Hurricane reaches agreement with Kazakh government on tax obligations

Aug 11, 1999 02:00 AM

Canada's Hurricane Hydrocarbons announced that its subsidiary Hurricane Kumkol Munai had concluded an agreement with the Kazakh government on issues related to taxes and royalties.
After several rounds of negotiation, the two sides determined that Hurricane Kumkol Munai's total obligations to Kazakh tax authorities for royalties, road taxes and certain employee remittances amounted to 928 million tenge (or $ 7.1 million, assuming an exchange rate of 131 tenge per dollar). Hurricane has already paid 699 million tenge ($ 5.3 million) of the total to the government, and Astana has agreed to waive the Canadian company's obligation to pay 527.5 million tenge ($ 4.0 million) in fines, penalties and interest on overdue taxes.
Hurricane Kumkol Munai's President Thomas Marlo had said on August 6 that the settlement of tax arrears would help his company increase oil production levels. However, Hurricane said last week that the deal with Astana was expected to have a negative impact on net income in the first half of 1999 to the tune of $ 5.4 million.
The press release noted, however, that the Kazakh government had agreed to count the extra excise tax being paid by Hurricane Kumkol Munai serve as partial payment of a $ 5 million production bonus that will fall due this autumn.
Hurricane has over the past year seen profits, stock prices and output tumble in the wake of a bitter dispute between Hurricane Kumkol Munai and the Chimkent refinery over processing fees. It is still far from clear that cost-cutting measures and a planned merger with the Chimkent plant will set the situation aright.
Hurricane has been working in Kazakhstan since late 1996, when it was declared the winner of a privatisation tender for a majority stake in Yuzhneftegaz, the regional oil producer that had been operating the Kumkol field. The field is believed to contain about 429 million barrels of crude oil. Since Kumkol is Hurricane's only producing asset, last year's dispute with the Chimkent refinery had a strong negative effect on the company's profits and stock prices.

Source: NewsBase
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