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JKX Oil & Gas plc (LSE:JKX) will not release an interim dividend for its shareholders, the company said today.
The decision came alongside results for the January to June 2012 period, reflecting a drop in revenue and operating profit brought about by the fall on production in its Ukraine and Hungary assets and delays from gas production build-up in Russia.
“The Board has concluded that it is not appropriate at this time to award an interim dividend,” the company said in a statement, after carefully considering the firm’s cash position.
Still Solid
While JKX’s Chief Executive, Dr. Paul Davies, described the first half as a “solid” performance, the independent explorer had to write off $30.7 million from the value of its Ukraine assets, leaving the company just about $0.5 million operating profit.
Revenue for the first half was US$4.8 million less to $108 million, while operating profit was down to $31.3 million from $32.9 million for the comparable period last year, on an underlying basis.
Loss incurred after tax was at $5 million, in stark contrast with the $24 million profit JKX during the same period the year before.
Production Delay
Average realised price for oil may have fallen a few cents short to $97.82 per barrel but the impact is amplified by the 21% drop in production to 7,481 barrels of oil equivalent per day (boepd).
The decline in production was, in fact, expected by the company, although it hoped that will be offset by production in Russia. Unfortunately, it did not turn out the way JKX hoped as technical problems beset the ramp up of its first gas project in the country.
“We experienced some difficulties in bringing our wells on-stream at their design production rate,” stated Dr. Davies, adding that plant capacity production will be achieved by the first of 2013.
In a separate statement issued today, nonetheless, JKX said gas production from its Well-27 in Russia has now commenced, flowing to the processing facility for production testing.
Assurance
“We expect our performance in the second half of the year to reflect the extended schedule for build-up to Russian plant capacity, and remain committed to delivering long term value for our shareholders,” Dr. Davies closed.
Nigel Moore, who was appointed Chairman of the JKX a month ago, assured its shareholders saying:
“The Group strategy remains focused on oil and gas developments in eastern and central Europe and good progress has been made in the period towards achieving our 2012 goals.”
Some investors, however, was not so much re-assured by the tone of the firm’s half year report, which seemed to downplay the domino effect of the troubles in Russia to JKX’s financials. Share price dropped 3.4% to 91.75 pence by 1:50 PM.
