26th Sep 2006 07:02
JKX Oil & Gas PLC26 September 2006 6 Cavendish Square, London W1G 0PD, England, UK Tel: +44 (0)20 7323 4464 Fax: +44 (0)20 7323 5258 Web site: http://www.jkx.co.uk FOR IMMEDIATE RELEASE 26 SEPTEMBER 2006 JKX Oil & Gas plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Highlights 2006 2005 % Increase Revenue $60.6m $23.8m 155% Profit before tax $56.4m $14.5m 289% Profit before tax(excluding impairment reversal) $41.2m $14.1m 184% Cash generated from operations $45.3m $20.2m 124% Earnings per share (basic) 28.4 cents 7.5 cents 277% Interim dividend declared (per share) 1.0p 0.5p 100% - Record oil and gas realisations, revenues and cash resources - Strong drilling performance in Ukraine with two rigs - Approval of tie-in to Soyuz main gas trunk line in Ukraine - Step up of exploration effort JKX Chief Executive, Dr Paul Davies, said: "We are pleased with the strong performance that we have delivered in the firsthalf. The Group continues to benefit from the development of its operationscoupled with strong oil and gas prices. "We expect the Company's performance in the second half to be in line withexpectations." ENDS For further information please contact: Sofia Rehman / Anthony Cardew Cardew Group 020 7930 0777 CHAIRMAN'S STATEMENT I am pleased to report that the Company has had a successful first six months ofthe year. During the period, JKX benefited from increased development drillingin Ukraine, strong international oil prices and significantly improvedrealisations for gas sold in Ukraine. Major highlights for the period include : • 155% increase in revenue to $60.6m ($23.8m) • 289% rise in profit before tax to $56.4m ($14.1m) • 124% increase in operating cash flow to $45.3m ($20.2m) • 277% increase in earnings per share to 28.4 cents (7.5 cents) • 100% increase in the interim dividend declared to 1.0p per share (0.5p per share) The above figures for operating profit and earnings per share include thebeneficial effect of a $15.2m reversal of a portion of an impairment provisionmade in 1998 against Ukrainian producing assets. Production and Realisations Average production in the first half of the year was 10,664 boepd (7,521 boepd).Current production is in excess of 12,000 boepd as a result of continued successin development drilling, coupled with the upgrading of our facilities in Poltava. Average realisations for oil rose by 24% to $52.05/bbl ($41.97/bbl), reflectingthe continued growth in international oil prices through the period. Althoughoil exports from Ukraine remain curtailed, the Company continues to sell itsliquids production to domestic Ukrainian buyers at prices which are broadly inline with those that the Company believes it could achieve for export. It isanticipated that the Company will continue to sell its liquids production withinUkraine through the year end. Average realisations for gas rose by 54% to $2.69/Mscf ($1.75/Mscf) with all gasbeing sold into the domestic Ukrainian market. The sharp upward movement in gasrealisations in the period is a consequence of the revised pricing agreedbetween Russia and Ukraine at the beginning of the period for all Gazprom andcentral Asian gas delivered to Ukraine from/via Russia. Further rises indomestic Ukrainian gas prices are anticipated in 2007. Operational Highlights UkraineDevelopment of the Company's Ukrainian production licences has proceeded apacewith the employment of two dedicated drilling rigs. • Well I124 was drilled in the Ignatovskoye Field and brought on-stream in May at a rate of 1,530 bopd and 0.75 MMcfd of gas. • Well M154 was drilled in the Molchanovskoye Field and brought on-stream in May at a rate of 920 bopd and 1.0 MMcfd of gas. • Well I101 was re-entered in the Ignatovskoye Field and brought on-stream in June at the rate of 375 bopd and 3.7 MMcfd of gas. • Drilling of the first new Well R101 on the Rudenkovskoye Field was suspended in February at a depth of 4,570m due to higher than expected downhole pressures. The first 119m gas interval of the upper Visean and Tournasian formations was tested in June and flowed gas at an initial rate of 1.0 MMcfd, but declined sharply indicating the permeability of the interval to be low. Testing of shallower intervals is scheduled to begin in late September. • Upgrade and expansion of the field facilities continued with the installation of new intra-field flowlines, expansion of the oil rail loading terminal, new oil storage tanks and the installation of one of the new gas compressors. An important milestone was achieved at the end of the reporting period withreceipt of formal approval to tie-in the Company's production facilities atPoltava to the 56-inch Soyuz main gas trunkline. This work is scheduled forcompletion in 2007 and will effectively remove any ceiling on gas delivery fromthe Poltava licences. Since the end of the reporting period: • Well M155 has been drilled and completed in the Molchanovskoye Field and brought on-stream in early August at 100 bopd and 1.7 MMcfd of gas. • Well M153 has been drilled and completed in the Molchanovskoye Field and brought on-stream in late August at 540 bopd and 0.9 MMcfd of gas. • The second new compressor was delivered and successfully hooked up and commissioned during the annual field shut-in in September. In addition, the Company's wholly owned Ukrainian subsidiary entered into aone-year gas sales agreement with Shell Energy Ukraine in August for supply of aminimum of 250 million cubic metres (8.75 billion cubic feet) of gas fordomestic delivery, with options to increase the contracted volume and extend thecontract term. The Company has made progress with its exploration programme in Ukraine: • Formal award of the 5.5 sq.km Chervonoyarske East exploration licence was made in January, following the first open auction in Ukraine. Reprocessing of existing seismic data has been completed and interpretation work is ongoing. • The Company continues to seek agreement with the state company Ukrgasvydobyvanya to acquire the infrastructure relating to the three suspended production wells on the Company's 70 sq.km Elizavetovskoye exploration licence. A replacement well remains an option. The scheduling of exploration activities on the rest of the licence will depend on the resolution of this item. • The first exploration Well Z1 on the 95.7 sq.km Zaplavskoye exploration licence, adjacent to the Company's Poltava production licences, was drilled in the third quarter. The well did not encounter hydrocarbons and was plugged and abandoned and will be expensed in 2H 2006. Preliminary structural interpretation using the newly acquired well data suggests that the Well Z1 may have been drilled on the flank of the structure. The full set of 92 km of existing 2D seismic data is being reprocessed and reinterpreted, prior to deciding on the next phase of exploration activity on the licence. GeorgiaAnadarko, as operator of the consortium holding the 8,900 sq.km explorationlicence offshore Georgia (JKX: 4% net profit interest), has completed itsprocessing and interpretation of the 1,100 sq.km 3D seismic shot over the southof the block, and is choosing the location for the first well. The Companyunderstands that Anadarko is currently seeking to contract a deep waterdrillship for a 2007 spud. ItalyThe Company has applied for a production concession for its Civita gasdiscovery, now renamed Aglavizza (JKX: 100%), in cooperation with ENI. Firstsales gas is scheduled for the second half of 2007. In addition, the Company isworking with ENI on its plans for exploring the remaining part of the 277 sq.kmCivita exploration permit (JKX: 30%).The Company farmed down its interest in the 358 sq.km Fiume Arrone explorationpermit during the reporting period. The first exploration well on the permit isplanned for the fourth quarter of the year (JKX: 10%).Existing seismic has been purchased for the 165 sq.km Montalbano permit (JKX:40%), and reprocessing is currently being undertaken by the Italian operator,Vega Oil SpA.The Company is awaiting the award of an exploration permit for the 176 sq.kmCorrropli block (JKX: 100%). This is anticipated to be made in 2007. BulgariaThe Company farmed into the 4,800 sq.km onshore exploration licences, B Golitzaand B1 Golitza (JKX: 25%), and shot and processed 200 km of additional 2Dseismic in 2005. During the reporting period, the seismic data was interpretedand the first well location identified. The Company is exercising its option toincrease its interest to 50%, and is currently concluding a contract for a2,000HP rig for the spudding of a 4,850m well in March 2007. TurkeyThe Company is participating in three Karakilise onshore exploration licenses(JKX: 30%), covering a total of 1,230 sq.km in south-eastern Turkey. Thedeepening of the existing oil discovery well (Karakilise 1) is scheduled tocommence in September in order to evaluate the lower horizons.The Company is participating in two onshore exploration licenses in Thrace (JKX:25%), totalling an area of 897 sq.km. The existing seismic data was reprocessedin the period, and an additional112 km of 2D seismic is to be shot during the fourth quarter of the year. Theobjective remains to identify a drillable prospect for 2007. USAThe Company holds a 34.4% working interest in the 11,290 acre Center DeepFederal Unit in Shelby County, east Texas. The Company is evaluating thisremaining interest in the USA and is considering a number of options includingthe potential of selling the interest. Current and Future Activity The ongoing development drilling programme on the four production licences inPoltava will continue with two drilling rigs and extend into the coming year.The testing of all gas bearing horizons of the first new Well R101 on theRudenkovskoye licence is an important step in deriving a strategy for thedevelopment of this large, deep and technically challenging licence; additionaltechnical studies and further seismic reprocessing will undoubtedly be required.The second new well on Rudenkovskoye will be in the southern part of the licencein the vicinity of Well R12 which was successfully re-entered in 2005.The Company's priority is to increase its licence portfolio in and around itscore area. Exploration work has begun in earnest on the Company's explorationlicenses in Ukraine and this will continue into 2007. The Company anticipatesparticipating in further exploration and development projects in Ukraine withsuitable partners in the coming year.The Company is seeking to add to its initial exploration positions in Bulgariaand Turkey, and believes that its experience in efficiently developing andoperating onshore projects can be usefully extended into other areas. Dividend The Board is pleased to declare an interim dividend of 1.0p per share (0.5p pershare) as a reflection of the Company's drilling success and the upward benefitsassociated with high commodity prices in the period. The dividend will be paidon 6th November to shareholders who are on the Company's Register of Members atthe close of business on 6th October. Outlook Development drilling success at current oil and gas price levels in Ukraine willcontinue to generate strong operating cash flow through the second half of theyear. The strength of the Company's balance sheet will facilitate theacquisition of any new opportunities in the forthcoming period.I anticipate the Company's overall performance in the second half of the year tobe in line with expectations. Financial review Production summary 1H 2006 2H 2005 1H 2005-----------------------------------------------------------------------------------ProductionOil (Mbbl) 864 939 361Gas (Bcf) 6.4 6.6 6.0-----------------------------------------------------------------------------------Oil equivalent (Mboe) 1,930 2,037 1,361-----------------------------------------------------------------------------------Daily productionOil (bopd) 4,772 5,104 1,993Gas (MMcfd) 35 36 33-----------------------------------------------------------------------------------Oil equivalent (boepd) 10,664 11,067 7,521----------------------------------------------------------------------------------- Operating results 1H 2006 2H 2005 1H 2005 $ million $ million $ million-----------------------------------------------------------------------------------RevenueOil 43.0 46.5 13.3Gas 16.9 12.2 10.2Other 0.7 0.4 0.3----------------------------------------------------------------------------------- 60.6 59.1 23.8Cost of salesOperating costs (8.5) (10.5) (4.2)Depreciation, depletion and amortisation (7.2) (7.0) (2.7)Production based taxes (1.2) (0.9) (0.4)----------------------------------------------------------------------------------- (16.9) (18.4) (7.3)-----------------------------------------------------------------------------------Reversal of impairment provision 15.2 - ------------------------------------------------------------------------------------Total cost of sales (1.7) (18.4) (7.3)----------------------------------------------------------------------------------- 58.9 40.7 16.5Operating expensesGeneral and administrative expenses (3.9) (4.8) (2.4)-----------------------------------------------------------------------------------Operating profit 55.0 35.9 14.1----------------------------------------------------------------------------------- Earnings 1H 2006 2H 2005 1H 2005-----------------------------------------------------------------------------------Net profit ($m) 43.3 26.4 10.9Net profit ($m) excluding reversal of impairmentprovision 28.1 26.4 10.9Basic weighted average number of shares in issue (m) 152 152 145Earnings per share (cents) 28.38 17.63 7.52Earnings before interest, tax, depreciation andamortisation ($m) 47.6 43.3 17.1----------------------------------------------------------------------------------- Realisations 1H 2006 2H 2005 1H 2005-----------------------------------------------------------------------------------Oil (per bbl)* $52.05 $47.88 $41.97Gas (per Mcf) $2.69 $1.89 $1.75----------------------------------------------------------------------------------- *Oil prices are net of all transportation, shrinkage and brokerage charges. Cost of production ($/boe) 1H 2006 2H 2005 1H 2005-----------------------------------------------------------------------------------Production costs* $4.36 $4.09 $2.64Depreciation, depletion and amortisation $3.74 $3.43 $1.96Production based taxes $0.63 $0.41 $0.32----------------------------------------------------------------------------------- *Production costs relate to the operating costs attributable to oil and gasturnover. Cash flow 1H 2006 2H 2005 1H 2005-----------------------------------------------------------------------------------Cash generated from operations ($m) 45.3 49.1 20.2Operating cash flow per share (cents) 29.7 32.4 13.9 Balance sheet 1H 2006 2H 2005 1H 2005-----------------------------------------------------------------------------------Net cash ($m) 66.9 56.9 36.6Net cash to equity (%) 35.5 38.4 29.0Return on average capital employed (%) 51.6 39.0 20.0Capital expenditure ($m) 19.5 16.1 16.2----------------------------------------------------------------------------------- Group income statement Six months Six months Year to to to 30 June 30 June 31 Dec 2006 2005 2005 (un-audited) (un-audited) (audited) Note $000 $000 $000 ------------------------------------------------------------------------------------------- Revenue 3 60,564 23,756 82,883Cost of sales - excluding reversal of impairment provision 4 (16,847) (7,269) (25,686) - provision reversal of impairment provision 4 15,226 - -Total cost of sales (1,621) (7,269) (25,686)Gross profit 58,943 16,487 57,197General and administrative expenses (3,935) (2,399) (7,166)Operating profit 55,008 14,088 50,031Finance revenue 1,550 814 2,036Finance cost (137) (411) (772)Profit before tax 56,421 14,491 51,295Taxation 6 (13,166) (3,687) (14,066)Profit for the period 43,255 10,804 37,229------------------------------------------------------------------------------------------- Attributed to:JKX shareholders 43,255 10,897 37,301-------------------------------------------------------------------------------------------Minority interest - (93) (72)------------------------------------------------------------------------------------------- 43,255 10,804 37,229------------------------------------------------------------------------------------------- Dividends paid 7 (1,642) (825) (2,162)Dividend (per share) 0.6pence 0.3pence 0.8pence--------------------------------------------------------------------------------------------Earnings pershare - basic earnings per 10p ordinary share (in cents) 8 28.38 7.52 25.15 - diluted earnings per 10p ordinary share (in cents) 8 27.58 7.10 24.07-------------------------------------------------------------------------------------------- Statement of recognised income and expense Six months Six months Year to to 30 June to 30 June 31 Dec 2006 2005 2005 (un-audited) (un-audited) (audited) $000 $000 $000Equity - foreign currency translation 289 (296) (1,774)Net income/(expense) recogniseddirectly in equity 289 (296) (1,774)------------------------------------------------------------------------------- Profit for the period 43,255 10,804 37,229 Total recognised income and expense forperiod 43,544 10,508 35,455------------------------------------------------------------------------------- Attributable toMinority interest - (93) (72)JKX Shareholders 43,544 10,601 35,527 43,544 10,508 35,455------------------------------------------------------------------------------- Effects of changes in accountingpolicy:Recognition of split accounting ofConvertible Loan Notes followingadoption of IAS 32 - - (358) Minority interest - - -------------------------------------------------------------------------------- Group balance sheet Notes As at As at As at 30 June 30 June 31 Dec 2006 2005 2005 (un-audited) (un-audited) (audited) $000 $000 $000--------------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 21,370 16,778 19,869Property, plant and equipment 106,707 76,438 81,481Other receivables 1,748 2,566 1,554-------------------------------------------------------------------------------------- 129,825 95,782 102,904--------------------------------------------------------------------------------------Current assetsInventories - finished goods 692 528 762Trade and other receivables 10,789 3,827 6,278Cash at bank and in hand 66,888 36,640 56,923-------------------------------------------------------------------------------------- 78,369 40,995 63,963--------------------------------------------------------------------------------------Liabilities--------------------------------------------------------------------------------------Current liabilitiesCurrent tax liabilities (749) (444) (1,392)Trade and other payables (12,837) (8,150) (13,795)-------------------------------------------------------------------------------------- (13,586) (8,594) (15,187)--------------------------------------------------------------------------------------Net current assets 64,783 32,401 48,776--------------------------------------------------------------------------------------Non-current liabilitiesProvisions (305) (604) (590)Deferred tax (5,922) (1,377) (2,784)-------------------------------------------------------------------------------------- (6,227) (1,981) (3,374)--------------------------------------------------------------------------------------Net assets 188,381 126,202 148,306--------------------------------------------------------------------------------------EquityShare capital 12 23,505 23,292 23,292Share premium 12 37,668 36,846 37,524Merger reserve 12 30,680 30,680 30,680Other reserves Capital redemption reserve 12 587 587 587 Equity - share options 12 534 281 400 Equity - foreign currency translation 12 (987) 203 (1,275)Retained earnings 12 96,394 34,313 57,098--------------------------------------------------------------------------------------Total shareholders' equity 188,381 126,202 148,306--------------------------------------------------------------------------------------Minority interests - equity - - ---------------------------------------------------------------------------------------Total equity 188,381 126,202 148,306-------------------------------------------------------------------------------------- Group cash flow statement Note Six months Six months Year to to to 30 June 30 June 31 Dec 2006 2005 2005 (un-audited) (un-audited) (audited) $000 $000 $000--------------------------------------------------------------------------------------Cash flows from operatingactivities 9Cash generated from operations 45,248 20,175 69,335Interest received 741 713 1,588Interest paid - (862) (865)Income tax paid (10,672) (4,379) (13,180)--------------------------------------------------------------------------------------Net cash from operating activities 35,317 15,647 56,878-------------------------------------------------------------------------------------- Cash flows from investing activitiesProceeds from sale of property,plant and equipment 3,149 867 1,375Purchase of property, plant andequipment and intangible assets (20,394) (18,446) (34,208)---------------------------------------------------------------------------------------Net cash used in investingactivities (17,245) (17,579) (32,833)--------------------------------------------------------------------------------------- Cash flows from financing activitiesProceeds from issue of ordinaryshare capital 357 263 -Treasury shares purchased (2,357) - (2,695)Share issue costs 39 - (25)Loan (4,950) - -Dividends paid to shareholders (1,642) (825) (2,162)Net cash used in financingactivities (8,553) (562) (4,882) --------------------------------------------------------------------------------------Increase in cash and cashequivalents in the period 9,519 (2,494) 19,163Effect of exchange rates on cashand cash equivalents 446 - (1,374)Cash and cash equivalents at 1January 56,923 39,134 39,134--------------------------------------------------------------------------------------Cash and cash equivalents at end ofperiod 10 66,888 36,640 56,923-------------------------------------------------------------------------------------- Notes to the interim accounts 1. General information and accounting policies JKX Oil & Gas plc (the ultimate parent of the Group) is a public limited companylisted on the London Stock Exchange and incorporated in England. The registeredoffice is 6 Cavendish Square, London, W1G 0PD. The principal activities of theGroup are exploration, appraisal, development and production of oil and gas. The interim report was authorised for issue by the directors on 26 September2006. 2. Accounting policies Basis of preparation The Group adopted International Financial Reporting Standards (IFRS) adopted bythe European Union as the basis for preparation of its financial statements from1 January 2005, with a date of transition of 1 January 2004. Accounting policies, consistent with those used in the annual report andaccounts for the year ended 31 December 2005, have been applied to this InterimReport. Ukrainian business environment Ukraine continues to display emerging market characteristics, and itslegislation and business practices regarding banking operations, foreigncurrency transactions and taxation is constantly evolving as the governmentattempts to manage the economy. Risks inherent in conducting business in anemerging market economy include, but are not limited to, volatility in thefinancial markets and the general economy. Uncertainties over the development ofthe tax and legal environment, as well as difficulties associated with theconsistent application of current laws and regulations have continued. Ukrainianassets represent approximately 81% of the Group's oil and gas assets. The Group's operations and financial position may be affected by theseuncertainties. The Group's financial statements as at 30 June 2006 and for theperiod then ended do not include any adjustments to reflect the possible futureeffects on the recoverability and classification of assets or the amounts orclassifications of liabilities that may result from these uncertainties. 3. Revenue Revenue represents amounts invoiced net of value added and similar taxes for theGroup's share of oil and gas sales and related management services. 4. Cost of sales 30 June 30 June 31 Dec 2006 2005 2005 $000 $000 $000----------------------------------------------------------------------------------Operating costs 8,411 4,163 14,744 Depreciation, depletion and amortisation 7,216 2,670 9,659 Production based taxes 1,220 436 1,283 16,847 7,269 25,686 Reversal of impairment provision* (15,226) - -----------------------------------------------------------------------------------Total cost of sales 1,621 7,269 25,686---------------------------------------------------------------------------------- * The Group previously recognised an impairment charge in respect of certain oiland gas assets in Ukraine. In the period to 30 June 2006 the carrying value ofthe previously impaired assets in Ukraine was re-assessed and, based on improvedmarket prices for oil and gas in Ukraine, it was determined appropriate toreverse the impairment. The assets concerned have been re-instated atdepreciated historic cost. 5. Segmental analysis 1H 2006 UK Ukraine Georgia USA Rest of Sub Elimin- TotalExternal world total ationsrevenue $000 $000 $000 $000 $000 $000 $000 $000---------------------------------------------------------------------------------------------------------- Revenue bylocation ofasset Oil - 42,922 - - 110 43,032 - 43,032 Gas - 16,853 - 11 - 16,864 - 16,864 Management services 172 475 - - - 647 - 647 Natural gas liquids - 21 - - - 21 - 21---------------------------------------------------------------------------------------------------------- 172 60,271 - 11 110 60,564 - 60,564---------------------------------------------------------------------------------------------------------- Inter segmentrevenue Oil - 23,744 - - - 23,744 (23,744) - Gas - - - - - - - - Management services 4,549 586 - - - 5,135 (5,135) - Equipment 9,831 - - - - 9,831 (9,831) ----------------------------------------------------------------------------------------------------------- 14,380 24,330 - - - 38,710 (38,710) ----------------------------------------------------------------------------------------------------------- Total revenue Oil - 66,666 - - 110 66,776 (23,744) 43,032 Gas - 16,853 - 11 - 16,864 - 16,864 Management services 4,721 1,061 - - - 5,782 (5,135) 647 Natural gas liquids - 21 - - - 21 - 21 Equipment 9,831 - - - - 9,831 (9,831) ----------------------------------------------------------------------------------------------------------- 14,552 84,601 - 11 110 99,274 (38,710) 60,564---------------------------------------------------------------------------------------------------------- Operatingprofit/(loss) (1,813) 60,636 (45) (109) (762) 57,907 (2,899) 55,008Finance revenue 1,550Finance cost (137)Profit beforetax 56,421---------------------------------------------------------------------------------------------------------- Assets andliabilitiesSegment assets 2,303 112,926 5,878 5,302 14,897 141,306 - 141,306Cash at bankand in hand 62,634 3,721 - 70 463 66,888 - 66,888Loan notes - - - - - - - -----------------------------------------------------------------------------------------------------------Total assets 64,937 116,647 5,878 5,372 15,360 208,194 - 208,194---------------------------------------------------------------------------------------------------------- Segmentalliabilities (7,051) (5,811) (2) (70) (208) (13,142) - (13,142)Current taxliabilities - (749) - - - (749) - (749)Deferred tax - (5,922) - - - (5,922) - (5,922)-----------------------------------------------------------------------------------------------------------Totalliabilities (7,051) (12,482) (2) (70) (208) (19,813) - (19,813)----------------------------------------------------------------------------------------------------------- Non cashexpenditure(other thandepreciation) 484 - - - - 484 - 484----------------------------------------------------------------------------------------------------------Capitalexpenditure 205 18,505 108 74 788 19,680 - 19,680----------------------------------------------------------------------------------------------------------Depreciation,depletion &amortisation 70 24,718 1 - - 24,789 - 24,789---------------------------------------------------------------------------------------------------------- 1H 2005 UK Ukraine Georgia USA Rest of Sub Elimin- TotalExternal world total ationsrevenue $000 $000 $000 $000 $000 $000 $000 $000---------------------------------------------------------------------------------------------------------- Revenue bylocation ofasset Oil 10,022 3,250 - - - 13,272 - 13,272 Gas - 10,131 - 25 - 10,156 - 10,156 Management services 150 132 - - - 282 - 282 Natural gas liquids - 46 - - - 46 - 46-------------------------------------------------------------------------------------------------------- 10,172 13,559 - 25 - 23,756 - 23,756-------------------------------------------------------------------------------------------------------- Inter segmentrevenue Oil - 10,977 - - - 10,977 (10,977) - Gas - - - - - - - - Management services 4,923 506 - - - 5,429 (5,429) - Equipment 7,787 - - - - 7,787 (7,787) --------------------------------------------------------------------------------------------------------- 12,710 11,483 - - - 24,193 (24,193) --------------------------------------------------------------------------------------------------------- Total revenue Oil 10,022 14,227 - - - 24,249 (10,977) 13,272 Gas - 10,131 - 25 - 10,156 - 10,156 Management services 5,073 638 - - - 5,711 (5,429) 282 Natural gas liquids - 46 - - - 46 - 46 Equipment 7,787 - - - - 7,787 (7,787) --------------------------------------------------------------------------------------------------------- 22,882 25,042 - 25 - 47,949 (24,193) 23,756-------------------------------------------------------------------------------------------------------- Operatingprofit/(loss) 352 14,175 (52) (242) (145) 14,088 - 14,088Finance revenue 814Finance cost (411)Profit beforetax 14,491-------------------------------------------------------------------------------------------------------- Assets andliabilitiesSegment assets 17,710 63,344 4,569 5,182 5,750 96,555 - 96,555Cash at bankand in hand 32,826 3,321 4 454 35 36,640 - 36,640Loan notes - - - 3,582 - 3,582 - 3,582--------------------------------------------------------------------------------------------------------Total assets 50,536 66,665 4,573 9,218 5,785 136,777 - 136,777-------------------------------------------------------------------------------------------------------- Segmentalliabilities (4,871) (3,231) (17) (116) (519) (8,754) - (8,754)Current taxliabilities - (444) - - - (444) - (444)Deferred tax - (1,377) - - - (1,377) - (1,377)--------------------------------------------------------------------------------------------------------Totalliabilities (4,871) (5,052) (17) (116) (519) (10,575) - (10,575)-------------------------------------------------------------------------------------------------------- Non cashexpenditure(other thandepreciation) 201 - - - 48 249 - 249--------------------------------------------------------------------------------------------------------Capitalexpenditure 154 14,599 131 145 1,156 16,185 - 16,185--------------------------------------------------------------------------------------------------------Depreciation,depletion &amortisation 34 2,929 1 - - 2,964 - 2,964-------------------------------------------------------------------------------------------------------- 6. Taxation No liability to UK taxation has arisen during the six months ended 30 June 2006(2005: $nil) due to the availability of tax losses, relief for overseas taxespaid on dividends received and tax relief on employee share options exercised.Taxes charged on production of hydrocarbons are included in the cost of sales.Overseas tax has arisen in the Group subsidiary, Poltava Petroleum Company, inUkraine. 7. Dividends 30 June 30 June 2006 2005 $000 $000----------------------------------------------------------------------------------Dividends 1,642 825---------------------------------------------------------------------------------- 8. Earnings per share The calculation of earnings per ordinary share for the six months ended 30 June2006 is based on the weighted average number of shares in issue during theperiod of 152,399,912 (30 June 2005:144,827,846; 31 December 2005: 148,340,576)and the profit for the relevant period. The diluted earnings per share for the six months ended 30 June 2006 is based on156,835,333 (30 June 2005: 157,136,020; 31 December 2005: 157,078,505) ordinaryshares calculated as follows: 30 June 30 June 31 Dec 2006 2005 2005--------------------------------------------------------------------------------Basic weighted average number ofshares 152,399,912 144,827,846 148,340,576Dilutive potential ordinary shares:Convertible loan notes - 6,684,326 3,314,693Share options 4,435,421 5,623,848 5,423,236-------------------------------------------------------------------------------- 156,835,333 157,136,020 157,078,505-------------------------------------------------------------------------------- 9. Reconciliation of operating profit to net cash inflow from operating activities Six months Six months Year to to to 30 June 30 June 31 Dec 2006 2005 2005 $000 $000 $000----------------------------------------------------------------------------------Operating profit 55,008 14,088 50,031Depreciation, depletion and amortisation 7,766 2,964 10,330Reversal of impairment provision (15,226) - -Disposal of assets (36) (7) 471Share-based payment costs 134 - 229Exchange differences 91 22 (695)Changes in working capital (2,489) 3,108 8,969----------------------------------------------------------------------------------Cash generated from operations 45,248 20,175 69,335---------------------------------------------------------------------------------- 10. Cash and cash equivalents At At 1 January Net 30 June 2006 movement 2006 $000 $000 $000----------------------------------------------------------------------------------Cash 2,772 (1,392) 1,380Short term deposits 54,151 11,357 65,508----------------------------------------------------------------------------------Cash and cash equivalents 56,923 9,965 66,888---------------------------------------------------------------------------------- 11. The interim statements have been prepared on the basis of the accountingpolicies set out in the 2005 Annual Report and Accounts, a copy is available on the Company's corporate website (www.jkx.co.uk) or from the Company's registered office. 12. Movements in the total shareholders equity during the period were asfollows: Equity Capital share Share Merger redemption options translation Share Retained capital reserve reserve reserve reserve premium earnings Total $000 $000 $000 $000 $000 $000 $000 $000------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------Group:At 1 January 2006 23,292 30,680 587 400 (1,275) 37,524 57,098 148,306 Net gains notrecognised inthe incomestatement - - - - 288 - - 288 Purchase oftreasury shares - - - - - - (2,357) (2,357) Issue of new shares 213 - - - - 144 - 357 Issue of treasuryshares for settlement of share options - - - - - - 40 40 Profit attributableto equityshareholders' - - - - - - 43,255 43,255 Dividend - - - - - - (1,642) (1,642) Share options - - - 134 - - - 134-------------------------------------------------------------------------------------------------------------At 30 June 2006 23,505 30,680 587 534 (987) 37,668 96,394 188,381------------------------------------------------------------------------------------------------------------- 13. The above financial information does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. The financial accountsinformation for the preceding year is based on the statutory accounts for thefinancial year ended 31 December 2005. Those, upon which the auditors, Ernst &Young LLP issued an unqualified opinion, have been delivered to the Registrar ofCompanies. PricewaterhouseCoopers LLP were appointed as auditors on 18 May 2006and have carried out a review of the first half 2006 information and theirreport is included overleaf. 14. Copies of this interim report are being sent to registered shareholders andfurther copies are available from the Company's registered office. Registered office 6 Cavendish SquareLondon W1G 0PD Independent review report to JKX Oil & Gas plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the Group Balance Sheet at 30June 2006 and the related Group Income Statement, Group Statement of RecognisedIncome and Expenses, Group Cash Flow Statement for the six months then ended andrelated notes. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with basis set out in Note 2. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for theCompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. PricewaterhouseCoopers LLPChartered AccountantsLondon26 September 2006 Notes: (a) The maintenance and integrity of the JKX Oil & Gas plc web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. Glossary Mcf Thousand cubic feetBcf Billion cubic feetMcfd Thousand cubic feet per dayCfpd Cubic feet per dayMMcfd Million cubic feet per dayMbbl Thousands of barrelsMMbbl Millions of barrelsbopd Barrels of oil per dayboe Barrels of oil equivalentMboe Thousands of barrels of oil equivalentMMboe Millions of barrels of oil equivalentboepd Barrels of oil equivalent per daysq.km Square Kilometre$ United States DollarsLIBOR London InterBank Offered RateUS United StatesHryvna The lawful currency of Ukraine Conversion factors6,000 standard cubic feet of gas = 1 boe We welcome visits to our websitewww.jkx.co.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
JKX.L