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LONDON (Alliance News) - Cadogan Petroleum PLC Tuesday said it doesn't expect emergency increases in oil and gas industry production taxes in Ukraine to have any material impact on its financial position, operations or work programme.
The statement comes just a day after larger peer JKX Oil & Gas PLC, which also operates in Ukraine, said it 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,' following the changes to production taxes.
Cadogan Petroleum shares were up 13.6% to 11.79 pence on Tuesday.
On August 1, the Ukrainian government increased production taxes for the industry as part of its emergency budget legislation, including a tax increase on gas production which will increase the rate by roughly double to 55%, and a tax on oil production which will increase the rate to 45%.
For gas wells put on stream after August 1, a coefficient of 0.55 will be applied against the rates for the first 2 years of production.
Oil and gas explorer and producer Cadogan Petroleum, which has significant working interests in 11 licence areas covering 14 fields mainly in the west and central regions of Ukraine, said that based on current production levels and given its current cash position of USD47.0 million, the increase in rates until the end of 2014 will not have a material effect on the group's financial position, operations or work programme.
The company said it will continue to evaluate the impact of the changing fiscal environment in Ukraine and take measures to protect the interests of the company and its shareholders if necessary.
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.
Cadogan also said on Tuesday that due to a reverification of its drilling coordinates, the start up of drilling at company's planned first well in the Debeslavetaska licence will be slightly delayed to November, from September.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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