JKX To Acquire A Gas Field In Russia For USD 50 mln.

In a press release today, JKX said it had agreed to acquire 100% in Koshekhablskoye gas field in southern Russia. According to Miller & Lents, the field’s proved and probable reserves amount to 216 Bcf, which can add around 85% to the company’s hydrocarbon reserves. Through its subsidiary, JKX has already signed a conditional sale and purchase agreement with Mostotal Investments Limited to acquire 99.9% of the field’s licensee, Yuzhgazenergie LLC, for a cash consideration of USD 50 mln. The deal would be a related party transaction, as Glengary Overseas Limited, which holds a 25.48% stake in JKX, and Mostotal have a common parent shareholder. Vladimir Nesterenko: The acquisition will double JKX’s gas reserves, making it less vulnerable to reserve depletion. It would also bring JKX’s EV/2P multiple from the recent level of 25 to around 13. The deal implies that JKX would pay around USD 1.3/boe, which is likely to immediately support the stock price, given that the market has valued JKX’s reserves at USD 20-25 in terms of EV.