OREANDA-NEWS. March 15, 2011. Ukrnafta, the largest oil & gas producer in Ukraine, intends to increase its share capital by 25% up to UAH 16.9mn through additional share issue (13.6mn shares with nominal value of UAH 0.25), as company reported on Mar 14. The issue will be considered at the EGM scheduled on Mar 22.

Millennium Capital: from the broad point of view we consider the news as NEGATIVE for the UNAF stock as additional share issue will reduce the free float to ~4% from the current ~5%. At the same time we see that the issue may not be approved by the EGM. Taking into account the current market price of the stock of UAH 764 (as of Mar 14) the total value of the additional issue amounts to UAH 10.4bn. Therefore, the government (50% stake) will have to contribute in excess of UAH 5bn to the share capital to retain its controlling stake. We are skeptical it will be excited about that given the strained budget and anticipate it will turn down the proposal.