JKX Ukraine hydrocarbon output reaches record high in May

Poltava Oil and Gas Company, the Ukrainian subsidiary
of JKX Oil & Gas (JKX LN), produced 22.1 mcm of natural gas (up 74% yoy)
and 3.5 kt of oil and condensate (up 8% yoy) in May, according to information
provided by the Energy Ministry. In 5M19, the company produced 99.6 mcm of
natural gas (up 66% yoy) and 16.4 kt of oil and condensate (up 14% yoy).

Alexander Paraschiy: Based on
the Ministry’s data, we estimate that JKX’s total hydrocarbon output in Ukraine
reached 5,480 boepd in May, which is 51% more yoy and 8% more compared to
April. This is a record high level for the company’s Ukrainian asset. In 5M19,
the company’s output in Ukraine reached 5,130 boepd, which is 48% more yoy.

May’s statistics confirm JKX’s recent successful
drilling is paying off and suggest the company will show exceptionally strong
production results in 1H19. That said, we see JKX shares having value growth
potential. We note that its alleged outstanding tax debt in Ukraine – which the
company is challenging in the courts – remains a key risk.