JKX Oil & Gas net profit falls 64% yoy

JKX Oil & Gas (JKX LN) reported a 64% yoy decrease to USD 7.5 mln in its net profit before exceptional items, according to its quarterly report released on July 29. Revenue fell 11% yoy to USD 91.3 mln in 1H13 while average hydrocarbon output grew 21% yoy to 9,040 boepd for the period. Its 1H13 average oil sale price declined 8.5% yoy to USD 89.45/bbl. Its 1H13 average natural gas price slumped 39% yoy to USD 7.19/Mcf as a result of a 5x yoy increase its share of gas sold in Russia at the lower price of USD 2.6/Mcf (reaching over 50% of total production).

Oil and gas production costs in 1H13 grew 3x yoy to USD 21.3 mln, pushing down the company’s EBITDA 37% yoy to USD 36.5 mln. Net cash flow from operating activities declined 17% yoy to USD 34.5 mln in 1H13. JKX is currently producing 12,000 boepd, with up to 5,000 boepd from its Ukrainian assets, and reported it expects to maintain that level throughout the year.

Roman Dmytrenko: The company’s 1H13 profitability was hurt by its strategy to pursue production growth in Russia, where lower gas prices (by 4.7x) cut into the share of greater revenue generated by its Ukrainian operations. Yet there are signs of a turnaround: its most recent production data indicates current average daily production rate at its Ukrainian assets grew 15% from April to over 5,000 boepd currently. That suggests a multi-year downtrend in its Ukrainian output might be concluding as new drilling is underway.