Kolomoisky wins court battle with JKX management

The Supreme Court of the United Kingdom ruled on Dec. 2 to overturn a Court of Appeals ruling to restrict the voting rights of two minority shareholders in JKX Oil & Gas (JKX LN) at an AGM on June 3, 2015, the company reported the same day. JKX’s board restricted the voting rights of these two shareholders, collectively owning 38.9% of the company’s shares, prompting them to appeal the decision. JKX’s top management believed these shareholders ”were acting only in their own interests and not in the interests of all shareholders.” One of these minority shareholders, Eclaris Group with its 27.5% stake, is linked to Ukrainian tycoon Igor Kolomoisky.

Now that the votes of two minorities should be counted, JKX reported that two resolutions of the June 3 AGM were not approved. The first resolution was to approve (in advisory form) a remuneration report of JKX’s directors, while the second was to allow the directors to buy back JKX shares on the market. “The board will consider the implications of the judgment,” JKX stated in its Dec. 2 release.

Alexander Paraschiy: The news is broadly neutral for JKX, we believe. On the one hand, JKX lost an opportunity to buy back its shares, which have strong potential to increase as soon as lower taxes for Ukrainian gas producers are adopted. On the other hand, disapproval of the board remuneration report might encourage the key decision makers in the company to reduce their personal appetites in future periods, which could be beneficial for all JKX shareholders. For instance, in 2014, JKX reported a 20% yoy decrease in overall employee costs, while remuneration of directors decreased just 5% yoy. For 2015, the company plans to keep the salaries of its directors unchanged, while JKX’s profit will decline significantly. In 9M15, the company reported a 79% yoy decrease in its EBITDA to USD 5.4 mln.