JKX Oil & Gas Driving Ukraines Gas Potential Tom m Ree eed - - PowerPoint PPT Presentation

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JKX Oil & Gas Driving Ukraines Gas Potential Tom m Ree eed - - PowerPoint PPT Presentation

JKX Oil & Gas Driving Ukraines Gas Potential Tom m Ree eed CEO EO Ukrainia ian Ene Energy Day ay Lo Lond ndon 12 12 Jun une, 20 2017 Disclaimer The information contained in these presentation materials (the


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JKX Oil & Gas

Driving Ukraine’s Gas Potential

Tom m Ree eed CEO EO Ukrainia ian Ene Energy Day ay Lo Lond ndon 12 12 Jun une, 20 2017

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SLIDE 2

Disclaimer

The information contained in these presentation materials (the “Presentation”) has been prepared by JKX Oil & Gas plc (the “Company”). This Presentation is being made for information purposes only and does not constitute an offer or invitation for the sale or purchase of securities in the Company or any of the assets described in it nor shall they nor any part of them form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever or otherwise engage in any investment activity (including within the meaning specified in section 21 of the Financial Services and Markets Act 2000 as amended). The information in this Presentation does not purport to be comprehensive and has not been independently verified. While this information has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the Company or any of its officers, employees, agents or advisers as to, or in relation to, the accuracy or completeness of this Presentation, and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any management estimates or prospects contained in this Presentation. Such statements, estimates and forecasts reflect various assumptions made by the management of the Company and their current beliefs, which may or may not prove to be correct. A number of factors could cause actual results to differ materially from the potential results discussed in such forward-looking statements, estimates and forecasts including: changes in general economic and market conditions, changes in the regulatory environment, business and operational risks and other risk factors. Past performance is not a guide to future performance. Statements contained in this document regarding past trends or activities should not be taken as a representation

  • r warranty, express or implied, that such trends or activities will continue in the future. No statement in this document is intended to be a

profit forecast. You should not place reliance on forward-looking statements, which speak only as of the date of this document. The Presentation is not a prospectus nor has it been approved by the London Stock Exchange plc or by any authority which could be a competent authority for the purposes of the Prospectus Directive (Directive 2003/71/EC). This Presentation has not been approved by an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000. The information contained in this Presentation is subject to change, completion or amendment without notice and is subject to verification. Recipients of this Presentation in jurisdictions outside the UK should inform themselves about and observe any applicable legal

  • requirements. This Presentation does not constitute an offer to sell or an invitation to purchase securities in any jurisdiction.

You will be taken to have represented, warranted and undertaken to the Company that: (i) you have read and agree to comply with the contents and restrictions of this disclaimer; and (ii) you will conduct your own analysis or other verification of the data and information set

  • ut in this Presentation and will bear the responsibility for all or any costs incurred in doing so.

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SLIDE 3

JKX Oil & Gas (JKX LN)

E&P growth portfolio across Central/Eastern Europe and Russia

  • Ukra

krain ine: large-scale field development opportunity

  • Ru

Russ ssia ia: Stable cash-generating

  • perations
  • Hungary/Slo

lovakia ia: Significant exploration potential

  • Team

eam: : New board and executive management focused on modern development approach

Country Lice censes Prod Prod Ex Expl Infr nfras astruc uctur ure 20 2016 16 Pro roduc uction Reserve rves mmboe Cont ntinge gent Resource urces mmboe Gas mmc mmcf/d Oi Oil mb mbbl/d Total al mb mboe/d /d 1P 1P 2P 2P 3C 3C Ukrai kraine Ignativske Elyzavetivske Rudenkivske Novomykolaivske Movchanivske Zaplavska ✓ ✓ ✓ ✓ ✓ ✓ 2 Processing Facilities 1 LPG Plant 18.6 0.9 4.0 15 29 457 Russia Koshekhablskoye ✓ 1 Gas Processing 36.1 0.1 6.1 43 80 108 Hung ngar ary 6 Licenses ✓ 1 Gas Processing

  • 1

Slovakia 3 Licenses (25% WI) ✓

  • Total

al 54 54.7 1. 1.0 10 10.1 58 58 109 109 565 565

*Source: Company data, Reserves and Contingent Resources are DeGolyer and MacNaughton estimates as of 31 December 2016

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SLIDE 4

50 100 150 200 250 300 350 400 450 Base Case Rud Base Net tax liability G&A Net debt Rud Upside Russia Upside Unrisked NAV Current mkt cap $M $Mln

Hungary

EV EV Production $/ $/Flo lowing Barrel EV/2 V/2P+2C ($m) (kboe/d) (k$/kboe/d) ($/boe)

Eland Oil and Gas Nigeria

96.3 2.5 22.0 2.1

Exillon Energy Russia

198.8 13.7 16.8 0.4

Gulf Keystone Kurdistan

317.5 33.0 9.1 0.6

Petroneft Russia

27.5 1.4 16.2 0.5

Roxi Petroleum Kazakhstan

120.9 1.0 67.2 2.8

Urals Energy Russia

28.1 2.1 12.1 0.6

JKX KX Oi Oil l & & Gas as Ukraine/Russia

45.8 10.0 4. 4.1 0. 0.1

Av Average Av Average

23. 23.9 1. 1.2

Com

  • mparing JKX to
  • its peers:

Com

  • mparing JKX pote
  • tentia

ial l to

  • curr

current valu aluatio ion:

JKX Value Growth Potential

One external view on valuation of JKX

Source: Stockdale Securities; Company research

Ukraine Russia

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SLIDE 5

Progress & Priorities

Progress provides launch pad for growth

2016 Progress

  • Completed detailed field development plans (FDPs) for all core assets, identified growth opportunities,

and started their implementation

  • Increased production with minimum capital expenditure
  • Reduced operating costs and overheads, resulting in an increase in cash flow and profitability
  • Eliminated short-term financial liabilities (bond repurchase and restructuring)
  • Completed international arbitration procedure, while actively engaging in dialogue with the Government
  • f Ukraine.
  • Built a technical team

2017 Priorities

Ukraine: Execute development plan Hungary/Slovakia: Appraisal and Exploration Resolve legal issues with Ukraine Russia: Maintain base and consider strategic monetization

1 2 3 4 5 6

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Key Financials

($m) 2015 2016 Change % Production, boepd 8,996 10,083 12.1 Natural gas price ($ per Mcf) 4.20 2.95 (29.8) Oil price ($ per bbl) 49.75 45.94 (7.7) Group revenue 88.5 73.8 (16.6) EBITDA* 16.9 15.8 (6.5) Cash from operations 12.8 17.0 32.8 Adjusted cash from

  • perations**

18.0 30.0 66.7 Capital expenditure 6.2 7.5 19.4 Total debt 34.4 16.8 (51.5) Total cash 26.3 14.3 (45.6)

* before exceptional items **before legal/professional/restructuring costs

  • Eff

Effic icie iency of

  • f Ope

Operatio ions: In 2016 we increased year-

  • n-year group production by 12%, reduced operating

and administration costs by $5.4 million. Despite 30% decline in natural gas prices, operating cash flow (ex legal, professional, and restructuring fees) increased 67% to $30 million in 2016 vs $18 million in 2015.

  • Compelli

ling CAP APEX ef efficie iency cy: About 20 enhancement projects completed in Ukraine and Hungary from beginning of 2016 to date added ~1,200 boepd to our production as of April 2017. $2.8 million spent on completed enhancements has not only paid back already, but also generated estimated pre-tax cumulative free cash flow of $7.3 million by April 2017 and expected to generate a total of $15 million – more than five times the initial investment.

  • Su

Succ ccessful Deb ebt res restructuring: In 2016 we eliminated short-term financial liabilities by achieving a successful bond restructuring and repurchasing bonds. Bond repurchases generated additional cost savings of $2.6 million and return of 83% for the Company assuming the bonds were put in February 2017 ($5.7 million and 29%, respectively, if bonds were held until maturity in February 2020)

Progress to date

Our strategy works – next step is to scale it

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Impact of enhancement program in Ukraine

Well enhancement program stabilizes production while reducing CAPEX

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1,000 10,000 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16 Nov 16 Jan 17 Mar 17 Capex (Thousand USD) Capex (Thousand USD) Average BOE to February 2016 Average BOE from March 2016

Average BOE (boe/d) Capex (Thousand USD) Novo Nik Complex - average BOE/d Drilling stopped IG106 WO & M153 Perfs Enhancement program M166X Real field decline ~ 66%/year IG135 Old management average capex spend $1098K per month for ~24% decline/year Average BOE (boe/d) Capex (Thousand USD) Novo Nik Complex - average BOE/d Drilling stopped IG106 WO & M153 Perfs Enhancement program M166X Real field decline ~ 66%/year IG135 New management average capex spend $522K per month for ~0% decline/year

We implemented an enhancement program in the beginning of 2016 which helped to decrease the natural decline rate of production at our Novo-Nik complex of fields from estimated 20%+ per year to 0%.

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Ukraine’s Natural Gas Resources Support Growth

4Th Largest European supplier with significant scope for growth

Ukraine production stable but down 70% since Soviet peak Reserves could support return to previous maximum production

500 1,000 1,500 2,000 2,500 3,000 Bcf

700 00 2,45 450 34,0 4,000 00 150 50,00 000+ 350 50,00 000+

1 10 100 1,000 10,000 100,000 1,000,000

Production 2016 Production based

  • n EU R/P ratio

Official Reserves Conventional resources Unconventional resources

Bcf 8

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SLIDE 9
  • Ukraine’s reservoir quality is 10-

100 times better than US shale plays

  • However, due to poor execution

performance in Ukraine is up to 90 times worse vs. the United States

  • Productivity of gas extraction

technology in the US increased by up to 33 times in the past decade

  • Investment in new production

combined with technology transfer can help significantly increase gas production in Ukraine

Opportunity to Grow Gas Production in Ukraine

By bridging the performance gap vs. the United States

New-well ll pr productio ion pe per r ri rig*, , boepd d and d pe performance vs. . Ukr Ukrain ine Increase in new-well l pr producti tion pe per r ri rig g si since 200 007

* As measured by average first-month production of a well in a particular play multiplied by number of wells one rig drills per month. Data for US as provided in the EIA Drilling Productivity Report. Data for Ukraine (UGV) is based on estimated average IP rate of 40 mcmpd, drilling speed of 300 meters per month and average well depth of 3,000 meters per well Source: EIA, Company estimates

2,268 2,216 2,037 1,466 1,314 1,243 847 25 500 1,000 1,500 2,000 2,500 Marcellus Eagle Ford Niobrara Utica Bakken Haynesville Permian Ukraine (UGV) 5.2x 7.6x 8.7x 8.8x 10.5x 28.0x 33.6x 0.0x 10.0x 20.0x 30.0x 40.0x Permian Haynesville Niobrara Eagle Ford Bakken Marcellus Utica

34x 34x 51x 51x 53x 53x 60x 60x 83x 83x 90x 90x 92x 92x

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Sc Schemati tic dr drilli ling locat atio ions at t Ru Rudenkiv ivske field ld

  • Concept: Modern drilling and

completions using North American-style manufacturing approach to production

  • Resources: 2.8 Tcf in place, ~600

Bcf recoverable volumes

  • 1-2% recovery (Ukraine est.)
  • 25-50% recovery (US est.)
  • Pro

roduction of ~18,000 boe/d (1+ bcma) in 2020-2021

  • Fie

Field Development Pla lan includes 135 wells to produce over $3bn

  • f gas with anticipated capex of

~$660mn

Rudenkivske Full Field Development (FFD)

Focus of our growth going forward

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Rudenkivske Development Plan

De-risking by proving the concept using existing wells

  • Reservoir Stu

tudies (2 (2016-2017) 2017)

  • New technical team and philosophy
  • New Field Development Plan (focus on

Visean)

  • Analysis of 32 Soviet-era wells for re-

entry / workover

  • 7 successful well workovers to date
  • Appraisal (2

(2017)

  • Re-enter and ‘Clean up’ up to 11 pre-

selected old wells

  • Fracture stimulation of selected wells

(Started in May 2017)

  • Use results to fine tune FDP

Rudenkivske Novo Nik Ignatovskoye

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Early Results of Stimulation Program

Gains in workover efficiency; costs per stage

Work rkovers:

  • New technical team and operating

principles lead to much higher efficiency

  • Number of days per workover

down from 45 to 20

  • Expect improvements to show in

stimulation and drilling

Ea Early ly resu esult lts:

  • On well 19R 5 stages completed within 6

days at an approximate cost of $1.1 million (for stimulation and completion) with a total of 324 tonnes of proppant

  • placed. Flowback and testing ongoing.
  • Progress compared to 2013 with well

R103 when 10 stages were completed at a cost of $12.1 million, with 673 tonnes

  • f proppant placed

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Thank you!