JKX recommissions fourth gas well in Russia

JKX Oil & Gas (JKX LN) has completed repairs and put into operation well-27 in its Russian deposit with a current production rate of 16.3 MMcfd (2,717 boepd), the company reported on Dec. 7. With the well’s recommissioning, the Russian subsidiary of JKX will produce natural gas in excess of 45 MMcfd (7,500 boepd) from four wells, according to the report. The company plans to repair the fifth well, thus aiming to fully load its gas preparation facility of 60 MMcfd (10,000 boepd), while it did not specify the timing. In 1H15, JKX’s Russian assets produced 5,109 boepd of gas.

Alexander Paraschiy: The company’s Ukrainian assets are much more important drivers of its consolidated profit as the netback of its Ukrainian gas was 4.5x higher than for Russian (USD 5.28/Mcf vs. USD 1.18/Mcf, respectively) in 2014. Nevertheless, the news is encouraging for the company though far more encouraging would be the adoption of a new tax code by Ukraine’s parliament that would more than halve the effective gas production tax as of 2016. According to the latest information from Ukraine’s MPs, the new tax code could be voted on as soon as this week, though we believe that’s very optimistic.