Burisma Readies to Complete Ukrainian KUB-Gas Deal

Ukrainian private gas producer Burisma Holdings is expected to obtain 70% of KUB-Gas from Canada's Serinus Energy on February 8. It will then donate a 5% slice to the present 30% owner Cub Energy, the CEO of Cub, Mikhail Afendikov, says. US-registered Cub Energy has agreed to take the shareholding in lieu of exercising its pre-emption rights.

“This transaction provides our company with a strong local Ukrainian partner in Burisma and an immediate increase in our equity position in KUB-Gas from 30% to 35% for no additional consideration,” noted Afendikov. “Our interest in KUB-Gas continues to represent a very exciting growth project for the company, particularly with the recently announced reduction in royalties from 55% to 29% effective January 1, 2016.” Early this year the government lowered the rate of tax payable on output from deep wells.

Serinus will receive $30mn together with working capital and inter-company adjustments from Burisma’s owner, Resano.

KUB-Gas comes with assets in an insecure part of east Ukraine: it has the right to develop the Makiyivske, Pivnichno-Makiyivske,Olhivske, Verhunske and Krutohorivske gas fields in the Luhansk region. These territories in eastern Ukraine are controlled by Kiev. Drilling operations in the region were frozen in 2014 and were only partly reopened last October.

Burisma is a private company registered in Cyprus. Hunter Biden, a son of the US vice president Joe Biden is chairman of the management board. Another board member is former minister for the environment and natural resources, Nikolay Zlochevsky. Burisma holds 20 licenses for oil and gas field operation in Ukraine and is developing fields in Dnipro-Donetsk, and in the Carpathian and Azov-Kuban basins. Other producing assets include First Ukrainian Oil and Gas Company, Esko-Pivnich and Pari.

Marina Zvonareva