JKX Oil has been forced to make staff cuts in Russia, Ukraine and London as it battles a prolonged sector downturn.
However, the firm confirmed a new field development plan (FDP) could unlock 600 billion cubic feet of gas from one of its most technically challenging fields.
In London, the firm has consolidated its head office from four floors to one. It is now looking for new tenants to mitigate its rent obligations. In Ukraine, it cut its staff by 29% – 125 jobs. In Russia, JkX is targeting a 20% rduction in staff numbers by early 2017.
Its new development plan is targeted at Ukraine’s Rudenkivske field, which is estimated to contain 2.8 trillion cubic feet of gas.
A company statement read: “Utilizing modern development and completion techniques could result in the production of as much as 600 billion cubic feet of gas over the field’s lifetime. Analogous fields to Rudenkivske’s structure and depositional environment in North America were identified and their experience and empirical data were used in the Company’s planning. These North American fields were also previously considered uneconomic, and have recently been successfully developed using advanced well construction and field development design.
“The full field development model for the Rudenkivske field includes 135 wells over ten years and results in plateau production of approximately 110 million standard cubic feet per day (18,300 barrels of oil equivalent per day). Total capital investment over the same period is currently estimated at $660million.
“Despite Rudenkivske’s significant potential, the project is technically challenging. This is due to the complex stratigraphic architecture of the sands and inconsistent well drainage volume. Full field development will require the use of modern equipment and services that are not currently available in Ukraine. Further reform of Ukraine’s upstream investment environment, in particular royalty tax rates, would significantly reduce the financial risk of full field development. We are working closely with the Government of Ukraine to implement an investment environment supportive of innovation and risk-taking.”
From January to August, JKX produced 10,271 barrels of oil equivalent per day, an increase of 17.5% on the same period in 2015.
The firm has also been embroiled in a police investigation in Poltava.
A spokesperson added: “As previously disclosed, the Ukrainian police visited the office of PPC and the homes of two of our employees on 14 June. The searches undertaken were the result of an investigation of claims of alleged underpayment of taxes which have been made against PPC by a local prosecutor.
“Since then we have received a number of information requests from the police, many of which were unrelated to the original warrants.
“As stated in our earlier release, we cooperated fully with the searches but vigorously contest the validity of the claims. The Company notified both British and US embassies in Kiev and is considering further legal action in this respect.
A spokesperson added:”The group continues to make progress on litigation and financing challenges, but now does so with a substantial development plan for the future.”