Sector movers: Oil stocks extend gains as Budget confirms North Sea tax breaks

Confirmation by chancellor George Osborne of budgetary measures to ease the pain in the struggling oil industry gave energy producers and services stocks another big lift on Wednesday.

The 2015 Budget, the last of the current parliament, revealed new tax allowances worth £1.3bn in total to stimulate investment in the North Sea oil and gas industry amid a slump in prices.

The petroleum revenue tax will be slashed from 50% to 35% to support investment in older fields. Meanwhile, the supplementary charge will be cut from 30% to 20% and backdated.

Oil and gas stocks advanced on Tuesday on speculation ahead of the Budget, and the announcement didn't seem to disappoint, as shares extended gains into Wednesday afernoon. Blue chips Shell, Tullow and BP, all of which have exposure in the North Sea, were in demand in London, along with smaller peers Premier Oil, Parkmead and Faroe Petroleum.

Energy services and equipment groups such as Petrofac and Amec Foster Wheeler were also on the rise, shrugging off another slump in crude prices. Brent was down 2.3% at $53.44 a barrel.

Derek Leith, head of oil and gas taxation at EY, said the news will be "warmly welcomed by a beleaguered UK oil and gas sector".

"The UK Continental Shelf is a mature oil basin and, to remain capable of attracting international investment, it must have a very competitive tax regime. The government has taken a significant step towards creating such a regime today," he said.

In other news, BG Group was trading broadly flat despite announcing first oil from its part-owned Knarr field in the North Sea offshore Norway.

Meanwhile, shares in a number of AIM oil producers such as Stellar Resources, Alba Mineral Resources and Solo Oil rose after an update on their joint-owned Horse Hill discovery in the UK Weald Basin showed further potential oil pay.

Top performing sectors so far today
Construction & Materials 4,730.18 +4.84%
Industrial Transportation 2,896.21 +2.57%
Oil Equipment, Services & Distribution 17,944.33 +2.22%
Tobacco 44,613.40 +2.18%
Electricity 9,108.48 +2.06%

Bottom performing sectors so far today
Mining 13,654.48 -0.93%