JKX disappoints with tiny May production increase

JKX Oil & Gas (JKX LN) produced 7,847 boepd of hydrocarbons in May, according to its operating update on June 13. This was 0.6% more than April and about 23% less than May 2016. Its Ukraine production rose 8% from April to 3,837 boepd on the contribution of two wells commissioned in late April (6R and EM53). Ukraine output was about 13% lower from May 2016.

In Russia, JKX continued reporting declining production in May of -4.1% m/m and about -33% yoy to 3,860 boepd. Its Hungary output dropped 31% m/m to 150 boepd.

In 5M17, JKX produced 8,721 boepd of hydrocarbons, which is 16% less yoy. The decline occurred in its both markets, Ukraine (-8% yoy) and Russia (-23% yoy). 

Alexander Paraschiy: The company’s May result is a big disappointment: based on the preliminary results of its two new wells launched in late April, production growth in Ukraine could have been up to 25% m/m in May. The result implies JKX’s new Ukrainian wells are demonstrating high decline rates. Such suspicions of poor production are bolstered by the fact that the company did not provide any data on them. Earlier this year, it was proud to report good production levels at its new NN47 well during the first three months of its operation.

Moreover, we see JKX’s May and 5M results are inconsistent. In particular, to achieve average 5M17 production of 8,721 boepd (as reported), the company should have produced just 7,536 boepd in May 2017 (which is 4% less than it reported for the month), including 3,536 boepd in Ukraine (or 8% less than it reported). Such inconsistency was not observed in the first three months of 2017.