JKX are a growth oil and gas company, principally based in the Ukraine, but also present in several other countries, and have recently presented some excellent results.




JKX corporate website : http://www.jkx.co.uk/index.cfm

Poltava Petroleum : http://www.ppc.net.ua/inf_en.html

Annual report 2005 : Click HERE

JKX OIL & GAS plc ("JKX")



ANNOUNCEMENT OF

UKRAINIAN RIG REMOBILISATION





JKX Oil & Gas plc ("JKX") announces that it is restarting its in-field drilling and appraisal programme on the Novo-Nikolaevskoye Complex in March. The Skytop N75 rig will initially be mobilised to the Molchanovskoye field for a horizontal recompletion of the M-166 Devonian sandstone oil producing well.



The Skytop rig is scheduled to move to the Elizavetovskoye licence in June to spud the first of a planned 5-well development drilling programme. Drilling is also planned in 2013 on the Zaplavskoye licence, following completion of processing and interpretation of the 2012 additional 3D seismic data.



The Skytop rig is currently completing a one-well programme for another Ukrainian operator which is expected to complete later this month. The rig, which has been on long-term contract to the Company's wholly-owned subsidiary Poltava Petroleum Company ("PPC") since 2004, was contracted out in late Q3 2012 as part of the Company's cost management programme. More than 50% of the rig personnel are PPC staff.



JKX Chief Executive, Dr Paul Davies, commented:

"We are pleased to recommence the in-fill drilling programme on our core Ukrainian production licences, the production from which currently underpins our Group cash flow."



JKX is an exploration and production company listed on the London Stock Exchange. The Company has licence interests in Ukraine, Russia, Hungary, Slovakia and Bulgaria.



ENDS

JKX Oil & Gas (LON:JKX) reported revenues of $$74.3m for the six months to the end of June (2013: $91.3m).

Profit from operations before exceptional item was $5.8m (2013: $9.4m).

Chief executive Dr Paul Davies said: "The first half of the year saw a continuing improvement in the company's production levels, in line with our strategy in both Ukraine and Russia, with the contribution of the first two wells in our new Elizavetovskoye field demonstrating the potential of this asset to significantly raise the level of our Ukrainian production going forward.

"Revenues in the period have been adversely affected by lower gas realisations and lower oil production in Ukraine. However, we continue to benefit from strong oil, condensate, gas and LPG realisations which are expected to remain firm through the rest of the year.

"The work programmes in both Ukraine and Russia are fully funded. Production is anticipated to be maintained around 10,000 boepd through the second half of the year.

"The difficult political situation in the east of Ukraine has continued into the second half of the year, but to date our operations have not been directly affected."

Broker note concerning the situation in Ukraine:
"Concorde Capital July 22, 2014:
The Ukrainian government submitted to parliament on July 21 amendments to Ukraine’s tax code that would significantly increase royalty payments for private producers of natural gas. The proposal calls for boosting royalties for firms that sell gas to industrial producers to 70 percent of the regulated gas price (UAH 4,724/tcm, or USD 406/tcm, based on the current exchange rate). The current legislation stipulates the royalty payment at 28% (or 15% for those firms extracting gas from wells deeper than 5 km) of the price of imported gas (USD 282/tcm in June). If the draft becomes law, private gas producers will have to pay USD 284/tcm in royalties, up from USD 79/tcm they had to pay in June.
Alexander Paraschiy: The amendment, if approved by parliament, will surely ruin the attractiveness of gas production in Ukraine. The net positive effect for the state budget from such an initiative would be close to UAH 8 bln annualized, but it will be short-lived. It will also lead to a significant decrease in gas output by private producers. Note that gas output by private firms increased 33% yoy in 1H14, while output by state firms (which are restricted to low, regulated gas rates) fell 2.5% yoy. Since the initiative contradicts the government’s strategy of energy self-sufficiency, there is a chance that parliament will reject it.
If approved, the legislative initiative will cause a dramatic deterioration in the operating profit of Ukraine’s listed gas production companies: Serinus Energy (SEN PW), JKX Oil & Gas (JKX LN), Regal Petroleum (RPT LN) and Cadogan Petroleum (CAD LN)."

StockMarketWire.com
Production at JKX Oil & Gas fell to 10,052 barrels of oil equivalent per day in the third quarter - down from 11,943 boepd a year ago.

Gas production fell to 54.2 MMcfd from 62.7 MMcfd and oil output dropped to 1,025 bopd from 1,498 bopd.

LPG totalled 33 tonnes per day - down from 49 tonnes per day a year ago.

Chief executive Dr Paul Davies said: "Production levels were maintained above 10,000 boepd during the period despite challenging fiscal changes and political events in Ukraine, as well as the introduction of sanctions in Russia. We have continued to develop our licence portfolio and progress our development projects in Ukraine, whilst continuing to monitor the situation closely. Russian production remains constrained to around 80% of base capacity due to tubing issues in two wells. Rig mobilisation is underway, with rectification works anticipated to commence in the New Year."

StockMarketWire.com
JKX Oil & Gas is suspending its planned 2015 capital investment programme in Ukraine.

The company says this is due to the combination of Ukrainian Government-imposed restrictions on selling its gas to industrial clients and the punitive rate of gas production tax.

JKX says the capital investment programme will be suspended until the economic parameters for investment improve and consequently, the Skytop drilling rig is being stacked following its recent completion of well Ig-140, and operational and ancillary costs reduced. JKX says that further to the announcement of sales restrictions imposed on private gas producers by the Ukrainian government on 29 November, the company reports that it sold approximately 80% of its December gas production capacity to industrial customers, with only 20% of its gas production capacity shut-in during the month. But it adds that the market available to private gas producers in Ukraine continues to contract with competition for the increasingly limited number of credit worthy industrial customers becoming intense.

JKX anticipates that gas sales may reduce to less than 50% of its production capacity in Ukraine while the government decree remains in force and will necessitate shut-in of a proportionate level of gas production. At the same time, the Ukrainian temporary level of tax on gas production of 55% has been incorporated into the Ukrainian tax code for 2015.

StockMarketWire.com
JKX Oil & Gas reports successful test results from well E-303 in its Elizavetovskoye field in Ukraine.

JKX says that following additional perforations in the shallower A2 carbonate reservoir and acid treatment, co-mingled production with the G7-12 sandstone reservoirs was 5.21 MMcfd of gas and 18 bpd of condensate through a 48/64-inch choke with a flowing wellhead pressure of 505 psi.

Chief executive Dr Paul Davies said: "We are pleased that we have been able to co-mingle production from the sandstone and carbonate reservoirs to create an overall cash generative well result."

Well E-303 was drilled to a total depth of 4,406 metres and initially completed in the G7-12 sandstone reservoirs only. Production from the deeper reservoirs, whilst steady, is not economic in the prevailing economic conditions in Ukraine.

JKX has announced its decision to suspend its planned 2015 capital investment in Ukraine because of the combination of current restrictions on selling its gas to industrial clients and the substantially increased rates of gas production tax.

ON THE MOVE . Proxima Capital Group Inc ("PCG") notes the recent share price movement of JKX Oil & Gas plc and confirms that it is currently in the very early stages of considering a potential offer for JKX Oil & Gas plc.

StockMarketWire.com
JKX Oil & Gas plc and its wholly owned Ukrainian and Dutch subsidiaries have started arbitration proceedings against Ukraine under the Energy Charter Treaty, the bilateral investment treaty between the UK and Ukraine and the bilateral investment treaty between the Netherlands and Ukraine.

JKX is seeking compensation for the losses it has suffered from Ukraine's treaty violations, including Ukraine's failure to treat JKX's investments in a "fair and equitable" manner and failing to comply with commitments made by Ukraine in respect of JKX's investments.

In particular, JKX is seeking repayment of more than $180m in rental fees that its Ukrainian subsidiary has paid on production of oil and gas in Ukraine since 2011. In support of JKX's claims against Ukraine under the Energy Charter Treaty, an Emergency Arbitrator appointed under the Arbitration Rules of the Stockholm Chamber of Commerce has already issued an Emergency Award on 14 January 2015 ordering Ukraine to refrain from imposing royalties on the production of gas by JKX's Ukrainian subsidiary in excess of the rate of 28% (as opposed to the 55% rate that is currently applicable under Ukrainian law).

The Emergency Award is binding on Ukraine under international law; however, if Ukraine refuses to comply with the Award, JKX will seek to have it recognised and enforced by the Ukrainian courts. In addition, JKX will seek orders from the Tribunal constituted under the Energy Charter Treaty to compel Ukraine to comply with the Award.

StockMarketWire.com
JKX Oil & Gas has noted that Proxima Capital Group has now announced that it does not intend to proceed with a potential offer. The board confirmed that at no stage had any approach whatsoever been made by Proxima.

StockMarketWire.com
JKX Oil & Gas's board is repeating its recommendation that shareholders follow the advice of leading corporate governance advisory institution, ISS, and reject Proxima Capital's call for a change in JKX's leadership.

JKX said it noted the announcement made today by Proxima Capital and repeats the the position set out in the circular to shareholders on 31 December which has received the support of ISS.

JKX says the circular details the creditable performance of the company against the extremely difficult constraints arising from the main operations being in Ukraine and substantial decline in worldwide oil and gas prices. The circular also gives very clear reasons why, in the interests of shareholders as a whole, shareholders should vote against the Proxima resolutions.

JKX says Proxima has failed to respond to the board's substantial concerns. Furthermore, the company has noted that Proxima queries why JKX has been raising standard questions regarding disclosure of interests in the company's shares. Such requests are normal, especially where shares are held through a series of offshore trusts, as they are in Proxima's case.

Operational Update
JKX, an upstream oil and gas exploration and production company with significant assets in Ukraine and southern Russia, provides an operational update to investors following the change in management that took place on 28 January this year.

Introduction
At a requisitioned General Meeting of the Company held on 28 January 2016 an overwhelming majority of the Company's shareholders voted to replace the previous board of directors with a new Board. The new Board promised a greater level of transparency and engagement with shareholders and other stakeholders and, with this in mind, has conducted preliminary on-site reviews of the operations of JKX. Now, 30 days after its appointment, the Board sets out below the major findings of those reviews.

Tom Reed, JKX's new CEO, said, "In the past month, the team and I have visited all the main assets of the Group. We have identified significant scope for improvement in capital investments, and we found areas to realize both cost savings and production gains through the application of best in class technology and more hands-on execution throughout the portfolio. As we execute on these opportunities, we expect to deliver significant improvements to the value of JKX.

"We have also found several areas of legacy risk which we feel are necessary for owners to understand in more detail to properly assess their investment in this company. These risks are primarily related to production tax litigation in Ukraine, and are highlighted below in our update. We are confident in our ability to manage these risks, but we felt that shareholders should be aware of their nature and scope.

"In short, we are encouraged by the physical characteristics of our reservoirs in both Russia and Ukraine, the quality of the staff across the group, the opportunity for operational and capital spending improvements, and remain committed to improving value per share to all shareholders."

Production
In January 2016, the Company produced 10,553 boepd of which 9,863 boepd was gas. 6,581 boepd was produced in Russia and the remainder in Ukraine. This compares with January 2015 production of 8,126 boepd of which 7,284 boepd was gas. Since there was no additional drilling in 2015, production growth came primarily from the restoration of production from well-27 in Russia, following almost 2 years of repairs. There is currently no production from the Hungarian assets. We have confirmed that all development capex ceased in 2015 due to cash constraints and unless such a program is restarted in 2016, the production levels are likely to decline during this financial year. The Board is reviewing all development projects and enhancement opportunities.

Revenue
In January 2016, Company revenue (unaudited) was $6.4 million of which $4.8 million was from oil, gas, condensate and LPG sales in Ukraine and $1.6 million from gas and condensate sales in Russia. Revenue in January 2015 was $6.5 million ($5.0 million in Ukraine and $1.5 million in Russia). The slight reduction in revenues is primarily due to the weakening of local currencies and the decline in oil and gas prices, in line with international market trends, partly offset by higher volumes. Gas realisation per unit in Ukraine in January 2016 was 3.7 times higher than in Russia.

Convertible debt
The Company's main financial instrument is a $40 million convertible bond which was placed in 2013 with institutional investors. The bond pays an annual coupon of 8% payable semi-annually in arrears and matures in 2018 however bondholders have certain rights to early redemption of the bonds, as further described in the 2014 Annual Report.

The scheduled repayment to bondholders due this month of $12.3 million was made on time and in full from cash balances on hand. If all bondholders exercise their option to early redemption in February 2017, as they are entitled to under the terms of the bonds, the Company will owe bondholders a further $30.1 million at that time (consisting of $26 million principal, $1 million interest and a redemption premium of $3.1 million).

Ukrainian production tax litigation
The Hague Arbitration
The Company commenced arbitration proceedings against Ukraine under the Energy Charter Treaty, and the investment treaties between Ukraine and the United Kingdom and the Netherlands respectively on the basis of overpayment of production taxes ("rental fees"). During 2015 production tax rates in Ukraine were increased to 55% and capital control restrictions were introduced. On 14 January 2015, an Emergency Arbitrator issued an award ordering Ukraine to cease imposing rental fees in excess of 28% on gas produced by the Company's Ukrainian subsidiary, Poltava Petroleum Company ("PPC"), pending the outcome of the application to a full tribunal for the Interim Award. On 23 July 2015 an international arbitration tribunal issued an Interim Award requiring the Government of Ukraine to limit the collection of rental fees on gas produced by PPC to a rate of 28%.

The Interim Award was to remain in effect until final judgement is rendered on the main case (relating to the overpayment of approximately $180 million in rental fees, plus damages to the business). The arbitration hearing is expected to take place in July 2016 and will result in additional legal costs for JKX.

StockMarketWire.com
JKX Oil & Gas has confirmed that Ukraine police carried out unexpected searches at the offices of its subsidiary Poltava Petroleum Company yesterday.

The searches are part of an ongoing investigation announced by the company on 15 June. JKX says PPC is fully cooperating with the investigation, but nevertheless believes that it is in full legal compliance with matters outlined in the warrant and that the action is completely without merit.

JKX chief executive Tom Reed said: "We will be bringing this matter up with the relevant authorities in Kiev. I believe these actions to be a distraction for JKX and damaging to Ukraine's investment climate."

This was once a respectable share but has turned into junk now.

What is going to happen now

StockMarketWire.com
JKX Oil & Gas has confirmed that Ukraine police carried out an unannounced search of group subsidiary Poltava Petroleum Co's Kyiv office yesterday and claims the ongoing investigation is taking on the form of harassment.

This followed previous searches at the Poltava offices of PPC on 14 June and 11 January.

JKX said: "As the scope of the investigation continues to broaden without any apparent reason, justification, outcome or conclusion, it is increasingly taking on the form of harassment rather than a legitimate investigation into PPC's business operations.

"The group strongly believes that these actions are unfounded.

"PPC continues to cooperate with the enquiry, and has been providing all materials requested in the search warrants in full and in a timely manner.

"JKX and PPC maintain that PPC is in full legal compliance with all relevant Ukrainian law and regulation."

A statement added: "JKX supports the intention of the Government of Ukraine as expressed by Prime Minister Volodymyr Groysman on 23 January, 'to declare war on everyone who hampers entrepreneurs creating new jobs and the Government leading the country out of absolute poverty'.

"As a leading investor and employer in Ukraine over the past 22 years, the company believes it is exactly this kind of harassment that the government is attempting to halt."

StockMarketWire.com
JKX Oil & Gas has lost its main claim against Ukraine over excessive royalties and production taxes paid by the company's subsidiary, Poltava Petroleum Co.

JKX had lodged several claims under the agreement between the United Kingdom and Ukraine for the Promotion and Reciprocal Protection of Investments for approximately $168m for excessive royalties and production taxes paid by Poltava Petroleum Co plus damages.

The international arbitration tribunal has dismissed the main element of the company's claim but ruled that Ukraine violated its treaty obligations in respect of excessive levying of such taxes and awarded the company damages of approximately $11.8m, plus interest, and costs of $0.3m in relation to subsidiary claims.

In parallel to the claims made against Ukraine under the UK-Ukraine BIT, the company has persistently defended its position in the Ukrainian courts regarding the rental fee charges levied for 2010 and 2015 (totalling approximately $32m at current hryvnia-US dollar exchange rates).

JKX said that while this ruling posed additional challenges for the company in particular regarding the 2015 claims (totalling $22.3m at current exchange rates), the company would continue to defend its position in the Ukrainian courts in all outstanding cases.

JKX also said it intends to begin a dialogue with the Ukraine government in order to satisfy the terms of the award and reach a mutually beneficial outcome.

Chief executive Tom Reed said: "JKX has, over many years, been one of the largest foreign investors and major tax payers in the Ukrainian gas industry.

"We are disappointed with the decision on the overall award, but pleased that this result helps to draw a line under historical legal issues.

"As set out in our strategy a year ago, we now look forward to resolving all outstanding litigation and returning to our core business of drilling for oil and gas.

"We will call on the Ukrainian government to secure support in creating an environment in which JKX can execute its recently finalised field development plans, invest in gas production and assist Ukraine to achieve energy independence."

StockMarketWire.com
JKX Oil & Gas is 'particularly disappointed' by the withdrawal of support for the current board by 20% shareholder Proxima Capital Group.

It said that further to the announcement on 12 May in relation to the most recent request from Eclairs Group to propose ordinary resolutions to appoint Michael Bakunenko as a director of the company and to remove certain directors from office at the next annual general meeting, the board had met to discuss its recommendations in respect of the revised proposal by Eclairs.

JKX said that during the board's deliberations, it became clear that Proxima Capital Group, the company's 20% shareholder, and its two nominee directors, no longer supported the current composition of the board, and instead favoured a significant restructuring.

It said: Proxima have neither proposed any particular board composition, nor disclosed how they intend to vote on the Eclairs proposals or the draft AGM resolutions being prepared by the company.

"They have however notified the Board that they may choose to do so in the future.

"As a consequence, the remaining board directors expect that some, if not all, of the AGM resolutions which will be sent to shareholders in the coming days will not have the unanimous recommendation of the board.

"The executive and independent directors are particularly disappointed to be announcing the withdrawal of support by Proxima, the shareholder that led last year's overhaul of the board, at a time when the company is launching the groundbreaking field stimulation programme announced only yesterday, a central plank of the turnaround strategy previously supported by Proxima.

"The executive and independent directors will, over the coming days, carefully consider the AGM resolutions which best serve and protect the interests of the company, and the corresponding recommendations they will make to shareholders.

"In the meantime, shareholders should take no further action."