JKX Oil & Gas Announces Quarterly Operations Update

Source: www.gulfoilandgas.com 7/19/2021, Location: Asia

Highlights
- Ukraine average production of 4,101 boepd for Q2 2021, 7% higher than during Q1 2021.

- Net $36.5m of cash and cash equivalents, and oil and gas inventory of approximately $4.4m in value, held at 30 June 2021.

- The gas and oil prices in Ukraine have significantly improved by 77% and 58% respectively in comparison with H1 2020.

- IG149, a new well in the Ignativske field, was drilled and brought into production in Q2 2021. The well has produced an average of 962 boepd since starting production on the 21st May 2021.

Production

In Ukraine:

- IG149, a new well in the Ignativske field was drilled and completed in the Devonian reservoir. Following testing the choke was reduced to 25/64ths?. Average production from this well in June was 915 boepd with a current wellhead pressure of 930 psig.

- IG21, a leased well in the Ignativske field, was worked over to test the Visean carbonate reservoir and came online at an initial rate of 256 boepd and produced an average of 50 boepd since coming online in the second half of April.

- The drilling rig was demobilised following the drilling of IG149 and is expected to return to PPC ("Poltava Petroleum Company") in September to spud the next well. Meanwhile the PPC owned workover rig continues operating in the Novo-Nik complex.

In Russia:

- Acid treatments were carried out on 3 wells in Q2 2021 with no significant incremental production increase achieved. The coiled tubing unit has now been demobilised from the field as there are now not many future acid treatments expected to be required due to stable production from all wells.

- Russian average production was 5,282 boepd in H1 2021 and is unchanged from H1 2020 with no new wells added in the last year.

Liquidity

Our Ukrainian subsidiary held 3.0 million cubic metres of gas and 50.8 thousand barrels of oil inventory available for immediate sale at 30 June 2021. Approximate sales value of gas and oil inventory is calculated using average sales prices for June 2021.

Rental fee claims

Claims issued by the Ukrainian tax authorities for additional rental fees for 2010 and 2015 are still being contested through the Ukrainian court process as explained in the 2020 Annual Report. In July 2021 the Supreme Court satisfied demands of Poltava Petroleum Company (PPC) in respect of the case No. 816/844/16 and left the decisions of first and appellate instance courts in force. Also PPC has received the final judgement of the Supreme Court of Ukraine in Case No.816/4476/14 relating to the Poltava Tax Authorities appeal against lower court judgments in this case. This case relates to a claim for 2010 royalty payments and a judgment has been made in favour of the Poltava Tax Authorities. PPC is under no immediate obligation to pay the judgement as the Ukrainian tax authorities have to obtain approval of the Supreme Court of Ukraine before the payment can be collected from PPC. This hearing is expected to be heard in late 2021.

International arbitration award

The international arbitration award, directing the State of Ukraine to pay $11.8m plus interest and $0.3m costs to JKX as described in the 2020 Annual Report, was successfully legally recognised in Ukraine and JKX filed for collection. No possible future benefit that may result from this award will be reflected in the accounts until there is further clarity on the process for, and likely success of, enforcing collection.

Covid-19

The Group has all necessary arrangements in place to ensure the safe conduct of its business. We have implemented a number of policies recommended by Governments in the countries of our assets for the protection of our employees, as well as to help minimize the spread of coronavirus (Covid-19). Our first priority is the safety and wellbeing of our staff. Our next priority is supporting the local communities, especially where there is a lack of medical assistance, and we have directed our corporate and social responsibility projects helping to fight further spread of Covid-19. We continue to monitor the impact of Covid-19 developments on our industry, operations, staff and contractors and are confident about the safety measures we put in place.


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