, Rishi Sunak, doubled the tax to 35%, making the sector's overall tax rate one of the highest in the world at 75%. Profits from oil and gas extraction in the U.K. are subject to the tax until March 2028.

The U.K. government, however, revealed its intention to reduce the windfall tax on oil and gas companies in the event that the price of energy fell below a particular level for six months in a row.

In accordance with the most recent windfall tax, suppliers will only pay 40% in tax if oil prices drop to, or below, £56.91 ($71.40) a barrel for three consecutive months.

Producers in the North Sea have requested the government to amend the Energy Profits Levy to include an oil price floor because it might jeopardize investment and reduce output at a time when Britain is trying to increase domestic production.               

According to an Apache spokesperson, the company is reassessing investments as it is considering the challenging U.K. macro environment with its increasingly expensive and onerous tax and regulatory regime.

Zacks Rank & Key Picks

Currently, APA carries a Zack Rank #3 (Hold).

Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum Corporation (EPM - Free Report) , Eni SpA (E - Free Report) and RGC Resources Inc. (RGCO - Free Report) . While Evolution Petroleum sports a Zacks Rank #1 (Strong Buy), Eni SpA and RGC Resources carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Evolution Petroleum is a development stage company formed to acquire and develop oil and gas fields and apply both conventional and specialized technology to accelerate production particularly in low permeability reservoirs amenable to lateral drilling technology. EPM has witnessed an upward earnings estimate revision in the past 30 days for 2023 and 2024.

Eni SpA is a leading integrated energy major, which operates primarily through three business segments —Exploration & Production, Gas & Power and Refining & Marketing and Chemicals. E has witnessed an upward earnings estimate revision for 2023 and 2024, in the past 30 days.

RGC Resources is a holding company that offers energy and associated products and services through its operational subsidiaries —Roanoke Gas Company and RGC Midstream, LLC. RGCO has thousands of customers through its natural gas distribution companies that serve the Roanoke Valley and Bluefield, Virginia and West Virginia areas. 

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