JKX restricts dissenters from voting at June 5 AGM

JKX Oil & Gas’ (JKX LN) board of directors restricted Eclairs Group and Glengary Overseas shareholders, which hold 38.98% of total voting rights, from attending or voting at the company’s AGM on June 5, JKX reported on May 31. The restriction is based on the company’s inability to determine the ownership structure and voting arrangements behind the two mentioned entities. As a result of the board decision, the total number of voting rights at the AGM has been reduced to 104,779,774 ordinary shares. In a separate statement also released on May 31, Eclairs said it’s currently negotiating with other shareholders to vote against the current management’s re-election.

Roman Dmytrenko: Depriving Eclairs and Glengary their voting rights creates the conditions for a legal dispute to prevent the upcoming AGM, or recognize its results as invalid. Alternatively, we might see a takeover bid from Eclairs and Glengary at a premium to the current share price. Regardless of the outcome of this conflict, we see the rising tensions at JKX as having a positive impact on its share performance in the short term.

The management shake-up has already stimulated some positive news flow on the company’s operations, which is aimed at demonstrating the efficiency of the current management. The long-term perspective, however, looks gloomy in our view. The company’s current management has undermined shareholder value by concentrating on Russian field development while neglecting highly profitable operations in Ukraine. The efficiency of the possible new Eclairs-related management also looks questionable considering that Ukrnafta – Ukraine’s largest oil producer that is controlled by Kolomoisky – is facing the same problem of declining hydrocarbon production.