The JKX Oil & Gas board has concluded that it will need to reduce capex to offset additional production tax costs of about $10 million in the period, according to a news release from the company.

The news came after the board assessed the consequences of the emergency legislation passed by the Ukrainian government in early August. The legislation imposes a substantial increase in production taxes for the five-month period from August to December 2014.

For JKX, these additional taxation costs amount to about 25% of the company’s budgeted capex program in Ukraine for 2014.

The company said its drilling program continues at Poltava with completion of the important deep Elizavetovskoye well E-303, which will be followed by the oil-targeted IG-141 well in the Ignatovskoye Field. In parallel, its ongoing capital investment program in Ukraine will be reduced, commensurate with the shortfall in operating cash flow attributable to the increase in production taxes.