Friday, 15 February 2013

JKX Oil & Gas


Buy: 62.5p Target 80p

JKX Oils is a FTSE 250 listed Production and Exploration company's principle assets in Ukraine, Russia and Central Europe with there portfolio now extends to 14 assets with activities spanning the full-cycle E&P value chain from exploration, appraisal and development through to production.

The company has a share price of 62.5p with a marketcap around £107m we have to look closely at the story here and the reason for its recent decline. JKX oil & gas seem to have been struggling to tread water between 69p-78p for a number of weeks.
After technical setbacks in Russia and failure to meet forecast and expectation with production contacting 11.8% overall from Oct 2011 - Oct 2012 the company slipped from 180p in the early part of February 2012 down to 55p low February 2013.

The value here is broadly based around technicals and fundamental perspective's via the usual layman format I convey. '' As I flick through the Maverick Journal of 84' we look at the assets JKX hold ''

Shares in issue 171.67mill
Net Tangible Asset Value 181.1p
Net Asset Value 189.92p
Price Earnings around 2.8
Price to Tangible Book 0.37 (One of, if not, the lowest on FTSE)
Bloomberg Median Estimate Target Price 137.50p (Upside +110%)

Cash at last accounts release £6.5m but with recent fund raising (£25m via bonds priced @ 87.425p),
Revenues from last full year £150m with profit before tax circa £50m
Fore casted £135mil revenue to end 2012 with Pre Tax profit £38.7m
At interim stage Revenues £65m with pre tax loss £400k

The slack start to 2013 should see a taut move in there developments with the company announcing successful placing of convertible bonds at 87p raising $40m.

Last director Buy: Cynthia Dublin 40,000 at 80p Oct.2012

We also have the company announcing Elizavetovskoye reserve upgrade,Rudenkovskoye Multi-Stage Frac Update where CEO Paul Davis says '' This is one of the most important projects in the JKX portfolio and has the potential to kick-off the full-scale development of our largest licence in Ukraine''. Also the update of the upgrade equipment in transit to PPC demonstrates further potential increase in product streams from Novo-Nikolaevskoye plant.

For the more rough backed riders of the stock market I'll put it this way,The company has assets valued much higher than the current SP coupled with a decent cash position and a recovering production and revenue stream which is becoming buoyant once again. For a TA point the company have retracted to 55p and were well oversold, Currently we have a company caught in a negative vacuum based around activities that are being remedied and for this reason i suggest a position at the current level will reward the investors is as stated.

Chief Executive, Dr Paul Davies, called operating results for the first half of the year 'solid' with strong gas and LPG realisations in Ukraine offsetting the shortfall in Russian production and associated revenues. "We anticipate the modest decline in production levels in Ukraine through year-end being more than offset by a rising contribution to group production from Russia,"

I see some resistance at low 70's with a tidy leg back up to the relative price of 80p consoling shareholders and reigniting investor confidence.

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