Ukrnafta boosts hydrocarbon output 8% yoy in 1Q19

Ukraine’s leading oil company Ukrnafta (UNAF UK) 
produced 376 kt of crude oil and condensate in 1Q19, which is 6.4% more yoy and
1.2% more qoq, according to its Apr. 24 update. Its production of natural gas
reached 290 mcm in 1Q19, which is 10.6% more yoy and 2.0% more qoq. Total
production of hydrocarbons reached 51,350 boepd in 1Q19, according to Concorde
Capital calculations, which is 8.0% more yoy and 1.6% more qoq. The increase
was reached due to production stimulations at its existing wells and
reactivation of some idle wells, the company commented.

Based on interim results, the company updated its
production plan for the full year, expecting that its oil production will reach
1.507 mmt (up 4.1% yoy) and gas production will reach 1.129 bcm (up 4.3% yoy).

Alexander Paraschiy: If the
company’s production plans materialize, this year will be the first in over 12
years in which Ukrnafta enjoys a year-on-year increase in natural gas
production (after halting a 12-year streak in oil production declines in 2018).

While these developments are encouraging, the key
issue for the company remains unresolved tax debt, which might reach USD 1.2 bln, including
penalties. Such debt prevents the
company’s development and puts it under risk of liquidation. Recall, the
company’s shareholders decided at their Mar. 28 meeting to pump needed money
into the company via Naftogaz’s purchase of 4.06 bcm in natural gas from
Ukrnafta. However, Ukraine’s Cabinet has yet to approve such an initiative.