JKX hydrocarbon output falls 8% yoy in 1Q17

JKX Oil & Gas (JKX LN) reported an 8% yoy drop in natural gas and oil output in 1Q17 to 9,436 boepd, according to its report on April 11. The decline was mostly the result of its Russian output dropping 16% yoy to 5,320 boepd. Its 1Q17 Ukraine production rose 0.7% to 3,917 boepd.

On a monthly basis, the decline was more pronounced. March total output was 8,405 boepd, or 14% less than February, 17% less than in January and 23% less yoy. The March decline in Russia was 19% m/m and 35% yoy (to 4,568 boepd), which JKX attributed to the start of a workover at Well #25. This well produced about 30% of the gas of all of JKX’s Russian subsidiaries in February.

In Ukraine, the company produced 3,534 boepd of hydrocarbons in March, which is an 8% decrease both on a month-on-month and year-on-year basis. The decline was mostly caused by continued fall in production at its new NN-47 well, which produced about 230 boepd in March (55% less than in February and 75% less than in January).

JKX’s output at its newly developed Hungarian assets were stable m/m in March at 307 boepd. The company also reported that it had signed a contract with Schlumberger to stimulate 11 wells in Ukraine in 2Q and 3Q.

Alexander Paraschiy: The March results are discouraging, especially in JKX’s Ukrainian fields, which generate most of the company’s profit. By hiring Schlumberger, JKX might make up the yoy decline in the rest of the year, but the efficiency of such work has yet to be proven. When adding the USD 34 mln tax claim risk in Ukraine to the field development/stimulation risks, we see JKX stock as having more potential to lose its price in the near term, rather than gaining.