Jkx Oil & Gas Share Discussion Threads

[stonefold] 30/6/2016 08:51

29-06-2016
Interview with Daniel Valk the new General Director of Poltava Petroleum Company.
Possibility of following Cadogan’s lead into the services sector.

[stonefold] 28/6/2016 19:44

Glavey, Looks like you got your wish. Eclairs Group, (controlled by Ukrainian billionaire Igor Kolomoisky) today voted to block most of the AGM resolutions.

[glavey] 10/6/2016 20:02

So the new board want holders to vote through the same remuneration policy put in place by the old guard which saw them well rewarded whilst the share price collapsed and holders lost 95% of the value of their investment.

And those 'independent directors' seem rather close...

What next? A sheaf of nil-cost options perhaps?

Plus ça change, plus c'est la même chose.

[wallywoo] 06/6/2016 15:41

Hi Stonefold, hard one this very illiquid now, with very few shares changing hands. At first glance you would say this is an incredible bargain with the assets they have. However, the Russian assets are only producing gas, and that can only be sold domesticly for peanuts (until the market opens up), and the Ukraine assets are all under threat due to the country being on its knees.

As you say it could all change very quickly, and JKX would be a huge benefactor if it does. Tax levels have been halved but I still don't think they are drilling due to cash transfer restrictions, but as you say that is changing.

[stonefold] 05/6/2016 15:37

In the next month or two.

As the AGM is due soon = 28th June, and the $180 M arbitration hearing is expected to occur in July, and there was mention of talks between JKX and Ukraine Gov to attempt to resolve matters I thought I would have a wild guess at possible outcomes.

After adjusting for current cash, including possible early repayment Feb 2017 of the bonds, assuming that any increase in CapEx is met by the slight (but IMHO expected) increase in oil and gas prices over the next year. Then approx. £9.5M of the current market cap of £36.85 M is IMO due to the expectation that the Ukraine Gov will pay £9.5M to settle all the tax issues.

That is to say that if all the court cases and arbitration case were to reach their conclusions, it would result in a net payment to JKX of approx £9.5M. But that this payment is already factored into the current share price of 21p.

It would be quicker and avoid legal costs if an out of court settlement were reached and payment were made by a tax credit or tax bond.

If the worst case occurs then JKX lose all court and arbitration cases and would be forced to sell up everything to try to cover the debts giving a share price of zero.

In the best case, then replace the net payment to JKX of £9.5M with one of £126.7M to give (eventually) a Market cap of £154M, which results in the share price of 87p. Plus possibly some additional amount if damages or interest are awarded.

The economic conditions in Ukraine are steady and improving for instance ForEx controls are being lifted, including soon the lifting of restictions to transfer funds from Ukrainian to UK banks.

[stonefold] 13/4/2016 11:34

Update on the 9 wells + kit.

Kharkov Economic Court of Appeal on April 5, 2016 notes that.

Jkx (lost the appeal) / (or presumed they would lose) so on 29-03-2016 signed an agreement to voluntarily return the property to Ukrgasdobycha.


Link to story in english for a change.


12-04-2016

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Perhaps JKX will have better luck with the Arbitration hearing in July.

[glavey] 02/3/2016 15:38

Goodness me, they have been bribing courts you say. Tut, tut, whatever next!

[wallywoo] 02/3/2016 08:44

Stonefold, anybody who has known this company a long time will know this is standard business practice in Ukraine. Local Courts are bribed, appeals are made all the way up - then nothing changes - it has been happening for years

[stonefold] 01/3/2016 16:17

Another couple of weeks to hear whether JKX have lost 9 wells + kit.

[glavey] 01/3/2016 02:10

"And the BoD wasted $6.9m in legal fees in their fruitless efforts to keep out Eclairs and Glengarry." > Fair enough, but you don't seem to have considered what might have been the situation if they hadn't. Besides, they weren't fruitless insofar as they (rightly or wrongly) postponed what might have been.

"How did the old BoD have the nerve to stand up at that EGM when they had already paid themselves a whacking golden parachute? Staggering duplicity." > Again, fair enough, but you need to look at this in context. The report doesn't really provide much enlightenment in other areas, does it? The only thing of note seems to be that they are now of the view that they should continue the legal challenges over taxes that they previously intimated they felt to be a diversion and were considering to abandon. Otherwise, what does this 'operational update' tell you that wasn't already known?

It's early days, but Proxima and the new board need to do a lot more to demonstrate that they are good to their word.

[pessimizer] 29/2/2016 14:13

And the BoD wasted $6.9m in legal fees in their fruitless efforts to keep out Eclairs and Glengarry. What a waste - with the only beneficiaries being the lawyers. Anyone know who advised JKX? They should be shamed for such bad advice.

[pessimizer] 29/2/2016 14:11

Perhaps the new team is getting a grip and that we can all look for the green fields beyond.

One of several very interesting items in that update:

• "Approximately $2.5 million of severance costs and additional remuneration which the previous board approved and paid to themselves in the last 24 hours BEFORE the General Meeting on 28 January 2016." (my capital letters).

How did the old BoD have the nerve to stand up at that EGM when they had already paid themselves a whacking golden parachute? Staggering duplicity.

[pessimizer] 29/2/2016 14:08

I see that the new team at JKX have posted an update:

RNS Number : 3869Q
JKX Oil & Gas PLC
29 February 2016


29 February 2016

JKX Oil & Gas plc ("JKX", the "Company" or the "Group")
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.
Ukrainian Legal Cases
The Group has several potential near-term contingent liabilities arising from three separate court proceedings over the amount of rental fees paid in Ukraine for certain periods since 2007, which in total amount to a potential liability of approximately $41 million, including interest and penalties. We believe that these claims are without merit under Ukrainian law and we will continue to contest them vigorously. There are several hearings scheduled in the coming months on these proceedings and we will update shareholders in due course.
Ukrainian production licenses
Following action initiated in late 2015, in January 2016, the State Geology and Mineral Resources Survey of Ukraine suspended four of PPC's subsoil use permits, initially with effect from 1 February 2016, but then with an extension period until 1 March 2016. The authority gave a list of actions that were required in order to avoid suspension (including a change to the minimum production requirements under the licenses) and would normally have given the operator sufficient time to remedy the failings. Instead PPC were given only one month to do so. Through further discussion with the relevant authority, PPC has been given more time to comply and hearings regarding the status of the licenses are planned for March 2016, at which the Board and PPC is confident of a positive outcome. We will make an announcement as soon as we have clarity on this issue.

Overheads and one-off costs
Going forward, we intend to clearly separate significant and non-recurring administrative costs from the Company's operating costs. Using this approach, other significant costs that the Company has incurred related to past, non-operating events include:
• Approximately $3.9 million of legal costs incurred by the Company from 2013 to date in connection with the restrictions imposed on the exercise of voting and other rights of two major shareholders, Eclairs and Glengary, in 2013 and again in January 2016;
• As a result of the Supreme Court of the United Kingdom finding against the Company an additional $3 million (approximate amount including interest) of legal costs incurred by Eclairs and Glengary in successfully challenging the restrictions imposed;
• Approximately $3.5 million in legal fees incurred to date in respect of the international arbitration proceedings (see above); and
• Approximately $2.5 million of severance costs and additional remuneration which the previous board approved and paid to themselves in the last 24 hours before the General Meeting on 28 January 2016.
Management is exploring all options to mitigate these one-off costs and will keep shareholders informed as appropriate.
Looking ahead
There are many challenges facing the Company, not all of them easily understood from previous communication. We are making this announcement in the spirit of a new and transparent approach to actively engage all shareholders and other stakeholders of the Company, as we stated we would prior to the recent General Meeting. We have had 30 days to review operations and accounts within the Company, and are presenting our findings in the form of this operational update.
We are in the process of appointing two independent non-executive directors and hope to make announcements on this in the near future.
The Company's Final Results for the year ended 31 December 2015 will be announced on 21 March 2016.
ENDS

[flyingbull] 29/2/2016 00:03

The March oil stock challenge is on! Deadline for entries is midnight on Monday 29 Feb 2016. Good luck!!!

fb

[glavey] 09/2/2016 05:34

"not subject to closed period regulation" > Best you let him know then.

"I meant a business update before the board takeover, there has not been one since July." > Nor in past years.

"Must be hard being a "know it all"." > You tell me...

[wallywoo] 08/2/2016 08:27

Glavey - Paul Davies no longer a director therefore, not subject to director closed period regulation.

I meant a business update before the board takeover, there has not been one since July.

Must be hard being a "know it all". So many posts to make and pointing out so many stupid comments!

[glavey] 07/2/2016 01:33

"well no sign of Paul Davies dumping his shares" > It's a close period.

"Very surprised not had a business update - very strange" > Really? Within two working days you expect an update?

[flyingbull] 01/2/2016 15:49

The February oil stock challenge is still on....deadline for entries is midnight on Tuesday.

[wallywoo] 01/2/2016 15:45

well no sign of Paul Davies dumping his shares, be interesting to see what happens now! Very surprised not had a business update - very strange

[glavey] 30/1/2016 05:42

A question for those who voted for Proxima, or even those that didn't. Apart from their suggested intention to consider retracting the companies arbiration claim of circa $270m for overpayment of production taxes, what are their plans for the 'disparate CEE/CIS play' that is JKX? Can anyone advise me? Have I missed something?


"Well a pretty resounding decision. Even without the suspended shares. It shows that there is a lot of appetite for change." > It also confirms how strong the links are between major holders, wouldn't you agree?

"Time to fill your boots???" > Doesn't look like too many hold with that view so far, except perhaps Proxima and allies. There must be quite a limited free float now.

[jumbo66] 29/1/2016 11:35

not long mate this will be sold for a song at no where near the true value we all know whos guna profit out of this all imho dyor etc re jumbo sad day

[pessimizer] 29/1/2016 11:35

Well a pretty resounding decision. Even without the suspended shares. It shows that there is a lot of appetite for change. Let's hope now that the new people deliver... Time to fill your boots???