Jkx Oil & Gas Interim Results

Date : 08/29/2008 @ 2:02AM
Source : UK Regulatory (RNS and others)
Stock : Jkx Oil & Gas Plc (JKX)
Quote : 129.75  -2.75 (-2.08%) @ 11:35AM
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Jkx Oil & Gas Interim Results

    RNS Number : 2679C
  JKX Oil & Gas PLC
  29 August 2008
   


    FOR IMMEDIATE RELEASE                                                                     
     29 AUGUST 2008                
    JKX Oil & Gas plc

    INTERIM RESULTS
     FOR 
    THE SIX MONTHS ENDED 30 JUNE 2008

    Financial Highlights

                                                                        2008                
2007           % Increase

    Revenue                                                                   $116.8m         
  $84.7m             38%

    Operating profit                                                         $82.2m           
  $53.5m             54%
                
    Cash generated from operations                                 $95.4m              $68.8m 
           39%
    before changes in working capital

    Earnings per share (basic)                                         39.43 cents       
24.40 cents       62%
        
    Interim dividend    declared (per share)                        2.2p                  
2.0p                  10%

    Strategic Highlights

    *     An 11 million barrels of oil equivalent increase to Proved plus Probable reserves
    *     Good progress achieved towards completing the Soyuz pipeline tie-in 
    *     Progress with the Koshekhablskoye development project in Russia
    *     Gas discovery in Hungary with Hajdás -1 exploration well
    *     Continued development of the Company's exploration portfolio

    JKX Chief Executive, Dr Paul Davies, said: "We are pleased to report another set of robust
results and to delivering good operational
progress across our licence areas. In addition to making significant advancements within our
core production and development hubs of Ukraine
and Russia, the Company is delighted with its exploration success in Hungary and looks forward
to further progress with the project. We will
continue to focus on developing our Ukrainian and Russian operations whilst prudently
expanding our exploration portfolio in central and
Eastern Europe. We look forward to building upon our progress to date."

    ENDS

    For further information please contact: 
 Sofia Rehman / Anthony Cardew / Matthew Law  Cardew Group  020 7930 0777

    Chairman's statement

    I am pleased to report that the Company has delivered strong financial growth in the first
half of the year, resulting primarily from
increased realisations for its oil and condensate production and further improvement in
realisations for gas sold in Ukraine. Good progress
has also been made on the Company's development and exploration programmes. 

    Major financial highlights for the period include:

    * 38% increase in revenue to $116.8m ($84.7m)
    * 54% rise in operating profit to $82.2m ($53.5m)
    *     39% increase in operating cash flow before changes in working capital to $95.4m
($68.8m) 
    *     62% increase in earnings per share to 39.43 cents (24.40 cents)
    *     10% increase in the interim dividend declared to 2.2p per share (2p per share)
    Production and Realisations

    Average production in the first half of the year reduced by approximately 10% to 11,607
boepd (13,008 boepd), due to the natural decline
in oil production in the period coupled with the continued delivery limitation on the volume
of gas that can be exported from our Poltava
production facility. Current production is in excess of 12,000 boepd.

    Average realisations for oil have risen by 77% to $90.45/bbl ($51.22/bbl), reflecting the
strong growth in international oil prices
during the period. Average realisations for gas rose by 38% to $5.40/Mscf ($3.90/Mscf) and
have tracked the increased pricing of gas
imported into Ukraine from Russia. We anticipate continued upward pressure on gas realisations
through the second half of the year, leading
to a further upward movement at the beginning of 2009.

    Reserves  

    Independent reservoir consultants have been re-evaluating the reserves on the Company's
Poltava licences. These are now divided into
five main field areas: Ignatovskoye, Novo-Nikolaevskoye, Molchanovskoye North, Molchanovskoye
Main and Rudenkovskoye respectively. 
    Revised reserve estimates are now available for three of the five field areas, namely
Ignatovskoye, Novo-Nikolaevskoye and
Molchanovskoye North. The Proved plus Probable (P+P) reserves for these areas at the 30th June
2008 are: Ignatovskoye - 9.06 MMboe;
Novo-Nikolaevskoye - 0.30 MMboe; and Molchanovskoye North - 6.97 MMboe. These revised
estimates give an increase of 11 million boe to
earlier P+P reserve estimates. The development plans associated with the revised reserve
estimates have a contributory effect to the
increase in the depreciation, depletion and amortisation rate in the period. This is further
described in the financial review. 

    Detailed Reserve Revisions
                  Ignatovskoye        Novo-Nikolaevskoye     Molchanovskoye North
               Oil    Gas   Oil+Gas   Oil    Gas   Oil+Gas   Oil    Gas    Oil+Gas
              MMbbl   Bcf    MMboe   MMbbl   Bcf    MMboe   MMbbl   Bcf     MMboe
   Proved     2.163  33.32   7.716   0.017  0.178   0.046   1.949  19.673   5.228
  Probable    0.247  6.59    1.346   0.169  0.506   0.253   0.726  6.105    1.744
 Prov + Prob  2.410  39.91   9.062   0.185  0.684   0.299   2.675  25.778   6.971

    Work is ongoing in the Molchanovskoye Main field area where the results of workovers and
re-completions over the next period will be
critical in determining the level of remaining reserves in an area where the Company has had a
wide range of productivity from wells drilled
to date. The remaining P+P booked reserves from this area are 10.6 MMboe and an absence of
improved production rates in the coming periods
may reduce this figure. Revised reserve estimates for this area will be available in 2009.

    In the Rudenkovskoye Field, where the current remaining P+P booked reserves are 21.6
MMboe, relatively little drilling work has been
performed to date and potential well performance (and therefore economic reserves) can only be
determined following the implementation of
the results of the upcoming fracture stimulation programme. Revised reserve estimates for this
area are expected to be available in 2010.

    In Russia, the Koshekhablskoye reserves are unchanged from the P+P figure of 36.50 MMboe
at the date of acquisition.
    Group Reserves as at 30th June 2008
                       Total                  Ukraine               Russia
               Oil+Gas   Oil    Gas     Oil        Gas         Oil       Gas
                MMboe   MMbbl  MMboe   MMbbl   Bcf    MMboe   MMbbl   Bcf   MMboe
 1 Jan 2008     76.2     4.6    71.6    4.1   214.0    35.6    0.5   216.0  36.0
 - Revisions    11.0     6.4    4.6     6.4    27.1    4.6      -      -      -
 - Production   (2.1)   (0.8)  (1.3)   (0.8)  (7.7)   (1.3)     -      -      -
 30 June 2008   85.1    10.2    74.9    9.7   233.4    38.9    0.5   216.0  36.0

    Operations 

    Ukraine
    In the first half of the year, Poltava Petroleum Company ("PPC") has drilled and/or
completed four development wells and two appraisal
wells in the Poltava licences: 
    *     Appraisal Well I133 was drilled at the northern end of a structure to the west of
the Ignatovskoye Field and brought on-stream in
January at a flow rate of 3.7 MMcfd of gas and 560 bpd of condensate from the Tournasian
sandstone.
    *     Development Well M159 was drilled in the northern area of the Molchanovskoye Field
and brought on-stream in February at a flow
rate of 1.4 MMcfd of gas and 100 bpd of condensate from the Tournasian carbonate; subsequent
acid treatment increased this rate to 7.0 MMcfd
of gas and 400 bpd of condensate.
    *     Horizontal Development Well M164 was drilled in the northern area of the
Molchanovskoye Field and brought on-stream in May at a
flow rate of 7.4 MMcfd of gas and 1,200 bpd of condensate from the Devonian sandstone.
    *     Infill Development Well M163 was drilled in the northern area of the Molchanovskoye
Field and brought on-stream in July at a flow
rate of 11.5 MMcfd of gas and 1,200 bpd of condensate from the Tournasian carbonate.
    *     Development Well I136 was drilled on the north flank of the Ignatovskoye Field and
failed to produce oil from the depleted
lowermost carbonate section. It will be recompleted in the overlying gas-bearing Tournasian
reservoir. 
    *     Appraisal Well I134 was drilled to the west of the Ignatovskoye Field and tested
water from the lowermost Tournasian sandstone. It
is awaiting recompletion, stimulation and testing of the overlying gas-bearing Tournasian
carbonate. 
    Since the end of the reporting period, development well M165 was drilled in the northern
area of the Molchanovskoye Field and is being
completed in the Tournasian carbonate. 

    The Skytop rig is currently drilling exploration well Z3 located to the west of the
Molchanovskoye Field on the 95 sq km Zaplavskoye
licence. The rig will then move to the next location on the Zaplavskoye licence to drill
exploration well Z2 located to the south of the
Molchanovskoye field. The rig is scheduled to continue drilling activity in the licence areas
through the remainder of 2008 and 2009. 

    A new workover rig was purchased and commenced operations in late May with a full
programme of well repairs and re-completions planned
for the remainder of the year. Currently it is re-completing Well I33 as a Tournasian
carbonate producer.

    The hydraulic fracture stimulation test programme for the producing wells on the
Rudenkovskoye Field is on schedule to commence at the
end of the third quarter. The aim of the programme is to identify a preferred stimulation
technique to be employed for the full development
of the field. At the same time, an acid fracture stimulation programme is being prepared to
enhance production from the Tournasian carbonate
in areas where the natural fracture system is less developed.

    The project to tie-in the PPC production facility to the 56 inch Soyuz pipeline is
on-schedule to be completed in the third quarter of
the year. All equipment has now been delivered to site and tie-in work is well advanced.
Commissioning and final regulatory approvals are
expected in September.
    The 42 sq km 3D seismic programme on the Chervonoyarske East exploration licence has been
completed and processing is underway. 

    Russia
    Yuzhgasenergie ("YGE"), JKX's wholly owned subsidiary, is redeveloping the Koshekhablskoye
Field in the southern Russian Republic of
Adygea which was acquired in late 2007. 

    As reported in May, detailed inspection of the existing gas processing facilities at the
field has dictated their complete replacement
rather than an extensive refurbishment programme. Design work for the new plant is progressing
and orders have been placed for a number of
the long lead items. The requirement for procurement of additional new equipment and attendant
regulatory approvals will delay YGE's target
for commercial gas delivery beyond the year-end. 

    The site for the gas processing facilities has been cleared, the site office refurbished,
a materials store established and
accommodation for the rig crews installed. Land for a 70 man field camp has been acquired, the
camp buildings have been delivered,
connection of utilities is in progress and camp construction is about to commence.

    YGE has scheduled a ten well workover programme for the Oxfordian reservoir and the Kremco
900 rig has completed its mobilisation from
Poltava, Ukraine. The first two drilling pads have been prepared and a third is about to
commence construction. The rig is now on-site and
will commence workover operations imminently.

    A coiled tubing unit has been contracted from Poland and is due on the field at the end of
September. The unit will provide stimulation
and production testing of the existing wells as soon as they have been rehabilitated and
recompleted. YGE expects to start production
testing of the first well at the beginning of the fourth quarter.

    YGE completed the 105 sq km 3D seismic programme over the Koshekhablskoye Field on
schedule. Processing of data is complete and
interpretation is in progress with the objective of selecting a target in the third quarter
for the deeper Callovian reservoir exploration
well. More detailed evaluation of the overlying Oxfordian carbonate reservoir features will
follow in the fourth quarter. The Callovian
exploration well will be over 6,000 metres deep and bids are currently being received from
potential drilling contractors with a view to
commence drilling at the end of the year. 

    Hungary
    In December 2007, the Company farmed into the Hern I & Hern II exploration licences (JKX:
50%) which cover 5,420 sq km in the Pannonian
Basin of north eastern Hungary.  The 350 sq km 3D seismic dataset acquired in the Polgar
region has been interpreted and several prospects
have been mapped.  

    The first exploration well, Hajdás -1, was spudded in May and reached a total depth of
1,166m. The well encountered three productive gas
bearing intervals, two in Miocene Pannonian sands and one in a Miocene volcaniclastic
sequence. The upper zone of Miocene sand flowed at 3.8
MMcfd through a 10mm choke, the lower zone of Miocene sand flowed 3.9 MMcfd through a 10mm
choke, and the Miocene volcaniclastic section
tested at 5.9 MMcfd through a 12mm choke. The well has now been completed as a potential
future producer.  Gas quality from all three zones
is excellent. The well did not reach one further objective in a deeper Miocene formation and
additional wells are planned to test this and
other targets within the area.  The next well is expected to spud in the fourth quarter and
acquisition of an extension to the Polgar 3D
seismic dataset is also planned for the same period.

    Bulgaria 

    The Company operates the B Golitza and B1 Golitza exploration permits (JKX: 50%) which
cover a total of 3,499 sq.km, onshore Bulgaria.
During the period, a 250 sq km 3D seismic acquisition project was commissioned across the
Kamchia Tertiary Basin on the eastern part of the
permits. This area contains numerous gas discoveries in stratigraphic traps containing
reservoirs of Eocene and Oligocene age. The seismic
acquisition is scheduled to be completed by the end of the fourth quarter, leading potentially
to exploration drilling in 2009. 

    In July, Gold Point Energy Corporation signed a letter of intent to farm in for a 20%
working interest in the eastern portion of the
permits in exchange for funding $5 million of exploration expenditures.  

    Turkey
    The Company is participating in the three Karakalise onshore exploration licences (JKX:
30%), covering a total of 1,230 sq.km in
south-eastern Turkey. Following the acquisition of additional seismic data in 2007 and a
reinterpretation of the legacy seismic database
over the area, the Hakan Yilmaz -1 exploration well was spudded in April.  The well
encountered oil shows in the targeted Mardin Formation
but failed to flow hydrocarbons on a DST test.  The well has now been plugged and abandoned.

    In January, the Company farmed into two onshore exploration licences in the South East
Bismil area of south east Turkey (JKX: 20%).
These two licences cover a total of 590 sq. km south of the giant Bati Raman oilfield.  In
late 2007, a total of 105 km of 2D seismic data
was acquired over the area of the 2006 Koyunlu -1 discovery well and a location was
established for the Koyunlu -2 appraisal well.  

    The well was spudded in February and encountered the targeted Gharzan Formation 70m higher
than in Koyunlu-1. Although oil shows were
recorded whilst drilling, the well flowed water on a DST test and was subsequently plugged and
abandoned.

    It is now intended to evaluate the potential of the Palaeozoic Bedinan Formation in both
the Karakilise and South East Bismil areas in
light of the success of an exploration well on adjacent acreage which has recently yielded
commercial production from this deeper horizon.

    Slovakia
    In April, the Company entered into an agreement to farm in to the Svidnik, Medzilaborce
and Snina exploration licences in the Carpathian
Fold Belt in north east Slovakia (JKX: 25%). The licences cover a total area of 2,278 sq km. A
238 km 2D seismic programme is currently
underway and expected to be completed in September.

    The Carpathian Fold Belt has been an active area for oil and gas exploration and
production for many years. Advances in seismic imaging
technology have resulted in recent discoveries in analogous structural settings in Poland. The
Company believes that the use of similar
exploration techniques in Slovakia could assist in the identification of hydrocarbon bearing
targets in an area with potential for
dip-closed thrust traps of significant size.

    Georgia
    Anadarko is the operator of the consortium holding the 8,900 sq.km exploration licence
offshore Georgia (JKX: 4% net profit interest).
Following the withdrawal of BP and Chevron from the consortium, Anadarko is seeking to attract
additional farm-in partners and to secure a
deep water drilling rig to drill its commitment well on the licence. We remain an enthusiastic
partner in this frontier project but
recognise the logistical difficulties in progressing to the next stage.

    USA
    JKX holds a 34.4 % working interest in the 45 sq km West Huxley Deep Federal Unit in
Shelby County, East Texas. The operator, Newfield
Exploration, has proposed an aggressive drilling programme to evaluate the proven Lower
Cretaceous reservoirs in the Unit.  

    The West Huxley Deep Well JJ-1 was spudded in May and is currently being prepared for
completion in the Pettit limestone interval. The
Company is seeking an exit at an appropriate time from this non-core asset. 

    Italy
    As reported in February, the Company sold its wholly owned subsidiary, JKX Italia Ltd, to
Mediterranean Oil & Gas plc and no longer
holds any licences in Italy.

    Current and Future Activity

    The drilling programme on the Poltava licences for the second half of the year will
include more development drilling on the
Ignatovskoye and Molchanovskoye Fields and appraisal drilling on the productive carbonate and
sandstone horizons which lie between them. In
addition, the drilling of two further wells on the contiguous Zaplavskoye exploration licence
and the acquisition of additional seismic
should provide us with a better understanding of its reserves potential. The results of the
hydraulic fracture stimulation test programme on
the producing wells in the Rudenkovskoye Field will provide the base criteria for the 2009
drilling and development programme on this large
and technically challenging field. Gas production from our Poltava licences in the current
period has remained constrained. Completion of
the tie-in project to the Soyuz pipeline in the coming period will not only remove this
restriction, but will also provide us with the
security of two export routes for gas delivery from our fields. We enjoy an excellent working
and investment climate in Ukraine and will continue to pursue all potential development and
exploration
opportunities there.

    In Russia, the focus is on bringing the Koshekhablskoye Field back on-stream. We now
anticipate that the workover and recompletion
programme will be completed by the end of 2009. The gas market in Russia is evolving and we
will continue to seek additional development
licences for our Russian portfolio. 

    The strategy of focusing the Company's exploration efforts in eastern and central Europe
appears to be bearing fruit. The second well in
Hungary will appraise the Hajdás gas discovery and potentially lead to a development project
in 2009. We anticipate participating in further
exploration plays in the area in the coming periods.
    
Dividend

    The Board is pleased to declare a ten per cent increase in the interim dividend to 2.2p
per share (2007: 2p per share). The dividend
will be paid on 17 October to shareholders who are on the Company's Register of Members at the
close of business on 12 September. 

    Board Changes

    As announced in June, Dipesh Shah and Michel-Marc Delcommune have joined the Board as
Non-executive Directors. I am certain that the
Company will benefit from their wide experience in the industry.

    Outlook

    The Company is in the process of expanding both its development and exploration
portfolios. This effort is being supported by our robust
and profitable producing capability in Poltava, Ukraine. We will continue to seek and examine
development opportunities in both Ukraine and
Russia whilst prudently expanding our participatory exploration portfolio in central and
eastern Europe. 

    I anticipate the Company's overall performance in the second half of the year to be in
line with the Board's expectations.

    
 

    Financial Review
    Revenue

    The Group's robust profit and cash flow performance in the period primarily resulted from
strong international oil prices and Ukrainian
gas prices which compensated for the Group's reduced oil and gas production in the period.  

    Total production of 2,113Mboe is down 10% (1H 2007: 2,355Mboe) due to natural decline in
oil production, and current capacity
limitations on gas processing facilities in our Ukrainian fields.

    Oil realisations were up 77% at $90.45/bbl (1H2007: $51.22/bbl). Ukrainian gas
realisations were also up significantly (38%) at an
average $5.40/Mcf (1H 2007: $3.90/Mcf). On account of the surge in oil realisations, total oil
revenues in the period of $75.1m (1H 2007:
$54.4m) remained 64% of total revenues. This is despite the oil/gas production mix declining
in the period to 39%/61% (1H2007: 45%/55%). We
look forward to further increases in the Group's gas realisations which, coupled with
anticipated increases in gas production in Ukraine
post commissioning of the Soyuz pipeline connection, should underpin gas revenues and cashflow
in the near term.

    Cost of sales and G&A

    Operating costs totalled $11.7m ($5.60/boe) in the period (1H 2007: $4.26/boe). The bulk
of this rate increase was a result of wage
inflation in Ukraine, from where all of Group's production and revenue continue to derive, and
the costs associated with the operations of
Yuzhgazenergie in Russia which was acquired in 2H 2007. 

    Depletion, depreciation and amortisation amounted to $14.1m ($6.66/boe) (1H 2007:
$3.66/boe). This significant rate increase results
from higher expected capital costs to produce the Group's revised Ukrainian oil and gas
reserves. Reserve reviews have been completed on
three, of the now five, fields recognised by the Group in Ukraine. The capital programmes
associated with producing the revised reserves
have been adjusted to reflect the current view of the reservoirs and the industry's current
cost environment. At the same time, whilst
reserve reviews on the remaining two fields, Molchanovskoye Main and Rudenkoskoye, are not
anticipated to be completed until 2009 and 2010
respectively, the capital costs for their existing development programmes have in the meantime
been updated. Future changes in drilling
costs, and/or development programmes, may result in further changes in DD&A rates. 

    Production based taxes have also risen in the period to $2.3m ($1.10/boe) (1H 2007:
$0.72/boe). This reflects an overall rate increase
in the basket of six production related taxes applied in Ukraine.

    General and administrative expenses are up 14% in the period to $6.5m (1H 2007: $5.7m). As
with production costs, the largest single
contributor to this increase is wage and salary inflation in Ukraine.

    Taxation

    The total tax charge for the period of $21.8m (1H 2007: $18.1m) relates entirely to
Ukrainian activity. This 21% increase in the tax
charge recognised in the period is lower than would be expected based on the 50% increase in
profit before tax. This mainly results from a
reduction in the deferred tax liability in the period, itself primarily a function of a
weakening of the US dollar (the Group's reporting
currency) in relation to the Ukrainian Hryvna (the statutory currency for Ukrainian tax
purposes).

    Cash Flow and Capital Expenditure

    Cash generated from operations before changes in working capital rose 39% in the period to
$95.4m (1H 2007: $68.8m). This followed the
strong operating performance and facilitated the $57.7m (1H 2007: $35.9m) investment in
exploration and development programmes, and the
$7.4m (1H 2007: $3.7m) paid as a final dividend to shareholders for the previous year. The
increased capital expenditures in the period
follow the 2007 acquisition of the Group's Russian subsidiary, Yuzhgazenergie LLC ("YGE").
Development of YGE's Koshekhablskoye field
accounted for 37% ($21.3m) of total capital expenditures in the period. It is anticipated that
over the next 18 months the percentage of
total Group capital expenditure represented by this Russian development will increase
materially (it is currently estimated that capital
expenditures on the development will exceed $160m).  

    As a result of the YGE related expenditure, the proportion of capital expended on the
Group's Ukrainian assets fell to 50% (H1 2007:
86%), although the quantum was little changed at $29.0m (H1 2007: $30.8m). The
exploration/development mix is also little changed at 13%/87%
(H1 2007: 14%/86%). Despite the 61% overall increase in capital expenditure and 100% increase
in dividends, the operating performance still
enabled the Group's net cash balances to increase by $17.1m in the period (1H 2007: $19.1m). 

    Business risks

    The Company is subject to all the usual risks to which independent oil and gas companies
are subject including risks relating to the
success of exploration and development activities, the inherent uncertainty associated with
the assessment of reserves quantities, the
availability and performance of equipment and staff, the delivery of production to customers,
and access to markets and commodity prices.
There is additional country risk for our operations in Ukraine and Russia, please see note 19
in the notes to the interim financial
statements.

    Risk management is carried out by the Finance Director under policies approved by the
board of directors. 

    (a)  Market risk

    (i)  Foreign exchange risk

    The group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with
respect to Ukrainian Hryvna and the Russian Rouble. Foreign exchange risk arises from future
commercial transactions, recognised assets and
liabilities and net investments in foreign operations. 

    The group manages its exposure by matching, as far as is practical, receipts and payments
in the same currency and by following a range
of commercial policies to minimise exposure to the Hryvna denominated sales. 

    (ii) Price risk

    The group is exposed to international oil and gas price movements. The group is a price
taker and does not enter hedge agreements unless
required for borrowing purposes from time to time.

    (iii) Cash flow and fair value interest rate risk

    As the group has no significant interest-bearing assets, the group's income and operating
cash flows are substantially independent of
changes in market interest rates.

    The group manages its cash flow interest rate risk by using floating interest rates.
    (b) Credit risk
    Credit risk arises from cash and cash equivalents and deposits with banks and financial
institutions, as well as credit exposures to
customers, including outstanding receivables and committed transactions. Credit risk on cash
and cash equivalents is managed at a group
level. For banks and financial institutions, only independently rated parties with a minimum
rating of 'A' are accepted. Local customers are
managed at local level and are evaluated if there is no independent rating, taking account of
its financial position, past experience and
other factors.

    Management does not expect any losses from non-performance by any counterparties.

    The Company does not have any concentration of credit risk and the management does not
consider there to be any exposure to loss.

    (c) Liquidity risk

    Management monitors rolling forecasts of the group's liquidity on the basis of expected
cash flow.

    Capital risk management

    The group's objectives when managing capital are to safeguard the group's ability to
continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. 

    In order to maintain or adjust the capital structure, the group may adjust the amount of
dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets. 

    The group has no borrowings (2007: nil).
      
    Fair value estimation

    The carrying value less impairment provision of trade receivables and payables are assumed
to approximate their fair values. The fair
value of financial liabilities for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market
interest rate that is available to the group for similar financial instruments.
    
 
                     Financial review

 Production summary      1H 2008  2H 2007  1H 2007
 Production
 Oil (Mbbl)                  830      971    1,051
 Gas (Bcf)                   7.7      7.6      7.8
 Oil equivalent (Mboe)     2,113    2,236    2,355
 Daily production
 Oil (bopd)                4,563    5,277    5,807
 Gas (MMcfd)                  42       41       43
 Oil equivalent (boepd)   11,607   12,152   13,008


                                                      1H 2008  2H 2007   1H 2007
 Operating results                                         $m        $m       $m
 Revenue
 Oil                                                     75.1      68.1     54.4
 Gas                                                     40.8      29.8     29.6
 Other                                                    0.9       1.9      0.7
                                                        116.8      99.8     84.7
 Cost of sales
 Operating costs                                       (11.7)     (8.4)   (10.2)
 Depreciation, depletion and amortisation              (14.1)    (10.5)    (8.6)
 Production based taxes                                 (2.3)     (1.6)    (1.7)
                                                       (28.1)    (20.5)   (20.5)
 Provision for impairment/write off of exploration          -    (17.5)        -
 costs
 Total cost of sales                                   (28.1)    (38.0)   (20.5)
 Gross Profit                                            88.7      61.8     64.2
 Operating expenses
 General and administrative expenses                    (6.5)     (6.7)    (5.7)
 Impairment of investment                                   -         -    (5.0)

 Operating profit                                        82.2      55.1     53.5


 Earnings                                              1H 2008  2H 2007  1H 2007
 Net profit ($m)                                          61.8     36.7     37.7
 Basic weighted average number of shares in issue (m)      157      155      154
 Earnings per share (basic, cents)                       39.43    23.57    24.40
 Earnings before interest, tax, depreciation and          97.3     66.5     62.9
 amortisation ($m)


 Realisations    1H 2008  2H 2007  1H 2007
 Oil (per bbl)*   $90.45   $70.40   $51.22
 Gas (per Mcf)     $5.40    $4.00    $3.90
    *Oil prices are net of all transportation, shrinkage and brokerage charges. 


 Cost of production ($/boe)                1H 2008  2H 2007  1H 2007
 Production costs                            $5.60    $3.76    $4.26
 Depreciation, depletion and amortisation    $6.66    $4.69    $3.66
 Production based taxes                      $1.10    $0.73    $0.72


 Cash flow                              1H 2008  2H 2007  1H 2007
 Cash generated from operations ($m)       86.9     83.0     70.5
 Operating cash flow per share (cents)     55.5     53.5     45.7


 Balance sheet                                         1H 2008  2H 2007  1H 2007
 Net cash ($m)                                            85.4     68.1    100.3
 Net cash to equity (%)                                   24.8     23.8     39.7
 Return on average capital employed (%)                   39.2     27.3     31.9

 Increase in property, plant and equipment/intangible
 assets ($m)
 Ukraine                                                  29.0     34.0     30.8
 Russia                                                   21.3     67.8        -
 Other                                                     7.4     10.2      5.1
 Capital expenditure ($m)                                 57.7    112.0     35.9
    
 
                    Group income statement

                                                                           Six months to  Six
months to  Year    to 
                                                                                 30 June      
 30 June  31 December
                                                                                    2008      
    2007         2007
                                                                            (un-audited)  
(un-audited)    (audited)
                                                                                    $000      
    $000         $000
                                                                    Notes
 Revenue                                                                6        116,847      
  84,677      184,509
 Cost of sales
 Operating costs - excluding impairment/write off of exploration        4       (28,183)      
(20,523)     (40,839)
 costs
 Provision for impairment/write off of exploration costs                4              -      
       -     (17,694)
 Total cost of sales                                                            (28,183)      
(20,523)     (58,533)
 Gross profit                                                                     88,664      
  64,154      125,976
 General and administrative expenses                                             (6,500)      
 (5,699)     (12,386)
 Impairment of investment                                              15              -      
 (5,000)      (5,000)
 Operating profit                                                     5,6         82,164      
  53,455      108,590
 Finance income                                                                    1,542      
   2,311        4,761
 Finance cost                                                                      (112)      
    (19)         (50)
 Profit before tax                                                                83,594      
  55,747      113,301
 Taxation                                                               9       (21,842)      
(18,093)     (38,892)
 Profit for the period                                                            61,752      
  37,654       74,409

 Earnings per share                           - basic earnings per     11          39.43      
   24.40        47.97
                                              10p ordinary share 
                                              (in cents)
                                              - diluted earnings       11          39.04      
   24.00        46.79
                                              per 10p ordinary
                                              share (in cents)

 Dividends paid        10    (7,436)    (3,708)   (10,032)
 Dividend (per share)      2.4 pence  1.2 pence  3.2 pence


                    Statement of recognised income and expense

                                    Six months to  Six months to           Year 
                                          30 June        30 June              to
                                             2008           2007          31 Dec
                                     (un-audited)   (un-audited)            2007
                                             $000           $000       (audited)
                                                                            $000
 Equity - foreign currency                  2,980            106             517
 translation                      
                                  
 Net income/(expense) recognised            2,980            106             517
 directly in equity               
 Profit for the period                     61,752         37,654          74,409
 Total recognised income and               64,732         37,760          74,926
 expense for the period           
    
 
                    Group balance sheet

                                          Notes      As at       As at     As at
                                                   30 June     30 June    31 Dec
                                                     2008         2007      2007
                                                      (un-        (un-         (
                                                  audited)    audited)  audited)
                                                      $000        $000      $000
 Assets
 Non-current assets
 Property, plant and equipment              7      266,739     141,056   232,241
 Other intangible assets                    7       26,514      27,671    18,423
 Goodwill                                            3,256           -     2,716
                                                   296,509     168,727   253,380
 Current assets
 Inventories - finished goods                        2,017       1,096     1,391
 Trade and other receivables                        20,510      13,607    10,380
 Cash at bank and in hand                  13       85,391     100,314    68,126
                                                   107,918     115,017    79,897
 Assets of disposal group classified as    16            -           -     3,051
 held for sale
                                                   107,918     115,017    82,948
 Total assets                                      404,427     115,017   336,328

 Liabilities
 Current liabilities
 Current tax liabilities                           (8,906)     (3,064)   (1,912)
 Trade and other payables                         (29,187)    (20,557)  (22,911)
                                                  (38,093)    (23,621)  (24,823)
 Liabilities directly associated with
 the assets classified as held for sale    16            -           -     (127)
                                                  (38,093)    (23,621)  (24,950)
 Non-current liabilities
 Provisions                                 8      (3,812)       (552)   (3,575)
 Deferred tax                                     (18,830)     (6,619)  (21,579)
                                                  (22,642)     (7,171)  (25,154)
 Total liabilities                                (60,735)    (30,792)  (50,104)
 Net assets                                        343,692     252,952   286,224

 Equity
 Share capital                             14       24,245      23,812    24,148
 Share premium                             14       40,964      38,246    40,217
 Merger reserve                            14       30,680      30,680    30,680
 Amounts recognised directly in equity                    
 related to assets held for sale           14          -             -       803
 Other reserves
   Capital redemption reserve              14          587         587       587
   Equity - share options                  14        2,579       2,325     2,448
   Equity - foreign currency translation   14      (1,670)     (4,258)   (4,650)
 Retained earnings                         14      246,307     161,560   191,991
 Total shareholders' equity                        343,692     252,952   286,224

    Group cash flow statement
    

                                                 Six months            Six months           
Year 
                                                          to                    to            
 to
                                                     30 June               30 June          31
Dec
                                                        2008                  2007           
2007
                                                (un-audited)          (un-audited)      
(audited)
                                                        $000                  $000           
$000

                                 Notes
 Cash flows from operating        12
 activities  
 Cash generated from operations                       86,865                70,514        
153,480
 Interest received                                     1,884                 3,019          
5,161
 Interest paid                                           (3)                     -            
(6)
 Income tax paid                                    (16,186)              (16,769)       
(38,707)
 Net cash from operating                              72,560                56,764        
119,928
 activities

 Cash flows from investing
 activities
 Acquisition of subsidiary, net                        (119)                     -       
(44,428)
 cash of acquired
 Proceeds from sale of                                    14                     -            
 38
 property, plant and equipment
 Net proceeds on disposal of      16                   2,911                     -            
  -
 business
 Short term loan advanced                               (90)                     -           
(70)
 Purchase of property, plant                        (51,572)              (34,114)       
(80,744)
 and equipment and intangible
 assets
 Net cash used in investing                         (48,856)              (34,114)      
(125,204)
 activities

 Cash flows from financing
 activities
 Proceeds from issue of                                  844                    78          
2,330
 ordinary share capital
 Proceeds from                                           (7)                    33            
 33
 borrowing/(repayment of
 borrowing)
 Dividends paid to shareholders   10                 (7,436)               (3,708)       
(10,032)
 Net cash used in financing                          (6,599)               (3,597)        
(7,669)
 activities

 Increase/(decrease) in cash                          17,105                19,053       
(12,945)
 and cash equivalents in the
 period
 Effect of exchange rates on                             160                   145            
 45
 cash and cash equivalents
 Cash and cash equivalents at 1                       68,126                81,116         
81,116
 January
 Cash and cash equivalents at     13                  85,391               100,314         
68,216
 end of period 
 Included in cash classified as                            -                     -           
(90)
 held for sale
 Included in cash and cash        13                  85,391               100,314         
68,126
 equivalents as per balance
 sheet



    
Notes to the interim financial statements
 
1.       General information and accounting policies
 
JKX Oil & Gas plc (the ultimate parent of the Group) is a public limited company listed on the
London Stock Exchange and incorporated in
England. The registered office is 6 Cavendish Square, London, W1G 0PD and the principal
activities of the Group are exploration, appraisal,
development and production of oil and gas reserves. The registered number of the Company is
03050645.
 
This condensed consolidated interim financial information was approved by the directors for
issue on 29 August 2008.
 
This condensed consolidated interim financial information does not comprise statutory accounts
within the meaning of section 240 of the
Companies Act 1985. Statutory accounts for the year ended 31 December 2007 were approved by
the Board of directors on 2 April 2008 and
delivered to the Registrar of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 237 of the Companies Act 1985.
 
This condensed consolidated interim financial information has been reviewed and not audited.
 
2.       Basis of preparation
 
This condensed consolidated interim financial information for the six months ended 30 June
2008 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34,
*Interim financial reporting* as adopted by the
European Union. The financial information should be read in conjunction with the annual
financial statements for the year ended 31 December
2007 which were prepared in accordance with IFRSs as adopted by the European Union.
 
3.       Accounting policies
 
The accounting policies adopted are consistent with those used in the annual financial
statements for the year ended 31 December 2007. A
copy of the annual financial statements is available on the company*s corporate website
(www.jkx.co.uk) or from the company*s registered
office.
 
Taxes on income in the interim period are accrued using the tax rate that would be applicable
on expected total annual earnings.
 
The following new standards, amendments to standards or interpretations are mandatory for the
first time for the financial year beginning 1
January 2008, but are not relevant for the Group:
 
·          IFRIC 11, *IFRS 2 - Group and treasury share transactions*.
·          IFRIC 12, *Service concession arrangements*.
·          IFRIC 14, *IAS 19 * the limit on a defined benefit asset, minimum funding
requirements and their interaction*.
 
The following new standards, amendments to standards and interpretations have been issued, but
not effective for the financial year
beginning 1 January 2008 and have not been early adopted:
 
·          IFRS 8, *Operating segments*, effective for annual periods beginning on or after 1
January 2009. IFRS 8 replaces IAS 14, *Segment
reporting*, and requires a *management approach* under which segment information is presented
on the same basis as that used for internal
reporting. 
·          IAS 23 (amendment), *Borrowing costs*, effective for annual periods beginning on
or after 1 January 2009. The Group currently has
no borrowing.
·          IFRS 2 (amendment), *Share-based payment*, effective for annual periods beginning
on or after 1 January 2009. Management is
assessing the impact of the new requirements.
·          IFRS 3 (amendment), *Business combinations* and consequential amendments to IAS
27, *Consolidated and separate financial
statements*, IAS 28, *Investments in associates* and IAS 31, Interests in joint ventures*,
effective prospectively to business combinations
for which the acquisition date is on or after 1 July 2009. Management is assessing the impact
of the new requirements.
·          IAS 1 (amendment), *Presentation of financial statements*, effective for annual
periods beginning on or after 1 January 2009.
Management will develop new proforma accounts under the revised disclosure requirements of
this Standard.
·          IAS 32 (amendment), *Financial instruments: presentation*, and consequential
amendments to IAS 1, *Presentation of financial
statements*; effective for annual periods beginning on or after 1 January 2009. This is not
relevant to the group as the group holds no
puttable instruments.
·          IFRIC 13, *Customer loyalty programmes*, effective for annual periods beginning on
or after 1 July 2008. This is not relevant to
the group.
    
 
4.       Cost of sales

                                     Six months  Six months               Year
                                           to          to                 to  
                                        30 June     30 June             31 Dec
                                           2008        2007               2007
                                           $000        $000               $000
      Operating costs                    11,781      10,222             18,430
      Depreciation, depletion and        14,080       8,617             19,097
 amortisation
      Production based taxes              2,322       1,684              3,312
                                         28,183      20,523             40,839
       Provision for                          -           -             17,694
 impairment/write off of
 exploration costs 
 Total cost of sales                     28,183      20,523             58,533

5.       Operating profit 

    In calculating the operating profit there have been no costs recorded in addition to
operating costs and general and administrative
costs  (2007: $5.0m impairment of investment in Ukraine). All assets that are subject to
amortisation are reviewed for impairment whenever
events or circumstances indicate that the carrying value may not be recoverable. Goodwill is
reviewed at the end of each financial year or
as circumstances dictate.


6.       Segmental analysis

           1H 2008                                                            Rest of
       External revenue                               UK    Ukraine  Russia    world   Sub
total $000  Eliminations   Total
                                                     $000    $000     $000     $000           
            $000       $000

 Revenue by location of asset  Oil                       -   75,132        -        -         
75,132             -   75,132
                               Gas                       -   40,771        -        -         
40,771             -   40,771
                               Management services
                                                         -      944        -        -         
   944             -      944
                                                         -  116,847        -        -        
116,847             -  116,847

 Inter segment revenue         Oil                       -        -        -        -         
     -             -        -
                               Gas                       -        -        -        -         
     -             -        -
                               Management services
                                                    12,418        -        -        -         
12,418      (12,418)        -
                               Equipment            15,329        -        -        -         
15,329      (15,329)        -
                                                    27,747        -        -        -         
27,747      (27,747)        -

 Total revenue                 Oil                       -   75,132        -        -         
75,132             -   75,132
                               Gas                       -   40,771        -        -         
40,771             -   40,771
                               Management services
                                                    12,418      944        -        -         
13,362      (12,418)      944
                               Equipment            15,329        -        -        -         
15,329      (15,329)        -
                                                    27,747  116,847        -        -        
144,594      (27,747)  116,847

 Operating profit/(loss)                             (894)   87,345  (2,130)      189         
84,510       (2,346)   82,164

    The results of operations in the US, which were previously reported separately, are now
included in rest of world.
 
6.               Segmental analysis (continued)

           1H 2007                                                            Rest of
       External revenue                               UK     Ukraine  Russia   world   Sub
total $000  Eliminations  Total
                                                     $000     $000     $000    $000           
            $000       $000

 Revenue by location of asset  Oil                        -   54,373       -        -         
54,373             -  54,373
                               Gas                        -   29,562       -       12         
29,574             -  29,574
                               Management services
                                                        180      550       -        -         
   730             -     730
                                                        180   84,485       -       12         
84,677             -  84,677

 Inter segment revenue         Oil                        -        -       -        -         
     -             -       -
                               Gas                        -        -       -        -         
     -             -       -
                               Management services
                                                      3,467        -       -        -         
 3,467       (3,467)       -
                               Equipment             18,794        -       -        -         
18,794      (18,794)       -
                                                     22,261        -       -        -         
22,261      (22,261)       -

 Total revenue                 Oil                        -   54,373       -        -         
54,373             -  54,373
                               Gas                        -   29,562       -       12         
29,574             -  29,574
                               Management services
                                                      3,647      550       -        -         
 4,197       (3,467)     730
                               Equipment             18,794        -       -        -         
18,794      (18,794)       -
                                                     22,441   84,485       -       12        
106,938      (22,261)  84,677

 Operating profit/(loss)                            (3,181)   59,947       -    (995)         
55,771       (2,315)  53,455

7.              Property, plant and equipment and intangible assets

    During the period the group acquired $57.7m additional assets, with 86% being in Ukraine
and Russia on the Group's oil and gas producing
and development assets and 14% being spent on intangible assets.


8.              Provisions

                                                      30 June  30 June  31 Dec
                                                         2008     2007    2007
                                                         $000     $000    $000
 Provision for site restoration                         2,053      518   1,890
 Deferred consideration, due after more than one
 year, relating to the acquisition of Yuzhgazenergie    1,734        -   1,653
 LLC
 Other provisions                                          25       34      32
                                                        3,812      552   3,575

9.              Taxation

    No liability to UK taxation has arisen during the six months ended 30 June 2008 (2007:
$nil) due to the availability of tax losses,
relief for overseas taxes paid on dividends received and tax relief on employee share options
exercised. The tax charged in the period
relates to Ukrainian corporation tax which has arisen in the Group subsidiary, Poltava
Petroleum Company. Taxes charged on production of
hydrocarbons in Ukraine and the USA are included in cost of sales.
 
    10.       Dividends

                   Six months    Six months    Year
                         to            to      to  
                      30 June       30 June  31 Dec
                         2008          2007    2007
                         $000          $000    $000
 Dividends paid         7,436         3,708  10,032

    In respect of the full year 2007 a final dividend of 2.4 pence per share (2006: 1.2 pence
per share) was paid in the period. An interim
dividend for 2008 has been declared of 2.2 pence per share (2007: 2.0 pence per share) which
will be paid in October 2008.

      11.  Earnings per share

    The calculation of earnings per ordinary share for the six months ended 30 June 2008 is
based on the weighted average number of shares
in issue during the period of 156,606,199 (30 June 2007:154,312,676; 31 December 2007:
155,127,794) and the profit for the relevant period.

    The diluted earnings per share for the six months ended 30 June 2008 is based on
158,160,088 (30 June 2007: 156,883,948; 31 December
2007: 159,020,018) ordinary shares calculated as follows:

 NumbeNumber of Shares                       30 June      30 June       31 Dec
                                                2008         2007         2007
 Ba   sicBasic weighted average number   156,606,199  154,312,676  155,127,794
 of shares
 DilutiveDilutive potential ordinary
 shares:
 Share  Share options                      1,553,889    2,571,272    3,892,224
                                         158,160,088  156,883,948  159,020,018

    12.  Reconciliation of operating profit to net cash inflow from operating activities

                                        Six months       Six months      Year 
                                                to               to         to
                                           30 June          30 June     31 Dec
                                              2008             2007       2007
                                              $000             $000       $000
 Opera  Operating profit                    82,164           53,455    108,590
 Depre  Depreciation, depletion             15,170            9,412     20,831
 and amortisation
 Impai   Impairment of property,                90              897     17,660
 plant and equipment/intangible
 assets
 Profit    Profit on disposal of             (843)                -          -
 assets
 Impai   Impairment of investment                -            5,000      5,000
 Shar     Share-based payment                  131              193        315
 costs
 Exch     Exchange differences             (1,334)            (144)        250
 Ca        Cash generated from              95,378           68,813    152,646
 operations before changes in
 working capital
              Changes in working           (8,513)            1,701        834
 capital
 Cash   Cash generated from                 86,865           70,514    153,480
 operations

13.           Cash and cash equivalents

                                 At                    At
                                  1  Net movement      30
                            January          $000    June
                               2008                  2008
                               $000                  $000
 Cash                         1,313           478   1,791
 Short term deposits         66,813        16,787  83,600
 Cash and cash equivalents   68,126        17,265  85,391

      14.  Movements in total shareholders' equity during the period were as follows:

                                                            Equity               Foreign
                                                 Capital     share  currency translation 
Assets held for sale
                                                 redempt   options          reserve $000      
           $000
                                  Share  Merger      ion   reserve                            
                  Share  Retained earnings
                                 capita  reserv  reserve      $000                            
                 premiu               $000
                                      l       e     $000                                      
                      m                      
Total
                                   $000    $000                                               
                   $000                      
 $000
 Group:
 At 1 January 2007               23,801  30,680      587     2,132               (4,364)      
              -  38,179            127,614 
218,629
 Net gains not recognised in
 the income statement

                                      -       -        -         -                   106      
              -       -                  -   
  106
 Issue of employee share
 options                             11       -        -         -                     -      
              -      67                  -   
   78
 IFRS 2 share option charge
                                      -       -        -       193                     -      
              -       -                  -   
  193
 Profit attributable to equity
 shareholders                         -       -        -         -                     -      
              -       -             37,654  
37,654
 Dividend                             -       -        -         -                     -      
              -       -            (3,708) 
(3,708)
 At 30 June 2007                 23,812  30,680      587     2,325               (4,258)      
              -  38,246            161,560 
252,952

 Group:
 At 1 January 2008               24,148  30,680      587     2,448               (4,650)      
            803  40,217            191,991 
286,224
 Net gains not recognised in
 the income statement

                                      -       -        -         -                 2,980      
              -       -                  -   
2,980
 Issue of employee share
 options                             97       -        -         -                     -      
              -     747                  -   
  844
 IFRS 2 share option charge
                                      -       -        -       131                     -      
              -       -                  -   
  131
 Profit attributable to equity
 shareholders                         -       -        -         -                     -      
          (803)       -             61,752  
60,949
 Dividend                             -       -        -         -                     -      
              -       -            (7,436) 
(7,436)
 At 30 June 2008                 24,245  30,680      587     2,579               (1,670)      
              -  40,964            246,307 
343,692

15.       Impairment of investment

    In addition to its wholly owned Ukrainian interests, the Group holds an investment in a
Ukrainian oil and gas company. The Directors
considered that this investment was impaired in full in 1H 2007 and this resulted in a charge
of $5.0m to the income statement in that
period.


16.        Assets held for sale

    The assets and liabilities of JKX Italia Limited were presented in the 2007 annual report
and accounts as being held for sale. On 27
February 2008 the company was sold to Mediterranean Oil & Gas plc for a consideration of EUR2
million.


17.        Capital commitments

    Under the programmes for exploration, development and production of oil and gas assets in
USA, Hungary, Turkey, Ukraine and Russia, the
Group had committed $4.5m (2007: $3.2m) to future capital expenditure on drilling rigs and
facilities as at 30 June 2008.


18.           Related-party transactions

    On 22 November 2007, the group acquired 100 per cent of the share capital of
Yuzhgazenergie LLC, an oil and gas exploration and
development company based in Russia. Yuzhgazenergie LLC was owned by Mostotal Investments
Limited ('Mostotal'). Mostotal and Glengary
Overseas Limited ('Glengary') are controlled by Mr Alexander Zhukov. Glengary, held 25.15 per
cent shareholding in JKX Oil & Gas plc at the
date of acquisition. As a related party transaction the acquisition was approved by the
shareholders of JKX Oil & Gas plc at an
Extraordinary General Meeting. 

    Key management compensation amounted to $2.0m for the six months ended 30 June 2008 (30
June 2007: $2.1m).

    19.  Ukrainian and Russian business environment

    Ukraine and Russia display emerging market characteristics, and the legislation and
business practices regarding banking operations,
foreign currency transactions and taxation are constantly evolving as the governments attempt
to manage the economies. Risks inherent in
conducting business in an emerging market economy include, but are not limited to, volatility
in the financial markets and the general
economy. Uncertainties over the development of the tax and legal environment, as well as
difficulties associated with the consistent
interpretation and application of current laws and regulations, have continued. As at 30 June
2008, oil and gas assets based in Ukraine and
Russia represent approximately 62% and 29% respectively of the Group's oil and gas assets.

    The Group's operations and financial position may be affected by these uncertainties. The
Group's interim financial statements do not
include any adjustments to reflect the possible future effects on the recoverability, and
classification of assets or the amounts or
classifications of liabilities that may result from these uncertainties.

    20. Copies of this half-year report are being sent to registered shareholders and further
copies are available from the Company's
registered office.

    Registered office
    6 Cavendish Square
    London W1G 0PD

    Statement of directors' responsibilities 

    The directors' confirm that this condensed consolidated interim financial information has
been prepared in accordance with IAS 34 as
adopted by the European Union, and that the interim management report herein includes a fair
review of the information required by the
Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:

    *     an indication of important events that have occurred in the first six months and
their impact on the financial information, and a
description of the principal risks and uncertainties for the remaining six months of the
financial year; and
    *     material related party transactions in the first six months and any material changes
in related party transactions described in
the last annual report 
    The directors of JKX Oil & Gas plc are listed in the JKX Oil & Gas plc Annual Report for
31 December 2007, with the exception of the
appointment of two additional non-executive directors, Mr D Shah and Mr M Delcommune, the
appointments were effective 1 June 2008. A list of
current directors is maintained on the JKX Oil & Gas plc website www.jkx.co.uk.




    By order of the Board







    Dr Paul Davies
    Chief Executive Officer







    B J Burrows
    Finance Director


    
 
    Independent review report to JKX Oil & Gas plc

    Introduction

    We have been engaged by the company to review the condensed set of financial statements in
the half-yearly financial report for the six
months ended 30 June 2008, which comprises the Group income statement, Group balance sheet,
Group statement of recognised income and
expense, Group cash flow statement and related notes. We have read the other information
contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial
statements.

    Directors' responsibilities

    The half-yearly financial report is the responsibility of, and has been approved by, the
directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial
Services Authority.

    As disclosed in note 2, the annual financial statements of the group are prepared in
accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this half-yearly financial report
has been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting", as adopted by the
European Union.

    Our responsibility

    Our responsibility is to express to the company a conclusion on the condensed set of
financial statements in the half-yearly financial
report based on our review. This report, including the conclusion, has been prepared for and
only for the company for the purpose of the
Disclosure and Transparency Rules of the Financial Services Authority and for no other
purpose. We do not, in producing this report, accept
or assume responsibility for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.

    Scope of review

    We conducted our review in accordance with International Standard on Review Engagements
(UK and Ireland) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.

    Conclusion

    Based on our review, nothing has come to our attention that causes us to believe that the
condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all
material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's
Financial Services Authority.

    PricewaterhouseCoopers LLP
    Chartered Accountants
    London
    29 August 2008

    Notes:
    (a) The maintenance and integrity of the JKX Oil & Gas plc web site is the responsibility
of the directors; the work carried 
    out by the auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any
changes that may have occurred to the interim report since it was initially presented on the
web site.
    (b) Legislation in the United Kingdom governing the preparation and dissemination of
financial information may differ from 
       legislation in other jurisdictions.

    Glossary

 Mcf     Thousand cubic feet
 Bcf     Billion cubic feet
 cfpd    Cubic feet per day
 MMcfd   Million cubic feet per day
 Mbbl    Thousands of barrels
 MMbbl   Millions of barrels
 bcpd    Barrel of condensate per day
 bpd     Barrels per day
 bopd    Barrels of oil per day
 boe     Barrels of oil equivalent
 Mboe    Thousands of barrels of oil equivalent
 MMboe   Millions of barrels of oil equivalent
 boepd   Barrels of oil equivalent per day
 sq.km   Square Kilometre
 $       United States Dollars
 LIBOR   London InterBank Offered Rate
 US      United States
 Rouble  The lawful currency of Russia
 Hryvna  The lawful currency of Ukraine 

    Conversion factors
    6,000 standard cubic feet of gas = 1 boe

    We welcome visits to our website
    www.jkx.co.uk

This information is provided by RNS
The company news service from the London Stock Exchange
 
  END 
 
IR FKFKKFBKDNFB
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