After a period of tug-of-war with the Canada Revenue Agency (CRA) over a $1.3 billion tax dispute, Suncor Energy Inc. (USA) (NYSE:SU) has put tax matters to rest. The development comes as a major reprieve for the company and its shareholders given that Suncor was at the risk of losing huge amount of money in back taxes and penalties.
Suncor had been made to deposit $657 million with the CRA ahead of the determination of a case in which the tax agency faulted some of the company’s past financial disclosures. The CRA raised questions over the losses Suncor reported in 2007. The losses related to settlement of derivative contracts. The tax dispute moved to court and the tax court in Canada recently ruled in favor of Suncor, allowing the company to close the chapter on the $1.3 billion tax case.
Investors liked the developed and pushed up shares of Suncor. But growing optimism of price rebound in the oil market is also helping lift oil stocks.
OPEC puts pressure on nonmembers to cut production
OPEC members have agreed to lower their output by at least 1.2 million barrels a day (bpd), about 1% of the global output. They are also pressing on nonmembers of the oil cartel to cut their production as part of concerted efforts to strengthen and stabilize oil prices that have remained depressed for more than two years. OPEC wants nonmembers to cut their production by at least 600,000 bpd.
Russia, a non-OPEC producer, is reportedly committed to the production freeze plan and will lower its output level by 300,000bpd. That leaves the rest of nonmembers outside Russia to trim their production by 300,000bpd to meet OPEC’s target.
If OPEC and nonmembers agree and commit to the production cuts, the outcome should be speedy removal of the global oil supply glut that has subdued oil prices since 2014. For energy companies like SU, Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), rebounding crude prices will be a boon.
Shares of Suncor rose 0.5% to close at $32.50 in the last session. The stock has risen more than 25% since the beginning of 2016, recently rising amid hopes of rebound in the oil market as OPEC works a production cut.