JKX Oil & Gas has highlighted potential liabilities of $41 million from its Ukrainian operation as the company’s management seeks to restore investor confidence by offering more information about its operations.
The company, which has been hit by the falling oil price and political tension between Ukraine and Russia, replaced its board last month as it bids to restore investor confidence.
The liabilities relate to JKX’s three cases against the government in Kiev over allegations that it was overcharged in production taxes for certain periods since 2007.
The company said in a statement: “We are making this announcement in the spirit of a new and transparent approach to actively engage all shareholders and other stakeholders of the company.”
New chief executie Tom Reed, said: “”We have also found several areas of legacy risk which we feel are necessary for owners to understand in more detail to properly assess their investment in this company.
He added: “We are confident in our ability to manage these risks, but we felt that shareholders should be aware of their nature and scope.”
JKX’s entire board quit last month after Proxima Capital Group, its second-largest shareholder, said the erstwhile board’s failure to manage the business well had led to a “destruction of value”. One of its nominees said that relations with key stakeholders had been “irreparably” damaged.
JKX shares are worth less than 5 percent of their May 2008 peak. The company has a market value of about £37million.
Reed said he would not bother with JKX’s stock price for at least a year and instead focus on building up production.
The board said in statement it would consider all its options, including monetising on an asset.
JKX on Monday said it had produced 10,533 barrels of oil equivalent per day in January, warning production levels would decline if it was unable to restart its development programme, which ceased last year.
Reed said: “We have identified significant scope for improvement in capital investments, and we found areas to realize both cost savings and production gains through the application of best in class technology and more hands-on execution throughout the portfolio.
“As we execute on these opportunities, we expect to deliver significant improvements to the value of JKX.
JKX added it is in the process of appointing two independent non-executive directors and hopes to make announcements on this in the near future.
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