JKX Oil & Gas has endured two major leadership shake-ups in 18 months.
It has also been entangled in an on-going court battle.
Today the turbulent firm reported a 17.3% slide in production year-on-year (8,598 boepd vs 10,393 boped).
Acting chief executive Victor Gladun said: “During the first half of the year, we have started implementing the Field Development Plans, completed Phase 1 of the appraisal program in the Rudenkivske field in Ukraine, completed well 25 workover in Russia and restructured the significant short-term bond liabilities.
“On the Board level, continued disputes between major shareholders and the Board resulted in a change of the Executive Directors for the second time in 18 months. The Board is actively looking for new Executive and Non Executive Directors. I have taken on the role of Acting CEO to secure a smooth transition. Tom Reed acted as Advisor to the Board and Advisor to the Acting CEO and Russell Hoare served as Acting CFO from the date of the Annual General Meeting (“AGM”) on 30 June 2017 until 31 July 2017 to help with the transition. Irrespective of changes in the management team, the Company will continue to seek to mitigate its litigation risks and potential liabilities with the Ukrainian Government, execute on Field Development Plans, and establish opportunities for long-term growth.”
The firm reported a $7.7million loss for the first half of the year. Its total cash balance has slipped from $14.3million as of December 31 to $4.4million.
Outgoings include ongoing legal fees.
A spokesman said: “During 2016, searches were undertaken by the Ukrainian police at the office of PPC and the homes of two of our employees. The searches undertaken were the result of an investigation into claims of alleged underpayment of taxes which have been made against PPC by a local prosecutor. In January 2017 there were further searches at both the Poltava and Kyiv offices of PPC, followed by requests for documentation.
“PPC cooperated fully with the authorities and believes that it is in full legal compliance with the matters outlined in the police requests and that the various searches and requests are completely unjustified. We referred the matter to the British and US Embassies in Kyiv to ask for their assistance in engaging with the relevant authorities to resolve the situation.
“In respect of the Company’s international arbitration against Ukraine to recover production related taxes in Ukraine (‘Rental Fees’) paid by PPC since 2011 and, damages to the business, the tribunal dismissed the main element of the Company’s claim for payment of excessive Rental Fees on 6 February 2017. The tribunal ruled that Ukraine was found not to have violated its treaty obligations in respect of excessive levying of such taxes, but awarded the Company damages of approximately $11.8 million plus interest and costs of $0.3 million in relation to subsidiary claims. In response to this result, the Government of Ukraine submitted an appeal to the UK High Court against the damages award to which the Company has responded. The High Court will consider the appeal in the second half of 2017.
“While disappointed with the overall result of the arbitration, we are confident that the Company will be successful defending the appeal in the High Court. The conclusion of these proceedings presents an opportunity to draw a line under historical legal issues and engage with the Government of Ukraine to settle this award and the local tax issues and return focus to key operational matters. We have commenced this settlement process in earnest, will re-engage with it once the new management team has been appointed, and in the meantime continue to defend our local legal cases. While we are optimistic regarding the outcome of these matters, given the magnitude of the legal provisions recorded in respect of the 2010 and 2015 claims, we have considered the risk to the Group’s ability to continue as a going concern further in Note 2 to the financial information.”
Elsewhere, the firm has started implementing the Field Development Plans, completed Phase 1 of the appraisal program in the Rudenkivske field in Ukraine, completed well 25 workover in Russia and restructured the significant short-term bond liabilities.
The company leader added: “Following significant staff reductions across the Group during 2016, the increased operational activity in Ukraine, Russia and Hungary and the uncertainties over governance and management of the Company in recent weeks, it is a testament to the commitment and resilience of our employees that the Company continues to operate effectively.
“I’d like to thank all of our employees for their continued hard work and faith in the Company.”