LONDON (Alliance News) - JKX Oil and Gas PLC shares plummeted Wednesday after it said it swung to a loss in the first half of 2015 from a substantial profit a year earlier, as lower production compounded by lower oil and gas prices resulted in revenue plummeting in the period.
JKX Oil shares were down 20% to 15.25 pence per share on Wednesday morning.
The company focused on Ukraine and Russia reported a loss of USD7.3 million in the first half of 2015, swinging from a USD5.8 million profit a year earlier after revenue tanked to USD44.4 million from USD74.3 million.
Lower commodity prices took their toll, as revenue across all of its segments fell year-on-year. Oil revenue dropped to USD7.3 million from USD19.2 million, gas revenue fell to USD34.2 million from USD50.3 million and liquefied petroleum gas revenue decreased to USD2.2 million from USD4.8 million.
The average price achieved by JKX in the first half was USD51.71 per barrel, considerably down from USD92.39 per barrel a year ago, which the company said was "in line with trends in international oil prices".
"Oil and gas prices are forecast to remain subdued for the remainder of 2015. The group's cost base is benefiting from the devaluation of the hryvnia and rouble, although this may be offset by inflation in future periods," said the company, referring to the Ukrainian and Russian currencies.
In tandem with lower commodity prices, production fell to 1.6 million barrels of oil equivalent from 1.8 million barrels a year earlier. On a daily average basis, production fell to 8,611 barrels of oil equivalent per day from 10,126 barrels.
"Both our subsidiaries in Ukraine and Russia have remained under pressure during the first half of 2015. Revenues declined significantly primarily due to a sharp fall in oil and gas realisations and lower production volumes," said Chief Executive Paul Davies.
JKX said it expects to become cash flow positive in the remainder of 2015 as it continues to reduce its operating and administrative costs in response to lower oil prices. The company has already suspended its capital investment programme in Ukraine until the investment conditions improve and the currency restrictions are lifted.
The effect of the oil price is evident from the company's reduced capital expenditure, which fell to USD4.2 million in the first half of 2015 compared to USD21.4 million a year earlier.
However, the company said it will consider resuming development drilling in Ukraine in the second half of 2015.
"We are making vigorous efforts to restore a positive investment climate in Ukraine for independent oil and gas producers and believe these are slowly making headway. Restrictions on the sale of our gas were lifted in February, and there is an increasing indication that production tax rates might fall during the second half of the year," JKX said.
It also will increase the capacity of its plant in Russia before the end of the year, and complete the first tubing replacement programme in Russia in 2015. That tubing programme in Russia is significant as the tubing failures at the operation have constrained production in the first half.
Outside of its core operations, the company also will try to secure permits for its Hernad licences in Hungary and drill two exploration wells over its acreage in Slovakia.
"The group's performance in 2015 has demonstrated the resilience and strength of its business and gives the board confidence in its ability to return to profitability when external conditions improve," JKX said.
"The board continues to review its dividend policy. Taking into account the group's capital commitments, forecast cash flows and debt servicing schedules, the board has concluded that it is not appropriate at a time of tight liquidity to award an interim dividend. It will review its dividend policy in the circumstances prevailing at the year end," added the company.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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