Ukrnafta’s Oil Extraction Down 2.9% yoy, Gas Output by 4.5% in 1Q08

Ukrnafta (UNAF: SELL) announced yesterday that it had reduced oil and gas condensate extraction 2.9% yoy to 769.3 ths m3 in 1Q08; gas production decreased by 4.5% yoy to 793.3 ths m3. Meanwhile, Ukrnafta posted 1Q08 production of liquefied gas at 49.0 ths mt and stable gasoline at 62.5 ths mt. Vladimir Nesterenko: The company’s 1Q08 results confirm our view that Ukrnafta’s hydrocarbon production will be decreasing in the next few years. Though the extent of the 1Q08 downturn points toward a 2008 annual reduction in output that could exceed our projection of a 1.0% decrease in oil & condensate output and 1.5% drop in gas production. If worse-than-expected output dynamics extend through into the next quarter, we would revise our 2008 forecasts accordingly. Ukrnafta’s 1Q gas processing performance is consistent with our full-year forecast.