Ukraine Restrictions Take Toll on JKX
Independent Ukrainian producer JKX Oil & Gas said that the negative implications of recent Ukrainian government actions has led to a decision to suspend its planned 2015 capital investment programme, until the economic parameters for investment improve.
On November 29th, the Ukrainian Government issued a Decree directing major industrial buyers to acquire their gas solely from the Ukraine state-owned gas company Naftogaz, for a three-month period. These buyers included entities were previously contracted to receive gas produced by JKX's Ukrainian subsidiary.
In addition, the Ukrainian placed a tax rate of 55% on gas production, which has now been incorporated into the Ukrainian tax code for 2015.
JKX reports that the market available to private gas producers in Ukraine continues to contract with competition for the increasingly limited number of credit worthy industrial customers becoming intense.
The company anticipates that gas sales may reduce to less than 50% of its production capacity in Ukraine whilst the Decree remains in force and will necessitate shut-in of a proportionate level of gas production.
JKX sold approximately 80% of its December gas production capacity to industrial customers, with only 20% of its gas production capacity shut-in during the month.