Preliminary Results Presentation 28 March 2012 Agenda Paul Davies - - PowerPoint PPT Presentation

Preliminary Results Presentation

28 March 2012

Agenda

Paul Davies Chief Executive Introduction Cynthia Dubin Finance Director Financial Review

2

Martin Miller Technical Director Operational Review Peter Dixon Commercial Director Market Overview Paul Davies Chief Executive Summary & Outlook

Paul Davies Chief Executive Officer

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Introduction Key milestones

• Successfully entered independent

gas market in Southern Russia

• Record revenue of $237m in

reporting period

• Ukraine continues to generate

strong cash flow and more than $1.4bn of cumulative revenues to $1.4bn of cumulative revenues to date

• Reserves increased to more than

90MMboe

• Uniquely placed to take advantage
• f growth opportunities in existing

markets

4

Cynthia Dubin Finance Director

5

Financial Highlights Record revenue and strong operating profits

• Revenue up by 23% to a

record $236.9m

• Strong operating profit given

12% production decline and absorption of rise in production tax by $61.9m

• Capital intensive year with

Key Figures

($m) Y2010 Y2011 Change % Production (boepd) 10,324 9,045

• 12%

Group Revenue 192.9 236.9 +23%

• Capital intensive year with

focus on Russian project

• Year end cash of $28.9m -

Board recommends to forego final dividend

6 Operating Profit* 95.0 82.1

• 14%

Effective all-in tax rate 29.6% 59.1% +100% Cash from Operations 146.3 124.2

• 15%

Capex 178.5 162.0

• 9%

Realised gas price ($ per Mcf) 7.59 9.74 +28% Realised oil price ($ per bbl) 69.15 98.27 +42% * 2010 excludes exceptional items

Group Revenue Record revenue

• Revenue rose by 23% to a record $236.9m
• Benefit from high international oil and gas prices
• New LPG plant makes positive contribution
• Gas now represents 75% of total production volume
• Positive price movements more than offset production decline of 12%

7 192.9 4.0 33.3 10.9 4.2 236.9 150 160 170 180 190 200 210 220 230 240 250

Y2010 Ukraine oil price and volume effect Ukraine gas price and volume effect Ukraine LPG Other Y2011

Sales

$m

95.0 44.0 82.1 60.0 80.0 100.0 120.0

Profit from Operations

(before exceptionals)

Profit from Operations before Exceptionals Strong operating profits given production tax rise

• Small reduction in operating

profit compared to tax increase

• Production tax, mainly in

Ukraine, increased from $5.2m to $67.1m

• Underlying operating costs

$m

• 61.9

3.1 1.1 0.8

• 80.0
• 60.0
• 40.0
• 20.0
• 20.0

40.0

Y2010 Sales increase Royalty and rental fee impact Exchange effect Movement in costs Change in impairment provision Y2011

• Underlying operating costs

remained constant

• Continued focus on cost

control during capital intensive period

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• Effective all-in tax rate of 59.1% has been driven by the rise in production tax

in Ukraine moving from $5.2m in 2010 to $67.1m in 2011

• Oil based production tax rate has decreased 30% for 2012. This would have

reduced the 2011 effective all-in tax rate to 53.1%

Tax Absorbed material rise in production tax

2010 $m 2011 $m Profit before tax 20.8 82.1

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Profit before tax 20.8 82.1 Add: Production based taxes 5.2 67.1 Add: Non recurring 81.3 5.9 Adjusted profit before tax 107.3 155.1 Taxation (0.4) 22.9 Add: Production based taxes 5.2 67.1 Add: Tax effect of non-recurring items 26.9 1.6 Adjusted taxation charge 31.7 91.6 Effective tax rate (%) (1.8%) 27.9% Effective all-in tax rate (%) 29.6% 59.1%

107.8 56.1 9.8 4.8

Y2010

$178.5m

Capital Expenditure Focus on bringing Russian project on stream

• Capital intensive year with

additions of $162.0m

• Focus on completion of

Russian project

• Investment in LPG facility in

Ukraine yielding better returns than expected

$m

returns than expected

• Drilling and exploration

activity in Hungary, Slovakia and Bulgaria only partially successful

10 103.4 41.4 12.4 4.8

Y2011

$162.0m

Russia Ukraine Hungary Rest of world $m

Movement in Cash and Cash Equivalents Reaping rewards of past investments

• Ukrainian subsidiary continues to generate substantial cash from operations
• Excluding the Ukrainian production tax rise, cash generated from operations

would have been $185.9m, a 27% increase over 2010

$m 62.0 124.2 100.0 150.0 11

Including restricted cash

62.0

• 2.0
• 22.7
• 12.8
• 152.1

39.5

• 7.2

28.9

• 200.0
• 150.0
• 100.0
• 50.0
• 50.0

Y2010 Cash from

• perations

Net interest paid/received & Foreign exchange movement Tax paid Exploration capital spend Development capital spend & Final payment for Russian acquisition Funds received from Credit Suisse borrowing & Repayment of borrowings Dividends paid Y2011

Martin Miller Technical Director

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JKX Oil & Gas plc Operations map

Ukraine Hungary Southern Russia Bulgaria Slovakia 13

Operations Highlights Focus on Russia, progress in Ukraine

• Completion of the Koshekhablskoye

gas processing facility in Russia

• Embarking on Phase II at

Koshekhablskoye to enable production to double from booked reserves

• Group net reserves growth adds 8

MMboe before production

• Addition of LPG production plant in

Ukraine increasing value of gas by approx 7%

• Drilling of two successful exploration

wells in the Molchanovskoye “Wedge Zone” and the Zaplavskoye exploration licence

• Completion of design and tender

process for the R-103 multistage frac planned for 2012

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Russia Koshekhablskoye Phase I complete

Milestones

• Commissioned plant utilities and

gas processing facility (GPF)

• Completion and tie-back to the

plant of 3 Oxfordian production wells Forward Programme Forward Programme

• Evaluating Phase II Oxfordian

production acceleration

• Workover of 2 Callovian appraisal

wells – in progress

• Evaluating potential Phase III

Callovian development

• Preparing for forthcoming

exploration licence auctions in Adygea

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Ukraine LPG plant delivered on time and on budget

Milestones

• Construction, installation and

commissioning of LPG plant in 1H2011

• n time and on budget
• Averaged 61 tpd during 2H2011

enhancing gas stream revenue

• M-170 “Wedge Zone” well finds gas in

deeper Devonian reservoir

• Z-04 in Zaplavskoye licence extension

proves gas in V24/25 sandstone reservoir Forward Programme

• R-103 multistage frac design complete

and tenders in from major contractors

• Project team to include experienced

North American expertise

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Hungary – Slovakia – Bulgaria Key Slovakia well due in 4Q 2012

Milestones

• Turkeve Ny-7 discovery to be put

into production despite high CO2 content

• Otherwise disappointing results

from Hungary exploration

• Relinquished Golitza licences in
• Relinquished Golitza licences in

Bulgaria Forward Programme

• Tiszavasvari-6 discovery to be

appraised in 2H 2012

• 4Q2012 drilling of Cierne-01 well

in Svidnik licence, Slovakia

• Evaluation of seismic in Provadia

licence, Bulgaria

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Slovakia Hungary Bulgaria

P+P Reserves Increases due to well productivity in Russia

• Russian reserves up by 98 Bcf to 365 Bcf due to improved well performance
• Molchanovskoye Main potential unrealised, reduced from 41 Bcf to 5 Bcf
• Novo-Nikolaevskoye reserves mapped and appraised, plus 12 Bcf and 0.2

MMbbl

• Hadjunanas gas reserves reduced due to water breakthrough, not

compensated for by Turkeve additions or potential for additional Hadjunanas

• il reserves
• il reserves

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Remaining total reserves as at 31 December 2011

Oil MMbbl Gas Bcf Oil & Gas MMboe TOTAL 3.3 524.1 90.7 UKRAINE 2.6 155.3 28.5 RUSSIA 0.4 364.8 61.2 HUNGARY 0.3 4.0 1.0

Peter Dixon Commercial Director

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Gas Prices Ukraine high and Russia rising

• Gas production now 75% of our total production volume and is increasing
• Demand forecasts for Europe remain strong amidst declining indigenous

production

• US experiencing an unexpected collapse in Hub prices – but a correction is

inevitable

• Early mover in growing Ukrainian market
• Political drive in Russia for gas price growth - currently 15% per annum
• 5.00

10.00 15.00 20.00 2002 2007 2012 F/cast 2017 F/cast $/Mcf

Historical and future gas prices – Ukraine, Russia, US and Europe

Ukraine gas realisations ($ per Mcf) Russia gas realisations ($ per Mcf) European gas price ($ per Mcf) Henry Hub ($ per Mcf)

• Political drive in Russia for gas price growth - currently 15% per annum

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Source: JKX Analysis

Yamal Peninsula “The edge of the world”

Yamal 21

Russian Gas Supply/Demand The role of independents

• Historical Gazprom fields

now all in decline

• To replace lost production,

Gazprom is investing into development of Yamal peninsula

• Resulting increase in

bcm

Nadym-Pur-Taz Ob and Taz Yamal onshore Yamal offshore New developments

1000 900 800 700

• Resulting increase in

production cost will continue to drive gas prices in Russia

• Emergence of major new

independent producers of gas, JKX being one of them

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Source: General Scheme, Ministry of Energy Russian Federation

2010 2020 2030

600 500 400 300 200 100

Region Industrial Segment 2010 bcm 2020 bcm Stavropol Chemical Industry 3.8 5.5 Krasnodar Cement 0.7 2.1 Karachaevo- Cherkessiya Cement 0.5 0.6 Astrakhan Heat and Power 0.5 0.5 Krasnodar Heat And Power 0.0 1.1

Industrial Gas Demand in Southern Russia Strong growth continues

• Southern regions show

strongest growth in industrial demand in Russia

• The Krasnodar and Adygea

regions are expected to increase industrial consumption by some 6 bcm by 2020 – (a doubling of

Krasnodar Oil Refining 0.2 0.2 Rostov Metallurgy 0.1 0.1 TOTAL 5.8 10.0

• 5.00

0.00 5.00 10.00 15.00 20.00 25.00

Krasnodar and Adygeya Stavropol 6 republics

• f Northern

Caucasus Rostov Astrakhan Kalmikiya

Regional Forecast

by 2030 by 2020 2010 23 bcm

by 2020 – (a doubling of demand)

• JKX has entered this market

via a gas sales contract with a major gas trader in the region

• We intend to play an

increasing role in this high priced, fast growing market

Source: ERTA Consult

Paul Davies Chief Executive

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People Expansion of expertise

Cynthia Dubin Finance Director

Strong project finance and banking background as well as experience in oil, gas and energy sectors

Alastair Ferguson Non-Executive Director

More than three decades of oil and gas industry

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experience, including Russia and Ukraine

Andy Williams Head of Corporate Reporting and Compliance

Chartered Accountant with extensive experience in advising listed international oil and gas companies

Gene Palenka Finance Director of CIS region

Part of a strong local management team, leading the finance department in Poltava since 1998

People Expansion of expertise

Alexander Bogdanov General Manager, Yuzhgazenergy (“YGE”)

Significant experience in managing large construction projects in Russia

Jesus Cabello Lead Drilling Engineer

Big company experience in planning drilling operations on

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an international level

Fariq Ishaak Group Tax Manager

Bringing valuable tax expertise in-house

Technical Team Six subsurface experts

Expertise in realising greater value from existing assets and evaluating potential opportunities

Summary Positioned for growth

• Entered successfully one of the

fastest growing gas markets

• Derived strong cash flow from

existing operations

• Robust operating profits despite

$62m tax increase

• Increased reserves to 90MMboe
• Increased reserves to 90MMboe
• JKX in unique position as

benefitting from early mover advantage in its core markets

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Outlook 2012 - a year of consolidation and expansion

• Exploit potential for increase in

production from existing developments

• Anticipate oil and gas realisations

to remain high

• Add to current reserves base
• Take advantage of growth
• Take advantage of growth
• pportunities in existing markets

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Questions & Answers

Appendices

Asset Life Cycle

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Remaining Reserves

1 Jan 2011 Revisions Production 31 Dec 2011 TOTAL Oil MMbbl 7.0 (2.8) (0.9) 3.3 Gas Bcf 468.5 70.3 (14.7) 524.1 Oil + Gas MMboe 85.1 8.9 (3.3) 90.7 UKRAINE Oil MMbbl 6.5 (3.0) (0.9) 2.6 Oil MMbbl 6.5 (3.0) (0.9) 2.6 Gas Bcf 195.3 (26.1) (13.9) 155.3 Oil + Gas MMboe 39.1 (7.4) (3.2) 28.5 RUSSIA Oil MMbbl 0.3 0.1 0.0 0.4 Gas Bcf 267.0 97.8 0.0 364.8 Oil + Gas MMboe 44.8 16.4 0.0 61.2 HUNGARY Oil MMbbl 0.2 0.1 0.0 0.3 Gas Bcf 6.2 (1.4) (0.8) 4.0 Oil + Gas MMboe 1.2 (0.1) (0.1) 1.0

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Reserves

33

Work programme 2012/2013 (subject to financing and/or technical merit)

Licence H1 2012 H2 2012 H1 2013 H2 2013 Seismic Poltava 3D Reprocessing Zaplavskoye 50 km2 3D acquisition Provadia 2D Interpretation Hernad 3D acquisition Poltava M-172, Z-04, I-135, N-78, M-166W I-132, I-140, Z-05, M-173, R-104, M-17X M-20X E-301, R-105, R-106 34 Exploration & Appraisal Drilling Koshekhablskoye W-09 W-22 Hernad Tiszavasvari-6b Svidnik Cierne-1 Development Activity Koshekhablskoye Gas export commencement Phase II planning Phase III planning Phase II design Oxfordian workovers Phase II design and implementation Poltava Compression upgrade R-103 multistage frac Elizavetovskoye Pilot prod. start Hadjunanas Hn-1 oil prod. start Gh-1 gas compression Tiszavasvari planning Turkeve Ny-7 pilot production

Ukraine Novo-Nikolaevskoye Complex

35

Ukraine Novo-Nikolaevskoye Complex Cross Section

36

Russia Koshekhablskoye Field

37

Russia Koshekhablskoye Field Cross Section

38

Hungary Hadjunanas Area Cross Section

39

Hungary Hadjunanas Area Cross Section

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Bulgaria and Slovakia

Bulgaria JKX holds a 40% interest and operates the B1 Golitza exploration licences respectively covering 971sq.km in eastern Bulgaria. These licences are being relinquished at the end of March 2012. The Company also has a 18% carried interest in the 1,787sq.km Provadia exploration licence operated by Overgas. Slovakia JKX holds a 25 % interest in the Svidnik, Medzilaborce and Snina exploration licences, covering a total area of 2,278 sq.km in the Carpathian Fold Belt in north east Slovakia.

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