Preliminary Results Presentation 28 March 2012
Agenda Paul Davies Chief Executive Introduction Cynthia Dubin Finance Director Financial Review Martin Miller Technical Director Operational Review Peter Dixon Commercial Director Market Overview Paul Davies Chief Executive Summary & Outlook 2
Paul Davies Chief Executive Officer 3
Introduction Key milestones � Successfully entered independent gas market in Southern Russia � Record revenue of $237m in reporting period � Ukraine continues to generate strong cash flow and more than $1.4bn of cumulative revenues to $1.4bn of cumulative revenues to date � Reserves increased to more than 90MMboe � Uniquely placed to take advantage of growth opportunities in existing markets 4
Cynthia Dubin Finance Director 5
Financial Highlights Record revenue and strong operating profits � Revenue up by 23% to a Key Figures record $236.9m � Strong operating profit given ($m) Y2010 Y2011 Change % 12% production decline and absorption of rise in Production (boepd) 10,324 9,045 -12% production tax by $61.9m Group Revenue 192.9 236.9 +23% � � Capital intensive year with Capital intensive year with focus on Russian project Operating Profit* 95.0 82.1 -14% � Year end cash of $28.9m - Board recommends to Effective all-in tax rate 29.6% 59.1% +100% forego final dividend Cash from Operations 146.3 124.2 -15% Capex 178.5 162.0 -9% Realised gas price ($ per Mcf) 7.59 9.74 +28% Realised oil price ($ per bbl) 69.15 98.27 +42% 6 * 2010 excludes exceptional items
Group Revenue Record revenue � Revenue rose by 23% to a record $236.9m � Benefit from high international oil and gas prices � New LPG plant makes positive contribution � Gas now represents 75% of total production volume � Positive price movements more than offset production decline of 12% Sales $m 250 240 10.9 230 4.2 220 33.3 210 4.0 200 190 236.9 180 192.9 170 160 150 Y2010 Ukraine oil price and Ukraine gas price and Ukraine LPG Other Y2011 volume effect volume effect 7
Profit from Operations before Exceptionals Strong operating profits given production tax rise � Small reduction in operating Profit from Operations (before exceptionals) profit compared to tax $m 120.0 increase � 95.0 Production tax, mainly in 100.0 82.1 Ukraine, increased from 80.0 $5.2m to $67.1m 60.0 � � Underlying operating costs Underlying operating costs 44.0 40.0 remained constant � Continued focus on cost 20.0 3.1 control during capital 1.1 0.8 - intensive period -20.0 -40.0 -60.0 -61.9 -80.0 Y2010 Sales Royalty and Exchange Movement Change in Y2011 increase rental fee effect in costs impairment impact provision 8
Tax Absorbed material rise in production tax � Effective all-in tax rate of 59.1% has been driven by the rise in production tax in Ukraine moving from $5.2m in 2010 to $67.1m in 2011 � Oil based production tax rate has decreased 30% for 2012. This would have reduced the 2011 effective all-in tax rate to 53.1% 2010 2011 $m $m Profit before tax Profit before tax 20.8 20.8 82.1 82.1 Add: Production based taxes 5.2 67.1 Add: Non recurring 81.3 5.9 107.3 155.1 Adjusted profit before tax Taxation (0.4) 22.9 Add: Production based taxes 5.2 67.1 26.9 1.6 Add: Tax effect of non-recurring items 31.7 91.6 Adjusted taxation charge Effective tax rate (%) (1.8%) 27.9% Effective all-in tax rate (%) 29.6% 59.1% 9
Capital Expenditure Focus on bringing Russian project on stream � Y2010 Capital intensive year with $m $178.5m additions of $162.0m 9.8 56.1 � 4.8 Focus on completion of Russian project � Investment in LPG facility in Ukraine yielding better 107.8 returns than expected returns than expected � Drilling and exploration activity in Hungary, Slovakia $m Y2011 and Bulgaria only partially $162.0m 12.4 successful 4.8 41.4 Russia Ukraine 103.4 Hungary Rest of world 10
Movement in Cash and Cash Equivalents Reaping rewards of past investments � Ukrainian subsidiary continues to generate substantial cash from operations � Excluding the Ukrainian production tax rise, cash generated from operations would have been $185.9m, a 27% increase over 2010 $m 150.0 124.2 100.0 62.0 62.0 39.5 50.0 28.9 - -2.0 -7.2 -12.8 -22.7 -50.0 -100.0 -150.0 -152.1 -200.0 Y2010 Cash from Net interest Tax paid Exploration capital Development Funds received Dividends paid Y2011 operations paid/received & spend capital spend & from Credit Suisse Including Foreign exchange Final payment for borrowing & restricted cash movement Russian acquisition Repayment of borrowings 11
Martin Miller Technical Director 12
JKX Oil & Gas plc Operations map Ukraine Slovakia Hungary Southern Russia Bulgaria 13
Operations Highlights Focus on Russia, progress in Ukraine � Completion of the Koshekhablskoye gas processing facility in Russia � Embarking on Phase II at Koshekhablskoye to enable production to double from booked reserves � Group net reserves growth adds 8 MMboe before production � Addition of LPG production plant in Ukraine increasing value of gas by approx 7% � Drilling of two successful exploration wells in the Molchanovskoye “Wedge Zone” and the Zaplavskoye exploration licence � Completion of design and tender process for the R-103 multistage frac planned for 2012 14
Russia Koshekhablskoye Phase I complete Milestones � Commissioned plant utilities and gas processing facility (GPF) � Completion and tie-back to the plant of 3 Oxfordian production wells Forward Programme Forward Programme � Evaluating Phase II Oxfordian production acceleration � Workover of 2 Callovian appraisal wells – in progress � Evaluating potential Phase III Callovian development � Preparing for forthcoming exploration licence auctions in Adygea 15
Ukraine LPG plant delivered on time and on budget Milestones � Construction, installation and commissioning of LPG plant in 1H2011 on time and on budget � Averaged 61 tpd during 2H2011 enhancing gas stream revenue � M-170 “Wedge Zone” well finds gas in deeper Devonian reservoir � Z-04 in Zaplavskoye licence extension proves gas in V24/25 sandstone reservoir Forward Programme � R-103 multistage frac design complete and tenders in from major contractors � Project team to include experienced North American expertise 16
Hungary – Slovakia – Bulgaria Key Slovakia well due in 4Q 2012 Milestones � Turkeve Ny-7 discovery to be put into production despite high CO 2 content � Otherwise disappointing results from Hungary exploration � � Relinquished Golitza licences in Relinquished Golitza licences in Bulgaria Slovakia Forward Programme Hungary � Tiszavasvari-6 discovery to be appraised in 2H 2012 � 4Q2012 drilling of Cierne-01 well in Svidnik licence, Slovakia Bulgaria � Evaluation of seismic in Provadia licence, Bulgaria 17
P+P Reserves Increases due to well productivity in Russia � Russian reserves up by 98 Bcf to 365 Bcf due to improved well performance � Molchanovskoye Main potential unrealised, reduced from 41 Bcf to 5 Bcf � Novo-Nikolaevskoye reserves mapped and appraised, plus 12 Bcf and 0.2 MMbbl � Hadjunanas gas reserves reduced due to water breakthrough, not compensated for by Turkeve additions or potential for additional Hadjunanas oil reserves oil reserves Remaining total reserves as at 31 December 2011 Oil MMbbl Gas Bcf Oil & Gas MMboe TOTAL 3.3 524.1 90.7 UKRAINE 2.6 155.3 28.5 RUSSIA 0.4 364.8 61.2 HUNGARY 0.3 4.0 1.0 18
Peter Dixon Commercial Director 19
Gas Prices Ukraine high and Russia rising � Gas production now 75% of our total production volume and is increasing � Demand forecasts for Europe remain strong amidst declining indigenous production � US experiencing an unexpected collapse in Hub prices – but a correction is inevitable � Early mover in growing Ukrainian market � � Political drive in Russia for gas price growth - currently 15% per annum Political drive in Russia for gas price growth - currently 15% per annum Historical and future gas prices – Ukraine, Russia, US and Europe 20.00 15.00 $/Mcf 10.00 5.00 - 2002 2007 2012 F/cast 2017 F/cast Ukraine gas realisations ($ per Mcf) Russia gas realisations ($ per Mcf) European gas price ($ per Mcf) Henry Hub ($ per Mcf) Source: JKX Analysis 20
Yamal Peninsula “The edge of the world” Yamal 21
Russian Gas Supply/Demand The role of independents � Historical Gazprom fields bcm now all in decline 1000 Nadym-Pur-Taz Ob and Taz Yamal onshore Yamal offshore New developments � To replace lost production, 900 Gazprom is investing into development of Yamal 800 peninsula 700 � � Resulting increase in Resulting increase in production cost will continue 600 to drive gas prices in Russia 500 � Emergence of major new independent producers of 400 gas, JKX being one of them 300 200 100 0 2010 2020 2030 Source: General Scheme, Ministry of Energy Russian Federation 22
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