JKX Ukraine hydrocarbon output drops 4% in August

JKX Oil & Gas (JKX LN) produced 9,146 boepd of
hydrocarbons in August, according to its operating update on Sept. 11. This is
8% higher than July (but 7% less than August 2016, according to our estimates).
The key driver of month-over-month growth was the Russian division of JKX,
which boosted output 16% m/m to 5,747 boepd (-1% yoy, we estimate) due to the
contributions of well #25, which was put into operation in late July after
workover. The company also reported it has started workover of its #5 well
there.

In Ukraine, JKX produced  3,293 boepd of oil and
gas in August, or 4% less m/m (and 19% less yoy, we estimate). The decline was
the result of a production drop at its NN22 well, the company explained. JKX
also reported it paid USD 1.1 mln on a coupon on its convertible notes in
August.

Alexander Paraschiy: The decline in Ukraine, and boosted Russian output, is what we anticipated a month ago. In September, we expect relatively
stable output in Russia and continuing decline in Ukraine. We also remain
bearish on JKX stock, taking into account the company’s poor end-1H17 liquidity (which is unlikely to have improved), implying a
lack of money for repairs and investments, as well as unresolved tax debt
issues in Ukraine, which imply the company may still have to pay net USD 14-37
mln to Ukraine’s budget in the short term.