25th Sep 2007 07:00
JKX Oil & Gas PLC24 September 2007 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 25 SEPTEMBER 2007 JKX Oil & Gas plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Highlights Financial 2007 2006 % Increase Revenue $84.7m $60.6m 40% Operating profit $53.5m $39.8m 34%(excluding reversal of impairment provision in 1H 2006) Cash generated from operations $70.5m $45.3m 56% Earnings per share (basic) 24.4 cents 18.4 cents 33%(excluding reversal of impairment provision in 1H 2006) Interim dividend declared (per share) 2.0p 1.0p 100% Operational • Average daily production increased by more than 20% to 13,008 boepd (10,664 boepd) • Strong drilling record in Ukraine with the operation of two drilling rigs • Sound progress in further improving field facilities including work to tie-in the Soyuz main gas trunk line JKX Chief Executive, Dr Paul Davies, said: "JKX has made excellent progress during the first half of the financial year. Wehave continued to expand our operations in Poltava and have successfullyincreased our daily rate of production and exploration activity in the area. "Our conditional acquisition of the Yuzhgazenergie in Southern Russia, followingthe period end, presents the Company with an exciting and significantopportunity to increase its reserves and asset base. We have considerableexperience of operating in the region and we look forward to returning value toshareholders following our timely entry into the dynamic Russian gas market. "We expect the Company's performance in the second half to be in line with the Board's expectations." ENDS For further information please contact:Sofia Rehman / Anthony Cardew Cardew Group 020 7930 0777 CHAIRMAN'S STATEMENT I am delighted to report that the Company has delivered excellent results forthe first six months of the financial year. Underlying our success is theincreased production from successful development and appraisal drilling in JKX'sPoltava operations, the continued buoyancy of international oil prices andfurther improvements in the realisation for gas sold in Ukraine. Good progresshas also been made on the Company's exploration programme. Significantly, following the period end and in keeping with our strategy ofdeveloping a portfolio of oil and gas assets in and around the states of theformer Soviet Union, we announced the conditional acquisition of theKoshekhablskoye gas field in southern Russia. The US$50 million acquisition wasapproved by shareholders at an Extraordinary General Meeting on 3 September2007. Financial highlights for the period include: • 40% increase in revenue to $84.7m ($60.6m) • 34% rise in operating profit to $53.5m ($39.8m)* • 56% increase in operating cash flow to $70.5m ( $45.3m) • 50% increase in cash balances to $100.3m ($66.9m) • 33% increase in earnings per share to 24.4 cents ( 18.4 cents)* • 100% increase in the interim dividend declared to 2p per share (1p per share) * The above comparative figures for operating profit and earnings per shareexclude the beneficial effect in the 2006 figures of a $15.2m reversal of aportion of an impairment provision made in 1998 against Ukrainian producingassets. Production and Realisations Average production in the first half of the year rose by more than 20% to 13,008boepd (10,664 boepd). Current production remains in excess of 13,000 boepd, ofwhich approximately 45% is oil and condensate. Average realisations for oil remain essentially unchanged at $51.22/bbl ($52.05/bbl) with the Company continuing to sell its liquids production into thedomestic Ukrainian market. Average realisations for gas rose by 45% to $3.90/Mscf ($2.69/Mscf) with all gasbeing sold into the domestic Ukrainian market. Gas realisations are expected toremain at current levels through to the year end with a further upward movementanticipated at the beginning of 2008. Operational Highlights Ukraine Work on the four Poltava production licences continued to be the major focus ofthe Company's efforts in the period with two dedicated drilling rigs undercontract. • Well M157 was drilled in the Molchanovskoye Field and brought on-stream in January at a rate of 7.3 MMcfd of gas and 620 bopd. • Well R102 was drilled in the Rudenkovskoye Field and brought on-stream in May at a rate of 7.7 MMcfd of gas and 90 bopd. • Well M160 was drilled in the Molchanovskoye Field and brought on-stream in May at a rate of 7.4 MMcfd of gas and 495 bopd. • Well I127 was drilled in the Ignatovskoye Field and brought on-stream in June at the rate of 3.4 MMcfd and 26 bopd. • Expansion of the field facilities continued including an extension to the main camp complex and the installation of more than 50km of additional intra-field flowlines. In addition to the above, a hydraulic fracture stimulation programme has beeninitiated on the Rudenkovskoye licence, with the first frac being performed atthe end of the second quarter on one of the gas bearing sandstone intervals ofWell R101. Results to date are inconclusive and the results from an extendedpressure test on the well and fracture analyses of core data from Well R102 arebeing used to optimise the stimulation technique. Since the end of the reporting period: • Well I128 was drilled in the Ignatovskoye Field and brought on-stream in August at the rate of 1,000 bopd and 0.3 MMcfd. • Well M158 was drilled in the Molchanovskoye Field and brought on-stream in August at a rate of 1.3 MMcfd of gas and 45 bopd. • Well M162 was drilled in the Molchanovskoye Field and brought on-stream in August at a rate of 3.9 MMcfd of gas and 120 bopd. • Well I130 was drilled in the Ignatovskoye Field and suspended in September pending simulation or sidetracking. • Well M161 was drilled in the Molchanovskoye Field and is currently awaiting acidisation and testing. • Well I129 was drilled in the Ignatovskoye Field and is currently awaiting tie in to the production facilities and testing. The project to tie-in the PPC facility to the 56 inch Soyuz pipeline has seengood progress during the reporting period. The hot tap into the Soyuz line wassuccessfully executed, and construction of the 5km spur line to the PPCfacilities has been completed. PPC has now taken delivery of an additional gasdew point control plant, and arrival of an additional compressor unit isimminent. However, due to a delay in delivery of the bespoke metering skid,commissioning of the tie-in is now anticipated for the end of the first quarterof 2008. The Company has made progress with its exploration programme in Ukraine. Thefirst exploration Well Z1 on the 95.7sq.km Zaplavskoye exploration licence wasdrilled in 2005. Reprocessing and reinterpretation of the 92km 2D seismic dataincorporating the well data was undertaken in the reporting period and showedthat Well Z1 was drilled off-structure. Additional 2D seismic was shot in thefirst quarter of the period, and the processed data have now been assimilatedinto the data set. A drilling location for the second exploration Well Z2 willbe selected in the coming month for a planned spud in the first quarter of 2008. Georgia Anadarko is the operator of the consortium holding the 8,900 sq.km explorationlicence offshore Georgia (JKX: 4% net profit interest). We await the conclusionof Anadarko's recent farm-out exercise which was initiated following thewithdrawal of BP and Chevron (formerly Unocal) from the consortium. Bulgaria The Company operates the onshore exploration permits, B Golitza and B1 Golitza(JKX: 50%), which now cover a total of 3,499 sq.km following a mandatory acreagerelinquishment at the end of the initial exploration period. During the period,Well R1 was spudded on the B Golitza permit and is currently drilling ahead.Existing seismic and well data have been reprocessed over the B1 Golitza permitand a decision on whether to acquire further seismic data will be taken by theyear end. Turkey The Company is participating in the three Karakalise onshore explorationlicences (JKX: 30%), covering a total of 1,230 sq.km in south-eastern Turkey.Since the end of the period, additional seismic data were acquired over twoleads and are currently being processed. The Company is also participating inthree onshore exploration licences in Thrace (JKX: 25%), comprising an area of980 sq.km. An additional 110 km of 2D seismic was acquired and processed duringthe second quarter and these data are currently being interpreted with theobjective of identifying a prospect for drilling in the first quarter of 2008. Italy The Company has applied for a production concession for its Aglavizza gasdiscovery (JKX: 100%) within its Civita exploration licence area. Thedevelopment plan has first sales gas scheduled for early 2009. ENI has nowwithdrawn from the remaining part of the 270 sq.km Civita exploration permit(JKX: 100%), and the Company is presently surveying a drilling location for theCivita North prospect exploration well. The first exploration well on the FiumeArrone permit (JKX: 10%) was drilled in the third quarter and was plugged andabandoned with non-commercial gas shows. Reprocessing of existing seismic overthe 165 sq.km Moltalbano permit (JKX: 40%) continues. The Company has beenawarded a permit for the 176 sq.km Corropoli exploration block (JKX: 100%) andthe registration process is expected to be completed by year end. The Board hasdeemed the continued development of the above portfolio of Italian assets to lieoutside the Company's core strategy, and a process of divestment is underway. USA The Company holds a 34.4% working interest in the 45.6 sq.km Center Deep Unit inShelby County, east Texas. This asset is included in the above divestmentprocess. Current and Future Activity The ongoing drilling programme on the Poltava licences will continue thedevelopment of the Ignatovskoye and Molchanovskoye Fields whilst also appraisingthe productive carbonate and sandstone horizons which lie between them. Inaddition, a second exploration well is scheduled on the Zaplavskoye Field in thefirst quarter of next year. The initial phase of development of theRudenkovskoye Field comprises the specification of a hydraulic fracturestimulation programme. Currently, data are being gathered on the initialstimulation of the sandstone horizon in Well R101, prior to design andimplementation of a more extensive stimulation programme for Wells R12, R101 andR102. During the coming six months we anticipate completing the tie-in projectto the Soyuz pipeline. Additional development and exploration opportunities inUkraine continue to be actively pursued by the Company. Completion of the acquisition of Yuzhgazenergie LLC, the holder of the southernRussian Koshekhablskoye gas field licence, is anticipated in the fourth quarter.The initiation of workover operations on the field, together with restructuringand staffing of Yuzhgazenergie will be a key focus for the coming year. We areseeking additional development licences for our Russian portfolio. The Company wishes to participate in more exploration plays in eastern andcentral Europe, both in an operating and non-operating capacity. It isanticipated that further exploration work will be undertaken in both Bulgariaand Turkey in the coming periods. Dividend The Board is pleased to declare a doubling of the interim dividend to 2p pershare (2006:1p per share) as a result of the Company's strong cash flow andliquidity. The dividend will be paid on 5 November to shareholders who are onthe Company's Register of Members at the close of business on 5 October. Board Changes As announced in June, Nigel Moore has been appointed as Non-executive Director,and Martin Miller and Peter Dixon appointed as Technical Director and CommercialDirector respectively. Outlook The Company intends to continue the efficient development of its primaryproduction centre in Poltava whilst utilising its expertise of operating in theregion to develop expeditiously its second production hub in Russia. Thestrength of the Company's balance sheet and strong cash flow provide adequatescope for further acquisitions in the near term. I anticipate the Company's overall performance in the second half of the year tobe in line with the Board's expectations. Financial review Production summary 1H 2007 2H 2006 1H 2006------------------------------------------------------------------------------ProductionOil (Mbbl) 1,051 923 864Gas (Bcf) 7.8 7.3 6.4------------------------------------------------------------------------------Oil equivalent (Mboe) 2,355 2,138 1,930------------------------------------------------------------------------------Daily productionOil (bopd) 5,807 5,016 4,772Gas (MMcfd) 43 40 35------------------------------------------------------------------------------Oil equivalent (boepd) 13,008 11,620 10,664------------------------------------------------------------------------------ 1H 2007 2H 2006 1H 2006Operating results $m $m $m------------------------------------------------------------------------------Revenue Oil 54.4 49.8 43.0Gas 29.6 20.8 16.9Other 0.7 0.5 0.7------------------------------------------------------------------------------ 84.7 71.1 60.6Cost of salesOperating costs (10.2) (8.9) (8.5)Depreciation, depletion and amortisation (8.6) (7.1) (7.2)Production based taxes (1.7) (1.5) (1.2)------------------------------------------------------------------------------ (20.5) (17.5) (16.9)------------------------------------------------------------------------------Reversal of impairment provision - - 15.2------------------------------------------------------------------------------Total cost of sales (20.5) (17.5) (1.7)------------------------------------------------------------------------------Gross Profit 64.2 53.6 58.9Operating expensesGeneral and administrative expenses (5.7) (2.8) (3.9)Impairment of investment (5.0) - -------------------------------------------------------------------------------Operating profit 53.5 50.8 55.0------------------------------------------------------------------------------ Earnings 1H 2007 2H 2006 1H 2006------------------------------------------------------------------------------Net profit ($m) 37.7 34.5 43.3Net profit ($m) excluding impairment of investment and impairment reversal 42.7 34.5 28.1Basic weighted average number of shares in issue (m) 154 153 152Earnings per share (basic, cents) 24.40 22.51 28.38Earnings before interest, tax, depreciation and amortisation ($m) 62.9 58.6 47.6------------------------------------------------------------------------------ Realisations 1H 2007 2H 2006 1H 2006------------------------------------------------------------------------------Oil (per bbl)* $51.22 $56.43 $52.05Gas (per Mcf) $3.90 $2.95 $2.69------------------------------------------------------------------------------ *Oil prices are net of all transportation, shrinkage and brokerage charges. Cost of production ($/boe) 1H 2007 2H 2006 1H 2006------------------------------------------------------------------------------Production costs $4.34 $3.35 $4.36Depreciation, depletion and amortisation $3.66 $3.31 $3.74Production based taxes $0.72 $0.72 $0.63------------------------------------------------------------------------------ Cash flow 1H 2007 2H 2006 1H 2006------------------------------------------------------------------------------Cash generated from operations ($m) 70.5 53.4 45.3Operating cash flow per share (cents) 45.7 34.9 29.7 Balance sheet 1H 2007 2H 2006 1H 2006------------------------------------------------------------------------------Net cash ($m) 100.3 81.1 66.9Net cash to equity (%) 39.7 37.1 35.5Return on average capital employed (%) 31.9 33.8 51.6Return on average capital employed (%) (excluding reversal of N/A 35.1 35.0impairment provision)Capital expenditure ($m) 35.9 23.9 19.5------------------------------------------------------------------------------ Group income statement Six months Six months to to Year to 30 June 30 June 31 December 2007 2006 2006 Note (un-audited) (un-audited) (audited) $000 $000 $000--------------------------------------------------------------------------------------------------------------Revenue 84,677 60,564 131,692Cost of sales - excluding reversal of impairment provision 4 (20,523) (16,849) (34,396) - reversal of impairment provision 4 - 15,228 15,228--------------------------------------------------------------------------------------------------------------Total cost of sales (20,523) (1,621) (19,168)Gross profit 64,154 58,943 112,524General and administrative expenses (5,699) (3,935) (6,717)Impairment of investment 12 (5,000) - -Operating profit 53,455 55,008 105,807Finance revenue 2,311 1,550 3,380Finance cost (19) (137) -Profit before tax 55,747 56,421 109,187Taxation 6 (18,093) (13,166) (31,431)Profit for the period 37,654 43,255 77,756 Dividends paid 7 (3,708) (1,642) (4,495)Dividend (per share) 1.2 pence 0.6 pence 1.6 penceEarnings per share - basic earnings per 10p 8 24.40 28.38 50.89 ordinary share (in cents) - diluted earnings per 10p 8 24.00 27.58 49.52 ordinary share (in cents) Statement of recognised income and expense Six months Six months to to Year to 30 June 30 June 31 December 2007 2006 2006 (un-audited) (un-audited) (audited) $000 $000 $000 Equity - foreign currency translation 106 289 (3,089)--------------------------------------------------------------------------------------------------------------Net income/(expense) recognised directly in equity 106 289 (3,089) Profit for the period 37,654 43,255 77,756 Total recognised income and expense for the period 37,760 43,544 74,667 -------------------------------------------------------------------------------------------------------------- Group balance sheet Notes As at As at As at 30 June 30 June 31 Dec 2007 2006 2006 (un-audited) (un-audited) (audited) $000 $000 $000----------------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 27,671 21,370 23,432Property, plant and equipment 141,056 106,707 119,445Other receivables - 1,748 -Investments 12 - - 5,000---------------------------------------------------------------------------------------- 168,727 129,825 147,877----------------------------------------------------------------------------------------Current assetsInventories - finished goods 1,096 692 1,031Trade and other receivables 13,607 10,789 9,533Cash at bank and in hand 100,314 66,888 81,116---------------------------------------------------------------------------------------- 115,017 78,369 91,680----------------------------------------------------------------------------------------Liabilities----------------------------------------------------------------------------------------Current liabilitiesCurrent tax liabilities (3,064) (749) (2,001)Trade and other payables (20,557) (12,837) (12,132)---------------------------------------------------------------------------------------- (23,621) (13,586) (14,133)----------------------------------------------------------------------------------------Net current assets 91,396 64,783 77,547----------------------------------------------------------------------------------------Non-current liabilitiesProvisions (552) (305) (437)Deferred tax (6,619) (5,922) (6,358)---------------------------------------------------------------------------------------- (7,171) (6,227) (6,795)----------------------------------------------------------------------------------------Net assets 252,952 188,381 218,629----------------------------------------------------------------------------------------EquityShare capital 11 23,812 23,505 23,801Share premium 11 38,246 37,668 38,179Merger reserve 11 30,680 30,680 30,680Other reservesCapital redemption reserve 11 587 587 587Equity - share options 11 2,325 534 2,132Equity - foreign currency translation 11 (4,258) (987) (4,364)Retained earnings 11 161,560 96,394 127,614----------------------------------------------------------------------------------------Total shareholders' equity 252,952 188,381 218,629---------------------------------------------------------------------------------------- Group cash flow statement Six months Six months to to Year to 30 June 30 June 31 December 2007 2006 2006 Note (un-audited) (un-audited) (audited) $000 $000 $000--------------------------------------------------------------------------------------------------------------Cash flows from operating activities 9Cash generated from operations 70,514 45,248 98,693Interest received 3,019 741 2,706Income tax paid (16,769) (10,672) (25,783)--------------------------------------------------------------------------------------------------------------Net cash from operating activities 56,764 35,317 75,616 --------------------------------------------------------------------------------------------------------------Cash flows from investing activitiesProceeds from sale of property, plant and equipment - - 94Proceeds from sale of US assets - 3,149 3,090Purchase of investment - - (5,000)Short term loan advanced - - (200)Purchase of property, plant and equipment and intangible assets (34,114) (20,394) (43,870)--------------------------------------------------------------------------------------------------------------Net cash used in investing activities (34,114) (17,245) (45,886) --------------------------------------------------------------------------------------------------------------Cash flows from financing activitiesProceeds from issue of ordinary share capital 78 357 1,222Treasury shares purchased - (2,357) (2,784)Share issue costs - 39 (18)Loan 33 (4,950) -Dividends paid to shareholders (3,708) (1,642) (4,495)--------------------------------------------------------------------------------------------------------------Net cash used in financing activities (3,597) (8,553) (6,075) --------------------------------------------------------------------------------------------------------------Increase in cash and cash equivalents in the period 19,053 9,519 23,655Effect of exchange rates on cash and cash equivalents 145 446 538Cash and cash equivalents at 1 January 81,116 56,923 56,923--------------------------------------------------------------------------------------------------------------Cash and cash equivalents at end of period 10 100,314 66,888 81,116-------------------------------------------------------------------------------------------------------------- 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 by the directors for issue on 25 September2007. 2. Accounting policies Basis of preparation This consolidated interim financial information has been prepared in accordancewith the Listing Rules of the Financial Services Authority. The financialinformation should be read in conjunction with the annual financial statementsfor the year ended 31 December 2006 which were prepared in accordance with IFRSsas adopted by the European Union. The accounting policies adopted are consistent with those used in the annualfinancial statements for the year ended 31 December 2006. A copy of the annualfinancial statements is available on the company's corporate website (www.jkx.co.uk) or from the company's registered office. 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 and interpretation of current laws and regulations, havecontinued. As at 30 June 2007, oil and gas assets based in Ukraine representapproximately 83% 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 do not include any adjustmentsto reflect effects on the recoverability, and classification of assets or theamounts or classifications of liabilities that may result from theseuncertainties. 3. Change in functional currency Effective 1 January 2007 JKX plc (the Group's parent company) changed itsfunctional currency from Sterling to US Dollars. This change reflects theincreasing influence of the US Dollar on the Company's operations. Thepresentational currency of the Company and the Group remains the US Dollar. 4. Cost of sales ------------------------------------------------------------------------------------ 30 June 30 June 31 Dec 2007 2006 2006 $000 $000 $000------------------------------------------------------------------------------------Operating costs 10,222 8,413 17,343------------------------------------------------------------------------------------Depreciation, depletion and amortisation 8,617 7,216 14,303------------------------------------------------------------------------------------Production based taxes 1,684 1,220 2,750------------------------------------------------------------------------------------ 20,523 16,849 34,396------------------------------------------------------------------------------------Reversal of impairment provision* - (15,228) (15,228)------------------------------------------------------------------------------------Total cost of sales 20,523 1,621 19,168------------------------------------------------------------------------------------ * 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 historical cost. 5. Segmental analysis ---------------------------------------------------------------------------------------------------------------------- 1H 2007 Rest of Sub External revenue UK Ukraine USA world total Eliminations Total $000 $000 $000 $000 $000 $000 $000 ---------------------------------------------------------------------------------------------------------------------- Revenue by location of asset Oil - 54,373 - - 54,373 - 54,373 ---------------------------------------------------------------------------------------------------------------------- Gas - 29,562 12 - 29,574 - 29,574---------------------------------------------------------------------------------------------------------------------- Management services 180 550 - - 730 - 730---------------------------------------------------------------------------------------------------------------------- 180 84,485 12 - 84,677 - 84,677----------------------------------------------------------------------------------------------------------------------Inter segment revenue Oil - - - - - - ----------------------------------------------------------------------------------------------------------------------- Gas - - - - - - ----------------------------------------------------------------------------------------------------------------------- Management services 3,467 - - - 3,467 (3,467) ----------------------------------------------------------------------------------------------------------------------- Equipment 18,794 - - - 18,794 (18,794) ----------------------------------------------------------------------------------------------------------------------- 22,261 - - - 22,261 (22,261) -----------------------------------------------------------------------------------------------------------------------Total revenue Oil - 54,373 - - 54,373 - 54,373---------------------------------------------------------------------------------------------------------------------- Gas - 29,562 12 - 29,574 - 29,574---------------------------------------------------------------------------------------------------------------------- Management services 3,647 550 - - 4,197 (3,467) 730---------------------------------------------------------------------------------------------------------------------- Equipment 18,794 - - - 18,794 (18,794) ----------------------------------------------------------------------------------------------------------------------- 22,441 84,485 12 - 106,938 (22,261) 84,677---------------------------------------------------------------------------------------------------------------------- Operating profit/(loss) (3,181) 64,947 (138) (857) 60,771 (2,315) 58,455 ---------------------------------------------------------------------------------------------------------------------- 1H 2006 Rest of Sub External revenue UK Ukraine USA world total Eliminations Total $000 $000 $000 $000 $000 $000 $000 ---------------------------------------------------------------------------------------------------------------------- Revenue by location of asset Oil - 42,922 - 110 43,032 - 43,032---------------------------------------------------------------------------------------------------------------------- Gas - 16,853 11 - 16,864 - 16,864---------------------------------------------------------------------------------------------------------------------- Management services 172 496 - - 668 - 668---------------------------------------------------------------------------------------------------------------------- 172 60,271 11 110 60,564 - 60,564---------------------------------------------------------------------------------------------------------------------- Inter segment revenue Oil - - - - - - ----------------------------------------------------------------------------------------------------------------------- Gas - - - - - - ----------------------------------------------------------------------------------------------------------------------- Management services 2,848 - - - 2,848 (2,848) ----------------------------------------------------------------------------------------------------------------------- Equipment 9,831 - - - 9,831 (9,831) ----------------------------------------------------------------------------------------------------------------------- 12,679 - - - 12,679 (12,679) ----------------------------------------------------------------------------------------------------------------------- Total revenue Oil - 42,922 - 110 43,032 - 43,032---------------------------------------------------------------------------------------------------------------------- Gas - 16,853 11 - 16,864 - 16,864---------------------------------------------------------------------------------------------------------------------- Management services 3,020 496 - - 3,516 (2,848) 668---------------------------------------------------------------------------------------------------------------------- Equipment 9,831 - - - 9,831 (9,831) ----------------------------------------------------------------------------------------------------------------------- 12,851 60,271 11 110 73,243 (12,679) 60,564 ----------------------------------------------------------------------------------------------------------------------Operating profit/(loss) (1,813) 60,636 (109) (807) 57,907 (2,899) 55,008 ---------------------------------------------------------------------------------------------------------------------- In 2006 the Company previously recorded the inter country revenue of $26m fromoil in Ukraine. This has been adjusted to reflect only inter segment revenue. 6. Taxation No liability to UK taxation has arisen during the six months ended 30 June 2007(2006: $nil) due to the availability of tax losses, relief for overseas taxespaid on dividends received and tax relief on employee share options exercised.The tax charged in the period relates to Ukrainian corporation tax which hasarisen in the Group subsidiary, Poltava Petroleum Company. Taxes charged onproduction of hydrocarbons in Ukraine and the USA are included in the cost ofsales. 7. Dividends 30 June 30 June 31 Dec 2007 2006 2006 $000 $000 $000------------------------------------------------------------------------------------Dividends 3,708 1,642 4,495 ------------------------------------------------------------------------------------ 8. Earnings per share The calculation of earnings per ordinary share for the six months ended 30 June2007 is based on the weighted average number of shares in issue during theperiod of 154,312,676 (30 June 2006:152,399,912; 31 December 2006: 152,802,322)and the profit for the relevant period. The diluted earnings per share for the six months ended 30 June 2007 is based on156,883,948 (30 June 2006: 156,835,333; 31 December 2006: 157,018,655) ordinaryshares calculated as follows: Number of Shares 30 June 30 June 31 Dec 2007 2006 2006----------------------------------------------------------------------------------Basic weighted average number of shares 154,312,676 152,399,912 152,802,322Dilutive potential ordinary shares:Share options 2,571,272 4,435,421 4,216,333---------------------------------------------------------------------------------- 156,883,948 156,835,333 157,018,655---------------------------------------------------------------------------------- 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 2007 2006 2006 $000 $000 $000 ------------------------------------------------------------------------------------Operating profit 53,455 55,008 105,807Depreciation, depletion and amortisation 9,412 7,766 15,581Disposal of assets 897 (36) 1,813Share-based payment costs 193 134 266Exchange differences (144) 93 (2,689)Changes in working capital 1,701 (2,489) (6,857)Reversal of impairment provision - (15,228) (15,228)Impairment of investment 5,000 - -------------------------------------------------------------------------------------Cash generated from operations 70,514 45,248 98,693------------------------------------------------------------------------------------ 10. Cash and cash equivalents At At 1 January 30 June 2007 Net movement 2007 $000 $000 $000 ------------------------------------------------------------------------------------Cash 981 (10) 971Short term deposits 80,135 19,208 99,343------------------------------------------------------------------------------------Cash and cash equivalents 81,116 19,198 100,314------------------------------------------------------------------------------------ 11. Movements in the total shareholders equity during the period were as follows: Equity Foreign Capital share currency 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 2007 23,801 30,680 587 2,132 (4,364) 38,179 127,614 218,629Net gains not recognised in the income statement - - - - 106 - - 106Issue of new shares 11 - - - - 67 - 78 Profit attributable to equity shareholders' - - - - - - 37,654 37,654Dividend - - - - - - (3,708) (3,708)Share options - - - 193 - - - 193-------------------------------------------------------------------------------------------------------------------At 30 June 2007 23,812 30,680 587 2,325 (4,258) 38,246 161,560 252,952------------------------------------------------------------------------------------------------------------------- 12. Impairment of investment In addition to its wholly owned Ukrainian interests the Group holds aninvestment in a Ukrainian oil and gas company. The Directors consider that thisinvestment has been impaired in full during the period. This has resulted in acharge of $5.0m to the income statement. 13. Subsequent events Russian acquisition On 24 July 2007, JKX Oil and Gas plc announced the proposed acquisition ofYuzhgazenergie LLC, a company with limited liability, incorporated in Russia for$50 m. On 3 September 2007, the resolution to approve the proposed acquisitionwas passed at an Extraordinary General Meeting of the company. The acquisitionremains subject to a number of conditions as set out in the Circular distributedto shareholders with the notice of the Extraordinary General Meeting. Assets held for sale Subsequent to the period end, the Company's assets in Italy, which have a netbook value of $4.8m at 30 June 2007, are now classified as held for sale. 14. 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 2006. Those, upon which the auditors,PricewaterhouseCoopers LLP issued an unqualified opinion, have been delivered tothe Registrar of Companies. PricewaterhouseCoopers LLP have carried out a reviewof the first half 2007 information and their report is included overleaf. 15. Copies of this interim report are being sent to registered shareholders andfurther copies are available from the Company's registered office. Registered office6 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 2007 which comprises the Group balance sheet at 30June 2007 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 the basis set out inNote 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 2007. PricewaterhouseCoopers LLPChartered AccountantsLondon25 September 2007 Notes: (a) The maintenance and integrity of the JKX Oil & Gas plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. Glossary Mcf Thousand cubic feetBcf Billion cubic feetcfpd Cubic feet per dayMMcfd Million cubic feet per dayMbbl Thousands of barrelsMMbbl Million barrelsbcpd Barrel of condensate per daybpd Barrel per daybopd 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 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