jkx oil & gas/media/files/j/jkx/download-centre...targeting world-class performance...
TRANSCRIPT
JKX Oil & GasInvestor presentation
London
March 2017
Disclaimer
The information contained in these presentation materials (the “Presentation”) has been prepared by JKX Oil & Gas plc (the “Company”).
This Presentation is being made for information purposes only and does not constitute an offer or invitation for the sale or purchase of
securities in the Company or any of the assets described in it nor shall they nor any part of them form the basis of or be relied on in
connection with, or act as any inducement to enter into, any contract or commitment whatsoever or otherwise engage in any investment
activity (including within the meaning specified in section 21 of the Financial Services and Markets Act 2000 as amended).
The information in this Presentation does not purport to be comprehensive and has not been independently verified. While this information
has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or
will be accepted by the Company or any of its officers, employees, agents or advisers as to, or in relation to, the accuracy or completeness
of this Presentation, and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no
representation or warranty is given as to the achievement or reasonableness of any management estimates or prospects contained in this
Presentation.
Such statements, estimates and forecasts reflect various assumptions made by the management of the Company and their current beliefs,
which may or may not prove to be correct. A number of factors could cause actual results to differ materially from the potential results
discussed in such forward-looking statements, estimates and forecasts including: changes in general economic and market conditions,
changes in the regulatory environment, business and operational risks and other risk factors. Past performance is not a guide to future
performance. Statements contained in this document regarding past trends or activities should not be taken as a representation or warranty,
express or implied, that such trends or activities will continue in the future. No statement in this document is intended to be a profit forecast.
You should not place reliance on forward-looking statements, which speak only as of the date of this document.
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The information contained in this Presentation is subject to change, completion or amendment without notice and is subject to verification.
Recipients of this Presentation in jurisdictions outside the UK should inform themselves about and observe any applicable legal
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2
JKX Oil & Gas (JKX LN)E&P growth portfolio across Central/Eastern Europe and Russia
• Ukraine: large-scale field development opportunity
• Russia: Stable cash-generating operations
• Hungary/Slovakia: Significant exploration potential
• Team: New board and executive management focused on modern development approach
*Source: Company data, Reserves and Contingent Resources are DeGolyer and MacNaughton estimates as of 31 December 2016
Country Licenses Prod Expl Infrastructure
2016 Production Reserves
mmboe
Contingent
Resources
mmboeGas
mmcf/d
Oil
mbbl/d
Total
mboe/d 1P 2P 3C
Ukraine Ignativske
Elyzavetivske
Rudenkivske
Novomykolaivske
Movchanivske
Zaplavska
✓
✓
✓
✓
✓
✓
2 Processing Facilities
1 LPG Plant18.6 0.9 4.0 15 29 457
Russia Koshekhablskoye ✓ 1 Gas Processing 36.1 0.1 6.1 43 80 108
Hungary 6 Licenses ✓ 1 Gas Processing - - - - - 1
Slovakia 3 Licenses (25% WI) ✓ - - - - - -
Total 54.7 1.0 10.1 58 109 565
3
Progress & PrioritiesProgress provides launch pad for growth
2016 Progress
• Completed detailed field development plans (FDPs) for all core assets, identified growth opportunities,
and started their implementation
• Increased production with minimum capital expenditure
• Reduced operating costs and overheads, resulting in an increase in cash flow and profitability
• Eliminated short-term financial liabilities (bond repurchase and restructuring)
• Completed international arbitration procedure, while actively engaging in dialogue with the Government of
Ukraine.
• Built a technical team
2017 Priorities
Ukraine: Execute
development plan
Hungary/Slovakia:
Appraisal and
Exploration
Resolve legal issues
with Ukraine
Russia: Maintain base
and consider strategic
monetization
1
2
3
4
5
6
4
Strategic Growth PrioritiesLeading Central/Eastern European focused E&P
• Increase production
• Explore and appraise Hungary & Slovakia
upside potential
• Improve market profile for retail and
institutional investors
Production growth underpinned by transparency and western technology
• Leverage existing resource base and local
expertise
• Introduce modern technology and practices
targeting world-class performance
• Strengthen corporate culture with focus on
transparency, inclusivity and individual
responsibility
Production, boepd Capital Expenditures, $ million
0.0
5.0
10.0
15.0
20.0
2014 2015 2016
k b
oepd
5
0
10
20
30
40
50
2014 2015 2016
$ m
illio
n
Capital Investment ProjectsUkraine re-investment drives future growth
* Indicative full-cycle project capital expenditures (CAPEX) subject to Final Investment Decision (FID) and/or Board authorization.
Project Country Scope
Indicative
CAPEX*
$mn
Year 1
Production
mboepdEUR
mmboe
Well enhancements Ukraine
Enhancement projects on existing wells and
rig-less interventions (ESPs, velocity strings &
perforations)
2.4 1.7 1.4
Fracking of existing wells
Rudenkivske fieldUkraine Fracking of up to 11 existing wells 17.7 4.4 4.1
Ignativske waterflood Ukraine Oil-focused enhanced recovery project 7.5 1.5 0.6
Well 5 workover Russia Workover of existing non-producing wells 3.0 6.4 1.8
Sidetrack Hungary Sidetrack of existing wells 1.8 0.1 0.3
Rudenkivske full field
development (Phase 1)Ukraine 2 pads with 12 wells each 153.7 16.4 9.2
Callovian well RussiaNew well to de-risk predicted porous Callovian
reservoirs15.0 7.2 4.0
Other VariousOther projects and base / maintenance CAPEX
for 2017-201813.1
TOTAL 214.1 37.7 21.5
Pro
ject
pri
ori
ty /
ph
asin
g
6
24.3
32.5
39.0
7.7
14.9
9.9
22.514.0
0.9
4.9
34.2
55.053.0
8.6
19.8
0
10
20
30
40
50
60
Gas Condensate Oil Gas Condensate
$/b
oe
Capital Allocation Prioritized for ReturnsAcross the project portfolio of the Group and potential targets
Indicative product sales prices, $/boe Prioritizing capital projects – scale vs. returns
Ukraine Russia
Gas $4.6/mcf
($27.5/boe)
Oil $50/boe
European oil and gas benchmark prices
Ukraine -enhancements
Ukraine - Rud fracs
Ukraine - Rud drilling (24
wells)
Ukraine -Ignativske
Russia well 5
Russia -Callovian well
0
2
4
6
8
10
12
14
16
18
0 5 10 15 20 25
EU
R,
mm
boe
Project net revenue/CAPEX, $/$
Initial stages of
Rudenkivske
development in Ukraine
have the highest impact
for JKX
• JKX has a variety of projects in Ukraine and Russia
• Rudenkivske project provides good balance of scale and returns with additional upside with
decreased royalty rates
7
Ticker JKX LN
Share price (01/25/2017), GBp 25.5
Shares outstanding 171,723,145
Market cap, GBPmn 43.8
GBPUSD (03/17/2017) 1.24
Market cap, USDmn 54.3
Net debt, USDmn 2.5
EV, USDmn 56.8
Financial results: Reversing the Trend
JKX Oil & Gas plc share information
JKX Oil & Gas plc trades with a premium Listing on London Stock Exchange
8
5.74
4.20
2.95
30%
$2.95
2014 2015 2016 2014 2015 2016
8.707.45
5.38
$5.38
28%
(22.4)%
(23,0)
(35,8)
(22,4)
2014 2015 2016
Key Financials
($m) 2015 2016Change
%
Group revenue 88.5 73.8 (16.6)
Loss from operations
before exceptional
items
(10.7) (3.9) 63.6
Exceptional items (64.9) (30.8) 52.5
Loss from operations
after exceptional items(75.6) (34.8) 54.0
Cash from operations 12.8 17.0 32.8
Capital expenditure 8.7 5.6 (35.6)
Realised gas price
($ per Mcf)4.20 2.95 (29.8)
Realised oil price
($ per bbl)49.75 45.94 (7.7)
0
5
10
15
20
25
0
20
40
60
80
100
Vo
lum
e
Pri
ce, G
Bp
Volume Price
2016: Building a Sound Platform for GrowthPositive operating cash flow despite environment
• Operating cash flow in 2016 was $30.0mn vs. $18.0mn in 2015 due to lower costs
• Legal, professional, and restructuring costs increased from $5.2mn in 2015 to $13.0mn in 2016 due to international
arbitration costs ($3.9mn), settling of previously incurred claims against major shareholders ($3.2mn), severance and
redundancy costs ($3.2mn), professional advisory fees related to Board replacement ($0.5mn), and other legal fees
• Other costs include convertible bond repayments and repurchases which increased significantly in 2016
• Upon successful completion of the bond restructuring $16.0 million of bonds are outstanding which will be repaid in
roughly equal installments in 2018-2020
YE 2014 – YE 2016 cash position, $ million
9
25.4 25.9
14.1
18.0
6.2
5.2
6.0
30.0
7.5
13.0
21.5
0.0
10.0
20.0
30.0
40.0
50.0
60.0
31 December2014
Cash fromoperations
CAPEX Legal,professional,restructuring
Financing /other
31 December2015
Cash fromoperations
CAPEX Legal,professional,restructuring
Financing /other
31 December2016
New Board and Executive ManagementEnhancing governance and driving an operational re-set
Name Position Experience
Paul
Ostling
Non-executive Chairman
Independent
Tom
ReedCEO, Executive Director
Russell
HoareCFO, Executive Director
Alan
Bigman
Non-executive Director
Independent
Bernie
Sucher
Non-executive Director
Independent
Vladimir
Tatarchuk
Non-executive Director
Vladimir
RusinovNon-executive Director
RAVEN RUSSIA
10
Science Driven Organizational StructureDarcy’s Law incorporated into the E&P philosophy
𝑞 =𝑘ℎ
𝐺𝜇𝐵𝐽𝐷 ∆𝑝
Field Development Well Construction Production Operations
geological & petro-physical
properties inherent in the rock
– permeability, oil viscosity,
thickness of the oil bearing
zone
𝑘ℎ
𝐺𝜇𝐵∆𝑝𝐽𝐷
Completion –
mathematically the radius of
the well bore in relation to
the oil bearing formation
the pressure differential
between the reservoir & the
well bore at the perforations
Name Position Background
Andrew
Spencer
Head of Field
Development
Planning
Ritchie
Wayland
Exploration
Manager
Robert
GlaserGeologist
Amar
DosanjhGeologist
Nick
De’AthGeologist
Name Position Background
Roman
Galchenko
Completions
Engineer
Micah
Spencer
Petroleum
Engineer
Calvin
Yao
Reservoir
Engineer
Iskander
Diyashev
Reservoir
Engineer
Name Position Background
Mike
Stolte
Operations
Director
Thomas
Rut
Operations
Director
Paul
Wood
Group
Operations
Manager
11
Why Ukraine?Integrated developed European gas market with premium pricing
• 4th largest European producer after Norway,
Netherlands and the UK
• Premium pricing to Europe & US
• Developed pipeline and natural gas infrastructure
• Import dependent EU and Ukraine supports pricing
and fiscal policies
• Ukraine imports 35% of its demand
• Ukraine Government strategic target for energy
independence by 2021
Source: IHS, BP, Naftogaz of Ukraine, Bloomberg
Import dependent Europe’s 4th largest gas producer Europe’s premium pricing underpins supply & imports
Developed infrastructure supports market access Ukraine’s Attractive Natural Gas Market
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2009 2010 2011 2012 2013 2014 2015 2016
Price,$/M
cf
HenryHub NBP Ukraine
0.0
10.0
20.0
30.0
40.0
50.0
60.0
BCF/D
Other UnitedKingdom Netherlands Norway Ukraine TotalConsumptionEurope
DEMAND
IMPORTS
EUROPRODUCTION
12
Ukraine’s Natural Gas Resources Support Growth4Th Largest European supplier with significant scope for growth
13
Ukraine targets energy independence with 27bcm by 2020...Ukraine production stable but down 70% since Soviet peak
Long reserve life of ~3x EU highlights resources… Development scope supports doubling of production
0
5
10
15
20
25
30
35
40
45
50
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
R/PRatio,years
Ukraine Norway EU(WgtAvg)
R/Pratios
Ukraine35yrsNorway16yrs
EU10yrs
Source:BPStatisticalReviewofWorldEnergy 2016.
0
500
1,000
1,500
2,000
2,500
3,000
194
0
195
0
196
0
197
0
197
6
198
0
198
5
199
1
199
3
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
Bcf
7061,348
33,697
150,000+
350,000+
1
10
100
1,000
10,000
100,000
1,000,000
Production 2016 Production R/P25 years
Reserves Conventionalresources
Unconventionalresources
Bcf
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2016 2017 2018 2019 2020
Production,Bcm
Base Brownfields Greenfields
• Dramatic gas sector reforms in 2015-2016
– Gas price unified for all consumers
(residential prices increased 5-6 times to
market rates)
– Legislation passed mandating
implementation of sector unbundling and
restructuring based on EU’s Third Energy
Package which separates generation and
transmission assets
• Energy independence by 2020
– Ukraine still imports 35% of gas consumed
– New gas production plan calls for 40%
increase in production from current levels to
meet expected demand
• Lower royalties critical to achieving this goal
– Initiative to introduce 12% production tax for
new wells widely supported, but failed to
pass in 2016
Ukraine’s Gas Sector ReformsGovernment objective for energy independence by 2020
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2016 2017 2018 2019 2020
Base Brownfields Greenfields
Ukraine’s Official Gas Production Target (Bcf/d)
14
45%29%
18%16%
15%13%12%
10%10%
8%5%4%4%
1%0%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
UkraineCondensateUkraineGas
USRomaniaAlbaniaTurkey
HungaryCroatia
LithuaniaBulgariaSlovakiaIreland
NetherlandsPolandGreece
• Ukraine needs an attractive, simple and
stable tax regime to make outside investors
take serious notice
• Ukraine’s current tax rates are not
competitive internationally
• Greenfield projects are currently not
feasible b/c full-cycle costs exceed
netbacks to producers
• A single 12% royalty rate calculated on the
basis of a transparent European hub price
will make Ukraine an immediate destination
for external investment
Pace of Growth Driven by Gas TaxationKey piece of the puzzle for energy independence by 2020
Royalty rates in Ukraine are significantly higher than peers
Proposal: 12%
Sources: Deloitte, Ministry of Finance of Ukraine, Company analysis
Reducing royalty rates will allow for faster development
15
• JKX’s Ukraine licenses located on the southern edge of the
prolific Dnieper-Donetsk Basin (DDB)
• DDB has already produced over 70 Tcf of gas and retains
significant potential across Carboniferous and Devonian
reservoirs (3000-5000 m depth)
− 35 Tcf recoverable conventional reserves
− 120 Tcf recoverable conventional resources
− 100-400 Tcf unconventional potential
• Production of 7 bcf/d in 1960s before Soviet focus shifted to
West Siberia more than double current production
• Largest fields (e.g. Shebelinka) in terminal decline, but hundreds
of smaller fields and geological prospects remain
− 90% of Ukraine’s current gas production comes from DDB
− Gas 85% of total resources; oil (10%) concentrated in the
north west part of the basin
− Hydrocarbons tend to be high quality (low percentage of
inert gases, no H2S)
Ukraine’s Dnieper-Donets BasinA world class petroleum province
16
JKX Ukraine Reserves & Resources
Source: Company data, DeGolyer & MacNaughton
Elyzavetivske and West Mashivske Licenses‘NovoNik’ Complex of Licenses
Production and Reserves in Ukraine
2016 Production Reserves and resources, mmboe
boepd 1P 2P 3C
Rudenkivske 120 9.5 22.2 381.8
Ignativske 1,364 2.8 3.9 50.1
Elyzavetivske 1,448 1.3 1.7 20.8
Movchanivske 651 0.5 0.6 2.8
Novomykolaivske 396 0.6 0.7 0.1
Zaplavska 0 0 0 1.4
Total 3,979 14.6 29.1 457.0
• Growth focused on
Rudenkivske license
• Protect the base
production with
EGR, EOR,
workovers and
enhancements
• Monitor the market
and seek
opportunities for
further growth
17UKRAINE
Rudenkivske Field PotentialLarge in place gas volumes in thick clastic reservoirs
18
Rudenkivske target horizons
Rudenkivske project summary
UKRAINE
Mid-termFull
Field
Activity
Wells # 24 110
Workovers # 9 -
CAPEX $mn 154 500
EUR mmboe 20.9 60
Year 1 production mboepd 13.4 nm
• Largest hydrocarbon potential with 2.8 tcf in place, up to 600 bcf recoverable volumes and incremental production of up to 24k boepd
• Development began in Soviet period (1970)
with 32 wells drilled with up to 70mmscf/d IP
rates, albeit with very low recovery rates due
to limits of technology
• Full Field Development includes manufacture-
style drilling and multistage fracture of vertical /
deviated wells with scope for 25-50% recovery
rates
• Isolated sand ‘lenses’ to be connected
horizontally and vertically by large fracks
• Activity plan includes 135 wells with
anticipated capex of ~$660mn
Rudenkivske AnaloguesTransferring success to Ukraine
• Williams Fork formation in Piceance Basin in Colorado
close analog for the Rudenkivske field
• The field was discovered in the 1970s but abandoned
due to economics until 1990s as application of multi-
stage fracturing reduced costs
• Learning curve and advances in technology allowed
for 2x increases in recovery
• Cost reduction through adoption of manufacturing-
style approach to drilling and completion essential for
economic development of the field
19
Parameter Rudenkivske, Dnieper
Donets basin
Williams-Fork, Piceance
basin
Utica, Appalachian
basin
Deep Bossier, East
Texas Basin
Lance Pool,
Pinedale/Jonah Field,
Green River Basin
Gas saturation 55-80% 35-55% 40-65% 50-95% 65-75%
Clay Content 10-20% 5-21% 20-40% 10-22% 10-15%
Total Porosity 6-17% 6-8.5% 3-10% 5-14% 6-12%
Permeability >0.1mD <0.1mD 0.0001mD <0.5mD <0.1mD
Pressure (psi) 5600-8900 3000-7000 3100-8600 >10,000 3000-7800
Gross Thickness (metres) 300-800m 600-1000m 50-300m 300-760m 700-1000m+
Depth (metres) 3000-4500m 2000-3500m 600-4000m >5000m 2600-4400m
Average IP rates 10 – 12MMscf/d 1 – 2MMscf/d 5 – 47MMscf/d 2 – 15MMscf/d 6 – 7.5MMscf/d
Average EUR (per well) 4 – 5Bcf 1 – 2Bcf 2.5 – 5Bcf 5 – 7Bcf 4 – 9Bcf
UKRAINE
Sources: Companies’ public data
• Full field development will start around well R104 (Mid-term) and
later graduate towards other areas (Full-field). R104 mid-case and
type well mid-case production profiles and associated well
economics are provided below
• Mid-term development wells are assumed to have higher CAPEX
($5.7mn) which will be reduced to $4.5mn for full-field
development wells with efficiency improvements
• Gas price of $5.7 / mmcf ($200 / mcm), 29% gas royalty rate, and
$2.5 / boe OPEX cost were used for economic evaluation
Rudenkivske EconomicsCompelling returns with investment scale
20
Indicative monthly R 104 area well (Mid-
term) and type well production profiles
(log scale), boepd and cumulative, mboe
Indicative pre-tax economics for mid-term and type
well profiles
UKRAINE
Mid-term Full-field
Production unlocked, EUR15, mboe 687 716
30-day IP, boepd 2,496 551
1-year decline, % -85% -49%
Well cost, $mn 5.7 4.5
NPV10, $mn 6.1 5.2
IRR 234% 51%
P/I 2.0 2.1
Simple payback, months 6 23
Discounted payback, months 7 26
Unit development cost, $ / boe of EUR 8.3 6.3
CAPEX per flowing barrel, $k / boepd 29.0 26.1
Rudenkivske Lessons LearnedComparison between R103 and Future Development
21
• Guar cross-linked will be replaced by HCFR as it is a cleaner fluid and leaves less damaging residue in
the reservoir.
• Large variation in frac parameters witnessed in R103 which can in part be attributed to lack of Dipole
Sonic data which will be recorded in all new wells.
• R103 only targeted the Devonian so could be horizontal. 19R twin will be vertical to enable the
simultaneous fracturing of 3 intervals – Devonian, Tournaisian and V26.
• Vertical wells are likely to be replaced by horizontal wells once the recovery by zone is better understood.
• Fracturing costs significantly less now than when R103 was fractured which dramatically improves the
economics and allows for time to progress along the learning curve prior to the increase in costs.
• New wells to be drilled with Top Drive as opposed to rotary drilling which historically was used. Potential
to dramatically reduce drilling time.
UKRAINE
R103 R19 TwinWell type Horizontal Vertical# of reservoirs 1 3# of fracs 10 8
Fluid type Guar cross-linked Polyacrylamide HCFR
Proppant type 20/40 High Strength 30/50 Lightweightfrac length, m 100-300 100
frac width, mm 10 20Initial production, MMscf/d 2.9 11.1
Total recovery, Bcf 1.1 5.4
22
Rudenkivske FDPField Development Plan Summary
Preparation (2016-2017
Initial development (2017-2018)
Full-field development
(2018+)
• Select wells from existing
well stock for interventions
and fracturing
• Execute well
enhancements
(perforations) to gain
experience working over
old wells, test hypotheses
and gather data
• Approvals, commercial
agreements and of the
preparations for fracturing
legacy wells
• Secure rig and frack fleet
• Continue well workovers and
enhancements
• Design & Test fracture and
completions technology
• Fracture preselected legacy
wells
• Execute contracts for
manufacturing-style, pad-
based development
• Drill initial wells and
implement data acquisition
program
• Delineation and development
drilling (135 wells w. multiple
fracks) using manufacturing-
style approach
• Reservoir management
• G&G studies
UKRAINE
Rudenkivske FDP – Mid-termExisting well stimulation and pad drilling
23
Appraisal well selectionExisting well review, workover and
stimulation
• 30 shut-in and abandoned wells have been reviewed to identify candidates for workover and stimulation
− Up to 9 wells to be worked over and/or fractured (50+ stages total) were identified
− Total mid-term production potential: 10-15 bcf
− ~700 mm well perforations of existing wells provide insight into what may be achieved with up to
100m frac - well NN16 tested at 14 MMcf/d rate (watered out in December) and NN47 tested at
16.9 MMcf/d rate (declined to 11.5 MMcf/d in January 2017).
• This will allow to improve understanding of the field and generate cash flow to support full field
development
• Building on data generated from workovers and stimulation, pad-based development to be launched
with two 12-well pads around wells R104 and R19 (locations are being confirmed)
UKRAINE
• FFD focuses on drilling and multistage fracture of
vertical / deviated wells
• Economies of scale to be achieved via
manufacturing-style drilling and fracking process
• Isolated sand ‘lenses’ to be connected horizontally
and vertically by large fracks
• FFD (including mid-term development):
− Recoverable reserves: up to 500-600 bcf
− Total number of wells: 135
− Total CAPEX ~$650 million
Schematic drilling locations at Rudenkivske field
Rudenkivske FDP – Full Field“North-American style” manufacturing approach
24UKRAINE
Rudenkivske SensitivitiesType well indicative economics sensitivities
25
Effect of 30% change in key value drivers on 5-year single well NPV10, $mn
• Chart below shows effect of 30% change of key value drivers on total single-well NPV10 ($5.2 million in the base case based on
full-field type curve)
• Change in gas price, IP rate, royalty rate, and well cost have the greatest impact
5.2
UKRAINE
-3.2
-2.9
+2.6
+1.3
+.3
+3.2
+2.9
-1.3
-.3
-4.0 -3.0 -2.0 -1.0 +1.0 +2.0 +3.0 +4.0
Gas price - $4.0/$7.4 / mmcf
Rud IP rate - 3.0/5.5 mmcf/d
12% royalty
Rud well cost - $3.2m/$5.9m
Opex - $1.8/$3.3 / boe
Decrease Increase
Ignativske Waterflood EnhancementsWaterflood potential for enhanced oil recovery
26
• Isolated southern carbonate oil block identified
as a target for enhanced oil recovery via
waterflood. The pilot area has 3 wells (IG-124,
IG-126 and IG-138) drilled to date
• Target injection rate is 10,000 bbl/d using two
injection wells (~10x increase from current rate)
• An additional 0.5 – 1.8 mmboe of incremental oil
can be recovered from this isolated block as a
result of successful waterflood campaign
• Additional oil recovery could potentially be
added once analysis on Devonian clastic
reservoir’s waterflood potential is completedTop of structure map of Lower Carboniferous
carbonate reservoir in Ignativske field showing
isolated waterflood pilot area
Ignativske project summary
UKRAINE
Mid-termFull
Field
Activity
Wells # 2 EOR
CAPEX $mn 9
EUR mmboe 1.5
Year 1 production mboepd 0.6
Elyzavetivske Infill ProjectsAccelerating natural gas production from base assets
27
• Production acceleration from producing A-2
reservoir
− The A2 interval is a Lower Permian
carbonate-evaporite deposit. This interval
has both high porosity and high
permeability, and is the primary productive
facies of the A2 reservoir
− The FDP’s objective is to drill and
complete two infill wells (E-308 then E-
305) to accelerate gas production and
increase ultimate gas recovery within
Elyzavetivske
• Appraisal of West Mashivske area of the
license
− West Mashivske area to the West of main
producing area has production potential in
the A carbonates and lower G sands
totaling up to 50 bcf
− A redevelopment of a previously drilled
and producing well to begin appraisal
phase
− Up to 5 wells for FFD
Elyzavetivske project summary
UKRAINE
Mid-termFull
Field
Activity
Wells # up to 5
CAPEX $mn 20.0
EUR mmboe 2.5
Year 1 production mboepd nm
Koshekhablskoye Workovers Support Cash FlowExisting production and well workover potential
• A producing gas field with significant proved reserves
located in Southern Russia (Republic of Adygeya -- East
Kuban Depression)
• Production from Upper Jurassic (Oxfordian) biohermal
carbonates (4,800-5,000 m). Approximately 130 bcf of gas
has been produced from the Oxfordian reservoirs since
onset in 1982 (including about 88 bcf produced before JKX
acquired the field)
• Since JKX acquired the field in 2007, a brand new
production facility with capacity of up to 60 mmscf/d was
installed
• Historically JKX developed Oxfordian gas reserves.
Several well workovers are planned to increase production
from this reservoir in 2017-2018, including workover of
currently non-producing well-5
28
Well-5 workover project summary
RUSSIA
Mid-termFull
Field
Activity
Wells #
Workovers # 1
CAPEX $mn 3.0
EUR mmboe 6.4
Year 1 production mboepd 1.8
Top Oxfordian B Depth Structure Map
Oxfordian Gas Producers
Proposed Callovian well location
Callovian Growth OpportunityUnlocking significant natural gas resources
• Callovian reservoirs, not tapped yet by
existing wells, provide significant
growth opportunity
• Total 2C original gas in place (OGIP)
from all five Callovian reservoirs
estimated to be approximately 630 bcf.
It is estimated that a 2P gas recovery
of 34 to 43 bcf of gas can be obtained
from a single well in the Callovian
reservoirs, over 15 years
• The recommended vertical well
location intersects predicted porous
reservoir within the Lower Callovian
(V), Upper Callovian (I-IV), and
Oxfordian reservoirs. Good well control
and seismic data provided high
confidence that at least one gas target
will be productive
29
Callovian project summary
RUSSIA
Mid-termFull
Field
Activity
Wells # 1 10
Workovers # - -
CAPEX $mn 15 100-125
EUR mmboe 7.2 60
Year 1 production mboepd 4.0 nm
Hajdúnánás IV MP
0.5-1.5 Bcf gas
1-2 MMboe oil
Hajdúnánás V
MP
5-7 Bcf prospect
Tiszavasvári IV MP
20 Bcf appraisal
100-200 Bcf upside
Emőd V MP (Mezo)
1-1.5 MMboe appraisal
5-10 MMboe expl upside
Pély I MP
5-10 Bcf prospect
Jászkisér II MP
4-7 Bcf prospect
• Six mining licenses (100% net) and processing facilities with 18 mmcf/d of capacity
• Production from Hn-2 well restarted after successful sidetrack at an initial rate of 1.8 MMcf/d after a production and sales break of more than three years
• Development planning is underway and future work may include a workover of the existing Hn-1 well to add production from the Lower Pannonian reservoir interval
30
Hungary: Sidetrack Result Highlights Opportunity Recent Hn-2 well returns Hajdunanas field to production
HUNGARY
• Tisza IV: Tight gas appraisal project with very large upside potential
− Tiv- 6 Discovery: 300 meter gas column
− 2% Royalty (unconventional terms)
• Mezo (Emőd V): Shallow (1200-1400m) oil field redevelopment with significant exploration upside
− Apply 3D seismic and EOR to old oil field (10 MMboe in place, 1 MMboe produced, 1-1.5 mmboe remaining recoverable potential)
− 5-10 MMboe of additional recoverable oil from 2 leads on the 100km^2 license
− No royalty for EOR projects
• Haj IV: Shut-in gas field redevelopment with deeper oil appraisal
− Remaining shallow (1000m) gas in the formerly producing Hajdúnánás field (0.5-1 Bcf)
− Miocene oil potential (1.5-3 MMboe) in satellite exploration projects
• Haj V: Additional gas exploration prospect near gas plant
− Will require Tisza IV production facility
31
JKX Projects in HungaryHighlights
LICENCE Phase 1 Phase 2 Full-field
Tiszavasvári IV Farm-out 1 well10-20
wells
Emőd V3D
Farm-out2 wells 5-6 wells
Hajdúnánás IV 1 well 1 well 3-4 wells
Hajdúnánás V 1-2 wells
CAPEX $mn 2.5 – 3.08.0 -
10.0
40.0 -
80.0
HUNGARY
Hungary projects summary
4th Bid Round – Concessions
• Government Bid round 4
International Activity in Hungary
• Six international and two domestic companies control >95% of exploration & production acreage.
• Full spectrum – exploration to field redevelopment (MOL)
JKX Strategy
• Near term appraisal and development
• Field redevelopment
32
Hungary Bid Round Activity Concession rounds to field redevelopment
HUNGARY
• JKX owns 25% non operating working interest
• DiscoveryGeo (Operator) using Magneto Telluric
survey data to calibrate expensive but low
resolution 2D seismic data
• The prospective resource sizes (up to 20 MMboe
OOIP and 30 Bcf IGIP) are material
• Smilno -1 well
– Site under construction, Conductor driven,
well spud expected Dec 2016
– 12 bcfe recoverable resource (mid case)
• Other wells Poruba -1 and Kriva Ol’ka -1 have
estimated EUR of 1.5 MMboe net to JKX
• Delays in permitting and activist environmental
protestors are delaying site construction
Slovakian OperationsProspective resource enhancement through technology
33SLOVAKIA
Appendix
Reserves & Resources (PRMS Basis)DeGolyer & MacNaughton reports
35
Reserves & Resources
Range of Commerciality
Range of Uncertainty
PRMS Category Reserves (Net) Contingent Resources (Net) Prospective Resources
PRMS Classification 1P 2P 3P 1C 2C 3C Low Best High
Proved P Probable P+P Possible P+P+POil & Cond Natural Gas Total Total Oil & Cond Natural Gas Total Total Oil & Cond Natural Gas Total Total Total Total Total
1000 bbl MMcf KBoe KBoe 1000 bbl MMcf KBoe KBoe 1000 bbl MMcf KBoe KBoe KBoe KBoe KBoe
Ignativske 1 082 10 133 2 771 2 771 680 2 789 1 145 3 916 1 361 2 176 1 724 5 639 11 975 17 533 50 097
Movchanivske (Main/North/Wedge) 264 1 266 475 475 65 242 105 580 75 252 117 697 - 1 254 2 760
Novomykolaivske 242 2 176 605 605 60 422 130 735 26 291 75 810 - - 147
Rudenkivske 311 54 989 9 476 9 476 378 73 784 12 675 22 151 718 94 780 16 515 38 666 9 334 101 432 381 766
Zaplavska 0 - - - - - - - - - - - 33 376 1 406
Elyzavetivske 23 7 428 1 261 1 261 6 2 408 407 1 668 27 10 869 1 839 3 507 - 6 204 20 828
UKRAINE 1 922 75 992 14 587 14 587 1 189 79 645 14 463 29 051 2 207 108 368 20 268 49 319 21 342 126 798 457 003
- - -
Koshekhablskoye 413 255 007 42 914 42 914 354 221 941 37 344 80 258 383 236 307 39 768 120 026 24 120 74 772 107 528
- - - - - - - -
- - - - - - - -
RUSSIA 413 255 007 42 914 42 914 354 221 941 37 344 80 258 383 236 307 39 768 120 026 24 120 74 772 107 528
- - -
Hadjunanas (100% WI) - - - - - - - - 13 867 158 158 - - -
Tiszavasvari 6 (100% WI) - - - - - - - - - - - - 235 276 677
HUNGARY - - - - - - - - 13 867 158 158 235 276 677
TOTAL 2 335 330 999 57 502 57 502 1 543 301 586 51 807 109 309 2 603 345 542 60 193 169 502 45 697 201 846 565 208
Source: as per DeGolyer & MacNaughton Report December 31, 2016
Total Petroleum Initially-In-Place (PIIP)
Discovered PIIP Undiscovered PIIP
Commercial Sub-Commercial
Technical, Engineering and Operations Team Global geo-market technical experience applied locally
Name Position Experience Background
Andrew
Spencer
Head of Field
Development
Planning
Over 12 years of experience in well test analysis, production forecasting, classical reservoir engineering and
simulation, nodal analysis, artificial lift design, stimulation, production optimization, workover/well planning, field
development planning and reserves evaluation.
Roman
Galchenko
Completions
Engineer
Completions engineer with 15 years experience in Russia and in the U.S. with Marathon and BP focused on
unconventional developments involving multi-stage fracturing with conventional, slick-water, hybrids and
utilizing sliding-sleeve and plug-and-perf systems.
Mike StolteOperations
Director
34 years management and execution experience. Diversified management knowledge in drilling, subsurface,
completions, production and reservoir engineering. Extensive on-site field supervision in completions,
workovers and operations across 1000s of wells in the U.S. and internationally. Broad unconventional
development and logistics expertise.
Thomas RutOperations
Director
Over 25 years of upstream E&P experience in the U.S. and internationally in major IOC’s and NOC’s in both
onshore and offshore environments. Technical expertise in development planning, production optimization, well
interventions and reservoir management.
Paul WoodGroup Operations
Manager
Following engineering roles with Schlumberger in Europe and Russia, joined JKX Oil & Gas in 1995 initially as
PPC Ukraine Engineering Manager and since 1997 responsible for PPC operations, process and facilities
engineering.
Ritchie
Wayland
Exploration
Manager
Over 35 years of geoscience expertise in West Africa Deepwater, onshore Nigeria, UKCS Gas Basin,
Australia and UK North Sea. Exploration and field development projects in Central and Eastern Europe and
Russia.
Micah
Spencer
Petroleum
Engineer
Petroleum engineer with 7 years experience in design, production and completions engineering experience
from unconventional and conventional reservoirs in Texas, Louisiana, North Dakota, Gulf of Mexico shelf and
internationally in China, Angola and Kazakhstan.
Calvin YaoReservoir
Engineer
Reservoir Engineer with about 25 years of experience in integrated reservoir modelling and simulation,
reservoir performance analysis and prediction, waterflooding and CO2 EOR, field development planning. Calvin
has extensive hands-on experience with conventional, unconventional, deepwater reservoirs.
Robert
GlaserGeologist
Over 10 years of experience in evaluation and drilling carbonate reservoirs in the Permian Basin and offshore
Brazil, clastic fields in the deepwater Gulf of Mexico, Midcontinent, and onshore Gulf Coast, in addition to
unconventional (shale and chert) plays in the Permian, San Joaquin, and Appalachian basins.
Amar
DosanjhGeologist
Technical geoscientist experienced in petroleum systems modeling, geological modelling, seismic and well log
interpretation and regional geological synthesis. Regional basin expertise in the British Isles and Wyoming and
unconventional project work undertaken in the Canning basin, Australia.
Nick De’Ath Geologist
Over 40 years management experience in exploration and development including at BP as Chief Geologist in
the North Sea and General Manager of Colombia. As VP at Triton Energy, developed the multi Tcf gas
reserves in the Malaysia Thailand JDA. Regional expertise as Yukos Chief Reservoir Geologist and subsurface
lead for TNK-BP in Moscow.
Iskander
Diyashev
Reservoir
Engineer
Over 25 years of reservoir engineering experience including reserves evaluation, engineering and
management, FDPs, integration of engineering and geological data and application of geostatistics,
engineering design and production forecasts of horizontal and stimulated wells.
36
Highlights:
• 1994: Poltava Petroleum Company, first oil and gas company with private ownership established in Ukraine
• 1995: successful IPO on the London Stock Exchange
• 2005: Entry into Eastern Europe
• 2007: Entry into Russia
• 2012: Production in Russia launched
• 2015: Six new production licences in Hungary
• 2016: New Board and Senior Management team with mandate to return company to growth and restore shareholder value
• 2016: restart of development with completion of the new Field Development Plan
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
JKX historyOver 20 years of independent E&P experience in Central/Eastern
Europe
JKX production history, 1995-1H2016
37
Eclairs Group
Ltd27.5%
Proxima Capital Group19.9%
Neptune Invest & Finance
Corp13.0%Keyhall
Holding11.4%
Others28.2%
Shareholder Structure
Shareholder Share, % Brief information Shareholding
since
Eclairs Group
Ltd
27.5% The beneficial owners of Eclairs are
Ukrainian businessmen Igor
Kolomoiskiy and Gennady
Bogolyubov which have a wide range
of business interests including the
Privatbank Group (one of Ukraine’s
largest banking groups), ferrous and
non-ferrous metals, media, aviation,
petrochemicals etc.
2007
Proxima Capital
Group
19.9% Proxima Capital Group is an
independent investment firm focusing
on investments in Russia, Ukraine
and the CIS. Proxima Capital Group
offers M&A advice, fund raising and
debt restructuring and also invests in
assets and asset portfolios with a
focus on Russia, Ukraine and CIS
countries that are at an early stage of
development and which will benefit
from effective management and
proven sector experience
2015
Neptune Invest &
Finance Corp
13.0% Neptune, a Moscow-based investment
fund, is beneficially-owned by Turkish
businessman Burak Özdoğan
2015
Keyhall Holding 11.4% The sole beneficial owner of Keyhall is
Mr Oleksandr Ratskevych who is a
partner of Alexander Zhukov (who
owned 11.4% of shares through
Glengary Overseas ltd since 2004)
2016
38