Ukrnafta restarts production at Leliakivske field

The State Geology and Subsoil Service of Ukraine renewed the Leliakivske field license belonging to Kashtan Petroleum, a joint venture of Ukrnafta (UX: UNAF UK, SELL), 55%, and Shelton Petroleum, 45%, after shut-in of the field in October 2010, Ukrnafta announced in a press release on Friday. Prior to suspension, the field produced 113.2 mt of oil and condensate, and 26.8 ths m3 of gas per day. Antonina Davydenko: The news is clearly positive for Ukrnafta, potentially improving production that has been steadily declining (oil output -4.1% y-o-y to 1.3 mln mt in 7M11; gas condensate -39% y-o-y to 105 ths mt, and gas -3.7% to 1.3 bln m3.). Assuming no delays in restarting operations at the Leliakivske field, we estimate it could add approximately 2% to Ukrnafta’s oil output and 4% to gas output in 2011. This could potentially add USD 4 mln in revenue this year, which is only a marginal 0.1% of our total forecast for revenue of USD 3.5 bln in 2011. We maintain a SELL recommendation on the stock.