Naftokhimik and Halychyna Oil Refineries resume operations

Naftokhimik Prykarpattya (NAFP: N/R) and Halychyna Refinery (HANZ: N/R) resumed oil refining in April, according to Ukrainian News. Last month, the plants refined 26.2 ths mt of oil and 86.0 ths mt, respectively. Vladimir Nesterenko: We keep our long-lived view that Naftokhimik and Halychyna stocks are extremely high-risk investments, mainly due to problems with loading their capacity and the excessive involvement of their controlling shareholder, Privat group, in the management, resulting in unpredictable business decisions. Both are majority owned by Privat group; since 2006 the plants have suffered from insufficient oil supplies. Ukrnafta (UNAF: SELL), 42% owned by Privat can cover roughly 1/2 of the refineries’ needs, while Privat failed to secure supplies of Russian crude since 2006. In late 2007 things got even worse, when Ukrnafta redirected its crude to Ukrtatnafta, the largest and state-controlled Ukrainian refinery, which lost crude supplies from Tatneft. Over 1Q08, Ukrnafta sold around 85% of its crude to Ukrtatnafta.