JKX EBITDA rises 26% yoy in 1H19

JKX Oil & Gas (JKX LN) posted USD 45.3 mln in net
revenue in 1H19, or 7% more yoy, according to its interim report released on
July 31. In Ukraine, its revenue increased 12% yoy to USD 37.2 mln, while in
Russia it decreased 11% yoy to USD 8.1 mln. Recall, its hydrocarbon output advanced 49% yoy
in Ukraine and decreased 4% yoy in Russia in 1H19.

The company’s profit from operations improved 51% yoy
to USD 6.6 mln in 1H19, with Ukraine contributing most to the growth with USD
8.6 mln operating profit (up 79% yoy). JKX’s operating profit before
exceptional items increased 24% yoy to USD 8.9 mln, implying its EBITDA rose
26% yoy to USD 17.8 mln in 1H19. The company’s bottom line increased 16% yoy to
USD 2.2 mln.

JKX invested USD 12.0 mln into CapEx in 1H19, almost
doubling it yoy. Most of CapEx, USD 8.5 mln, was spent on Ukrainian assets. The
company reported a cash balance of USD 10.6 mln and total debt of USD 5.6 mln
as of end-1H19.

In 2H19, the company expects to boost its hydrocarbon
production in Ukraine based on the results of its newly commissioned IG142 well
and its WM4 well, which it plans to drill in Ukraine starting August. In
Russia, the company counts on production from Well-5, which it commissioned in
late June, as well as a positive result from a workover of its non-operational
Well-18.

Alexander Paraschiy: The
company’s intensified drilling and workover program enabled it to boost output
and improve its operating and net profit, despite a decline in hydrocarbon
prices. Most likely, its second-half results will be stronger due to both a
further increase in output and seasonal improvement in prices. Therefore, our
view on JKX stock is bullish.