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required in Kobolyev's employment contract, he stressed. Due to such demands, the updated plan is based on an assumption of no compensation of Naftogaz losses related to public service obligations (PSO), as well as the distribution of 90% of Naftogaz’ 2018 profit, or UAH12.3bn, in dividends to the state (up from a 50% distribution rate indicated earlier). On top of that, Naftogaz forecasts the accumulation of 20bcm of natural gas stockpiles by the start of the new heating season (up from 17bn accumulated last year). The plan also assumes repayment of loans for UAH16.5bn ($590mn). With the updated assumptions, Naftogaz sees its 2019 financing gap at UAH71.3bn ($2.53bn), most of, which it proposes to cover with new debt of UAH63.6bn ($2.25bn), including $0.5bn in Eurobonds and the rest to be borrowed from Ukrainian state banks. “We hope for ... a professional discussion of the realistic ways to cover the company’s financial gap,” Kobolyev added. The company’s end-2018 debt amounted to $2.02bn, Kobolyev reported, which is the lowest level for the last six years. The updated plan forecasts the company’s 2019 net profit at UAH16.0bn, or a 1.2x y/y increase.
Ukraine’s leading oil producer Ukrnafta increased total production of hydrocarbons by 8% year-on-year (a 1.6% growth quarter-on-quarter) to 51,350 boepd in January-March, according to Concorde Capital calculations published on April 25. The company produced 376 tonnes of crude oil and condensate in the first quarter of 0219, which is 6.4% more y/y and 1.2% more q/q, according to its April 24 update. Ukrnafta's production of natural gas reached 290 mcm in January-March, which is 10.6% more y/y and 2.0% more q/q. 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 1.507mn tonnes (up 4.1% y/y) and gas production will reach 1.129 bcm (up 4.3% y/y). Concorde's Alexander Paraschiy believes that 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).
Ukrnafta posts 63x surge in 2018 profit, yet to distribute dividends Ukraine’s largest oil producer Ukrnafta (UNAF UK) generated UAH36.1bn net revenue in 2018, which is 34% more y/y, according to its annual report published on April 25. Its EBITDA advanced 5.4x y/y to UAH9.5bn and net profit skyrocketed 63x y/y to UAH6.4bn. Despite improved P&L, the company did not reach progress in resolving its debt issue to the state, as payables to the budget increased 7% y/y to UAH12.7bn as of end-2018. At the company’s April 25 AGM, shareholders failed to approve the company’s 2018 results and dividend distribution. Commenting on that, Yuriy Vitrenko, the top manager of Naftogaz (which holds a 50%+1 stake in Ukrnafta) and head of Ukrnafta’s supervisory board, said that the company’s 2018 financials were provided to shareholders too late to become familiar with them. Vitrenko also listed the conditions for Ukrnafta shareholders to approve dividend distribution. First, the Cabinet must publish its resolution on dividend distribution for state-owned companies (recall, the media reported on April 24 that the Cabinet decided to order a 50% distribution of 2018 profit). Second, the Cabinet must approve the decision of Ukrnafta’s EGM that allows Naftogaz to purchase natural gas from Ukrnafta. Recall, on March 28, Ukrnafta shareholders decided that Naftogaz will buy 4.06bcm of natural gas from the company, and Ukrnafta will use the proceeds from the deal to repay its tax debt. Alexander Paraschiy of Concorde Capital said in a note: “By postponing dividend distribution from Ukrnafta, Naftogaz is trying to force the government to allow it to buy the natural gas
65 UKRAINE Country Report May 2019 www.intellinews.com