JKX decreases hydrocarbon output 17% yoy in 1Q21

JKX Oil & Gas (JKX LN) produced 9,177 boepd of
hydrocarbons in 1Q21, according to its April 14 trading update. This is a 7%
decline qoq and 17% decline yoy. Most of the decline happened on its Ukrainian
assets where production was 3,843 boepd in 1Q21 (down 12% qoq and 28% yoy). The
company explains such a result by the absence of drilling activity in the
previous year as well as the loss of the IG142 well in mid-February (which
produced 321 boepd in early 2021). JKX also stated that it completed the
drilling of the IG111 well (with no concrete results so far) and successfully
worked over the NN76 well (now producing 243 boepd) in 1Q21. It started
drilling a new IG149 well on April 9. In Russia, JKX output remained relatively
stable at 5,334 boepd (down 3% qoq and 5% yoy).

The company also reported on its high liquidity as its
end-1Q21 net cash balance stood at USD 28.4 mln, up from USD 24.3 mln as of
end-2020 and USD 14.9 mln as of end-2019.

Alexander Paraschiy: The company’s Ukrainian performance disappoints, as even without the
lost well IG142 it is demonstrating about an 8% qoq decline in production,
after a 5%-7% qoq decline demonstrated in 1Q20-3Q20. The 1Q21 result in Ukraine
already marks a 38% decline from the peak production level demonstrated in
3Q19, and the decline in 2Q21 should be about 10% qoq. With such performance,
the Ukrainian output of JKX could fall by more than 25% yoy and its total
output could decline by over 14% yoy in 2021. The company needs a critical mass
of new successful wells to stabilize its Ukrainian output and improve
fundamentals in the mid-term.