JKX Oil & Gas - Increased Russian exposure to spoil 2013 financials

Обзоры по компаниям и отраслям 31.01.2013 JKX Oil & Gas shares lost more than 20% following its 4Q12 update in which the company reported missing its production target by 20%. The full-year results disappointed in both output, which fell 15% yoy by our estimates, and operating profit, due to an increased share of low-marginal Russian natural gas in the output structure. The share of Russian-made gas (zero in 2011) reached 33% in 4Q12 and is going to increase to 60% in 2013 to cut JKX’s average netback 44% yoy to USD 27 /boe. To make things worse, the company noted a lack of cash for development and tapped the market for USD 40 mln via convertible five-year notes. JKX trades on par with its Russian peers, and we see that room for both upside and downside is limited for now.