PJSC Ukrnafta publishes its results for the first quarter of 2018.

Highlights

• An average daily production of oil and condensate as well as gas continues to grow,
• Average daily production of oil and condensate for Q1 is at 3.9 ktonnes and of gas is at 2.9 mln m3,
• Total oil and condensate production volume for the reported period made up 353 ktonnes and total gas production volume was at 262 mln m³,
• Ukrnafta started repaying its overdue tax debt on monthly basis and has already repaid UAH 300 mln for the reported period.

Key developments

• 42 capital workovers and stimulations of oil and gas wells completed,
• The coverage of remote monitoring system reached 94 wells, including the systems expansion on 5 wells with new options for wells control,
• Drilling of two new wells in Sumy and Lviv oblasts approved,
• 11 considerations of the environmental impact assessment (EIA) took place,
• The local budgets of all levels have started to receive share of rent revenues, paid by the company for mineral resources production, since January.

Financial results

Production results

 Mark Rollins, Chairman of the Executive Board of Ukrnafta:

“In the first quarter we continued last year’s positive dynamics and proved once again the efficiency of our strategy. That is a significant increase in our profit. Step by step we are restoring the production volumes. We are working on consistent modernization of its internal structure and processes. At the same time, despite all efforts and court decisions, we failed to receive extension of our licenses that have expired or will expire lately this year. This is a high risk for Ukrnafta’s operations and, thus, puts all achievements under threat.”

Analysis of operational and financial results

Ukrnafta improved significantly its financial results in Q1 2018. Due to the favourable oil price conditions the company succeeded to drive up its net revenue by 26% on y-o-y basis while net profit increased by UAH 1,190 mln up to UAH 1,261 mln.

In Q1 2018, the company paid over UAH 3.3 bln in taxes, including UAH 300 mln of the overdue tax debt. Though there is still no solution (approved by the government) for the tax debt issue, since 2018 Ukrnafta has started repaying it on the regular basis along with all current taxes. At the same time, the company continues to make allocations to reserves for possible fines and penalties related to the rent and other tax arrears accumulated in the previous periods, which totalled UAH 0.9 bln in Q1 this year.

In the reported period Ukrnafta continued to improve its production indicators after the illegally forced suspension of production in six fields in the middle of 2017 due to non-extension of licenses by the State Service of Geology and Mineral Resources. The average daily production of oil and condensate increased by 5.4%, while the gas production increased by 7.4% against Q4 2017. At the same time the average daily LPG production went up by 9.9%.

Meanwhile, on y-o-y basis Ukrnafta decreased the volumes of hydrocarbons production in Q1 2018. The negative trend is because the company has not fully restored the production rate in the mentioned fields as well as because of natural production decline.

In Q1 2018, Ukrnafta continued to work on the base production wells by replacing failed ESPs (electric submersible pump installations). Eight wells had ESPs deployed, resulting with an increase of their daily production by 70.4% up to 42.6 tonnes of oil and condensate per day in average. In total, Ukrnafta had over 300 ESPs in operation. 

Since the beginning of the year Ukrnafta completed 28 capital workovers and 14 stimulation jobs. They included fishing workovers with pumps production tubing, recompletions, casing repairs, commingling of horizons and additional perforation of existing horizons etc. Due to the workovers Ukrnafta produced additional 1,082 tonnes of oil and condensate and 1.935 thousand m3 of gas in the reported period. The stimulations resulted with additional production of 1,920 t of oil with condensate and 181 thousand m3 of gas, in Q1 2018.

Meanwhile, in Q1 2018, eight licenses of Ukrnafta that were not extended on time by the State Service for Geology and Natural Resources expired. The company believes the regulator had to extend all its licenses in accordance with the legislation. Ukrnafta proved its position at the administrative court and its decision has come into force. As of today, the company continues production operations in all fields and pays the rent and other taxes at full extent.

In 2018 Ukranfta will see 27 of its licenses expire which collectively account for 53% of the annual production of oil and condensate and 33% of the annual natural gas production.

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