Yukos announces reductions in 2004 capital expenditures and deferral of certain monthly tax payments
Posted: 23 August 2004
YUKOS Oil Company announced that, as a result of certain accounts being inaccessible which denies the Company access to half of its monthly revenues, stringent cash conservation measures have been taken in order to allow it to extend the time it can continue normal operations. The Company will immediately reduce its annual capital expenditures for 2004 and its operating expenditures, including a postponement in social programs and charitable expenditure, by approximately a total of $700 million. It also will defer payment of certain current taxes. The Management stated that as a result of the capital expenditures reduction the annual production target for YUKOS Oil Company will be reduced from 90 million tons to 86 million tons for 2004. The revised target is still approximately 6% above 2003 production results.
YUKOS chief executive, Steven Theede, commented that: "As we announced in July of this year, mid-August would be a crucial time for the company. Despite numerous requests to allow legal access to our bank accounts in order for YUKOS to continue normal operations, collection orders remain in place and no cash is available to the company from those accounts. This means that half of our monthly revenue is not available to us to meet our day-to-day operating costs. The management has considered all options open to it and concluded that there is no other choice than to effect, immediately, a reduction in our capital and operating expenditures and deferral of certain current tax payments".
YUKOS continues to appeal the year 2000 tax assessment through all available legal processes. Meanwhile the Russian government has not allowed legal access to the Company’s bank accounts and has continued to collect monies, amounting to approximately half of the Company’s monthly revenues, and utilize those collections to pay against the disputed tax charge. To date the Company has voluntarily paid over $700 million of the year 2000 tax charge. Approximately another $800 million has been taken from the Company through the collection process. The Company continues to dispute the amount and basis for the tax charges, penalties and interest. It believes that all taxes in 2000 were handled in a legally proper manner under laws in effect at the time.
The company anticipates that as a result of its voluntary payments, and the government collection process, the entire amount of the court sanctioned additional 2000 tax bill ($1.7 billion) will have been paid by the end of August 2004. An alleged additional $1.7 billion for penalty interest and fines will remain to be paid.
For more information see www.yukos.com
Posted by Richard Price,
Editor Pipeline Magazine
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