JKX, Regal increase Ukraine gas output 5%, Serinus flat in November

The Ukrainian subsidiary of JKX Oil & Gas (JKX LN) produced 3,345 boepd of natural gas in November (up 5% m/m, down 5% yoy), we estimate based on statistics provided by Energobiznes. In 11M15, the company’s Ukrainian subsidiary produced about 3,460 boepd of natural gas, which was 14% less yoy.

KUB-Gas, a subsidiary of Serinus Energy (SEN PW), produced 3,725 boepd of gas in November (or 2,610 boepd net to Serinus working interest), which is -0.5% m/m and -31% yoy. In 11M15, KUB-Gas produced 3,857 boepd of natural gas (2,700 boepd net to Serinus working interest), which is 29% less yoy.

Regal Petroleum (RPT LN) produced 971 boepd of natural gas in November (up 5% m/m, up 8% yoy). In 11M15, it produced 942 boepd of natural gas, which is 6% less yoy.

Total production of natural gas in Ukraine amounted to 18.2 bcm in 11M15, which was 1% less yoy. Private gas producers boosted gas production 17% yoy to 3.5 bcm. The main growth driver in the private sector was SCM’s gas company NGD, which increased natural gas output 77% yoy to 1.17 bcm in 11M15. Domestic consumption of natural gas in Ukraine was 29.2 bcm (-21% yoy) in 11M15 and was covered by domestic production by 62%, according to our estimates.

Alexander Paraschiy: The performance of private gas producers in 11M15 reflects the government’s policy towards them, with its unaffordable 55% production tax rate (and 28% for Regal) introduced in August 2014 that has yet to be cancelled. We still expect new tax legislation, which is now scheduled to be approved by the end of this week, will result in tax rates being reduced for private gas producers to 29% (and 14% for Regal) since the start of next year. If so, there is a chance that gas producers will rethink their conservative investment plans in the beginning of 2016 and will show a positive gas production trend in the second half of the year.