Ukrnafta Improves Net Income Guidance to USD 163-198 mln

Ukrnafta (UNAF: SELL) CFO Vladimir Pustovarov said yesterday that the company improved its net income guidance for 2007 to USD 163-198 mln. At Ukrnafta’s AGM in May, Pustovarov said that the company would decrease its bottom line four times to USD 120.6 mln. Ukrnafta’s net income at the end of 6M07 was USD 80.3 mln (down 2.8 times yoy). Pustovarov also said that by the end of this year the company plans to increase its retail network to 588 outlets. In separate news, via an auction organized by the Ministry of Environmental Protection yesterday, Ukrnafta acquired the licenses to explore and develop the Ilemkivsky and Garkushensky natural gas fields for about USD 49.5 mln and USD 41.6 mln, respectively. Vladimir Nesterenko: Even upgraded, Ukrnafta’s 2007 net income plan remains 2 times below our forecast. USD 90 mln upstream investment looks substantial (1/3 of the company’s 2007 investment plan). Reserves were not disclosed, but definitely acquisition of new licenses will support Ukrnafta’s reserve replacement rate. The major risks in upstream remain capped gas prices and the possibility that production license will be given to some other company.