Page 70 - UKRRptMay21

encouraging as the comparable number for 2019 would be UAH20.8bn.
Some higher expected achieved price for natural gas should improve the company’s margins in 2021. Its cost-cutting measures will be also helpful for this year’s results, but are likely to undermine its growth, especially in the E&P segment. That said, we see that in the 1-2 year horizon, Naftogaz will maintain its strong balance sheet and slightly improve its operating margins. We retain our neutral view on NAFTO bonds.
Naftogaz group paid UAH20.6bn in taxes to the state and local budgets in January-March 2021. Naftogaz group’s contribution accounted for 8.2% of the state budget revenue in Q1 of 2021. Naftogaz group remains Ukraine’s biggest taxpayer. In 2020, Naftogaz group’s tax and dividend payments to budgets of all levels totaled UAH142.7bn.
JKX decreases hydrocarbon output 17% yoy in 1Q21. JKX Oil & Gas (JKX LN) produced 9,177 boepd of hydrocarbons in 1Q21, according to its April 14 trading update. This is a 7% decline qoq and 17% decline yoy. Most of the decline happened on its Ukrainian assets where production was 3,843 boepd in 1Q21 (down 12% qoq and 28% yoy). The company explains such a result by the absence of drilling activity in the previous year as well as the loss of the IG142 well in mid-February (which produced 321 boepd in early 2021). JKX also stated that it completed the drilling of the IG111 well (with no concrete results so far) and successfully worked over the NN76 well (now producing 243 boepd) in 1Q21. It started drilling a new IG149 well on April 9. In Russia, JKX output remained relatively stable at 5,334 boepd (down 3% qoq and 5% yoy). The company also reported on its high liquidity as its end-1Q21 net cash balance stood at USD 28.4 mln, up from USD 24.3 mln as of end-2020 and USD 14.9 mln as of end-2019.
JKX Oil & Gas (JKX LN) reported on April 28 that its Ukrainian subsidiary received a final judgment from the Supreme Court in favor of the tax authority related to tax claims for 2010.
To this end, the company is obliged to pay $14.1mn to the tax authority. According to the report, the company “is under no immediate obligation to pay the judgement” as another hearing that could allow the authorities to collect the payment “is expected to be heard in late 2022.”
In its recent annual report, JKX stated that the hearing on this case was successful for the company in June 2017, when the Kharkiv Appellate Court upheld the judgement of a lower court in favor of the JKX subsidiary. At the same time, the company has maintained provisions for payment under such litigation.
From the court ruling database, we learned that the Supreme Court cancelled the 2017 rulings of the first-tier and appellate courts that were made in favor of JKX. In this way, the court reinstated the rulings of the first-tier and appellate courts made in 2014, which were not in favor of JKX.
The news is a negative surprise for JKX, which is now very likely to
70 UKRAINE Country Report May 2021 www.intellinews.com