JKX Oil & Gas’ net profit drops 75% y-o-y in 2010

JKX Oil & Gas (LSE: JKX LN) decreased its net profit in 2010 to USD 21.2 mln, down 75% y-o-y, mainly due to a USD 75 mln non-cash impairment on Russian assets, according to an announcement yesterday. Operating profit before the exceptional item was USD 95 mln, down 20% y-o-y. Average daily production declined 11% y-o-y to 10,324 boepd, but thanks to increases in oil and gas prices, JKX’s top line did not suffer substantially, remaining flat at USD 193 mln, a meager 1.8% decline y-o-y. CapEx rose by 66% y-o-y to USD 178.5 mln. JKX’s board recommended a total 2010 dividend of 5 pence per share, unchanged from 2009. Antonina Davydenko: We expect JKX to start its Russian operations by 3Q11 and boost its Ukrainian production figures, which should help increase its 2011 top line by 25% y-o-y, according to our estimates, despite lower gas prices in Russia. However, in 2011 the company’s bottom line will suffer from increases in royalties – 40% for oil and 19% for gas, boosting JKX’s effective tax rate from 30% to 50%, providing for an estimated net income of USD 60 mln.