MARKET REPORT: Windfall tax hike fears sink oil and gas stocks

Shares in North Sea oil and gas firms plunged amid fears over an extension to the windfall tax.

Ahead of Thursday’s autumn statement, Chancellor Jeremy Hunt is expected to hike the levy on energy firm profits to 35 per cent from 25 per cent in a bid to shore up the public finances through tax rises and spending cuts.

This would see the oil and gas sector’s effective tax rate on UK profits rise to 75 per cent from 65 per cent.

In a further blow, the extra windfall tax could be extended to 2028 from 2026. 

The Association of British Independent Exploration Companies (Brindex), which represents 20 UK oil and gas firms, has hit out against the plans and warned it would impact investment in new projects.

Michael Hewson of CMC Markets said: ‘The likes of BP and Shell would probably be able to absorb better due to their global footprint, but would be increasingly problematic for the likes of Harbour Energy and EnQuest who make the bulk of their profits from domestic sources.’ 

Analysts at Stifel added that the windfall tax is an issue of politics rather than policy and would not be removed even if prices fall further.

Shell fell 0.1 per cent, or 2p, to 2358p but BP bucked the trend in the sector, its shares edging up 0.4 per cent, or 2.1p, to 480.5p.

Harbour Energy, meanwhile, tumbled 9.6 per cent, or 36.5p, to 342.6p, Serica Energy plunged 8.6 per cent, or 27.5p, to 292p, EnQuest sank 9.4 per cent, or 2.75p, to 26.55p and Energean slid 3.1 per cent, or 48p, to 1481p.

Ithaca Energy, which floated at 250p last Wednesday in the biggest listing on the London Stock Exchange so far this year, fell 9.9 per cent, or 23p, to 210p

Stock Watch – Cake Box

Cake Box breathed a sigh of relief after sales picked up following a difficult summer.

The maker of egg-free cakes took a hit following warmer weather, falling consumer spending and customers jetting off on delayed holidays.

But business has since proved sweeter with sales up in stores and online in October compared with a year earlier.

Revenue was up 2.1 per cent to £16.8million in the six months to September but profit fell 45.1 per cent to £2million.

 Shares rose 5.5 per cent, or 6p, to 115p.

The FTSE 100 rose 0.92 per cent, or 67.13 points, to 7385.17 and the FTSE 250 inched ahead by 0.03 per cent, or 6.04 points, to 19,622.25.

Informa was among the biggest risers on the blue-chip index after it cheered the return of events following the disruption caused by Covid. 

The publishing and exhibitions organiser said revenue rose 41 per cent in the ten months from January to October 2022.

Informa raised revenue forecasts for the year by £100million to between £2.3billion to £2.35billion. 

Profit is expected to be around £490million to £505million, above the £500million pencilled in by analysts. Shares rose 5.8 per cent, or 31.8p, to 584.4p.

Pharma stocks started the week on a strong footing following a host of positive updates.

AstraZeneca gained 2.6 per cent, or 270p, to 10868p after three of its drugs were recommended for regulatory approval by the European Union. 

Rival GSK gained 3.1 per cent, or 41.4p, to 1365p after the success of a study on its tuberculosis drug.

Cyber-security group Darktrace cheered the strong demand for one of its new products that uses artificial intelligence (AI) to curb cyber-attacks.

Prevent, which was rolled out in August, ‘has seen the longest list of customer opt-ins than for any product launch in its history’.

Shares, however, slipped 0.2 per cent, or 0.7p, to 395.2p.

Beazley, meanwhile, rose 4.2 per cent, or 25.5p, to 632p after analysts at RBC reiterated the bank’s ‘outperform’ rating and raised the insurer’s target price to 775p from 675p. 

The broker said Beazley’s update last Friday demonstrated its ‘underwriting prowess in a quarter challenged by the impact of Hurricane Ian’.

And Carnival was up 5.3 per cent, or 40.6p, to 809.4p after UBS hiked the cruise firm’s target price to 1219p from 588p.

Kainos Group rose 3 per cent, or 43p, to 1481p after the IT firm hailed its ‘transition to a global business’ after a surge in revenue, staff hires and growing demand from customers. 

Revenue surged 26 per cent to £179.8million in the six months to September and profit rose 11 per cent to £27.5million.