JKX boosts Ukraine gas output, Regal and Serinus flat in February

The Ukrainian subsidiary of JKX Oil & Gas (JKX LN) significantly boosted its February natural gas production, as can be concluded from preliminary reports of the Energy Ministry. JKX subsidiary’s daily gas output amounted to 0.578 mcm (about 3,400 boe), a 56% increase from January.

The boost in production happened despite the company warning that its winter gas output could decline significantly due to the interim government’s ban on private producers selling gas to large industrial consumers. The company’s February gas output was just 10% below its level in November, when there were no restrictions to sell gas. They expired as of March 1, 2015.

Other publicly listed gas producers demonstrated more stable gas output in February: Regal Petroleum (RPT LN) produced 0.15 mcm of gas per day (about 945 boe), which was a 3% m/m drop and 2% higher than November. KUB-Gaz, the Ukrainian subsidiary of Serinus Energy (SEN PW), produced 0.722 mcm of gas per day (2,975 boe, net to Serinus working interest), which was flat m/m but a 21% decline from November.

Total gas production in Ukraine was 1.51 bcm in February (flat m/m in daily terms), and gas production by private firms was 256 mcm (+8% m/m in daily terms).

Alexander Paraschiy: JKX’s February production stats suggest the company was able to find clients despite the temporary restrictions, which is what other private gas firms in Ukraine were able to do earlier. The encouraging news for Serinus is that its Ukrainian gas output has stabilized after a drop in January, though the proximity of its Ukrainian assets to the Donbas war zone remains its core operating risk.

In the coming month, we expect more increases in gas production by JKX’s assets and stable output by Regal and JKX. Yet we expect increased gas output by Ukrainian firms collectively only in 2016, after Ukraine amends its subsoil tax legislation, as it had promised in its talks with the IMF.