Ukrainian emergency legislation has resulted in a ‘significant’ increase in JKX’s production taxes.
The company assessed the consequences of the emergency legislation passed by the Ukrainian government earlier this year and found that gas production rates had doubled to 55%. The board concluded that it needs to reduce capital expenditure to offset production tax costs of $10million from August through December. These additional costs amount to approximately 24% of the budget for work in the eastern-European country.
The London Stock Exchange-listed business will continue its drilling at Poltava with completion of the deep Elizavetovskoye well E-303 followed by the oil-targeted IG-141. In parallel, its on-going capital investment programme in Ukraine will be reduced, commensurate with the shortfall in operating cash flow attributable to the increase in production taxes.
JKX began analysing the consequence of the legislation in August. It also has offices in Russia, Hungary and Slovakia.