JKX updates on tribunal decision, its tax debt

JKX Oil & Gas (JKX LN) issued a new statement on Feb. 7 clarifying the ruling of an international court against the Ukrainian government. In particular, the tribunal ruled that Ukraine did not violate the international agreement with the UK by imposing higher subsoil taxes, but it awarded JKX some damages “in relation to subsidiary claims” for a total amount of USD 12.1 mln. The company also admitted that it has outstanding claims from the Ukrainian tax authorities of about USD 32 mln, including a claim for taxes unpaid in 2015 of USD 22.3 mln. It stated that it is continuing to defend its position on these claims in Ukrainian courts.

Ukraine’s Minister of Justice Pavlo Petrenko wrote in his blog on Feb. 7 that the government is considering an appeal of the damages awarded. He commented that the international court recognized Ukraine’s moves those that “ensure adequate payments for the use of natural resources”, adding that “times of penny payments for subsoil have gone.”

Alexander Paraschiy: This is what we anticipated after reading the announcement from JKX yesterday. Recall also that the company has lost a case in the High Administrative Court in Kyiv regarding a USD 10 mln tax claim for the year 2010 (and failed to appeal in the Supreme Court). Now it is very likely to be obliged to pay the USD 22.3 mln tax debt for 2015. All in all, after the reconciliation of the international court award, JKX will owe the Ukrainian government about USD 20 mln. As we concluded yesterday, the international court ruling will not improve the financial stance of JKX much.