JKX delays launch of Russian operations until yearend

JKX Oil & Gas (LSE: JKX LN) said that the start of operations in southern Russia, previously scheduled for September, was delayed until the end of the year; extra cash needs related to the delay led the company to delay an interim dividend payment, according to its 1H11 earnings release yesterday. In 1H11, JKX decreased its net income 31.4% y-o-y to USD 24 mln, the drop being caused mainly by a 13x y-o-y hike in production-based taxes (USD 33 mln vs. USD 2.6 mln in 2010). Revenues went up 3% to USD 107.8 mln thanks to growing oil & gas prices, which offset the decrease in output. Operational expenses were down by 27% y-o-y. Antonina Davydenko: Due to delays in Russian operations, we revise our sales projection for JKX in 2011 downward to USD 211.2 mln (up 10% y-o-y), and net income to USD 52.5 mln (up 2.5x y-o-y). Weak results were expected given the hike in production-based taxes since the beginning of the year and JKX’s 19% y-o-y drop of production in 1H11.