JKX on the verge

Chief executive Paul Davies comments that the facility has been completed and just the operating permit now remains outstanding. This should be merely a matter of procedure, albeit one that involves considerable paperwork. Nevertheless, JKX signed a gas sales contract earlier this month and Mr Davies expects Russian gas prices to rise by around 15 per cent per year compound over the remainder of the decade.

While Koshekhablskoye is a large project that should in time evolve into JKX's largest earner, the Ukraine operations remain the group's engine for the time being. Ukraine generated high margins in the year, helped by the start up of liquefied petroleum gas production, and this helped JKX absorb the $61.7m (£38.9m) increase in Ukrainian production tax. The group also enjoyed two exploration successes in Ukraine, but downgraded its 2P reserves there due to disappointing results from recompletions, according to analysts at FirstEnergy Capital.

Mr Davies is confident that ongoing strong cash flow from Ukraine combined with reduced capital spending in Russia will maintain the current cash position. Prior to these results, broker N+1 Brewin was forecasting 2012 EPS of 63.9¢.