A. Oil and gas companies of all sizes are likely able to leverage some aspect of the economic stimulus packages passed by the federal government.
However, when considering available options, you’ll need to factor in that many benefits are mutually exclusive or come with reporting and compliance obligations. For small businesses, two disaster loan programs—The Paycheck Protection Program (PPP) and the Emergency Economic Injury Disaster Loans (EIDL) program—are available to them via the Small Business Administration (SBA). For those facing financial strain as a result of COVID-19, these forgivable loans can help offset a variety of costs. The PPP provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. EIDL loans can be used to cover any necessary financial obligations. Oil companies can apply for loans under both SBA programs as long as they don’t cover the same expenses.
To qualify for a loan under either program, your company must employ 500 workers or fewer (both full-time and part-time), or you must meet the industry size standard set forth by the SBA. The SBA’s size standard for crude petroleum extraction companies, for example, is 1,250 employees or fewer.
Additionally, the Employee Retention Credit (a 50% credit on qualifying wages paid to employees on March 13 through December 31, 2020) is available for employers who do not take advantage of the PPP and either:
- Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
- Experience a significant decline in gross receipts during the calendar
All employers are eligible to defer its social security tax liability due March 27 through the earlier of PPP loan forgiveness or December 31, 2020.
Midsized and larger oil companies may also be eligible for low-interest loans under the $500 billion economic stabilization plan included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Unlike the SBA programs, these loans must be paid back and come with public disclosure requirements.
The CARES Act also includes a number of tax savings opportunities, AMT credits, Net Operation Loss Carryovers/carrybacks, and tax-deductible charitable contributions.
Most recently, the Fed unveiled a new $600 billion Main Street Lending program available to small and midsized businesses with up to 15,000 employees or up to $5 billion in 2019 annual revenues. Principal and interest payments on these four-year loans can be deferred for the first year.
And, on April 23, Congress finalized an additional stimulus package that allocates $484 billion in funding, $320 billion of which is available for small business loan programs.
For more information on how oil and gas companies can take advantage of the SBA’s Paycheck Protection Program, read our Insight.