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In accordance with US SEC Regulation AC, important US regulatory disclosures and analyst certification can be found on the last page of this report.

[email protected], www.troika.ua

UKRAINE | OIL AND GAS

JUNE 3, 2010

Common JKX LNRecommendation (from SELL) HOLDLast price $3.40Target price (from $3.90) $3.70Upside 9%

Free float 38%Market cap $585 mlnEnterprise value $646 mlnADT, 100 days $2.3 mlnPrices as of May 28, 2010

Key data

2008 2009 2010E 2011EFinancials (IFRS), $ mlnRevenues 207 197 224 244EBITDA 153 151 169 178EBIT 125 120 140 146Net income 78 85 101 104EPS, $ 0.50 0.52 0.59 0.61ProfitabilityEBITDA margin 74% 77% 75% 73%EBIT margin 61% 61% 62% 60%Net margin 38% 43% 45% 43%

Price ratiosP/S 2.8 3.0 2.6 2.4EV/EBITDA 3.8 3.9 3.8 3.7P/E 6.8 6.5 5.8 5.6P/CF 4.2 4.4 4.7 3.5GrowthRevenues 12% 5% 14% 9%EBITDA 15% 1% 12% 5%EPS 4% 4% 13% 4%

Price performance, %

1m 3m 6m YTD

Common 13.8 11.3 27.0 25.6Relative to UX 21.8 10.6 33.1 35.6

Price performance, $

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

May '09 Jul '09 Sep '09 Nov '09 Jan '10 Mar '10 May '10

Share price Relative to UX

Max 4.49 (Nov 17, 09) Min 2.73 (Jul 10, 09)

Source: Bloomberg, Troika

Peter Keller 38 (044) 207 37 80

[email protected]

JKX Oil & GasGas Price Fall ExaggeratedWe upgrade JKX Oil & Gas from SELL to HOLD following the stocks

excessive 26% price correction over the past two months. We see future

reserve replacements as the most potent price trigger, with potential

materialization in around 1Q11. Another trigger is the start of gas sales

in Russia in 2011, which should increase revenues 9% yoy. The stock is

trading at a 2011E EV/EBITDA of 3.7, which is broadly in line with its

peers' 2010E11E harmonic mean of 3.6.

Recent fall is excessive. Since our SELL call in December 2009, the stock haslost 17%, while the Ukrainian market has gained 18%. However, we believe

that the recent sweeping correction has unduly pushed the shares too low,even considering the companys lower than expected gas selling price.

Lower gas price cuts into revenues, but enough remains. We decreaseJKX Oil & Gas expected 2010E gas selling price by 19% to $250 per 1,000 m3

to bring it in line with the new gas import agreement reached with Russia. But

even with this price drop, the company still demonstrates superior profitability

to its Russian and West European peers, which sell their gas at around $75 and

$230 per 1,000 m3, respectively.

Gas sales in Russia may boost revenues 9% yoy in 2011. JKX Oil & Gashas committed to selling gas in Russia in early 2011. On the back of a recent

$61 mln capital increase, it plans capex of up to $200 mln in 2010 for fiveworkovers in Russia and construction of an LPG plant in Ukraine. While the

positive impact of this development is partially diminished by lower gas prices

in Russia and the still relatively small 2P reserve base of 88.7 mln boe, we

believe that assuming a conservative scenario of full production from all six

Russian wells starting in mid2011, revenues should grow 9% yoy in 2011.

Strongest trigger: future reserve replacements. Having relatively modest 2Preserves, we see future reserve replacements as the most potent price trigger,

with potential materialization in around 1Q11. Despite 3.8 mln boe of 2P

reserves replaced in 2009, we conservatively model the production curve

without any future reserve replacements. However, incorporating a recurring2P reserve replacement of just 2.0 mln boe annually would raise the

fundamental value by 28% to $4.85 per share. We think that any major

adjustments to Ukraines gas import price or delays in the workover program in

Russia could also be potential price triggers.

Valuation. We value the company using a 50:50 split of core NAV and relativevaluation, with the latter based on equallyweighted P/E, EV/EBITDA,

EV/output and EV/reserves valuations. Our valuation yields a target price of

$3.70 per share, implying upside of 9%, which at current prices warrants an

upgrade in our recommendation from SELL to HOLD.

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JUNE3,2010 JKXOIL&GASGASPRICEFALLEXAGGERATED

2 TROIKA DIALOG

Valuation

Changes in assumptions

Assumption changes

New Old Change

2010E gas selling price in Ukraine, $ per 1,000 m3 250 310 19%

2014E gas selling price in Ukraine, $ per 1,000 m3 226 338 33%

2P reserves, beginning 2010, mln boe 88.7 85.2 4%

2010E capex, $ mln 188.1 111.8 68%

Expected end of extraction 2021 2020

Riskfree rate 9% 12%

2010E UAH/USD rate, aop 8.2 9.0 9%

2010 UAH/USD rate, eop 9.5 9.2 3%

Source: Troika

JKX Oil & Gas Ukrainian gas selling price decreased by 19% in 2010. We reduce the companysexpected 2010 gas selling price in Ukraine by 19% to $250 per 1,000 m3 as a result of the new gas

import agreement between Naftogaz Ukrainy and Russias Gazprom. In 201114, we even reduce

JKX Oil & Gas selling price in Ukraine by 3033% to a flat $226 per 1,000 m3 because we assume

that Naftogaz Ukrainys import gas price will be equal to the regulated gas price for industrial

consumers. But even if there were some premium to the import price (as is the case in 2010), we

see potential downward pressure for the domestic gas price for industrial consumers due to recent

government initiatives for direct imports from Central Asia, decoupling the gas price formula from

crude prices and constructing an LNG terminal in Ukraine. As a basis for our longterm gas price

forecast, we assume a flat Urals price of $70/bbl for 2011 and beyond.

Changes in Ukraines gas selling price, $ per 1,000 m3

0

100

200

300

400

05 06 07 08 09 10 11E 12E 13E 14E

Old assumption New assumpt ion

Source: Company, Troika estimates

2P reserves up 4% in 2009 due to reserve replacements. JKX Oil & Gas added 3.8 mln boe to its2P reserves in 2009 after it added 17.0 mln boe in 2008. Given these latest replacements and the

companys plans to add more reserves from existing licenses through license area expansion

(Russian license), exploration of deeper reservoirs (Rudenkivske license and Russian license) and

potential shale gas (Rudenkivske license), we believe that the probability for further reserve

replacements has increased. The view that JKX Oil & Gas is focusing more on reserve replacements

has also been confirmed by discussions with the management during a recent site visit.

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TROIKA DIALOG 3

2P reserve replacements, mln boe

0

20

40

60

80

100

2006 2006 2007 2007 2008 2008 2009 2009 2009

Acquisition of

license in Russia

Replacements

from existing

licenses

Reserves Extraction Replacements

Source: Company

Sensitivity of fundamental value to 2P reserve replacements

0.0

2.0

4.0

6.0

8.0

0.0 1.0 2.0 3.0 4.0

2P reserve replacements, mln boe per year

Fundamenta

lvalue,

$persh

are

Source: Troika estimates

One of our concerns regarding JKX Oil & Gas was that for a company producing 11,647 boepd in

2009, the 2P reserves of 88.7 mln boe look relatively small. Given the reserve replacements of

recent years and its plan to intensify this in the future, we think that this risk is partially mitigating.

Our sensitivity analysis of the fundamental value based on core NAV to 2P reserve replacements

shows that because JKX Oil & Gas has a relatively small 2P reserve base, reserve replacements

significantly affect its fundamental value. If we assume that the company would in the future be

able to add 2 mln boe to its 2P reserves every year (as it did in 2009), the fundamental value

would rise 28% to $4.85 per share.

Capex estimate for 2010 raised 68% due mainly to ambitious workover program. We increaseour capex forecast for 2010 by 68% from $112 mln to $188 mln due to the announced workover

program of five wells in Russia using two rigs and the construction of a liquefied gas petroleum (LGP)

plant in Ukraine. According to the management, capex this year could even reach $200 mln. The

program will be financed by the recent capital increase ($61 mln) and operating cash flow. The

success of the workover program is the basis for beginning gas sales in Russia in late 2010 or early

2011. Consequently, the failure or delay of the workover program is a potential risk, in our view.

Workover schedule in Russia with two rigs

Jan10

Feb10

Mar10

Apr10

May10

Jun10

Jul10

Aug10

Sep10

Oct10

Nov10

Dec10

Well 20

Well 25

Well 9

Well 5

Well 4

Source: Company

Production curve adjusted slightly on the back of plans for Russia. Based on the latestextraction figures in Ukraine, reserve replacements and plans for Russia, we adjust slightly the

expected production curve. As a result, we now expect a slightly lower plateau production of

26,000 boepd, 124% above 2009 extraction, and end of production in 2020.

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Changes in production curve, boepd

0

5,000

10,000

15,000

20,000

25,000

30,000

05 07 09 11E 13E 15E 17E 19E 21E

New assumpt ion Old assumpt ion


Recent capital increase incorporated. JKX Oil & Gas raised $61 mln in January through issuing15.3 mln new shares (9.7% capital increase). The company will use this money for its 2010

capex program and we incorporate this change of charter capital in our model.

Riskfree rate reduced to 9%. We now incorporate a reduced riskfree rate of 9% (down from12%) due to the ongoing narrowing of Ukraines Sovereign spread over the USTs.

Stronger than average 2010 exchange rate estimate. We now incorporate a better averagehryvnia rate forecast for 2010 of UAH8.2/$1 (down from UAH9.0/$1) and a yearend rate of

UAH8.5/$1 (down from UAH9.2/$1) due to ongoing improvements in the balance of payments.

Valuation

VALUATION SUMMARY

Over the last two months, JKX Oil & Gass share price has dropped 26%, in line with our previous

SELL recommendation, and it has even fallen below our old target price of $3.90 per share. We now

slightly reduce our target price by 5% from $3.90 to $3.70 per share, mainly as a result of a lower

expected Ukrainian gas price, partly mitigated by a reduced riskfree rate. This suggests 9% upside

from the current midmarket price. We base our target price on a 50:50 weighting of the

fundamental value derived from our core NAV model and the equity value derived from relative

valuation. Consequently, we upgrade our recommendation on the stock from SELL to HOLD.

Target price calculation, $ per share

Weight Equity value Upside

Core NAV 50% 3.80 12%

Relative valuation 50% 3.60 6%

Target price 3.70 9%

Current price 3.40


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TROIKA DIALOG 5

CORE NAV VALUATION

Core NAV valuation, $ mln

2009E14E 2014E21E

Sum of DCF 549.5 Riskfree rate 9.0% 6.0%

Net debt and preferred stock (1.6) Standard ERP 6.0% 5.0%

Minority interest Companyspecific risk 5.0% 3.0%

Net asset value, EV 551.0 Cost of equity 20.0% 14.0%

Cost of debt, after tax 10.1% 6.0%

Discount rate (2009E13E) 18.4% Share of equity 83.7% 92.9%

Discount rate (after 2013E) 13.4% Share of debt 16.3% 7.1%

Fundamental value, $ per share 3.80 WACC 18.4% 13.4%

Current price, $ per share 3.40 Pretax cost of debt 14.0% 8.0%


Sensitivity analysis of fundamental value, $ per share

Crude price, $/bbl30 50 70 90 110

9.4% 3.22 4.23 4.97 5.59 6.10

12.4% 2.94 3.86 4.53 5.10 5.56

15.4% 2.70 3.53 4.14 4.66 5.0718.4% 2.48 3.24 3.80 4.26 4.6421.4% 2.28 2.98 3.49 3.91 4.26

24.4% 2.11 2.75 3.21 3.60 3.91

27.4% 1.96 2.54 2.97 3.32 3.60

WACC


RELATIVE VALUATION

Peer group. We compare JKX Oil & Gas with the harmonic mean of multiples for E&P peers. Theharmonic mean of Russian, GEM and DM peers is only displayed for informational purposes.

Incorporated forecast periods. We apply 2011E multiples.

Relative valuation

Ticker Country/region MCap

$ mln 09 10E 11E 09 10E 11E 09 10E 11E 09 10E 11E

JKX Oil & Gas JKX LN Ukraine 583 6.8 5.8 5.6 3.9 3.8 3.7 139 144 106 6.6 7.7 8.5

E&P peers

Dragon Oil DGO LN Turkmenistan 3,079 12.5 7.7 5.9 4.1 2.6 1.8 109 95 80 3.4 3.3 3.1

Lundin Petroleum LUPE SS Russia, Europe, Asia 1,455 >100 7.9 8.7 4.2 3.1 2.6 139 102 90 10.0 10.5 11.1

Heritage Oil HOIL LN Russia 1,825 neg neg >100 neg neg >100 n/m n/m n/m 28.2 17.1 20.2

Premier Oil PMO LN Southeast Asia 1,972 28.0 12.8 8.4 5.5 4.6 3.5 113 102 89 6.5 7.2 7.9

Soco International SIA LN Asia, Africa 1,922 34.8 29.6 11.8 17.9 13.2 5.7 n/m n/m n/m 13.2 12.7 12.5

Dana Petroleum DNX LN Europe 1,413 31.3 11.0 8.2 5.3 3.5 3.0 104 99 96 11.7 12.8 14.4

Afren AFR LN Africa 1,215 >100 12.0 3.8 6.1 3.2 1.0 136 112 87 29.8 39.8 56.5

Regal Petroleum RPT LN Ukraine 468 neg 17.0 6.0 neg 5.0 3.0 63 91 89 n/m n/m n/m

Salamander Energy SMDR LN Europe, Trinidad 510 neg 12.8 10.8 7.7 3.6 2.9 109 90 76 10.3 11.4 12.5

Melrose Resources MRS LN Central Europe, Egypt 419 30.1 12.2 4.9 4.5 4.3 3.1 136 129 123 19.5 22.0 25.5

Petroneft PTR LN Russia 156 neg 42.0 3.5 neg 12.0 3.1 n/m 157 54 2.2 2.2 2.7Volga Gas VGAS LN Russia 305 n/a 24.8 8.2 n/a 17.6 6.1 n/m 398 199 5.6 5.7 5.9

Harmonic mean 592 23.8 13.3 6.3 5.6 4.5 2.6 107 114 89 7.1 7.2 7.8

Discount/premium 71% 56% 11% 31% 15% 42% 29% 26% 20% 6% 7% 9%

Russian integrated peers harmonic mean 17,496 4.4 3.9 3.9 5.2 4.2 3.8 73 73 67 2.6 3.3 3.2GEM integrated peers harmonic mean 13,080 12.4 9.9 8.5 4.6 4.6 4.1 177 244 241 10.9 17.1 17.2

DM integrated peers harmonic mean 118,031 12.0 8.5 7.2 4.6 3.6 3.2 155 153 149 13.5 13.5 13.4

P/E EV/EBITDA EV/output, $/boe EV/reserves, $/boe

Note: All multiples given equal 25% weight.

Source: Companies, Bloomberg, Troika estimates

Target multiples. We replace P/BV with P/E due to our belief that visibility of profits hasstabilized and investors are shifting their focus back to profitabilityoriented metrics. The other

multiples that we consider (EV/EBITDA, EV/output and EV/2P reserves) remain unchanged.

P/E. Based on the peers harmonic mean of 200510E P/E of 8.5, we apply a justified discountof 30% and obtain a target multiple of 6.0. JKX Oil & Gas shares have been trading with a

historic discount of around 30% on P/E. We believe that these justified discounts also properly

reflect country risk. The company had a high net margin of 43% in 2009 due to very beneficial

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6 TROIKA DIALOG

royalties, while its E&P peers had an average net margin of just 16% that year. It thus looks like

the market is punishing JKX Oil & Gas for having a net margin significantly above its peers.

EV/EBITDA. We use as a target multiple the peers harmonic mean of 200910E EV/EBITDAof 3.6 without any adjustments, because JKX Oil & Gas 2009 EBITDA margin of 77% is only

slightly above the peers average of 65%.

EV/output. Starting at peers harmonic mean of 200910E EV/output of $101/bbl, weincorporate a justified premium of 20%, because JKX Oil & Gas is able to create more value out

of its production, for a target multiple of $121/bbl.

EV/reserves. Based on peers harmonic mean of 200910E EV/reserves of $7.5/bbl, weapply a justified premium of 20% because JKX Oil & Gas is able to create more value out of its

2P reserves, arriving at a target multiple of $9.0/bbl.

Weighting. We continue to assign equal weights to these multiples to achieve an average equityvalue per share based on relative valuation.

Equity value calculation based on 2011E multiplesEV/EBITDA P/E EV/output EV/reserves

Weight 25% 25% 25% 25%

JKX Oil & Gas 3.7 5.6 106 8.5Target multiples 3.6 6.0 121 9.0

Discount/premium 4% 6% 12% 6%

Implied equity value, $ per share 3.23 3.62 3.94 3.62

Average equity value, $ per share 3.60


Our relative valuation with 2011E multiples gives us an equity value of $3.60 per share. This value is

relatively close to the fundamental value of $3.80 per share derived from core NAV and indicates

the consistency of both valuation approaches.

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TROIKA DIALOG 7

Model assumptions, $ mln

2008 2009 2010E 2011E 2012E 2013E 2014E200509 200914E

UAH/USD, eop 4.85 8.00 8.50 8.50 8.50 8.50 8.50 12% 1%

UAH/USD, aop 4.95 7.80 8.20 8.20 8.20 8.20 8.20 11% 1%

FINANCIALS

Oil and condensate 121.8 76.4 94.3 87.6 86.8 85.4 86.1 6% 2%

Crude price, $/bbl 84 52 64 60 60 60 60 12% 3%

Sold volumes, mln bbl 1.45 1.46 1.48 1.47 1.46 1.43 1.45 5% 0%

Natural gas 83.1 118.1 127.7 154.4 204.8 240.8 261.9 52% 17%

Gas price, $ per 1,000 m3 189 249 250 191 183 192 191 44% 5%

Sold volumes, bln m3 0.44 0.48 0.51 0.58 0.64 0.69 0.74 5% 9%

Other revenues 2.1 0.0 2.2 2.4 2.9 3.3 3.5 100% n/a

Revenues 207.0 196.5 224.2 244.4 294.6 329.5 351.4 24% 12%yoy 12% 5% 14% 9% 21% 12% 7%

Revenues, $/boe 51 46 50 39 37 37 37 n/a 4%

Operating expenses (54.4) (45.8) (55.0) (66.8) (79.9) (88.3) (88.3) 9% 14%

yoy 5% 16% 20% 21% 20% 11% 0%

Operating expenses, $/boe (13.5) (10.8) (12.3) (10.7) (9.9) (10.0) (9.3) 8% 3%

Royalties (12.4) (13.3) (14.4) (20.8) (27.6) (30.6) (33.4) 4% 20%

yoy 4% 7% 8% 45% 32% 11% 9%

Royalties, $/boe 3.1 3.1 3.2 3.4 3.4 3.5 3.5 3% 2%

Extraction costs (5.0) (5.5) (6.5) (7.9) (8.9) (10.0) (11.0) 6% 15%

yoy 11% 10% 18% 22% 12% 12% 10%

Personnel expenses (16.3) (14.5) (16.1) (18.4) (19.8) (21.3) (22.8)

Employees 595 600 649 749 799 849 889 16% 8%

yoy 24% 1% 8% 15% 7% 6% 5%

Monthly salary, $ 2,256 1,986 2,073 2,050 2,069 2,095 2,142 10% 2%

yoy 1% 12% 4% 1% 1% 1% 2%

SG&A (excl. personnel expenses) (8.7) (7.3) (9.0) (9.8) (11.8) (13.2) (10.5) n/a 8%

As % of revenues 4% 4% 4% 4% 4% 4% 3%

Other costs (12.0) (7.7) (9.0) (9.8) (11.8) (13.2) (10.5) 15% 7%

As % of revenues 6% 4% 4% 4% 4% 4% 3%

Other expenses (77.6) (66.2) (70.2) (73.9) (87.9) (105.3) (117.3) 47% 6%

yoy 34% 15% 6% 5% 19% 20% 11%

Depreciation (27.2) (31.1) (29.7) (31.9) (36.9) (50.5) (58.7) 34% 14%

As % of PP&E 122% 115% 16% 10% 10% 12% 13%

Interest expense (1.0) (1.1) (1.3) (1.4) (1.6) (1.7) (1.6) 10% 7%

Average interest rate 3.8% 2.6% 1.0% 1.0% 1.0% 1.0% 1.0%

Income tax (49.4) (34.0) (39.1) (40.6) (49.4) (53.1) (57.0) 25% 11%

Effective tax rate 39% 28% 28% 28% 28% 28% 28%

Total costs (132.1) (112.1) (125.1) (140.7) (167.8) (193.6) (205.7) 19% 13%

yoy 20% 15% 12% 12% 19% 15% 6%

Total costs, $/boe (32.8) (26.4) (27.9) (22.6) (20.8) (22.0) (21.6) 17% 4%

EXTRACTION AND RESERVESOil and condensate extraction, mln bbl 1.45 1.46 1.48 1.47 1.46 1.43 1.45 5% 0%

Oil and condensate extraction, bpd 3,959 3,991 4,054 4,032 3,998 3,931 3,964

Gas extraction, bln m3 0.44 0.48 0.51 0.58 0.64 0.69 0.74 5% 9%

Gas extraction, 1,000 m3 perday 1,203 1,301 1,399 1,599 1,748 1,902 2,022

Total extraction, mln boe 4.03 4.25 4.48 6.22 8.06 8.80 9.51 1% 17%Total extraction, boepd 11,033 11,647 12,285 17,040 22,080 24,120 26,055

NI/output, $/boe 19.4 20.1 22.4 16.8 15.8 15.5 15.4 22% 5%

Net revenues/output, $/boe 51.4 46.2 50.0 39.3 36.6 37.4 37.0 23% 4%

No of wells 50 55 62 72 77 82 86 12% 9%

Oil and condensate 2P reserves, mln bbl 9.6 8.4 6.9 5.4 4.0 2.6 1.1 2% 33%

Natural gas 2P reserves, bln m3 13.5 13.7 13.1 12.3 11.2 10.0 8.6 19% 9%

Total 2P reserves, mln boe 89.2 88.7 84.2 78.0 69.9 61.1 51.6 16% 10%

Expected number of extraction years left 22 10 19 13 9 7 5

Expected end of extraction, year 2027 2019 2029 2024 2021 2020 2019

CAGR


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8 TROIKA DIALOG

Ownership structure

40.9%

4.2%

4.2%

4.3%

5.6%

6.0%

6.3%

11.0%

17.5%

Ralkon ( I. Kolomoys ky) G lengary (A. Zhukov)

Interneft BlackRock

Naftogaz Ukrainy AXA

J P Morgan Fidelity International

Minority shareholders

JKX Oil & Gas IFRS financials, $ mln

2008 2009 2010E 2011E 2012E 2013E 2014EINCOME STATEMENTRevenues 207 197 224 244 295 329 351

COGS (35) (31) (35) (45) (56) (62) (64)

Gross income 172 165 189 199 239 267 287

Gross margin 83.2% 84.0% 84.2% 81.5% 81.0% 81.1% 81.7%

SG&A (20) (17) (20) (21) (24) (26) (24)

EBITDA 153 151 169 178 215 241 263Adjusted EBITDA 153 151 169 178 215 241 263EBITDA margin 73.7% 76.7% 75.5% 72.7% 72.9% 73.2% 74.9%

DD&A (27) (31) (30) (32) (37) (50) (59)EBIT 125 120 140 146 178 191 204

Interest income 2 (0) 0 (1) (1) (1) (1)

Forex gain

Revaluation gain (loss)

Other gains

EBT 128 119 140 145 177 190 204Income tax (49) (34) (39) (41) (49) (53) (57)

Minority interest

Net income 78 85 101 104 127 137 147Adjusted net income 78 85 101 104 127 137 147Net margin 37.7% 43.4% 44.9% 42.7% 43.2% 41.5% 41.7%

EPS, $ 0.50 0.52 0.59 0.61 0.74 0.80 0.85Adjusted EPS, $ 0.50 0.52 0.59 0.61 0.74 0.80 0.85

BALANCE SHEETAssets

Cash and equivalents 65 74 37 18 34 44 45

Receivables 15 32 27 24 29 33 35Inventories 2 2 2 2 3 3 4

Other current assets 7

Total current assets 89 108 67 45 67 80 84Total noncurrent assets 303 376 538 662 740 865 1,012

Total assets 392 484 604 707 807 945 1,096

LiabilitiesShortterm borrowings Payables 27 44 49 39 35 33 35

Other current liabilities 0 1 16 24 3 3 4

Total current liabilities 27 45 65 64 38 36 39

Longterm borrowings

Other noncurrent liabilities 31 35 34 32 29 31 32

Total noncurrent liabilities 31 35 34 32 29 31 32Total liabilities 58 80 99 95 68 68 70

Minority interest

Equity 334 404 506 611 740 877 1,025

Total liabilities and equity 392 484 604 707 807 945 1,096Net debt/(cash) (7) 6 61 77 33 24 25

CASH FLOW STATEMENTNet income 78 85 101 104 127 137 147

Minority interest

DD&A 27 31 30 32 37 50 59Working capital change (4) (13) 61 20 (47) (15) (1)

Other assets change 25 23 (67) 11 34 (28) (80)

Operating cash flow 127 127 125 168 151 143 124Maintenance capex (12) (17) (18) (17) (21) (23) (25)

Expansionary capex (88) (80) (170) (135) (77) (77) (69)

Other investments (5) 0

Investing cash flow (105) (97) (188) (152) (98) (100) (94)Change in debt

Dividends paid (14) (12) (15) (16) (19) (20) (22)

Share issues/(purchases) 61 Other (26) (24) (11) (20) (18) (13) (7)

Financing cash flow (40) (36) 35 (35) (37) (34) (29)Forex effects Net change in cash (18) (7) (28) (20) 17 10 1

RATIOS

P/E 6.8 6.5 5.8 5.6 4.6 4.3 4.0EV/EBITDA 3.8 3.9 3.8 3.7 2.9 2.5

P/BV 1.6 1.4 1.2 1.0 0.8 0.7 0.6ROE 23.4% 21.1% 19.9% 17.1% 17.2% 15.6% 14.3%

ROIC 23.8% 21.1% 19.9% 17.0% 17.1% 15.5% 14.3%Dividend per share, $ 0.09 0.07 0.09 0.09 0.11 0.12 0.13

Dividend yield 2.6% 2.2% 2.6% 2.7% 3.3% 3.5% 3.8%

P/S 2.8 3.0 2.6 2.4 2.0 1.8 1.7

P/CF 4.2 4.4 4.7 3.5 3.9 4.1 4.7

Revenue growth 12% 5% 14% 9% 21% 12% 7%

EBITDA growth 15% 1% 12% 5% 21% 12% 9%EPS growth 4% 4% 13% 4% 22% 7% 7%


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TROIKA DIALOG 9

Disclosure appendix

IMPORTANT USREGULATORY DISCLOSURES

An affiliate of Troika Dialog USA makes a market in the securities of JKX Oil & Gas, Regal Petroleum.

The research analysts, strategists, or research associates principally responsible for the preparationof this research report have received compensation based upon various factors, including quality of

research, investor client feedback, stock picking, competitive factors, firm revenues and overall

investment banking revenues.

Analyst certification

The following analyst(s) hereby certify that the views expressed in this research report accurately

reflect such research analyst's personal views about the subject securities and issuers and that no

part of his or her compensation was, is, or will be directly or indirectly related to the specific

recommendations or views contained in the research report: Peter Keller.

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This research report is prepared by TROIKA DIALOG or its affiliate named herein and provides general information only. Neither the information nor any opinion expressed constitutes arecommendation, an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures or derivatives related to such securities or investments. It is notintended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who mayreceive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in thisreport and should understand that statements regarding future prospects may not be realized.

Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investorsmay receive back less than originally invested. Past performance is not necessarily a guide to future performance.

Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to seek taxadvice based on their particular circumstances from an independent tax professional.

Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs orGDRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.

The information contained herein has been obtained from, and any opinions herein are based upon, sources believed to be reliable, but no representation is made that it is accurate or complete andit should not be relied upon as such. All such information and opinions are subject to change w ithout notice.

From time to time, TROIKA DIALOG or its affiliates or the principals or employees of its affiliates may have or have had positions or derivative positions in the securities or other instruments referredto herein or make or have made a market or otherwise act or have acted as principal in transactions in any of these securities or instruments or may provide or have provided investment banking orconsulting services to or serve or have served as a director or a supervisory board member of a company being reported on herein.

TROIKA DIALOG maintains strict internal policies, which are designed to manage any actual or potential conflicts of interest fr om harming the interests of investors.

Further information on the securities referred to herein may be obtained from TROIKA DIALOG upon request.

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For residents of the United States: This research report is being distributed in the United States by TROIKA DIALOG USA, INC., which accepts responsibility for the contents hereof. Any U.S.person receiving this report who wishes to effect transactions in any securities referred to herein should contact TROIKA DIALOG USA, INC., not its affiliate. Further information on the securitiesreferred to herein may be obtained from TROIKA DIALOG USA, INC. upon request.

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