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Krok has a habit of bouncing from ENW to JKX which ever the wind goes.
Cash is king in profits
Growing cash pile will be there difference from sales and capex needed to maintain / boost production. Who here thinks production will be maintained without further investment. Nothing wrong with spending 1x on new wells and side-tracks to get 3x return. Oil and gas prices recovered significantly, let's see by how much cash pile grows this year.
Plenty of clowns on twitter praising JKX for its growing cash pile. Some even trying to guestimate by which date its cash equals its market cap, if JKX “keeps adding $5-6 mn a quarter”
Long-story short – not any time soon
Actually, JKX has serious troubles to consistently generate cash. It is only able to do it under one of the two scenarios:
1) Invest a lot of money into capex like it did in 2H19, have a boost in production. The issue is that production growth is a very short-lived one; or
2) Skip capex, like it seems to have done in 2H2019, but then production decline accelerates
Both of the two scenarios are bad for JKX. The first one is bad because JKX would spend heavy amounts on capex but get very short-term production spike. The second one – because the depletion rates are high. In 4Q20 alone, it was 8%, in the last six quarters – 30%. You cash increases short-term but your core business starts dying
In all other cases, the free cash flow is negative, mostly due to the depletion of Ukrainian fields, which require a lot for money simply to maintain production. This is what happened in 1H19 and 1H20 – go check the numbers
Another 8% production drop in 1Q21 and the Ukrainian production would touch 4k. In 2Q21, the production will most likely sink below 4k. The share price will sink accordingly. Below 20p, I reckon
Unless JKX makes a miracle, like it did in mid-2019. Can it? Pretty unlikely