JKX boosts production in Russia to over 40 MMcfd

JKX Oil & Gas (JKX LN) completed acid treatment on its three production wells in the Koshekhablskoye field in the Russian Federation, the company reported on April 2. The flow rates of well-25 and well-27 were stabilized at 13 MMcfd and 15.8 MMcfd respectively while well-20’s initial production rate has reached 15.9 MMcfd. Since the three wells’ aggregate production now exceeds the company’s gas processing plant’s nominal capacity of 40 MMcfd, JKX said it decided to choke back its well-27 to accommodate production from well-20 until the gas processing plant is debottlenecked.

Roman Dmytrenko: Ukrainian Energy Ministry data indicates that JKX produced 5,200 boepd from its Ukrainian assets in February (down 35% yoy) while the Koshekhablskoye field update suggests the company’s current total average output has reached an estimated 11,900 boepd, compared to 8,000 boepd in 4Q12 with Russian gas production increasing to 55% of total output. Though it looks like JKX managed to deliver production growth, its positive impact on financials will be blurred by a 4x lower natural gas selling price in Russia, as compared to Ukraine. We expect the company’s increased focus on Russia will nearly halve its average netback to USD 27/boe in 2013.