At the beginning of April this year, Petrosannan Company – a joint operating company of NJSC Naftogaz Ukrainy and the Egyptian General Petroleum Corporation – performed hydraulic fracturing work on pilot wells in the concession area in the Western Desert of the Arab Republic of Egypt, thanks to which oil production increased more than 20%, or 600 barrels per day. According to a press release from the Integrated Communications Department of NJSC Naftogaz Ukrainy on Monday, provided that the achieved production volumes and current oil prices ($60 per barrel) are maintained, Naftogaz Group will thus receive additional income of $400,000 per month.
“Only the start of the current well stimulation campaign has allowed us to increase our oil production by 20%. We are planning to use this experience in the future, in particular, hydraulic fracturing of the wells, at other sites operated by Naftogaz Group in the Arab Republic of Egypt,” First Deputy Head of Naftogaz Serhiy Pereloma said.
Naftogaz Group implements hydrocarbon exploration and production projects in the Alam El Shawish East area in the Western Desert and South Wadi El Mahareeth and Wadi El Mahareeth areas in the Eastern Desert of Egypt.
Naftogaz group and Polish Oil and Gas Company (PGNiG) have signed a memorandum of understanding. The partners will jointly consider the possibility of putting together experience and resources to implement a number of projects, primarily in Western Ukraine.
“Naftogaz and PGNiG will primarily focus on exploring opportunities for joint exploration of greenfield areas in Western Ukraine, bordering Poland. In particular, the partners shall allow for cooperation in Berestyanska area, where Naftogaz signed a production sharing agreement with the government at the end of 2020,” the group said in a press release.
Naftogaz said that as part of its strategy approved in 2020, Naftogaz started implementing strategic projects to increase the resource base within the Black Sea shelf, Yuzivska area, the Carpathian region and new areas for which PSAs were concluded.
“By attracting international partners, we intensify the rate of progress of unlocking Ukraine’s resource potential. PGNiG is a public company with high standards that has discovered and is successfully developing a number of fields in Europe. In particular, PGNiG has proven track-record of discoveries and efficient gas production in Poland, in the region bordering Ukrainian Carpathians. At the same time, it has already successfully accomplished projects on expanding its gas producing business to other countries, including strong position in Norway. I am confident that we will be able to achieve mutually beneficial synergy,” Chief Operating Officer of the Naftogaz Group Otto Waterlander said.
“Ukraine, which has one of the largest gas reserves in Europe, offers a very attractive growth potential for upstream companies like PGNiG. We are particularly interested in gas production development in Western Ukraine. This region borders with our operations area in Poland, and our data confirms its potential. Naftogaz has been working there for many years and has considerable experience and valuable geological data,” Vice President of the Management Board of PGNiG SA, Chief Operating Officer Robert Perkowski said.
Gas supply company Naftogaz Ukrainy in April will keep the price of natural gas for household consumers (population) at the current level of UAH 6.86 per cubic meter, and the price of gas within the supplier of “last resort” for the next month will also remain at the March level of UAH 6.99 per cubic meter.
“We are going to offer our clients the same price in April as they had in March. And thus we end the heating season with a stable price,” he said on the air of Channel 5 on Wednesday evening.
At the same time, Kobolev did not say what fixed price the group is ready to offer under an annual contract, which will begin on May 1, 2021, to both the population and wholesale buyers.
“This price has not been determined yet. We have signed the first big contract [with Dmytro Firtash’s Ye Energiya LLC], which contains a pricing formula. The price will be known for sure on April 25 this year,” said the head of Naftogaz.
Kobolev also said that the group’s market share increased by 11 p.p. – up to 13% from August 2020 to the present day.
Representatives of the Naftogaz Group along with the Institute for Partnership and Sustainable Development, on Tuesday at Interfax-Ukraine, announced the start of the Development Energy Grant Competition for the selection of 50 projects of territorial communities and the allocation of UAH 100,000 to them.
“Communities need a modern and high-quality tool that will allow them to develop, to implement development projects that will contribute to the sustainable development of the community and the entire region. It is also interesting and important for us when our regions of production are developing in parallel with our company or at the level,” head of the regional development projects department of JSC Ukrgazvydobuvannia of the Naftogaz group Vitaliy Chudak said.
According to him, this issue is relevant today due to the completion of the processes of decentralization and the increase of local responsibility.
Chudak also said the projects should aim to achieve one of three sustainable development goals: good health and well-being, quality education and sustainable development of cities and communities.
“The common goal is the development of those communities with which we will work, setting benchmarks for other communities that will be familiar with successful implementation cases,” head of the NGO Institute for Partnership and Sustainable Development, project management and fundraising expert Daria Mustafina said.
According to her, this competition is a good example of introducing a close connection between business, government and society and their interaction for a common goal.
The organizers of the competition said that 242 communities from 11 regions of Ukraine are already participating in its first stage, which will last until February 20, of which 90 will move on to the next stage. Six months are allotted for the implementation of the winning projects, and the presentation of the finished projects is scheduled for the end of October 2021.
NJSC Naftogaz Ukrainy in 2020 rendered services to PJSC Gazprom (Russia) in organizing transportation of natural gas through the territory of Ukraine for $ 2.11 billion.
“For 2020, Gazprom fully paid for the annual capacity of the Ukrainian gas transmission system (GTS) for gas transportation. According to the agreement dated December 31, 2019 between Naftogaz and Gazprom, the cost of booking 65 billion cubic meters of annual capacity is $ 2.1 billion. In addition, in the fourth quarter of 2020, Naftogaz additionally rendered services to Gazprom for the use of the Ukrainian gas transportation system, for which it receives over $ 30 million,” the press release of the company said.
According to the company, the total volume of Russian gas transported in 2020 amounted to 55.8 billion cubic meters.
The net consolidated loss of the Naftogaz group in January-September 2020 amounted to UAH 17.034 billion compared to a net profit of UAH 21.31 for the same period last year.
“For the nine months, reported loss was UAH 17.0 billion, compared with a profit of UAH 12.9 billion for the same period in 2019, excluding discontinued operations [gas transit transferred from January 1, 2020 to GTSOU], reflecting lower demand and gas prices,” the company said in a statement Thursday.
According to the report, in the third quarter of this year, Naftogaz’s net loss from continuing operations was UAH 5.49 billion, which is 61.8% more than in the third quarter of last year. The group said that if we exclude the profit from transit during this period in 2019, then the increase in loss will not be so significant – 14.6%.
“Operating cash flow for the quarter was UAH 0.5 billion, compared with a negative operating cash flow of UAH 12.6 billion in Q3 2019 (excluding discontinued operations). For the nine months in a challenging environment, operating cash flow was UAH 16.1 billion, almost in line with the operating cash flow of UAH 16.9 billion in the same period last year,” Naftogaz said.
The group said that after abolishment of the Public Service Obligations (PSO) on August 1, 2020, Ukrainian gas consumers can switch freely from gas suppliers and benefit from market-based pricing, whilst gas intermediaries pay for gas supplies. However, payments for deliveries made before 31 July 2020 and under the PSO remain outstanding which results in provisions for bad debts, UAH 3.7 billion in the nine months. “Provisions for bad debts will likely have again a negative impact on profitability in the next quarter,” Naftogaz said.
According to the report, the group expects to receive of compensation from the state in the amount of UAH 32.204 million in 2020 under a law on cross payments with Ukrnafta recently passed, and this could bring the group to profits at the end of the year.
The group reported that adjusted EBITDA in 9M 2020 amounted to “minus” UAH 1.2 billion versus UAH 26 billion in 9M 2019, while in the third quarter the situation was reversed: this year EBITDA was positive – UAH 0.5 billion versus minus UAH 2.8 billion a year ago.
Naftogaz said that the positive contribution of exploration and production to EBITDA in 9M 2020 amounted to UAH 16.3 billion versus UAH 34.5 billion in 9M 2019, while the negative contribution from commerce was UAH 16.3 billion and UAH 9.9 billion respectively.
“Exploration and production result reflected lower gas prices that were partially offset by lower subsoil royalties as compared to the nine months of 2019,” the group said.
The group recalled that 10.7 billion cubic meters were produced and 12 billion cubic meters of natural gas were sold in 9M 2020.
In addition, Ukrnafta, in which Naftogaz owns 51%, increased the negative result of this year by UAH 2.2 billion, while last year its contribution was positive – UAH 1 billion. Ukrnafta’s result were negatively impacted by lower gas selling prices as well as lower volumes of crude oil sold, according to the report.
At the same time, the group managed to increase EBITDA from natural gas storage to UAH 3.8 billion from UAH 0.8 billion and to maintain a positive contribution of EBITDA from transportation, oil refining and sales of oil products – UAH 1.3 billion versus UAH 1.9 billion in 9M 2019.
“Gas storage reflected higher revenues from pumping and storage services due an increased demand. Oil midstream and downstream was primarily attributable to lower selling prices for petroleum products which were not wholly offset by attributable cost savings over the period,” the group said.
The group’s revenue in 9M 2020 fell compared to 9M 2019 by 6.2%, to UAH 103.17 billion, but in the third quarter it grew by 64%, to UAH 31.77 billion.
“Capital expenditure in the first three quarters of 2020 was UAH 11.8 billion, below the full-year target of UAH 20 billion. Free cash flow was resilient at UAH 4.1 billion,” Naftogaz said.
The group said that in the third quarter of this year capital expenditures totaled UAH 4 billion versus UAH 6.3 billion a year ago.
Its net debt fell from UAH 42.6 billion at the end of 2019 to UAH 19.7 billion at the end of the third quarter, and cash and cash equivalents fell from UAH 77.59 billion to UAH 45.81 billion.
In October-November 2020, the group paid off loans for the amount of UAH 3.36 billion and borrowed UAH 2.67 billion from banks.
Naftogaz Ukrainy unites the largest oil and gas companies in the country. The group is a monopolist in the storage of natural gas in underground storage facilities and the transportation of oil by pipeline throughout the country.
