Ukrnafta reports $2.7 mln in net profit in the first quarter of 2017

Ukraine`s largest oil producer, Ukrnafta, posted UAH 71.1 million, or US$2.7 million, in net profit in the first quarter of 2017 (Q1) against a net loss of UAH 510 million, or $19.3 million, year-over-year (y-o-y), according to the company`s press service.

”Ukrnafta recorded net profit at UAH 71.1 million in Q1 2017, which reflects positive trends in the company`s operating activities and stems from a reduction in crude oil royalties from the beginning of this year,” the press service said.

The company`s net revenue grew by 2.4 times over the period under review, to UAH 7.462 billion, or $282 million.

Quarterly oil and gas condensate production shrank by 3.9% to 366,000 tonnes, while natural gas output fell by 6%, to 313 million cubic meters. At the same time, the company managed to increase production of liquefied petroleum gas by 3.3% to 34,600 tonnes, the report said.

”In Q1 2017, the company managed to maintain daily production of oil and condensate at 4,100 tonnes, close to the 2016 level. However, the rate of decline in production of hydrocarbons has decelerated, including due to increased capital investment,” the press services said.

The capital investment grew by 24% in Q1 2017 year-over-year, to UAH 152 million, or $5.8 million, since the company boosted the essential spending on new equipment and maintenance, as well as capital workovers.

”The first quarter results are encouraging – we maintained stability of production and restored profitability of the company. We continue to modernize Ukrnafta, including its drilling organization, which will lead to improvement in efficiency and cost reduction,” said Chairman of Ukrnafta`s Executive Board Mark Rollins, adding that positive short-term results should not distract from the need for financial rehabilitation of the company.

He also noted the problem with the extension of licenses poses a serious risk for Ukrnafta`s business going forward.

As part of the effort to resolve the tax debt problem the management of Ukrnafta has developed an alternative plan of financial rehabilitation and is conducting consultations concerning practical aspects of its implementation. The company continues to take actions to recover overdue receivables and fulfills all its current tax obligations (UAH 2.7 billion in Q1 2017).

”As of today, the State Service of Geology and Mineral Resources of Ukraine has no legal grounds to refuse the extension of the licenses. In March 2017, Ukrnafta filed a lawsuit with Kyiv`s District Administrative Court to obligate the mineral resources agency to extend nine licenses expiring this year,” the press service said.

Earlier, Mark Rollins was appointed Chairman of the Executive Board at Ukrnafta in September 2015. While in office, he was reported to have stabilized the financial situation at the company, which has paid a record high amount of dividends and ensured the current payment of taxes.

The company reported UAH 8.74 billion in net loss in 2016 against a UAH 5.44 billion net loss in 2015. However, Ukrnafta stabilized its daily production of oil and condensate in 2016 at the level of 4,200 tonnes.

In September 2016, Kyiv`s District Administrative Court ordered the State Service of Geology and Mineral Resources of Ukraine to not suspend the issue of special permits to Ukrnafta, in connection with the company`s arrears under payments of royalties for the use of subsoil resources. Despite this, in early April 2017, Ukrnafta had to stop oil production at the Zavodske field in Lviv region over the refusal of the mineral resources agency to extend the relevant permit.

Memo. Ukrnafta is the largest state-owned oil and gas company in Ukraine. It accounts for about 70% of oil and condensate production, and 11% of gas extraction in the country. Ukrnafta is one of the key players in the retail market for petroleum products in Ukraine: the company owns more than 560 fuel filling stations throughout the country.

Ukrnafta`s shares are listed on the Ukrainian Exchange (UX) and the PFTS Stock Exchange (Kyiv). Depositary receipts for company`s shares are traded on the Frankfurt Stock Exchange. 

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