JKX 3Q19 hydrocarbon output rises 25% yoy

JKX Oil & Gas (JKX LN) produced 11,719 boepd of
hydrocarbons in 3Q19, the company reported on Oct. 9. This is 24.5% more yoy
and 13.2% more qoq. The rise was driven by improved performance in both its
Ukrainian assets (5,627 boepd, up 54.9% yoy and 15.9% qoq) and Russian assets
(5,502 boepd, up 3.8% yoy and 10.3% qoq).

The increasing production at its Ukrainian assets was
mostly a result of new well IG-142 (which produced over 900 boepd since its
commissioning in July), as well as the performance of two less productive new
wells commissioned in mid-2Q19.

In 9M19, JKX boosted its hydrocarbon output 19.1% yoy
to 10,668 boepd, driven solely by a 50.9% yoy surge in Ukrainian asset output
to 5,535 boepd.

The company also reported on its satisfactory
liquidity position with a USD 9.5 mln cash balance and USD 11.5 mln of hydrocarbon
inventory as of end-September.

Alexander Paraschiy: After
implementing an active drilling program in Ukraine since early 2018 and a
series of successful wells drilled, JKX is demostrating improving oil and gas
production for the third quarter in a row.

We expect the company’s 4Q output will be slightly
lower than in 3Q19 as output at its most successful recently commissioned
wells, IG-142 and IG-103, is declining fast. Meanwhile, it’s becoming less
likely that two new wells the company is drilling will be equally successful.
In any case, JKX’s annual ouptut is likely to grow 18-20% yoy in 2019, which
allows us to remain bullish on JKX stock.