JKX Cuts Losses, Faces Shaky Future

Ukraine-focused oil and gas producer JKX reported August 1 reduced losses in the first half of the year, from $10.1mn to $7mn, while also confirming the departure from their advisory roles of the former CEO Tom Reed and the CFO Russell Hoare on July 31. This was two months earlier than planned.

Two shareholders Eclairs and Proxima outvoted all the other shareholders at the June AGM to oust Reed and Hoare, and Proxima and most of the minor shareholders then voted against Eclairs' nominee for a directorship, Eclairs having earlier removed a Proxima representative.

Chairman Paul Ostling said he has also tendered his resignation along with the two other independent non-executive directors, which will leave just one, a representative of Proxima; the search for replacements continues under acting CEO Victor Gladun. The aim is to find replacements for chairman and non-execs, as well as the CEO and CFO, "within the next three months to ensure effective continuing management of the company."

Ostling said: "Following significant staff reductions across the group during 2016, the increased operational activity in Ukraine, Russia and Hungary and the uncertainties over governance and management of the company in recent weeks, it is a testament to the commitment and resilience of our employees that the company continues to operate effectively."

Contributing further to the corporate malaise have been setbacks at the prize Ukrainian asset, the Rudenkivske field, where wells have under-performed. Soviet-era data collected from the abandoned wells needs further appraisal, before more work can be done, it said.

JKX produced 8,598 barrels of oil equivalent/day, comprising 46.9mn ft³/d of gas and 779 b/d of oil and condensate, down 17.3% from 1H2016, mainly due to a well workover in Ukraine. The production cut was offset by improvement in prices, leading to a 7.3% increase in half-year revenue to $38.0mn.

"Although three out of four wells had gas shows in fractured intervals, previously unidentified water influx prevents commercial gas production at least until water-bearing zones are isolated," it said. " Our understanding of the complex geology of the Rudenkivske field is incomplete and needs thorough reassessment prior to spending larger amounts of capital on drilling."

And in Russia, output was down by a quarter compared with the first half of 2016 mainly owing to a planned workover that took a well offline for about four months following a fire on the workover rig. 

William Powell