9th Jan 2015 08:22
LONDON (Alliance News) - JKX Oil & Gas PLC on Friday posted successful test results from the E-303 well at the Elizavetovskoye in Ukraine, coming in the wake of its decision earlier this week to suspend its capital investment in Ukraine this year due to legislative and tax restrictions.
JKX said well E-303 was producing 5.21 million cubic feet of gas per day and 18 barrels per day of gas condensate.
The well was initially completed in the sandstone reservoirs at the site only as production from the deeper reservoirs, while steady, is not economic given the current economic conditions in Ukraine.
"We are pleased that we have been able to co-mingle production from the sandstone and carbonate reservoirs to create an overall cash generative well result," said Paul Davies, Chief Executive of JKX.
On Wednesday, JKX said it will suspend its capital investment plan in Ukraine for 2015 until the economic conditions in the country improve, citing legislation in the country restricting sales of gas to industrial clients and a hiked gas production tax as reasons for the move.
At the end of November, the Ukraine government ordered major industrial buyers to buy their gas solely from the Ukraine state-owned gas company Naftogaz for the next three months.
JKX said it sold around 80% of its gas production capacity in December to industrial customers, with only 20% of gas production capacity shut-in during the month.
But it said the market for private gas producers in Ukraine is continuing to contract, with increased competition for the "increasingly limited number of credit worthy industrial customers becoming intense".
It expects gas sales could fall to less than 50% of its gas production capacity in Ukraine while the legislation remains in force, necessitating a shut-in of a proportionate level of gas production.
In addition to the sales legislation, the Ukraine government has also incorporated the temporary 55% tax on gas production into its 2015 tax code.
JKX shares were down 1% to 12.00 pence in early trade on Friday.
By Sam Unsted; [email protected]; @SamUAtAlliance
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