JKX reports strong January results in Ukraine on successful well workover

JKX Oil & Gas (JKX LN) produced 10,136 boepd of hydrocarbons in January 2017, which is +1.8% m/m and -4.5% yoy, according to its report on Feb. 15. Its production in Ukraine showed spectacular growth of 13.4% m/m and 9.9% yoy (to 4,356 boepd), which the company attributes to the successful workover of well NN47 in late December. The well produced about 930 boepd of hydrocarbons, or about 21% of the Ukrainian subsidiary’s total result in January. In Russia, JKX decreased its output 5.5% m/m and 13.1% yoy, which is a result of declining output at two wells which underwent acid stimulation in November.

The company also reported on the start of natural gas sales in Hungary on Feb. 2 at an initial rate of 1.8 MMcfd (about 300 boepd), stating that its production forecasting and development planning there is underway.

Alexander Paraschiy: The long awaited increase of output in Ukraine, the company’s only cash generating region so far, is definitely good news. And it is especially positive that the company has some success in a well located in the Rudenkivske field, its biggest asset in Ukraine by reserves but the smallest by output. We expect the stock market will reward such interim success.

Thus far, it is too early to claim the new well in Ukraine will be successful (we will monitor its further performance), but the result that we are observing gives us a chance to posit that the company will be able to take some advantage of Rudenkivske, its biggest and previously most overlooked field. Thus far, we retain our neutral view on JKX stock, keeping in mind that it has two unresolved tax cases in Ukraine.