Ukraine and Russia-based oil & gas producer JKX Oil & Gas (JKX) is up 2.4% to 64p after returning to the black in the first six months of the year. The statement, which shows a swing from from a loss of $5.1 million for the same period in 2012 to a $7.5 million profit, also confirms its core projects are on track.


The last few months have been dominated by a bust up with largest shareholder Eclairs which some observers felt amounted to an attempt by regional oilgarchs to seize control of the company (we looked at the dispute back in May).


In this context Shares spoke to the JKX management team to get a handle on how the firm plans to move past this debacle.


Chief executive officer Paul Davies refuses to be drawn on the dispute with Eclairs, a vehicle for Ukrainian billionaire Igor Kolomoisky, which made a failed attempt to oust him from the board at last month's AGM (5 Jun) and continues to fight a High Court battle over the running of the company.


Focusing instead on operational matters, he says: 'We've got a good two-year programme so this is effectively the first half of four halves. We have made a solid start, we have stabilised Russian gas production and identified an economic way of stretching our plant capacity.


'We also got our two rigs back in March to pursue development and work-over programmes in Ukraine and have commenced our multi-stage fracking operation on the Rudenkovskoye field in the country with results likely towards the end of the third quarter.'

JKX - Comparison Line Chart (Rebased to first)

Missed production targets on mature fields and delays to the full-scale development of its Koshekhablskoye field in southern Russia have seen the stock crash from a high of 543p in 2008. Confronted with the poor performance of the shares, Davies adds: 'Shareholders want to see growth in the company and want to see us meeting targets.


'In the last two years we have had difficulties meeting targets mainly due to problems in getting the Russian project off the ground and a resulting squeeze on our liquidity. We have managed to get over that and I'd like to think we are back on the standard JKX road of setting out the things we aim to do and then doing them.'


According to Davie,s funding is underpinned by January's placing of a $40 million convertible bond – with operating cash flow of $42.3 million for the first half outpacing capital expenditure of $33.3 million.


House broker Oriel Securities, which reiterates its 'buy' rating on the stock in response to the results, says: 'JKX is currently trading at a 50% discount to our risked NAV (net asset value) of 125p a share, which we expect to narrow as the company ramps up production and demonstrates that any operational issues are behind them. '

Issue Date: 29 Jul 2013