JKX delays Russian well workover, November output falls in Ukraine

JKX Oil & Gas (JKX LN) reported on Nov. 27 that
workover of its well #5 in its Russian Koshekhablskoye field will require more
time and efforts than initially planned. It reported that an obstruction has
been encountered in the tailpipe of the well, and the company is still
considering options to clear it. The well was planned to be commissioned in
December.

JKX’s Ukrainian operations also did not bring
encouraging results. Based on preliminary information from the Energobiznes
data base, we estimate the company produced 3,060 boepd of hydrocarbons in
Ukraine in November, which is 6% less m/m and 25% less yoy. The company did not
provide its November monthly operating update for the first time this year.

Alexander Paraschiy: The company’s Ukraine results are below our expectations. This could be sweetened by the recently adopted
(but not yet signed) gas production tax cuts for new wells in Ukraine since
2018. So far, however, the key risk for JKX is its poor liquidity that requires
it to seek new external financing. And the delay with commissioning the Russian
well only complicates the liquidity issue for the company. All in all, we
remain cautious about JKX’s ability to improve its value.