JKX to start M-166 well recompletion in March
6 February 2013
JKX Oil & Gas (JKX LN) will start a horizontal recompletion of its M-166 well at its Molchanovskoye field (Ukraine), which suffered water ingress in 2011, the company said on Feb. 5. Following the M-166 well recompletion, a Skytop N75 rig is scheduled to spud the first of a five-well drilling program at its Elizavetovskoye field (Ukraine) in June.
Roman Dmytrenko: Our key concern about JKX was that the company is paying increasingly more attention to its Russian fields, which generate 4-5 times less cash flow per cubic meter of natural gas. The company’s share of Russian gas increased from 0% in 1Q12 to 33% in 4Q12, and may grow to 67% in 2Q13. From this standpoint, the restart of the company’s drilling campaign in Ukraine is a positive sign.
Nevertheless, we are skeptical about the economic potential of the M-166 well recompletion given the inherent uncertainties of this project. The announced recompletion would become the company’s second attempt to restore the well’s productivity after recurring water encroachments. But what’s of most concern is the scheduling of the new well’s drilling for June, which indicates that we might not see any increase in the company’s Ukrainian output until 4Q13 if the M-166 recompletion fails again.
