JKX hydrocarbon output drops 7% yoy in 1Q18

16 April 2018

JKX Oil & Gas (JKX LN) produced 8,749 boepd hydrocarbons in 1Q18, according to its operating update published on Apr. 13. This is 7.3% less yoy and 0.6% more qoq. Its Ukrainian assets, which usually contribute more than 90% to JKX’s EBITDA, produced 3,396 boepd, which is 13.3% less yoy and 4.7% more qoq. In Russia, it produced 5,263 boepd, which is 1.1% less yoy and 1.8% less qoq.


The company also reported it completed sidetrack drilling of its M158 well in Ukraine and is currently evaluating its results. In 2Q18, the company is going to activate its development operations with workovers of state-owned wells it recently leased, as well as drilling of a new well at its Elyzavetivske field.


Alexander Paraschiy: The company’s 1Q18 results imply its natural gas production in Ukraine continued to decline in March as compared to the first two months of the year, when it produced about 3,420 boepd, on average. We still hope for a turnaround in production in 2Q18, providing its newly commissioned well M158 is successful and providing the state-owned wells will be successfully developed.


However, given the company’s relatively low liquidity, we do not expect JKX will be able to develop its wells fast, meaning that even in the best-case scenario it will be unlikely to reach last year’s output level in 2018. We see a good chance for the company’s improvement of operations in 2019, but we are not rating the stock keeping in mind it has a huge debt problem (over USD 14 mln in net debt to Ukrainian tax authorities).