JKX, Regal undergo single-digit declines in 3Q15 gas production
23 October 2015
Natural gas production by the Ukrainian subsidiary of JKX Oil & Gas (JKX LN) was 3,450 boepd in 3Q15, according to our estimates, based on an Oct. 22 report by the Energobiznes news agency. The result amounted to a 2.3% qoq decline and 9.4% yoy decline in gas output. In September alone, the company produced 3,330 boepd of gas, which is -4.1% m/m and -10.4% yoy.
Regal Petroleum (RPT LN) showed more moderate decline as it extracted about 900 boepd of natural gas in 3Q15, -1.6% qoq and -7.3% yoy. In September, Regal’s gas output declined 2.9% m/m to 930 boepd.
Serinus Energy earlier provided its production data in its quarterly trading update for 3Q15, reporting a 39% yoy (and 1.5% qoq) decline in gas output at its Ukrainian assets to 2,682 boepd. In September, the company decreased its natural gas putput 1.2% m/m to 2,658 boepd, we estimate.
Meanwhile, Ukraine’s biggest private gas producer NGD, formerly part of DTEK (DTEKUA), continues to demonstrate a spectacular increase in natural gas output. In 3Q15, its gas production advanced 66% yoy and 18% qoq to about 22,520 boepd.
Total natural gas production in Ukraine dropped 1.8% yoy to 4.96 bcm in 3Q15 and 1.9% yoy to 14.81 bcm in 9M15.
Alexander Paraschiy: We expect the decline in natural gas output for Regal, JKX and Serinus will extend into 4Q15 as well, given that they significantly reduced their investment projects in Ukraine in the last 12 months. We anticipate the output of the Ukrainian subsidiaries of JKX and Serinus will start recovering in late 2016, provided that the Ukrainian parliament will vote to significantly lower gas extraction tax rates in the coming weeks.
If approved, the new legislation will reduce the tax burden per unit of gas production by more than 2.2x, from UAH 3,630/tcm in September to about UAH 1,600/tcm in December 2015, we estimate. Recall, the parliament approved on Oct. 6 the first reading of a bill to cut the tax rate to 29% from 55%. The approved draft law is likely to be enhanced and voted on in the second reading soon. The revision of the taxation regime for gas companies was one of the government’s commitments to the IMF.
