JKX ramps up hydrocarbon output 12%, profit 13% in 1H14

Обзоры по компаниям и отраслям 28.07.2014 JKX Oil & Gas (JKX LN) reported ramped up its hydrocarbon production by 12% yoy to 10,126 boepd in 1H14, according to its July 28 report. Both its Russian and Ukrainian assets contributed to the growth. The company expects its 2H14 output will be at a level of above 10,000 boepd. The company’s hydrocarbon sales increased just 2% yoy to 9,364 boepd in 1H14, as the company chose to increase its natural gas stockpiles in Ukraine during the period. In particular, the company increased gas output from its Ukrainian fields 20% yoy to 3,903 boped, while sales of gas in Ukraine fell 7% yoy to 3,456 boepd. JKX’s revenue decreased 19% yoy to USD 74.3 mln in 1H14, with the decline having been caused by the lower price of natural gas sold (-22% yoy to about USD 200/tcm), mainly due to lower prices in Ukraine. The company’s operating profit fell 38% yoy to USD 5.8 mln, while net profit improved 13% yoy to USD 8.5 mln in 1H14. Alexander Paraschiy: The company’s 1H14 production results were broadly expected, though the decline in gas sales came as a surprise. The company’s choice to postpone selling its gas to Ukrainian consumers seems logical, given that domestic prices for gas are still adjusting to hryvnia depreciation and thus should further increase in the coming months. The second half of 2014 could be better for JKX’s financials, but the core risk is parliament’s adoption of the initiative of the Ukrainian government to hike the production tax for gas by more than three times. Thus far, parliament has rejected the initiative, though we see a chance that the tax will be raised by no less than 50%, while the ultimate size of the tax increase could be smaller than what the government had initially planned.