JKX reports weak April operations, set to gain much in May

JKX Oil & Gas (JKX LN) produced 7800 boepd of hydrocarbons in April 2017, which is 7% less than in the previous month and 27% less than in April 2016. The month-on-month decline was mostly the result of decreased production in Russia (-12% m/m and -35% yoy to 4023 boepd) as the company met a delay in a well workover. In Hungary, JKX’s only well produced 216 boepd of hydrocarbons, which is 29% less m/m.

At the same time, the company was able to increase its production in Ukraine by 1% m/m to 3561 boepd (still 20% less yoy). Moreover, the company reported on the commissioning of two new wells in Ukraine which will significantly contribute to its May production result. Its EM53 well came online on April 22 and its output stabilized at about 210 boepd as of end-April. Its 6R well at the Rudenkivske field came online after perforations in late April and brought about 900 boepd in four days after commissioning.

In 4M17, JKX produced 9027 boepd of hydrocarbons (-13% yoy), including 3828 boepd in Ukraine (-5% yoy).

Alexander Paraschiy: If the two new Ukrainian assets will produce in May at the rates the company has recently reported, JKX will have about a 25% m/m increase in hydrocarbon production this month in Ukraine. This will be a good achievement for JKX’s key profit-generating division. It is especially encouraging that the company was able to deliver some good hydrocarbon yield at its Rudenkivske field, which is the biggest by reserves but the most questionable and most overlooked by JKX’ previous management. However, production sustainability at Rudenkivske-based wells is still under question – historically the wells there showed a radical decline in their output in 2-3 months. That said, we are looking forward to seeing JKX’s May results in Ukraine, and so far view the company as having a chance to improve its Ukrainian output in yoy terms this year.