The board of JKX Oil & Gas has decided that the combination of Ukrainian government-imposed restrictions on selling its gas to industrial clients and the punitive rate of gas production tax requires the company to suspend its planned 2015 capital investment program in Ukraine until the economic parameters for investment improve, the company said in a news release.
Consequently, the Skytop drilling rig is being stacked following its recent completion of well Ig-140, and operational and ancillary costs reduced.
Further to the announcement of sales restrictions imposed on private gas producers by the Ukrainian Government Decree of Nov. 29, 2014, JKX reports that it sold about 80% of its December gas production capacity to industrial customers, with only 20% of its gas production capacity shut-in during the month.
The market available to private gas producers in Ukraine, however, continues to contract with competition for the increasingly limited number of credit worthy industrial customers becoming intense, the release said. JKX anticipates that gas sales may reduce to less than 50% of its production capacity in Ukraine while the decree remains in force and will necessitate shut-in of a proportionate level of gas production.
At the same time, the Ukrainian temporary level of tax on gas production of 55% has been incorporated into the Ukrainian tax code for 2015, according to the release.
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