JKX hydrocarbon production in Ukraine falls in 10M16, new well launched

JKX Oil & Gas (JKX LN) boosted production of natural gas and oil 17% yoy to 10,163 boepd in 10M16, according to its report issued on Nov. 23. Its output in Russia surged 41% yoy to 6,142 boepd, while it fell in Ukraine 7% yoy to 4,021 boepd.

In October alone, JKX produced 9,901 boepd of hydrocarbons, which is 2% more m/m. In Ukraine, it boosted production by 3% m/m to 3,734 boepd, mainly due to the low comparison base (as it performed maintenance work at its natural gas processing plants in September). Year-over-year, its Ukrainian output fell 14% in October, based on our calculations.

JKX also reported on a work out performed on well NN16 in its most promising Rudenkovske field in Ukraine, which it completed on Nov. 6. It reached an initial peak hydrocarbon output of 3,200 boepd from the launched well, which has since declined. JKX promised to update on stabilized production volumefrom the well.

Alexander Paraschiy: JKX’s Ukrainian wells contributed most to its total profit, so the ultimate results of its NN16 well will be important for its future P&L. Now it looks like the company has a chance to improve its Ukrainian production, at least in the next year. Its success in Ukraine will depend on development of its Rudenkovske field, which is the least studied even though on paper it holds almost 70% of JKX’s Ukrainian 2P reserves.

We also note that the future of JKX will depend on factors other than its operational performance in Ukraine. Recall, the company has outstanding tax issues with the Ukrainian government, including tax authority claims for more than USD 30 mln. JKX’s also has a legal claim against the Ukrainian government to compensate more than USD 180 mln in losses. The court battles for these claims will reveal much about the company’s ability to remain a going concern.