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

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."