JKX – highest production since March 2016! #JKX

JKX – highest production since March 2016! #JKX

JKX recently announced its annual results and last week updated the market with Q1 quarterly results (latest share price 56p-ask, market cap £98 million):

(Source: Google)

Production – highest since March 2006!

Q1 2019 average production was 9,907 boepd – 11.6% greater than in Q4 2018.

March production was even higher, averaging 10,200 boepd, supported by the IG103 side track well.

The company notes that Ukrainian gas prices have recently fallen by about 20%. I’m not overly concerned by this: gas prices are volatile and fluctuate with the weather. A 20% fall is nothing out of the ordinary.

Cash Generation – difficult to calculate

At the end of December, JKX had cash and inventory worth $23 million.

After paying $6 million to bondholders in Q1, it had $10.5 million in cash and $4.8 million in inventory.

JKX could have had negative cash flow during the quarter due to investment activities and the bond paymen. However, unlike the previous quarter, JKX has not included receivables and payables in this announcement. At the end of December, JKX owed $4.3 million and was owed $3.9 million. Not having these numbers for the latest quarter makes it impossible for me to figure out the underlying cash generation.

Despite my inability to calculate JKX’s quarterly cash flows, I’m happy that it appears to be investing wisely, as indicated by the highest production in years.

Investor Relations – finally improving?

I’ve long complained about JKX’s awful investor relations and horrendous website. The company has at last listened to shareholders and a shiny new website now exists at www.jkx.co.uk. One thing to note is that the number of shares in issue listed on the website is incorrect and is stated as 104,779,774, not the correct number as listed in the annual report 166.7 million. I do wonder what the investor relations company is being paid for sometimes – money for old rope?

An investor presentation should be forthcoming during the quarter. Hopefully it’s a sign of things to come.

Conversely, the aforementioned lack of receivables/payables information is not a positive step forward.

New Ukrainian President – good news!

Ukraine has just elected comedian Volodymr Zelenskie as its President. JKX’s largest shareholder is reportedly a business partner of the new president. Were the President to have a word with the Ukrainian tax authorities who keep losing court cases against JKX, that could release up to $30 million (see the annual report page 5).

The Ukranian Hryvnia responded well to Zelenskie’s appointment and has been climbing against the dollar, potentially increasing earnings from the Ukranian operations:

(Source: xe.com)

Conclusion

I first bought JKX shares at just under 30 pence last summer. Since then, production and cashflow have increased and I’m happy with how the company is being run. It is now focused on turning its large reserves into cash and the strategy thus far has been successful. I look forward to the continued growth during 2019 and am hopeful that some of the $30 million held for tax liabilities will move into the cash pile!

 

At the time of publication, the author has a long position in JKX.

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