Final Results 2013 Maintaining a stable business platform in - PowerPoint PPT Presentation

Final Results 2013 Maintaining a stable business platform in volatile emerging markets 27 March 2014

Disclaimer This presentation contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst JKX believes the expectations reflected herein to be reasonable in light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Group’s control or within the Group’s control where, for example, the Group decides on a change of plan or strategy. The Group undertakes no obligation to revise any such forward-looking statements to reflect any changes in the Group’s expectations or any change in circumstances, events or the Group’s plans and strategy. Accordingly no reliance may be placed on the figures contained in such forward looking statements 2

Agenda Introduction - Paul Davies, Chief Executive Financial Review - Cynthia Dubin, Finance Director Operations Review - Martin Miller, Operations Director Our Markets - Peter Dixon, Commercial Director Summary & Outlook - Paul Davies, Chief Executive 3

Agenda Introduction - Paul Davies, Chief Executive Financial Review - Cynthia Dubin, Finance Director Operations Review - Martin Miller, Operations Director Our Markets - Peter Dixon, Commercial Director Summary & Outlook - Paul Davies, Chief Executive 4

Summary of 2013 Delivering targeted production and building reserves  Average oil and gas production increased by 18% to 9,731 boepd  Recommencement of development drilling in Ukraine in April 2013 following Q1 bond placement  Successful completion of 10-stage multi- frac in Rudenkovskoye field  Elizavetovskoye field development start-up on schedule and on budget  Increased gas production in Russia to plant capacity  Revenue down 10.9% to $180.7m due to interruption in Ukraine drilling programme  Operating profit after exceptionals increased to $9.2m  Earnings per share of 3.78 cents (2012: loss per share 6.59 cents)  Group reserves increased to 94.2 MMboe with a reserves replacement ratio of 112% 5

Agenda Introduction - Paul Davies, Chief Executive Financial Review - Cynthia Dubin, Finance Director Operations Review - Martin Miller, Operations Director Our Markets - Peter Dixon, Commercial Director Summary & Outlook - Paul Davies, Chief Executive 6

Financial highlights 2013 Improved liquidity and fully funded investment programme  Improved liquidity and financial stability from operating cash flow and placement of convertible bond  Revenues driven by Ukrainian gas prices which are expected to rise  Investment programme focused on Ukraine with recommencement of drilling  Fully funded 2014/2015 investment programme 7

Financial summary 2013 Ukraine impacted by interruption of development drilling  Revenue down to $180.7m due to lower Key Financials production in Ukraine, however partially ($m) Y2012 Y2013 Change offset by a significant increase in % revenues from Russia Group revenue 202.9 180.7 (10.9)  Profit from operations of $9.2m due to Profit from operations lower revenues and higher operating before exceptional 51.6 9.2 (82.2) items costs. No DD&A adjustment or significant exploration write-off Exceptional items 45.8 - N/A (pre-tax)  Strong operating cash flow of $74.8m Profit from operations  Capex spend in line with expectations after exceptional 5.8 9.2 58.6 items  Anticipated overall group reduction in realisations as Russia increases its Cash from operations 109.3 74.8 (31.6) contribution to revenue: Capital expenditure 67.3 64.4 (4.3)  Russia: $2.77/Mcf (2012: $2.60/Mcf)  Ukraine $11.96/Mcf (2012: $12.12/Mcf) Realised gas price 10.55 6.73 (36.2) ($ per Mcf) Realised oil price 93.55 92.12 (1.5) ($ per bbl) 8

Group revenue Reduction in Ukrainian revenue offset by increase in Russian revenue  Group revenue declined by 10.9% to $180.7m mainly due to lower production in Ukraine across all three products (oil, gas and LPG) and slightly lower realisations of gas, oil and LPG  However Russian production and resulting sales volumes from our Russian field dominated our product mix in 2013 and meaningfully contributed to revenues  Management of capex in 2012 resulted in a hiatus in our continuous drilling programme required to maintain our production levels in Ukraine. However, now we have funds to advance our investment programme and opportunity to improve production Group revenue ($m) 250.0 202.9 200.0 23.7 180.7 (14.8) (20.6) 150.0 (4.7) (5.8) 100.0 50.0 0.0 9 Y2012 Ukraine oil price and Ukraine gas price and Ukraine LPG price and Hungary oil/gas price Russia sales Y2013 volume effect volume effect volume effect and volume effect

Profit from operations Impacted by production volumes and Russian plant becoming operational  Profit affected by $22.2m decrease in revenues mainly due to reduced production in Ukraine however this was partially offset by an increase in revenues in Russia  In 2012 exceptional DD&A charge of $30.7m relating to accelerated depreciation on Ukrainian assets; no exceptional DD&A occurred in 2013  In 2012 impairment provision for oil and gas assets in Hungary of $15.1m; no impairment charge in 2013  Group operating costs increased due to inclusion of full period Russian plant operating costs and Ukrainian sales from inventory and gas purchases  Production based taxes reduced by 11.7% to $41.8m 60.0 51.6 Profit from operations ($m) 50.0 40.0 30.0 20.0 9.2 10.0 5.6 5.8 3.4 0.0 (3.4) (2.0) -10.0 (15.1) -20.0 (22.2) (23.8) -30.0 (30.7) -40.0 Profit from Exceptional item Exceptional item Profit from Sales Operating costs DD&A Administrative Production Write off's Y2013 operations - DD&A in - impairment in operations (after expenses and based taxes (before Ukraine Hungary exceptional foreign exceptional items) Y2012 exchange items) Y2012 10 2013 2012

Profit for the year Impacted by operations and reduced taxation charge  Full year administration expenses in Russia offset by lower foreign exchange loss  $2m charge for the fair value movement on derivative liability is associated with the convertible bond since its completion on 19 February 2013  Finance costs reduced by 23.4% to $3.6m (2012: $4.7m) which was partially offset by lower finance income resulting in net improvement of $1m  Taxation charge reduced by $25.2m, excluding the tax effects on the exceptional items, due to lower profitability, a reduced rate of corporation tax applicable in Ukraine and a deferred tax credit of $15m as a result of an increase in our Russian deferred tax asset 30.0 24.7 Profit after tax for the year ($m) 25.2 20.0 10.0 6.5 1.0 0.0 (2.0) (2.0) -10.0 (11.3) -20.0 (18.2) (22.2) -30.0 (36.0) -40.0 Profit after tax Exceptional Loss after tax Sales Operating costs, Administrative Fair value loss Net finance Reduction in the Profit after tax (before items, net of tax (after DD&A, expenses and on the derivative charges taxation charge Y2013 exceptional exceptional production foreign items) Y2012 items) Y2012 based taxes and exchange writeoffs 11 2013 2012

Capital expenditure Majority of investment in Ukraine  Focus returned to Ukraine  Capex programme fully covered by operating cashflow  Capex spend of $64.4m in line with expectations both in Ukraine and Russia  Investment in Ukraine accounted for 64.8% ($41.7m) of the total capex in 2013 in line with strategy of focusing on Ukraine  Ukrainian capital investments included:  Completion of multi-stage frac  Drilling of Elizavetovskoye well and completion of processing facilities  Capex of $20.2m in Russia to increase plant capacity 12

Movement in cash and undrawn credit facilities Stronger liquidity position  Cash generated from operations is $74.8m  Net cash financing inflow of the $37.8m from proceeds of bond placement  Significant improvement in cash and undrawn credit facilities of $40.7m at 31 December 2013  Fully funded capex programme for 2014/15  Russian production expected to be affected by tubing replacement in short- term although financial impact is limited Movement in cash and undrawn credit facilities ($m) 100.0 74.8 80.0 60.0 40.7 37.8 40.0 15.0 12.0 20.0 0.0 (2.5) (4.0) -20.0 (15.0) (15.9) -40.0 -60.0 (61.5) -80.0 31 December Cash from Income tax Purchase of Repayment of Credit Agricole Funds Purchase of Other 31 December 2012 operations paid property, plant borrowings faciltiy received from employee trust 2013 and equipment extension borrowings shares (net of costs) 13

Agenda Introduction - Paul Davies, Chief Executive Financial Review - Cynthia Dubin, Finance Director Operations Review - Martin Miller, Operations Director Our Markets - Peter Dixon, Commercial Director Summary & Outlook - Paul Davies, Chief Executive 14

Operational review 2013 Ongoing development, appraisal and exploration 15