JKX produces more but earns less on exchange rate fluctuation

JKX Oil and Gas, Ukraine
Ukraine news

JKX Oil & Gas, the Ukraine and Russian focused operator, said the weakness of the rouble affected revenue in the first five months of 2016, although production levels had increases on the same period from last year.

The company said it produced 10,322 barrels of oil equivalent per day between the start of January and the end of May, up 21% from the same period a year earlier.

Revenue came in 19% lower than the same period a year earlier, due to the weakening of local currencies, in Ukraine and Russia, as well as the decline in oil and gas prices.

Its gas producing well 27 contributed to a 41% increase in Russian production.

Gas production levels in Ukraine were stable year-on-year, whilst oil production increased by 12%.

Both results, it said, were due to the implementation of an “enhancement program targeting the technical potential of existing well stock”.

The company is in the process of repatriation of dividends for 2014 and 2015, after the National Bank of Ukraine eased the restrictions on payments of dividend to overseas shareholders.

Ukrainian police visited the office of its subsidiary PPC and the homes of two employees last week.

JKX said 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.

The company vigorously contests the validity of the claims.

“Although there is no direct evidence to date connecting these searches to the pursuit of our legal rights, we believe this police action to be in violation of the treaty arbitration protections, and the company is considering further legal action in this respect,” it said.

JKX is continuing with cost-reduction possibilities and has reduced head office headcount in London by 45% since January.

“The field development plan for our Ukrainian assets is nearing completion, and will provide a framework for future business and capital planning, as well as a baseline for investment decisions.

“The process of monetisation of our Russian and Hungarian assets is underway. We also look forward to completing our inherited legal battles as early as this summer, and getting back to work by resuming investment in oil and gas production through drilling and/or acquisition,” JKX Oil said in a statement.