Vermilion Energy Inc. T.VET

Are hedging gains subject to WFT?

[mnztr]

Suely VET can catagorize these are different then sale of NG.

[Quintessential1]

I would think they are as the hedge is just the sale of the commodity at a set price. The only way VET gets a reduction in WFTs is if the Irish Government allows past losses or future investment to reduce them or if they decide to reduce the percentage before they legislate it. GLTA 

[mnztr]

can't they just close the trade finanically before expiry and sell the commodity at spot and declare the gain as a trading gain? none of the commodities brokers are being subject to WFT AFIK. 

[Quintessential1]

Sounds like trying to have your cake and eat it too.  I think the financial instrument is tied to the commodity sale.  It would be an interesting loophole for the bean counters to investigate. GLTA

[mnztr]

Not really, you can buy and sell puts and options, if you sell a covered call, and it expires, it has no impact on the accounting for the underlying secuirty UNLESS you get called. If you close out the call before it has no impact. 

[Quintessential1]

I mean tied to the commodity sale by the government just by the nature of the business.  If you are registered as an oil and gas exploration company in Ireland and then try to claim that you were earning income from investments and not oil and gas exploration they are going to find it fishy. I think that the best VET can hope for is firstly a reduction in the rate paid based on the fact that

[mnztr]

they probably have or can have a seperate subdivision do the hedging. 

[Moemoney42]

I agree Quint, VET would be better off if they, as well as other producers, took the course of reducing the tax with previous losses and cap-ex. I think if all the companies in this sector collectively stand their ground, the WFT could be either reduced, and/or some of the normal business deductions would be included to minimize the tax bill..