JKX.L Regulatory News (JKX)

JKX Oil & Gas plc

INTERIM MANAGEMENT STATEMENT

 FOR THE THIRD QUARTER ENDING 30 SEPTEMBER 2013

Highlights

· 10-stage multi-frac at Rudenkovskoye field in Ukraine successfully completed. The well is still cleaning up.

· Well-05 at the Koshekhablskoye field in Russia has been worked over and side-tracked. The well is cleaning up and will be acidised in due course.

· Plant modifications to increase Koshekhablskoye plant capacity to 60 MMcfd planned for 1H 2014.

· Construction of the processing plant for the Elizavetovskoye field development in Ukraine is on schedule and development drilling has commenced. First gas is scheduled for year-end.

JKX Chief Executive, Dr Paul Davies, said:

"We have made good progress on all our Ukrainian and Russian projects since mid-year. The successful multi-frac in the Rudenkovskoye field has demonstrated the potential of the technique for developing this tight reservoir. Our focus is now on ensuring that the next fracced well in the programme will yield increased plateau production at a lower capital cost. Russian production remains at or above nominal plant capacity and completion of the crestal well-05 provides the additional production capability to fill the increased plant capacity by mid-2014."

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Production

Ukraine: Average production was 5,029 boepd comprising 21.6 MMcfd of gas and 1,434 bpd of oil and condensate, with LPG sales averaging 49 tonnes per day.

Russia: Average production was 6,873 boepd comprising 40.9 MMcfd of gas and 61.1 bpd of condensate.

Hungary: Gross production from the Hajdunanas Field was 83 boepd comprising 0.5 MMcfd of gas and 5.7 bpd of condensate (JKX share: 50%). The Hajdunanas-2 well had limited production during the period.

Outlook: We anticipate average production in the fourth quarter to be in excess of 11,000 boepd.

Ukraine

Development and Workover Activity:

Third quarter drilling and workover activity continued with the Skytop N-75 rig and the TW-100 workover rig. Following two disappointing appraisal wells IG-132 and IG-107 in the Ignatovskoye field, the N-75 rig drilled and completed the appraisal well Z-05 in the Zaplavskoye exploration licence. After finding poorly developed reservoirs close to the stratigraphic pinch-out, the well was side-tracked to a location approximately 190 metres to the north. Here the Visean V25 and V26 sandstone reservoirs were found to be gas bearing with an initial production rate of 4.6 MMcfd and 328 bpd of condensate from the V26 reservoir. The rate has since declined, implying limited reservoir communication, and preparations are now being made to perforate the upper V25 reservoir.

The rig is currently drilling well E-301, the first new development well in the Elizavetovskoye field, which is being deviated towards the Permian A2 reservoir at around 3,100m MD. This well will be followed by the second Elizavetovskoye development well E-302 towards the end of the year.

Rudenkovskoye R-103 Frac:

The 10-stage multi-frac was successfully completed in early September. There was one more stage than originally planned to compensate for a poor frac early in the operation. In total, 670 tons of proppant were injected along with 34,000 bbl of frac fluid. Maximum frac reach was over 240 metres and the propped width ranged from 3 to 6 millimetres. Initial gas flow from the reservoir exceeded 6 MMcfd but this has since levelled off at approximately 3 MMcfd at the end of the period with almost 14,000 bbl of frac fluid being recovered to date (more than 40% of the total injected). The well continues to clean up and there are now signs that the frac fluid volume is decreasing. . Installation of a smaller diameter velocity string within the production tubing is planned to maximise remaining fluid recovery and optimise gas production going forward. We expect that at least another month of clean-up of the well is required.

Facilities: Operations at the main production facility and the LPG plant continued smoothly through the period. Work continues on plant optimisation, re-routing flowlines to reduce back pressure, and wax clearance to enhance production from the available well stock.

Exploration: Further work is planned on the Zaplavskoye licence following the mixed results from the Z-05 well and sidetrack. The trap is evidently working and the focus is now on the identification of more continuous reservoirs.

Elizavetovskoye Licence: All the main components are on site for the pilot production plant to implement the initial development of the A2 reservoir. Construction is nearing completion and hook-up is about to commence. The 11 km export line is in place and the flow lines for the first wells have been laid.

Drilling has commenced and first gas is on track for the year-end.

A 3D seismic programme will commence as soon as the ground is ready. This data will be used to finalise the locations of subsequent wells and appraise the deeper G7-G12 reservoirs which provide the upside potential to the field reserves.

Russia

Development and Workover Activity:

Following the success of the large scale acid treatments on the development wells, production is being maintained by routine small treatments using mobile pumps without the need for coiled tubing intervention. However, these interruptions to normal well operations are having a minor effect on overall production levels.

The wells are being operated at production rates of 12-18 MMcfd for crestal well-20, 10-14 MMcfd for crestal well-27 while the north flank well-25 has been maintaining a steadier 11-13 MMcfd with the deep east flank well-15 flowing at 2-3 MMcfd. Overall production has been between 38 MMcfd and 45 MMcfd through the period.

The crestal well-05 workover and the sidetrack is complete. The well is now cleaning up before being connected to the Gas Processing Facility (GPF). A full acid treatment will be implemented using coiled tubing once the preliminary flow rates have been established.

The Geostream rig has been moved to well-27 for a tubing repair operation.

Facilities: The GPF continues to perform well with only minor problems associated with the restarting of the wells after acidising. Start-up procedures have been modified to minimise these, and some modifications will be made to the plant at the planned spring 2014 maintenance shut-down.

It is anticipated that production will increase to over 50 MMcfd by year-end with well-05 flowing and the tubing repair completed on well-27. Production could peak at over 55 MMcfd, depending on the how the plant performs in its existing configuration.

Plant simulation by JKX and the original manufacturer has confirmed that the GPF is capable of processing up to 60 MMcfd at current gas inlet conditions and sales specifications with some modifications to the piping and valves. The main focus of the spring shut-down will be to make the plant modifications to handle this increased throughput.

Exploration: YGE was awarded the 170.7 sq km Georgievskoye exploration licence in 2012. Recovery, reprocessing and interpretation of all the existing 2D seismic is now complete and recommendations for the 2014 seismic programme are under consideration.

Under the Koshekhablskoye licence commitment, YGE is obliged to evaluate the deeper Callovian reservoir potential using an approved technical institute. Data input and evaluation is complete and the report is in preparation.

Hungary

Development Activity

Hadjunanas and Gorbehaza fields (JKX: 50%): Well Hn-2 continues to produce at around 0.5 MMcfd with 6 bopd and about 1500 bwpd.

Sarkad I Mining Plot: JKX retains its 25% interest in the 15.6 sq. km farm-in area around the Nyekpuszta-2 gas condensate discovery well.

Turkeve IV Mining Plot: JKX retains its 50% interest in the 10 sq. km farm-in area around the Ny-7 high CO2 gas discovery well.

Exploration: Hernad licences (JKX: 50%): A shallow prospect, Tisvaszvari-15, has been identified, but possible drilling has been deferred until 2014.

Slovakia

Exploration: Svidnik, Medzilaborce and Snina explorationlicences (JKX 25%): Following a change of operator, drilling of the Cierne-1 exploration well has been deferred until 2014.

ENDS