JKX revenue rises 15%, EBITDA up 65% in 1H18

JKX Oil & Gas net revenue rose 15% yoy to USD
42.39 mln in 1H18, according to its July 30 interim report. Equal revenue
growth of 15% yoy occurred in both its key markets, Ukraine and Russia, to USD
33.21 mln and USD 9.13 mln, respectively. Its operating profit improved to USD
4.38 mln in 1H18 (from negative USD 5.43 mln a year before), with its Ukrainian
assets (generating USD 4.83 mln in profit) being traditionally the biggest
contributor to the result. JKX’s operating profit adjusted for exceptional
items reached USD 7.36 mln (up from negative USD 1.76 mln in 1H17). The
company’s EBITDA (adjusted for exceptional items) jumped 65% yoy to USD 14.48
mln and operating cash flow before working capital changes swelled 62% yoy to
USD 16.68 mln. Its net cash generated from operations surged 8x yoy to USD
12.56 mln, while cash use to CapEx decreased by 37% yoy to USD 6.49 mln. That
enabled JKX to improve its cash position: as of end-June 2018, its cash balance
was USD 7.49 mln, or 87% higher yoy.

JKX relinquished its Slovakian license and made some
progress in the disposal of its Hungarian assets, management reported,
declaring a focus on development of its Ukrainian and Russian assets.

Alexander Paraschiy: After last
year’s failure in the development of its Rudenkivske field in Ukraine, JKX
shifted its Ukraine strategy in 1H18 to a low-cost workover of its abandoned
state-owned wells. This enabled the company to significantly reduce its CapEx
and improve its cash balance, as well as count on an increase of hydrocarbon
output in Ukraine in 2H18. Meanwhile, better prices for oil and natural gas in
Ukraine enabled the company to boost its cash generation. That significantly
reduces the insolvency risk of JKX, even though the company still faces the
risk of being forced by the courts to pay up to USD 30 mln net to Ukraine’s tax
authorities.