JKX, Serinus, Regal decrease gas production in Ukraine in 1Q15

Internationally listed gas E&P companies have showed a decline in natural gas output in Ukraine in 1Q15, according to preliminary statistics of the Energy Ministry. The biggest decline in quarterly output was demonstrated by JKX Oil & Gas (JKX LN): gas production declined 20% yoy to estimated 2,935 boped in 1Q15. The company’s results were triggered by poor output in January 2015 (when output fell 34% yoy), while its March data also hints of a declining output trend. In particular, JKX’s average daily gas production declined 4% m/m (-26% yoy) in March to estimated 3,277 boe.

Another big decliner was KUB-Gas, Ukrainian subsidiary of WSE-listed Serinus Energy (SEN PW), whose output declined 19% yoy in 1Q15 (to an estimated 2,743 boepd, net to Serinus’s working interest). The company showed a radical decline in March output to an estimated 2,311 boepd, net to Serinus (-22% m/m and -33% yoy).

Regal Petroleum (RPT LN) demonstrated the most moderate quarterly decline to an estimated 960 boepd in 1Q15 (-7% yoy). Regal was the only company that showed a sequential increase in average daily gas production in March, or up 1% m/m (but still -8% yoy).

Total production of natural gas in Ukraine was flat yoy at 4.86 bcm in 1Q15, while production of gas by private companies jumped 16% yoy to 0.81 bcm. The total increase of gas production in Ukraine is a result of a 1.5x jump in gas production by just two companies, DTEK’s asset Naftogazvydobuvannia and a private Ukrnaftoburinnia.

Alexander Paraschiy: Under-investment of JKX and Serinus into existing wells in Ukraine, caused by an aggressive tax regime introduced in 2H14, is becoming clearly visible now. Hopes for output recovery of JKX are related to a possible decrease of subsoil taxes which are demanded by the IMF. In the case of Serinus’ KUB-Gaz, whose assets are located in the risky Luhansk region of Ukraine, the overall de-escalation of the conflict in Ukrainian Donbas looks much more important to re-start its investmetns and increase output.

Источник: Конкорд Капитал