JKX hydrocarbon output in Ukraine rises 8% m/m in October

JKX Oil & Gas (JKX LN) produced 8,807 boepd of
hydrocarbons in October 2017, which is 2.5% more m/m and 11.0% less yoy,
according to the company’s Nov. 14 report. The m/m growth was solely the result
of higher output in Ukraine: a 8.4% m/m rise to 3,283 boepd (still 12.1% less
yoy). The company attributed such growth to better output from its M153 well
(to 130 boepd from 26)  following its workover, as well as the restart of
its Novonik natural gas plant from maintenance work performed in the previous
month.

Its output in Russia remained flat m/m at 5,502 boepd
(12.1% less yoy). The company noted a workover delay in one of its five wells
in Russia, now expecting to complete the program in December.

In 10M17, JKX produced 8,662 boepd of oil and gas,
which is 14.5% less yoy, including an 11.1% decrease in Ukraine (to 3,563
boepd) and 18.9% yoy decline in Russia. 

Alexander Paraschiy: The
company’s October production in Ukraine looks encouraging (we did not expect
it), but we note that with that growth the company only reached its August
output level in Ukraine. It seems like November’s output will be flat m/m in
its two regions, and will only increase in Russia in December if JKX completes
the workover of its well on schedule.

We expect the company will produce no more than
8,750 boped of hydrocarbons in 2017, which would be 13% less yoy. We remain
bearish about JKX stock as we see high liquidity and solvency risks (the
company’s cash balance is low and its net tax obligations to Ukraine exceed USD
13 mln).