Phnc Unaf Update June 7 2010
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8/4/2019 Phnc Unaf Update June 7 2010
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UKRNAFTA:Milking the Cash Cow
Serhiy Petrenko | [email protected]
E Q U I T Y
R E S E A R C H
Oil & Gas
June 7, 2010
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Company Update
June 07, 2010
Ukrnafta: Milking the Cash Cow
Ukrnaftas oil prices rise. In the state Budget Law for 2010, passed
in late April, Ukraine pegged domestic oil prices for state-owned
companies to those of imported crude. We estimate that higher oil prices
will not only off-set the negative impact from higher royalties, but also
increase Ukrnaftas revenues and strengthen margins. We also believe
the government will be able to sustain the pegging procedure in the
future since Ukraines President, Parliament and government are
currently acting in concert and pursuing the same agenda.
Affordable increase in oil royalties. In the same state Budget Law for
2010, Ukraine raised oil royalties to boost state budget revenues.
According to the law, oil royalties will rise 79% Y-o-Y in 2010. However,
we estimate that the increase in royalties will be much milder
(26% M-o-M in May) as world oil prices declined from above $80/bbl to
slightly above $70/bbl.
All-in-all positive. The overall impact of all value drivers is positive for
the company, we estimate. Lower production output will be off-set by
revenues from resumed sales of natural gas, while growing world oil
prices will support the companys overall economics, enabling
stakeholders to continue milking the Ukrnafta Cash Cow. The
government will collect significant revenues from royalties and other
taxes, while private shareholders will continue to enjoy high margins and
tangible dividends (See Figure 1 to the right).
Rated with BUY. We use a DCF valuation, as latest developments,
pegged oil prices in particular, significantly reduce future uncertainty and
enable us to produce reliable forecasts. We therefore update our target
price from $58.6 to $60.8 and retain a BUY rating for the stock.Upside potential of up to 96%. According to our DCF model, the
company has an upside potential of up to 96%. As outlined in our previous
report Ukrnafta: two catalysts remaining, higher oil prices and resumed
gas sales are the key value drivers of the companys stock. At the same
time, we also assessed the negative impact of a heavier royalty regime
(See figure below).
Figure 2. Breakdown of Ukrnaftas value, $mln
Source: Phoenix Capital estimates
2,876
169309
275
320
186
3,797
1,600
2,040
2,480
2,920
3,360
3,800
Status Quo Higher Royalty
Pegged OilPrices
Gas atUAH945
Gas atUAH1857
Compens. forPast Gas
Total
Current M.Cap of $1,680mln
Target M.Cap of $3,291mln
Potential Upside of 96%
Status Quo represents TP before increase in royalties and other items
Current M.Cap of $1,680mln
Potential Upside of 96%
Status Quo represents TP before increase in royalties and other items
Figure 1. Natural gas prices to rise
Source: Source: Energobusiness, Phoenix Capital
0.0
7.3
14.5
21.8
29.0
36.3
43.6
50.8
-
20
40
60
80
100
120
140
2Q2009 3Q2009 4Q2009 1Q2010
EBITDA, $ mln (LHS)Oil realisation average price, $/bbl (RHS)
Ticker UNAF
Current Price, $ 31
Target Price, $ 60.8
Potential Upside, % 96%
M.Cap, $mln 1,679
EV, $mln 1,685
Net Debt, $mln -5
Shares out, mln 54Free float, $mln 87.352 week low, $ 14.852 week high, $ 38.9
Avg. D. Trading volume 6M, $ ths 485 ADR / GDR ratio 1:6
Web: www.ukrnafta.com
Source: Bloomberg, Phoenix Capital estimates
Figure 3. Ukrnafta stock perfomance
Source: Bloomber, Phoenix Capital estimates
15
19
23
27
31
35
39
55
70
85
100
115
130
145
9-Mar-10 6-Apr-10 4-May-10 1-Jun-10
UX Rebased , (LHS)
UNAF, $ (RHS), % (LHS)
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Company Update
June 7, 2010
Valuation SummaryWe believe that the following series of events now provide a good basis
for DCF valuation:
Ukraine introduced a new law requiring Ukrnafta to sell oil at
auction at market prices (effectively pegging it to Urals).
The company complied with the law and started selling its oil at
market prices ($67/bbl on May 31, 2010).
Major shareholders of the company signed the Agreement on
Understanding and Cooperation (AUC) to ensure efficient and
predictable cooperation in the future.
The above mentioned events reduce uncertainty surrounding the oil
pricing issue and enable us to forecast the companys cash flow with in a
reasonable margin of error.
We therefore use the DCF valuation to fine-tune our view and update our
target price to $60.8 (from $56.9) - retaining a BUY recommendation for
the stock.
The figure below shows share price sensitivity with the most important
value drivers, oil and gas prices:
Figure 4. Share price sensitivity, $
Base Oil Price in 2010, $/bbl
GasPrice,
$/mcm
44 54 64 74 84
20 47.6 51.7 55.7 59.7 63.8
70 50.2 54.2 58.3 62.3 66.3
120 52.7 56.8 60.8 64.8 68.9
170 55.3 59.3 63.4 67.4 71.4
220 57.8 61.9 65.9 70.0 74.0
Source: Phoenix Capital
Finite reserves, finite forecasting period. In our DCF model we take a
conservative approach and assume finite reserves along with a finite
forecasting period of 21 years which takes into consideration the current
Reserves-to-Production ratio of 19 and insignificant additions to the
companys 2P Reserves going forward.
We also note that the assumed forecasting period of 21 years does not
account for possible production from less efficient deposits (20 out of 98)
which were not included in the 2P reserves of 695mmboe.
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Company Update
June 7, 2010
The figure below outlines our DCF model with a breakdown of the
forecasting period into 2010-2018 and 2019-2030.
Figure 5. DCF valuation summary, $ mln
2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E
Net revenue 1,855 2,180 2,387 2,502 2,602 2,666 2,681 2,699 2,714
EBITDA 583 658 720 753 779 796 801 807 812
EBIT 500 565 619 649 675 691 695 700 704Income tax expense (121) (136) (150) (163) (176) (187) (195) (205) (216)
Tax adjusted EBIT 379 429 469 486 499 505 500 494 487
D&A 83 93 101 104 104 105 106 108 108
CapEx (105) (112) (113) (111) (108) (106) (107) (106) (106)
Change in working capital (29.1) (25.1) (18.5) (35.0) (37.3) (43.4) 0.4 25.2 3.9
Unleveraged free cash flow 328 385 439 443 457 459 500 522 494
WACC, % 13.5% 13.5% 13.5% 13.6% 13.6% 13.6% 13.6% 13.6% 13.6%
Present value of free cash flow 304 314 316 280 254 225 215 198 165
PV from 2010-2018 2,270
Terminal growth rate n/a
PV from 2019-2030 1,021
Terminal WACC n/aEnterprise value 3,291
Net debt -5
Equity value 3,296
Target price, $ 60.8
Current share price, $ 31.03
Upside to the fair share price, % 96%
We used a weighted average cost of capital of 13.5%. Our WACC is
based on an equity risk premium of 5%, a yield of 3.5% for 10-year US
Treasury bills, a sovereign bond spread of 5% and specific for the industry
beta (adjusted for the company risks) of 1.
Explanation of selected assumptions
We assumed that starting from 2012 the company will be paying out
dividends at a 30% payout ratio, as required by Ukrainian legislature.
While we expect a dip in production this year (12.2% for natural gas and
11% for oil and gas condensate), we assumed that starting from 2011,
production of hydrocarbons will decline at 2.5% p.a. a natural decline
rate.
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Company Update
June 7, 2010
Figure 6. Model Assumptions
Units 2007 2008 2009 2010E 2011E 2012E
Production
Oil
annual mmboe 20.9 20.0 18.4 16.4 16.0 15.6
average daily boepd 57,214 54,862 50,464 44,913 43,790 42,695
Gas
annual bcf 114 112 104 91 89 87
average daily mmcfpd 313 306 285 250 244 238
Gas Condensate
annual mmboe 2.46 2.57 2.47 2.41 2.35 2.29
average daily boepd 6,732 7,039 6,777 6,608 6,442 6,281
Total annual production mmboe 42.4 41.2 38.3 34.0 33.2 32.4
Realizations
Oil mmboe 19.7 18.4 17.6 15.7 15.3 14.9
Gas bcf 28 0 86 76 74 72
Gas Condensate mmboe 0.52 0.48 0.46 0.44 0.43 0.42
Prices
Oil $/bbl 57.3 72.8 25.2 64.1 73.7 81.1
Gas $/mcf 1.79 - 1.05 0.69 3.39 3.92
Gas $/mcm 63.1 - 37.2 24.5 119.6 138.3
Reserves mmboe 787 755 724 696 662 628
Macroeconomic assumptions
UAH / USD exchange rate, period avg. UAH/USD 5.05 5.35 8.11 7.90 7.65 7.55
UAH / USD exchange rate, eop UAH/USD 5.05 7.70 8.00 7.80 7.50 7.60
Ukrainian CPI % 16.6 22.3 12.3 10.1 15.0 12.0
Source: Company, Phoenix Capital estimates
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Company Update
June 7, 2010
Value driversBelow we detail key value drivers used in the DCF model and provide
rationale behind our assumptions.
Ukrnafta oil prices converge with Urals
In past years, Ukrnafta was selling its oil at a discount to market prices.
However, we are confident that the company will now be selling its oil at
market prices (Urals) for the following reasons.
Because the law says so. The government introduced legislative
changes that require state-owned oil and gas companies, Ukrnafta in
particular, to peg its oil prices to those of imported crude oil. The pegging
was stipulated in the State Budget Law for 2010 and some other
legislative acts. In essence, the pegging is enforced via a somewhat
complicated legislative procedure of setting the starting price for oil.
However, the starting price is in essence set at a weighted average priceof Urals plus a premium, both calculated by state authorities.
Below we detail several important aspects of the pegging procedure:
I. Oil and gas condensate of state-owned companies must be sold
at auctions.
II. Starting price for oil and gas condensate is determined by the
State Customs Service of Ukraine (SCSU) as a weightedaverage customs price of imported crude (Urals) for the 15-day
period preceding the date of application for the auction. A
premium for oil quality (as determined by the government,
currently $2.32/bbl) will be included in the starting price.
III. Oil may not be sold below the starting price, which is determined
by CSU (see p. ii).
IV. Selling at below market prices entails a penalty (to the state
budget), which is equal to the difference between the starting
price and factual price.
V. The terms of supplies must be EXW at the producers facility,
which means that access to third party facilities (previously a
serious hurdle for buyers) will not be needed.
The state has an incentive to ensure market prices . We believe that
the government has several incentives to ensure market prices. For one,
the government is eager to patch up its budget with additional VAT
revenues from higher oil prices. Secondly, since the new government
seeks a better relationship with Russia, the pegging procedure is needed
to protect Russian oil companies, which were previously at a disadvantage
as Ukrainian private companies bought cheap Ukrnafta oil.
Ukrainian legislature requires Ukrnafta oil bepegged to Urals
Weighted average
customs price of
Urals
Premium
for
Quality
Starting
Auction
Price
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Company Update
June 7, 2010
Latest oil auction confirms the notion of higher oil prices. Ukrnafta oil
was sold at market prices ranging from $67/bbl (starting price) to $68/bbl
in an auction that took place on May 31, 2010. The average realization
price rose by almost $20 (40%) from $48/bbl in April to $67/bbl in May
(see Figure 7 below).
Figure 7. Ukrnafta oil is sold at market prices
Source: Bloomberg, UICE, UKRSE, Phoenix Capital estimates
Risks are minor. Based on historical evidence, oil auctions can be
cancelled, rescheduled and oil price reduced. However, we believe these
risks are minor or short-lived. With strong support from both the President
and Parliament, the current government is more than capable of ensuring
Ukrnafta oil is sold at market prices.
Furthermore, as opposed to a previously challenged governmental
resolution (which imposed pegging of oil prices), the current pegging
procedure is introduced via the budget law, a legislative act with much
more clout. Therefore, we expect Ukrnafta will not challenge the pegging
procedure and will comply with the law by selling its oil at market prices.
Legislative loopholes will be patched. The pegging procedure currently
has no means to mitigate the risk of overstated oil prices, that is, the risk
of starting oil prices not being attractive to the market. Since the period to
estimate starting oil prices precedes the auction, oil can potentially be
offered at prices above the declining market (as it actually happened on
May 26 when oil was offered at $81/bbl while Urals already corrected and
traded at below $70/bbl). In this case, no bidder will be interested in
buying oil above the market.
Subsequently, if oil is not sold at the first and additional auctions in the
same month, state-owned Naftogaz must act as a buyer of last resort
purchasing unrealized volumes at the starting price of an additional
auction. Although the procedure has not been tested in practice, we
believe that Naftogaz will be reluctant to absorb losses associated with
overstated starting prices.
Therefore, we expect that the government has noted the issue of the failed
May 26 auction and will patch up the procedure to mitigate this risk of
overstated auction prices.
10
20
30
40
50
60
70
80
90
May-09 Jun-09 Aug-09 Sep-09 Oct-09 Dec-09 Jan-10 Feb-10 Apr-10 May-10
UralsUkrnafta crude oil price
$/bbl
May 31 - $67/bbl
$48/bbl
40% increase
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Company Update
June 7, 2010
Natural gas issue will be fixed
In the last several years, the company has been supplying natural gas
with off-take flowing to Naftogaz without getting paid for most of the
output. To rectify the problem, Ukrnafta initiated a series of legal actions
and made headway in what would lead to compensation for past supplies
at reasonable prices. The Ukrainian regulator has already raised the priceof natural gas for the company, but only by a mere 5% to UAH 210/mcm.
Ukrnafta is currently undertaking necessary actions to renegotiate gas
price and compensation for past supplies. Should the company succeed in
this endeavor, incremental payments for gas supplies from previous years
will add from $186 mln to $1.6 bln in value to shareholders.
Below we detail the essence of the natural gas issue, as we see it:
I. Ukrainian law requires that state-owned oil and gas producers
(with a state stake of 50% or above) supply their natural gas to
Naftogaz of Ukraine for the final use of residential consumers.
II. Residential users consumed 16.6 bcm in 2009, while state-owned Naftogaz produced 19.3 bcm. Of the latter volumes,
Ukrnafta produced 2.9 bcm with most of domestic gas (16.4 bcm)
coming from Ukrgasdobycha and Chernomorneftegaz, which are
both 100% state-owned. Therefore, it appears that only marginal
volumes of natural gas produced by Ukrnafta are required to
close the gap between production of fully state-owned companies
and residential consumers.
III. Prices for natural gas produced by state-owned oil and gas
producers, including Ukrnafta, are set by the National Electricity
Regulatory Commission (NERC) and capped by a regulated retail
tariff for residential users.
IV. Starting from January 2008, the tariff for Ukrnaftas gas was set
at the rock bottom level of UAH 199/mcm. In May 2010, NERC
marginally increased Ukrnaftas tariff to UAH 210/mcm.
Residential tariffs range from UAH 495/mcm to UAH 1,795/mcm.
V. According to the company, low regulatory gas tariffs do not cover
relevant costs, which we estimate at UAH 820 or slightly above
$100/mcm (See Figure 8).
Ukrnafta gas tariffs to rise. We believe that the company will succeed in
renegotiating higher gas prices with state authorities for the following two
reasons:
First, the State Budget Law for 2010 stipulates that state-ownedcompanies, Ukrnafta in particular, sell their gas to Naftogaz of Ukraine at a
price that covers substantiated costs and profit. Since todays regulated
gas price does not cover substantiated costs (see Figure 8), the company
will be able to use the law to its advantage and achieve a higher gas price.
Second, the requirement to sell natural gas at regulated tariffs to Naftogaz
will be lifted for all gas producers according to the Program for Economic
Development for 2010-2014 proclaimed by President Viktor Yanukovych.
Therefore, we assume that Ukrnaftas realized prices for natural gas will
rise to $120/mcm (to cover costs and provide a reasonable return of 15%)
in 2011 and will be CPI adjusted going forward.
Figure 8. Natural gas prices to rise
Source: Source: NERC, Company, Phoenix Capital
0
20
40
60
80
100
120
2007 2008 2009 2010A
Regulated tariffs for Ukrnafta, $/mcmRetail tariff for residential users, $/mcm
Total Ukrnafta Production Costs, $/mcm
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Company Update
June 7, 2010
Compensation for past gas supplies. We estimate that compensation
for unpaid gas supplies may range from $186 mln to $1.6 bln, depending
on the price assumed. However, we conservatively assume that
compensation will do no more but offset cash outflow to pay out dividends
in the amount of UAH 5 bln for the period 2006-2008. In other words,
possibility of compensation for the past gas supplies at market prices - left
outside of our model as a potential upside to our valuation (See Figure 2on the first page of this report).
Royalties
Royalties, also known as production-based taxes, amount to a large
portion of total production costs and therefore have a direct impact on the
companys value. Oil royalty paid by Ukrnafta in 1Q2010 accounted for
approximately 35% of oil price of around $49/bbl (see Appendix 1).
In the State Budget Law for 2010, passed in late April, Ukraine also raised
oil royalties to increase state budget revenues. According to the law, oil
royalties will rise 79% Y-o-Y in 2010. We acknowledge that the increase in
royalties will have a negative impact on the company, but estimate that the
increase will be much milder due to declining world oil prices to which
royalties are pegged in Ukraine.
The figure below simplifies the royalty setting mechanism in Ukraine.
Royalties are effectively pegged to fluctuations in Urals via an adjustment
coefficient. The coefficient is indicated in the figure below and is estimated
on a monthly basis by the Ministry of Economy of Ukraine based on an
average price of Urals (Urals Northwest Europe Crude Oil Spot and Urals
Mediterranean Crude Oil Spot on the International Petroleum Exchange
as reported by Bloomberg) for any given month.
Figure 9. Royalty setting mechanism in Ukraine
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Company Update
June 7, 2010
Furthermore, higher royalties will be offset with a premium by the increase
in Ukrnafta oil prices. As shown in the figure below, oil royalties are
expected to rise only by $5.6/bbl M-o-M in May, which is rather affordable
compared with the $20/bbl increase in oil prices observed at an auction in
the same month. Further increases in royalties will depend on world oil
prices, Urals in particular, as explained above.
Figure 10. Affordable increase in oil royalties, $/bbl, horizons less than 5km
Source: Ministry of Economy of Ukraine, Company, Phoenix Capital estimates
There is a risk that heavier royalties will affect the economics of selected
wells or production in general. Consequently, fewer new wells may be
coming online while older wells can be choked resulting in lower
production output in the mid to long run.
However, we believe that higher oil prices will support the economics of
Ukrnafta production and offset the increase in royalties with premium left
to shareholders.
19.2 18.6 18.9 20.121.7
27.3
0
5
10
15
20
25
30
Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10E
All-in-all, this can be another choke in the well
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Company Update
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Corporate governance
We believe that the risk of reemerging corporate conflict is minor in the
foreseeable future.
First, in February 2010, the two largest shareholders state-owned
Naftogaz and private Privat Group signed an Agreement on
Understanding and Cooperation, whereby resolving outstanding corporate
issues. The state now controls Ukrnaftas Supervisory Board while Privat
Group controls the Board of Directors.
Second, the company is complying with increasingly tougher regulations
by paying higher royalties and other charges to the state and regional
budgets.
Therefore, there is a low risk of reemerging corporate conflict, in our view.
Based on historical evidence, the company can challenge in court the
procedure of pegging oil prices to those of imports. We regard this risk as
minor since the current Cabinet of Ministers, to the contrary of the
previous Cabinet, enjoys support from both the President and Parliament.Furthermore, as opposed to a previously challenged governmental
resolution, the pegging procedure is now introduced via the budget law, a
legislative act with a much more clout.
Issue at a glance.
Ukrnafta is effectively controlled by the second largest
shareholder (42%), Privat Group, which has a loyal
management in the company. The largest shareholder
(50%), state-owned Naftogaz, has limited control over the
company. Disproportionate (with the holding stakes) power
over the companys business poses a threat of corporate
conflict, should the state wish to gain control in the
company.
Risk of challenging pegging procedure incourts is minor
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Company Update
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Selected Financial Items
Income Statement, $mln 2006 2007 2008 2009 2010E 2011E 2012E
Net revenue 1,659 976 1,757 1,230 1,855 2,180 2,387
COGS, incl. D&A (808) (502) (1,249) (1,032) (1,206) (1,439) (1,575)
Gross profit 851 475 508 199 649 741 812
Gross margin 51% 49% 29% 16% 35% 34% 34%
EBITDA 748 457 484 164 583 658 720EBITDA margin 45% 47% 28% 13% 31% 30% 30%
D&A (114) (117) (117) (81) (83) (93) (101)
EBIT 634 340 367 83 500 565 619
Financial income (expense) 13 (7) (4) (1) 4 5 6
Profit before tax 630 316 347 68 483 546 599
Income tax expense (152) (71) (77) (21) (121) (136) (150)
Net profit 478 245 269 47 361 408 447
Net margin 29% 25% 15% 4% 19% 19% 19%
Dividends - (0) (0) - (304) (351) (124)
Balance sheet, $mln 2006 2007 2008 2009 2010E 2011E 2012E
Assets
Long-term assets 1,463 1,547 1,020 982 1,028 1,086 1,085
PPE 1,215 1,252 830 813 855 906 907
Intangible assets 1 3 2 3 3 3 3
Other long-term assets 247 292 189 166 170 177 175
Total short-term assets 395 535 656 1,374 1,527 1,352 1,445
Inventories 196 255 274 334 332 326 307
Accounts receivable 109 187 306 897 1,034 859 688
Cash & cash equivalents 75 83 69 102 108 125 410
Total Assets 1,860 2,085 1,680 2,360 2,560 2,442 2,534
Liabilities & Equity
Equity 1,508 1,766 1,347 1,347 1,439 1,554 1,855Share capital 3 3 2 2 2 2 2
Retained earnings 1,243 1,488 1,164 1,168 1,256 1,364 1,667
Reserves & other 263 275 181 177 181 189 186
Liabilities 352 319 333 1,014 1,121 888 679
Long-term liabilities 193 159 5 69 67 66 62
Long-term debt 193 159 0 45 43 41 37
Other long-term liabilities 0 0 5 24 24 25 25
Short-terms liabilities 158 160 328 945 1,053 821 616
Short-term loans 0 0 19 0 0 0 0
Accounts payable 29 16 24 29 35 42 4
Other short term liabilities 129 144 284 916 1,019 780 571
Total liabilities and equity 1,860 2,085 1,680 2,360 2,560 2,442 2,534
Cash flow statement, $mln 2006 2007 2008 2009 2010E 2011E 2012E
Operating cash flow 575 143 37 (302) 415 476 530
Investment cash flow (265) (101) (89) (39) (104) (110) (114)
Financing cash flow (250) (33) 59 370 (307) (355) (127)
Changes in cash 60 9 7 30 4 12 289
Ratios and analysis 2006 2007 2008 2009 2010E 2011E 2012E
EV/Sales (x) 2.03 x 4.45 x 1.36 x 0.70 x 0.88 x 0.75 x 0.68 x
EV/EBITDA (x) 4.5 x 9.5 x 5.0 x 5.2 x 2.8 x 2.5 x 2.3 x
P/E (x) 6.8 x 17.4 x 8.6 x 19.6 x 4.7 x 4.1 x 3.8 x
P/BV (x) 2.2 x 2.4 x 1.7 x 0.7 x 1.2 x 1.1 x 0.9 x
ROE, % 32% 14% 20% 3% 25% 26% 24%
EPS, $ 8.8 4.5 5.0 0.9 6.7 7.5 8.3
Dividend payout ratio, % 0% 0% 0% 0% 84%* 86%* 28%
* Distribution of dividends for 2006-2008
Source: Company, Phoenix Capital estimates
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Company Update
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Appendix 1. Economics of Ukrnafta oil production
Source: Company, Phoenix Capital estimates
7.1
2.3
17.8
14.0
7.5
Net ProfitNet Income represent an amount which is
calculated as a remainder after subtracting fromnet oil revenues all relevant expenditures
SG&ASG&A include sales, general, administrative andother expenditures from ordinary operatingactivity
Oil royaltiesOil royalties account for about 35% of Ukrnafta selling priceassumed at $49/bbl.
After an increase in royalties to around $28/bbl and an increasein ol price to about $67/bbl royalties will constitute 41%, while
net margin should remain the same
Production Costs
Production costs include materials, energy, laborcosts and depreciation charge
Other taxes, exl. VAT
Other taxes include income tax and various fees andcharges, such as subsurface assets use charge,land fee, exploration charge and other
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Company Update
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Appendix 2. Regions of Ukrnafta Production Activities
Source: Company, Phoenix Capital estimates
257/8
390/23
508/7
367/68
253/63
190/23
343/16
209/9
102/0
239/22
118/12
170/10
184/33
Sumy
Kharkiv
Kherson
Odessa
Poltava
Lviv
Ivano-Frankivsk
326/17157/5
250/18
368/29
149/30147/22
341/63
229/28
163/12
139/9
159/19
xx (yyy )
Oil-refineries (OR)
Bulk-Oil Terminal
Oil transportation to OR by
tank-wagon
Oil flowdirections
Oil and Gas Production Enterprise
Oil transportation to OR by tank
truck
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Company Update
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Appendix 3. Valuation Multiples
Share price,$
EV M.Cap EV/Sales EV/EBITDA P/EEV/
2P Reserves,$/boe
Company Ticker Region of operation 2009 2010E 2011E 2009 2010E 2011E 2009 2010E 2011E 2009
UKRAINIAN Oil & Gas Companies
Cadogan Petroleum CAD LN Ukraine 0.28 14 65 3.9 x nm nm neg n/a n/a neg n/a n/a n/m
JKX Oil & Gas JKX LN Ukraine, Russia 3.36 504 579 2.6 x 2.3 x 2.2 x 3.3 x 2.5 x 2.3 x 6.8 x 5.3 x 5.0 x 5.7 x
Regal Petroleum RPT LN Ukraine 0.47 30 149 1.5 x 0.6 x 0.3 x -5.0 x 1.1 x 0.4 x neg 11.8 x 4.5 x 0.2 x
Ukrnafta UNAF UK Ukraine 30.97 1,685 1,680 1.4 x 1.1 x 1.0 x 10.2 x 4.3 x 3.4 x 35.7 x 7.6 x 6.0 x 2.4 x
Average (excl. Cadogan) 2.3 x 1.3 x 1.2 x 2.8 x 2.6 x 2.1 x 21.2 x 8.2 x 5.1 x 2.8 x
(Discount) /premium/ to int'l peers -90% -84% -52% -74% -79% -55% 11% -74% -40% -68%
INTERNATIONAL PEERS
Novatek NVTK RU Russia 6.5 21,278 19,736 7.5 x 22.9 x 4.0 x 17.1 x nm 9.6 x 24.0 x 74.8 x 12.9 x 3.1 x
LUKoil LKOH RX Russia 51.6 53,279 43,916 0.8 x 2.2 x 0.5 x 3.8 x 15.7 x 3.4 x 6.3 x 24.3 x 4.9 x 1.9 x
Rosneft ROSN RX Russia 7.1 94,564 74,985 2.0 x 6.5 x 1.4 x 7.0 x 19.6 x 4.6 x 11.5 x 28.2 x 6.2 x 2.6 x
MOL MOL HB Hungary & EU 74.8 15,479 7,816 1.0 x 4.9 x 0.8 x 9.1 x 24.8 x 5.9 x 13.5 x 44.0 x 8.0 x 23.3 x
OMV OMV AV Austria & EU 30.4 16,342 9,127 0.7 x 2.4 x 0.6 x 4.3 x 16.4 x 3.2 x 11.4 x 26.2 x 5.5 x 13.8 x
Dana Petroleum DNX LN EU & Egypt 15.4 1,654 1,422 2.7 x 4.0 x 2.0 x 6.2 x 7.1 x 3.1 x 40.2 x 19.6 x 8.2 x 7.4 x
Afren AFR LN West Africa 1.3 1,103 1,157 n/a 5.1 x 0.9 x 5.5 x 6.9 x 1.1 x neg 64.3 x 3.6 x 8.4 x
Salamander Energy SMDR LN Indonesia 3.4 647 520 4.1 x 5.4 x 1.9 x 8.6 x 8.2 x 3.3 x neg 17.7 x 11.1 x 10.0 x
Premier Oil PLC PMO LN North Sea/Asia 16.9 2,280 1,964 3.7 x 5.4 x 2.3 x 6.6 x 9.1 x 3.3 x 17.4 x 17.2 x 8.0 x 8.6 x
Soco international SIA LN Asia / Africa 23.3 1,851 1,925 n/a 29.0 x 4.9 x 17.3 x 28.2 x 6.1 x 37.7 x 63.2 x 11.9 x 13.0 x
Petroneft Resources PTR LN Russia 0.5 148 164 290 x 4.3 x 0.8 x neg 11.7 x 2.6 x neg 46.4 x 3.7 x 2.1 x
Tullow Oil TLW lN India/Africa/EU 16.6 15,856 14,727 17 x 33.2 x 8.6 x 32.6 x n/m 10.9 x nm nm 24.3 x 17.7 x
Lundin Petroleum LUPE SS Africa/EU/Asia 4.5 2,016 1,437 2.5 x 2.8 x 2.2 x 5.6 x 8.1 x 3.0 x neg 9.7 x 8.6 x 7.9 x
Melrose Resources MRS LN Egypt/EU/ USA 3.9 923 449 4.1 x 8.7 x 2.6 x 5.5 x 11.0 x 3.4 x neg nm 5.2 x 13.5 xOil&Natural Gas ONGC IN India 25.4 51,106 54,326 2.4 x 2.0 x 2.0 x 5.2 x 4.8 x 4.8 x 13.3 x 10.7 x 10.7 x 9.2 x
Petrom SNP RO EU/Serbia/Mold. 0.1 7,493 4,720 1.4 x 1.7 x 1.6 x 5.4 x 6.7 x 5.5 x 16.7 x 9.2 x 7.8 x 8.8 x
Volga Gas VGAS LN Russia 3.5 246 280 21 x 7.0 x 3.7 x n/m 14.2 x 4.9 x nm 22.7 x 7.5 x 3.6 x
Zhaikmunai LP ZKM LI Kazakhstan 7.8 1,662 1,443 14 x 6.3 x 2.7 x 31.2 x 8.7 x 3.6 x neg 19.2 x 6.1 x 3.2 x
AVG for international peers 24 x 8.5 x 2.4 x 10.7 x 12.6 x 4.6 x 19.2 x 31.1 x 8.6 x 8.8 x
Source: Bloomberg, Companies, Phoenix Capital estimates
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8/4/2019 Phnc Unaf Update June 7 2010
16/16
Company Update
June 7, 2010
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