Financial Highlights
• Revenue up 33% to $104.5m (2009: $78.6m)
• Operating profit up 9% to $48.6m (2009: $44.5m)
• Earnings per share 20.7 cents (2009: 20.2 cents)
• Operating cash flow up 12% to $67.2m (2009: $59.9m)
• Record period end cash of $107.2m (2009: $54.1m)
• Capital expenditure up 32% to $68.3m (2009: $51.6m)
• Interim dividend declared of 2.4p per share (2009: 2.3p per share)
Operational Highlights
• Production increased 15% to 11,689 boepd (2009: 10,191 boepd)
• Well test results on Koshekhablskoye field rehabilitation in Russia continue to exceed expectations
• Progress made on the Company's exploration programmes including expansion of Hungarian portfolio
Outlook
• 10% increase in Ukraine gas price since 1 August 2010, with positive impact on future revenue
• Overall production for the full year expected to be in excess of 10,500 boepd
• On target to meet key production objective of 20,000 boepd during 2011, despite lower current production
• Well funded to deliver development programmes
• Significant increase in drilling activity in H2
- Results expected from Rudenkovskoye in October 2010
- Results expected from Koshekhablskoye before year end
- Exploration drilling in Bulgaria and Hungary
JKX Chief Executive, Dr Paul Davies, commented:
'We have delivered improved results for the half year whilst accelerating our development programmes on our two deep gas licences in Ukraine and Russia respectively. Hungary increased its share of the Company's production, revenues, and profit, contributing 9% of Group revenues. We are confident of our ability to continue to deliver long term value for shareholders.'
Average production for the first six months of the year increased by 15% to 11,689 boepd (10,191 boepd). This improvement was driven by the continued development of drilling in the company's Poltava licences in Ukraine and the contribution of production from their Hajdunanas field in Hungary (JKX: 50%).
Ukraine
Poltava licences
In the first half of the year, the company's wholly owned subsidiary Poltava Petroleum Company (PPC) drilled and/or completed three development wells in the Poltava licences and worked-over six wells. A second rig has been contracted by PPC to continue development drilling in the main field areas of Ignatovskoye, Molchanovskoye and Novo-Nikolaevskoye to support production while the Skytop N-75 rig focuses on Rudenkovskoye drilling. Due to the rig still working on previous commitments, this rig will now only commence operations towards the end of the third quarter, which is significantly later than anticipated. This will have a negative impact on third and possibly fourth quarter production.
Elizavetovskoye licence
Following resolution of the status of the Elizavetovskoye licence, preparations are underway for a small seismic programme ahead of planned development drilling in 2011. Preliminary work has also begun on identifying the necessary facilities to enable gas production to commence in the second half of 2011.
Zaplavskoye licence
A 50% increase in the Zaplavskoye licence area, comprising 45 sq km, has been approved and is awaiting final ratification. A 100 km 2-D seismic programme in the Shagarivske area to the east of the Ignatovskoye field will be shot later in the year ahead of exploration drilling in 2011. The licence extension also in-fills an area between the Novo-Nikolaevskoye and Ignatovskoye licences where existing seismic indicates potential drilling targets and extends the western flank of the Ignatovskoye field.
Russia
Koshekhablskoye licence
JKX's wholly owned subsidiary Yuzhgazenergie (YGE) is redeveloping the Koshekhablskoye Field in southern Russia. Well work-over operations are ongoing and progress continues with the fabrication of the new gas processing facility (GPF). Site construction has commenced and commercial negotiations for the transport and sale of future gas production are underway.
Hungary
Hernad licences
JKX holds 50% equity in the 5,410 sq km Hernad licences in the northern Pannonian Basin, which includes the Hajdunanas field.
Development - The Hajdunanas field produces from two wells to a simple separator and then via a 14.5 km export line to an existing facility for input to the Hungarian gas pipeline system. Production rose to around 10.9 MMcfd with 251 bcpd (JKX net 1,034 boepd) during the first half of April. Water influx in the lower horizons at the end of the period reduced production and Hungarian Horizon Energy (HHE), the operator, is currently undertaking a water shut off and re-completion.
The adjacent Gorbehaza field was brought on-stream in August with the 2.5 km tie-in of well Görbehaza-1 to the Hajdunanas facilities. This well was drilled in the adjacent Nyírseg licence in 2009, and HHE and JKX have recently acquired PetroHungaria's minority interests in the field to match our 50/50 equity holdings in the Hernad licences. It is anticipated that the Gorbehaza production will offset any fall in ongoing Hajdunanas production.
Exploration - Interpretation of the 348 sq km of 3D seismic data acquired over the south eastern portion of Hernad I licence identified a number of prospects additional to Hajdunanas. A further 300 sq km 3D seismic survey is to be acquired in the third quarter. The Tiszatarjan-1 exploration well remains suspended as an oil discovery pending a forward programme of formation stimulation. TheTiszavasvari-6 exploration well, some 6.5 km north of Hajdunanas, was successfully drilled to a depth of 2,893 m and encountered good gas shows in the Lower Pannonian target formation. The well is currently suspended pending mobilisation of a workover rig to test and, if necessary, stimulate the reservoir Testing is anticipated in the fourth quarter. One further exploration well is planned for the licence in the second half of 2010.
Veszto licence
JKX holds a 25% equity interest in a 15.6 sq km part of the Veszto exploration licence in the eastern Pannonian Basin. A 3D seismic survey identified target horizons with amplitude supported Miocene clastic and volcanoclastic intervals within four-way dip closed structures. The first well, Nyekpuszta-1, was suspended due to the high pressures encountered. The second well, Nyekpuszta-2, reached a TD of 3,702m in the fourth quarter of 2009 and began testing a gas discovery late in the first quarter of 2010. The reservoir was stimulated with a propped frac and, despite initial flow rates being constrained by the abrasion due to returning proppant, the rates were steady at 2.0 MMcfd and 600 bpd oil/condensate with a FWHP of 4,500 psi. The well is now undergoing a full clean-up and test programme.
A third well is planned on the Nyekpuszta discovery for later in the year.
Bulgaria
JKX holds a 40% interest in the B1 Golitza licence and is the operator. Interpretation of the 250 sq km 3D seismic survey across the east-central parts of the licence has been completed and a number of prospects identified. Two of these were selected for the 2010 drilling programme. Well sites have been acquired and the first well, Staro Oryahovo South R-1, is scheduled to spud at the end of August. The second well, Shkorpilovtci South West R-2, will follow and is expected to spud in mid October. Both wells are targeting amplitude supported gas prospects with reservoirs of Tertiary age.
Slovakia
JKX holds a 25% interest in the Svidnik, Medzilaborce and Snina exploration licences in the Carpathian fold belt in north east Slovakia. The full first phase regional 2D seismic has all been interpreted and numerous leads have been identified for in-fill acquisition. The next phase of data acquisition will take place in the third quarter. The data should enable the participants to begin the process of firming up the leads for drilling during 2011 and identifying areas for relinquishment within the 2,278 sq km area of these three large licences.
Current and Future Activity
The second half of 2010 will see a significant increase in drilling activity with additional rigs operating in the Poltava licences in Ukraine and the Koshekhablskoye licence in Russia. Exploration activity will begin in Bulgaria, with continued drilling and testing taking place in our Hungarian licences.
The drilling programme on the Poltava licences for the second half of the year will include a second horizontal well on the deep Rudenkovskoye field and more development drilling on the Novo-Nikolaevskoye, Ignatovskoye and Molchanovskoye fields, targeting the productive carbonate and sandstone horizons. Re-completions will also include re-drilling some of the very productive horizontal sections in the Devonian sandstone.
On the Koshekhablskoye field in Russia, work-over activity will be augmented by side-tracking and redrilling of the Oxfordian reservoir sections as well as the deepening of one well to the Callovian reservoir before the year end. Testing activity will be ongoing ahead of the tie-in of the wells to the gas processing facility which is due to be completed in the second half of the year. JKX expect to start commissioning by the year-end.
The strategy of focusing exploration efforts in eastern and central Europe will continue. The company have established gas production in Hungary and further expansion of the exploration portfolio is underway. JKX continue to seek development opportunities in our core areas, and are currently very active in Ukraine.