PJSC Ukrnafta Audited Annual Financial Results for 2015

PJSC Ukrnafta, the major Ukrainian oil producer, announces audited Annual Financial Results for 2015. 

Production

Unit

2015

2014

Change, %

Oil with condensate (main & joint activities)

ktonne

1.671

1.888

(11,5)%

Gas (main & joint activities)

mln m3

1.503

1.737

(13,5)%

LPG

ktonne

154

163

(5,3)%

Motor fuel sales

ktonne

594

677

(12,3)%

Financial  (IFRS)

Unit

2015

2014

Change, %

Revenue

mln UAH

28.762

27.892

3,1%

Gross profit

mln UAH

17.092

13.769

24,1%

Operating profit/loss

mln UAH

(3.514)

2.991

-

Net profit/loss

mln UAH

(5.441)

1.265

-

 

Production and Operating Profit/(loss)

Market share of the company in total oil with gas condensate extraction in Ukraine in 2015 was 67,9%, the share in total gas production 7,6%. Oil & condensate production decreased from year to year by 11,5%. The natural exhaustion of wells and lack of investment in the restoration and modernization of facilities determined the decline in production.

The sharp decline in oil prices versus 2014 was the other main factor impacting the operating result. Oil prices averaged $54/bbl over 2015 vs $96/bbl over 2014.

The resulting operating loss was UAH 3.514 mln vs profit of UAH 2.991 mln in 2014.

 

Net Profit/(loss)

In 2015 PJSC Ukrnafta made a net loss of UAH 5.441 mln according to IFRS vs profit of UAH 1.265 mln in the previous year.

The financial performance was affected by a significant decline in underlying operating profit as reported above. However, the major part of the deterioration in PJSC Ukrnafta’s financials is explained by a number of non-monetray accounting provisions that were carried out in accordance with IFRS rules. Reserves for tax obligations have been accrued for UAH 2,6 bln; reserves resulting from penalty for the late payment of dividends of UAH 1,6 bln; provision for non-performing debt of UAH 6,2 bln, and a number of other adjustments. Although these accounting provisions have had a significant impact on the net profit, the Company’s management considers them necessary after detailed consultation with the Company’s auditors.

It should be noted that dividends of UAH 2,41 bln for the period 2011-2014 were paid to the State budget during the final quarter of the year. All dividends owed to the majority shareholder are have now been paid out.

Despite the reported losses the Company’s underlying business performance was stable throughout the year even under the difficult and volatile market conditions. However Management considers an increased level of investment vital in order to increase production and financial performance.

In 2015, PJSC Ukrnafta was among the ten largest taxpayers in Ukraine. Nevertheless, as has been widely reported, the Company maintains a large tax liability to the State Fiscal Service which it was unable to pay during the course of the year.

Therefore, the Company’s Management has proposed that a financial restructuring under court supervision is implemented as quickly as possible. Such a mechanism of financial recovery envisages the consent of all creditors for debt restructuring and repayment while allowing the simultaneous modernization and growth of the Company. Corporate recovery is also a mechanism to prevent the debt relief and bankruptcy. The relevant proposals were submitted to the Supervisory Board of PJSC Ukrnafta and are now under consideration.

 

Capital Investment

In 2015, the capital investment was UAH 492 mln which is 35,8% less than in 2014. The majority was concentrated in the upstream production businesses. This is far less than the amount required to stabilize production and replace aging plant and equipment. Major new investment will be required in 2016 for drilling and completion of wells, oil and gas pipelines construction, compressor stations, new technology and other production facilities necessary for intensification of PJSC Ukrnafta operational activities. Sustaining capital for the business is estimated to be at least UAH 0,9-1,0 bln even though this will still result in a production decline. Significant new investment has been budgeted for 2016 which will be deployed if market conditions allow.

 

Retail

PJSC Ukrnafta owns 537 petroleum filling stations, which is the one of the largest chains in Ukraine. 138 filling stations are equipped with LPG filling points. In 2015, the share of Ukrnafta in the total sales through Ukrainian filling stations was 17.3% of petrol and diesel fuel; 9.6% of LPG. Profitability was marginal during 2015. It was a very difficult trading year due to the challenging economic conditions in the country as a whole.

 

 

Employee & Social Expenditures

Realizing its social role, the Company pays great attention to protect the interests of employees, their professional growth and health. PJSC Ukrnafta provides substantial support to projects, which are implemented by local communities. The number of PJSC Ukrnafta employees is about 26 thousand people. In 2015, salary budget was UAH 1,98 billion, which increased by 17.3% comparing to 2014. During the year over 4000 employees passed advanced trainings, 1.350 persons received new professions. PJSC Ukrnafta pays great attention to social activities. Budget social expenditures in 2015 was UAH 155,2 mln. First of all, it was the welfare assistance to employees. Collective agreement covers a number of social benefits and guarantees for employees, including financial aid to large families, birth grants etc. In 2015, social facilities maintenance costs were UAH 91,9 mln.

 

Transition Year

2015 was a transition year for the company as a new Executive Chairman joined the company in the last quarter following approval of the Annual General Meeting of Shareholders of PJSC Ukrnafta earlier in the year. This was followed by a renewal of the members and structure of the Management Board which was approved by the Supervisory Board in December.

Early in 2016, PJSC Ukrnafta developed and submitted a new long-term strategy to the Supervisory Board, and has started a program of modernization that includes optimization of management expenditures, as well as an improved procurement strategy and labor safety programme. It is expected that the Company will begin major restructuring activities in the second half of the year.

 

For more information please contact press office: +38 044 239 14 93