Ukrnafta posts UAH 9 bln in 2016 losses, may sell assets to settle tax debt

The net losses of Ukraine’s leading oil producer Ukrnafta (UNAF UK) swelled 61% yoy to UAH 8.74 bln in 2016, according to its preliminary results posted on April 13. The losses were mostly the result of UAH 11.2 bln in receivables being written off, the company said. In particular, its receivables decreased to UAH 6.2 bln as of end-2016, down from UAH 17.4 bln as of end-3Q16 and UAH 14.2 bln as of end-2015.

Ukrnafta’s revenue dropped 21% yoy to UAH 22.58 bln, which was the result of a hydrocarbon output decline (by about 11% yoy) and lower realized prices. The company’s normalized EBITDA was halved yoy to UAH 2.96 bln.

CapEx amounted to UAH 0.51 bln, which was a slight increase from UAH 0.49 bln a year before, but still far below the level that allows for maintaining stable production. For that reason, Ukrnafta expects further hydrocarbon output decline in 2017. This year, the company hopes its CapEx program will be UAH 2.4 bln, though this amount “will depend on the arrangements concerning the repayment of the company’s tax debt”.

The company’s tax debt increased to UAH 13.2 bln as of end-2016 (from UAH 10.1 bln a year before), even though it managed to increase tax payments by 50% yoy to UAH 8.1 bln. The company’s current liabilities increased 19% yoy to UAH 28.8 bln.

The company also reported on April 14 that management has offered a new tax debt restructuring proposal for the supervisory board’s consideration. The review of the proposal was postponed to allow management to consult with the State Fiscal Service of Ukraine. Management was “instructed by the supervisory board to evaluate the sale of the company’s major assets as an alternative approach to meeting the tax obligations,” it reported.

Alexander Paraschiy: Ukrnafta is creeping even closer to its bankruptcy with no success in recovering its outstanding receivables, coupled with continued accumulation of payables to suppliers and the state budget. It is not much likely that Ukraine’s tax authorities will agree to any long-term restructuring of tax debt, so the option of selling some assets to repay the debt looks more likely now. In any case, Ukrnafta does not look like a going concern any more.