JKX Ukraine output falls 12% yoy in 3Q16, based on preliminary data

The Ukrainian subsidiary of JKX Oil & Gas (JKX LN) produced 144 mcm of natural gas (-8% yoy) and 31.7 kt of oil and condensate (+16% yoy) in 9M16, Concorde Capital learned from sector-wide preliminary data provided by Energobiznes. That implies about 4,060 boepd in total hydrocarbon output in 9M16, we estimate, which is 4% less yoy.

The results imply that in 3Q16, JKX’s Ukrainain division produced 45.7 mcm of natural gas (-18% yoy) and 11.0 kt of oil and condensate (+16% yoy), or total 3,910 boepd of hydrocarbons (-12% yoy). In September, its hydrocarbon output fell even more dramatically, by about 19% yoy and 11% m/m, we estimate.

Alexander Paraschiy: In a comment to Concorde Capital, JKX attributed the September decline in natural gas production to maintenance shutdowns at its Ukrainian gas treatment facilities. This allows us to expect that the company’s Ukrainian operations will be restored in 4Q16, on a qoq basis. While the September operations in JKX’s key profit-generating region do not look encouraging, that does not change much the company’s investment profile. As we highlighted earlier, much more important information that will define the company’s future should come from the non-operating side, namely on its court battles. We still expect some update on the Ukrainian authorities’ USD 10.5 mln tax claim against JKX, as well as on JKX’s USD 180+ mln claim against the Ukrainian government.