The Executive Board of PJSC Ukrnafta has submitted to the Supervisory Board of the company the proposal to modernize Ukrnafta’s drilling function. The management proposes to upgrade the company’s fleet of drilling rigs to improve performance and safety, streamline management structure and business processes, increase labor productivity and eliminate redundant functions.
Ukrnafta owns 46 drilling rigs most of which are obsolete and have low mobility; 60% of the rigs are over 20 years old. The company plans to procure or lease 2 new mobile rigs and upgrade 7 existing drilling rigs. The upgraded drilling fleet will enable the company to drill up to 20 wells per year.
The proposal envisages creation of a single drilling organization which will bring together the Okhtyrka, Pryluky and Prykarpattya drilling units. Besides the upgrade of the asset base and optimization of the management systems, the plan envisages optimization of the workforce in line with existing and future operational needs. The employees will be offered alternative employment in other units of the company, retraining, or voluntary retirement program with the appropriate compensation.
As reported, this year the company’s investment resources have been limited due to high royalty rate for oil, unresolved “legacy debt” and lack of decision by the Supervisory Board on the out-of-court sanation plan proposed by the new management. In 9 months 2016 Ukrnafta invested only UAH 390 mln, having paid UAH 5.3 bln in taxes to the state budget. The shortage of investment resources has adversely affected drilling operations, with drilling volume in 2016 declining by 89% compared to 2010. In 2016, Ukrnafta planned to put into operation 4 new wells, however, this plan will be not fully implemented.
According to the company’s estimates, the reduction of the rent tax for oil and condensate from the current 45%/21% to 29%/14% will enable Ukrnafta to reinvest additional UAH 1.5-1.6 bln a year, due to reduction in the tax burden. The additional investment resources will be used to finance a portfolio of projects including drilling of new wells, optimization of pumps, hydraulic fracturing, and reopening of old wells.