12 Jul 2019 07:00
LEI: 213800AS2I1XUAGQ6F27
12 July 2019
JKX Oil & Gas plc
("JKX", the "Company" or the "Group")
Quarterly Operations Update
Highlights
· Two new wells in Ukraine and Well 5 workover in Russia completed in Q2.
· Daily production up to 11,872 boepd on 30 June 2019, meaning average daily production of 10,132 boepd for H1 2019, up 16% year on year.
· Ukraine gas sales price significantly lower, while Russia regulated gas sales price unchanged.
· Both Ukraine and Russia produced sufficient operational cash flow to finance our continued investment in the fields as planned.
· $10.7m cash held at 30 June 2019. In addition to cash we are holding oil and gas inventory of approximately $8.0m in value.
Production
Q2 | Q1 | Q on Q % Change | H1 | H1 | Y on Y % Change | |
2019 | 2019 | 2019 | 2018 | |||
Total production, boepd | 10,354 | 9,907 | 4.5% | 10,132 | 8,728 | 16.1% |
Ukraine, boepd | 5,364 | 5,009 | 7.1% | 5,188 | 3,491 | 48.6% |
- Average gas production, Mcmd | 742 | 709 | 4.6% | 725 | 462 | 56.9% |
- Average oil and condensate production, boepd | 999 | 837 | 19.3% | 919 | 772 | 19.0% |
Russia, boepd | 4,990 | 4,873 | 2.4% | 4,932 | 5,146 | (4.2)% |
- Average gas production, Mcmd | 838 | 819 | 2.4% | 828 | 864 | (4.2)% |
- Average condensate production, boepd | 57 | 56 | 1.5% | 57 | 58 | (1.7)% |
Hungary, boepd | 0 | 25 | (100)% | 12 | 91 | (86.8)% |
Prices realised | ||||||
Ukraine | ||||||
- Average gas price, $/Mcm | 215 | 269 | (20.1)% | 247 | 279 | (11.5)% |
- Average oil and condensate price ($/bbl) | 60 | 59 | 1.7% | 59 | 71 | (16.9)% |
Russia | ||||||
- Average gas price, $/Mcm | 57 | 56 | 1.8% | 56 | 61 | (8.2)% |
In Ukraine:
· IG103 sidetrack production continues to exceed expectations with current production at 1,366 boepd with a wellhead pressure of 1,320 psi. To date the well has produced 278 Mboe.
· WM3 has not shown any significant decline and is currently producing at 559 boepd with a wellhead pressure of 1,326 psi.
· Oil production increase is partly due to NN81 that is currently producing 153 bopd.
· IG142 has been drilled to a depth of 2,515m and logging results indicate a net hydrocarbon column thickness of 31m. Once the well is completed the rig will relocate to the West Mashivska field to drill WM4, a follow-up well to WM3.
In Russia:
· The operational problems encountered during Well 5 operations were successfully overcome, the well was completed and, following initial acid jobs, put into production on 28 June. Current gas rate is 144 Mcmd (851 boepd). Further acid jobs are planned, as in other wells in this field several acid jobs were required for wells to achieve their full potential.
· The workover of Well 18 has started and is expected to take four months. This workover will include a repair of the production casing, removal of a parted tubing string, and the drilling of a sidetrack.
Liquidity
In $m | 30 June 2019 | 31 Dec 2018 | 30 June 2018 |
Total cash | 10.7 | 19.2 | 7.6 |
Bond liability (principal and interest accrued) | (5.7) | (11.3) | (11.3) |
Net cash/ (debt) | 5.0 | 7.9 | (3.7) |
Approximate sales value of gas and oil inventory | 8.0 | 9.9 | 3.1 |
Despite the significantly lower Ukrainian gas sales price, we remain in a net cash position and continue to finance all investment in the fields out of operational cash flow. H1 2019 cash outflow on capex exceeded $10m.
In addition to cash we are holding 24,838 Mcm of gas and 45,939 barrels of oil inventory available for sale at our Ukrainian subsidiary. Approximate sales value of gas and oil inventory is calculated using average sales prices for June 2019.
The remaining bond payments are $0.4m in August 2019 and $5.8m in February 2020.
Rental fee claims
Claims issued by the Ukrainian tax authorities for additional rental fees for 2010 and 2015 are being contested through the Ukrainian court process as explained in the 2018 Annual Report. Final resolution of the 2010 rental fee claim case is expected before the end of 2019. The 2015 rental fee claims were contested in eight separate cases. As previously reported, in early July one of these cases was closed in favour of JKX's subsidiary in Ukraine, Poltava Petroleum Company. Final resolution of the remaining seven 2015 rental fee claims cases, four of which are currently suspended, is expected during 2019 and 2020.
International arbitration award
In February 2019 JKX filed an application for the recognition and enforcement of an international arbitration award as described in the 2018 Annual Report. On 5 July 2019 the written judgment of the Kyiv Appellate Court was issued, satisfying the application to recognise the amounts due under the international arbitration award ($11.8m plus interest and $0.3m costs). This judgment may be subject to appeal in the Supreme Court of Ukraine before mid-August. No recognition will be made in the financial statements of any possible future benefit that may result from this award until there is further clarity on the process for, and likely success of, enforcing collection.
Recruitment of new Independent Non-Executive Directors ("INEDs")
Following the outcome of the recent AGM and the subsequent resignations of Andrey Shtyrba and Christian Bukovics, the Board has initiated a search for replacement INEDs with the appropriate skills, experience and sector knowledge to replace the previous incumbents.
The company has conducted a competitive tender and on the basis of the commercial and technical submissions received has appointed Ward Howell, the world's second oldest recruitment firm, with offices in numerous locations including London and Ukraine, to carry out an expedited search.
Whilst it is not possible to predict the exact time it will take to find appropriate candidates, the matter is a priority for the Board.
boepd - Barrels of oil equivalent per day
bopd - Barrels of oil per day
Mboe - Thousand barrels of oil equivalent
Mcm - Thousand cubic metres
Mcmd - Thousand cubic metres per day
psi - pounds per square inch
This announcement contains inside information as defined in EU Regulation No. 596/2014 and is in accordance with the Company's obligations under Article 17 of that Regulation.
ENDS
JKX Oil & Gas plc +44 (0) 20 7323 4464
Ben Fraser, CFO
EM Communications +44 (0) 20 7002 7860
Stuart Leasor, Jeroen van de Crommenacker