Ukrnafta profit jumps 2.7x yoy in 1H15

Ukraine’s top oil producer Ukrnafta (UNAF UK) reported a 29% yoy advance in its top line to UAH 15.54 bln in 1H15, according to its July 27 filing. Its revenue was driven by a 147% yoy surge in ammonia sales (to UAH 2.07 bln), fueled by a 111% jump in ammonia deliveries to 552 kt.

Also increasing was revenue from crude oil sales, which rose 22% yoy to UAH 7.16 bln, although deliveries of crude oil fell 11% yoy to 775 kt in 1H15. Its revenue from oil product sales decreased 8% yoy owing to less volume sold (though the company did not provide volume figures).

The company’s EBITDA jumped 139% yoy to UAH 5.25 bln and net profit soared 169% yoy to UAH 3.91 bln, implying EPS of UAH 26.8 for 1H15. The company reported no debt on its balance sheet and UAH 161 mln in cash, as of end-1H15.

Alexander Paraschiy: Most likely, the company was able to boost its profit owing to both higher realized prices of crude oil and heightened use of its produced natural gas for the production of ammonia. The company operated assets leased from a Privat-related nitrogen fertilizer producer for the sole purpose of  consuming its extracted natural gas “for its own purposes.” The own use of gas enabled the company to avoid selling this gas at a “social” (loss-bearing) price to the government. Instead, the company is selling nitrogen fertilizers at market prices.

As usual, we are restraining ourselves from forecasting the company’s future P&L, given a lot of uncertainties and lack of reliable information about Ukrnafta’s business. In any case, we treat the boosted profit of the company, which usually pays 100% of its dividends, as a positive development for its minority shareholders.