4th Aug 2014 07:34
LONDON (Alliance News) - JKX Oil & Gas PLC Monday said that newly passed emergency budget legislation in Ukraine will substantially increase production taxes for the oil and gas industry in the country until the end of the year.
The Eastern Europe-focused company said the emergency legislation takes effect from August 1 until December 31 and includes a tax increase on gas production which will increase the rate by roughly double to 55%.
JKX Oil & Gas shares were down 11% to 35.75 pence during early trading on Monday.
The oil and gas company's subsidiary Poltava Petroleum Company has four production licences and two exploration licences in the central Poltava region of Ukraine, and is the only non-state oil and gas company with a connection to the major Souyez pipeline transporting gas directly into Ukrainian and European markets.
JKX said that due to the changes to production taxes, its board is evaluating the impact on its ongoing investment programme and will be taking 'operational and financial measures to protect the interests of the company and its shareholders.'
Last week, JKX posted a drop in revenue and profit for the first half of the year, despite an increase in overall production levels, amid lower gas sales prices in Ukraine and a fall in the Ukrainian currency amid continued tensions in the country.
The company said at the time that its major Elizavetovskoye plant upgrade in Ukraine is on schedule to double capacity to 30 million cubic feet per day in the third quarter, while Russian plant capacity modifications is on schedule to increase capacity to 60 million cubic feet per day by year end.
In late July, Ukraine's government stepped down, clearing the way for possible elections in October as the country combats separatists in the east and Russian state-owned gas giant Gazprom continues to insist on payment of the country's gas bills.
In February, Russia upped the price for its gas deliveries to USD485 per 1,000 cubic metres, from USD285 before the ousting of former Ukrainian President Viktor Yanukovych.
Russia said in June that Ukraine owes a total of some USD4.5 billion in unpaid gas bills.
Ukraine is a key transit route for energy flows to Western Europe, and any halt in supplies would affect several EU member states dependent on Russian gas.
By Tom McIvor; [email protected]; @TomMcIvor1
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
JKX.L