JKX Oil & Gas plc Annual Report 20119At a glance01-17Board statements18-23Operational review24-36Financial review37-47CSR review48-61Directors' reports62-83Financial statements84-136How do we make decisions? The decision making process is key to our continued success.Commercial sourceTechnical subsurface sourceFinancial sourceStrategic signifi canceApplication of multi-disciplinary teams (technical, fi nancial, commercial, operational)Financial impactCommercial meritTechnical evaluationProject opportunity identifi cationProject analysis rigour disciplineProject risk return assessmentStop/goTransaction/project managementProject/transaction completion/ results deliveryOutcome:increased shareholder value

10Our strategy - objectivesOur vision is to be the leading independent upstream exploration and production company in central and eastern Europe. We have been able to achieve this by applying our core strengths, focusing our efforts on opportunities where we have a strategic advantage and a deep understanding of the subsurface and where we can leverage on our track record and build strong partnerships with key stakeholders.Strategic priorityGrowth. Production growth. Oil and gas reserves growth. Explore new opportunities across our existing portfolio. Increase exposure to Ukrainian and Russian gas markets. Acquire new licencesAchievements. Group reserves increased by 8.9 MMboe (before 2011 production) mainly as a result of the successful reappraisal of Koshekhablskoye, Russia, which was offset by a reduction in Ukraine reserves. Completion of construction of the Koshekhablskoye GPF. Appraisal of various potential value-accretive opportunities in Ukraine. Seven exploration wells drilled in Hungary. Recruited a London-based team of subsurface experts>The LPG plant was opened by the Deputy Head of Poltava State Administration, Boris Galushko, in July. The process extracts propane and butane from our export gas stream for sale as LPG. This reduces the gas available for export however the value of the LPG revenue signifi cantly exceeds the sales value of the gas lost and therefore enhances our economic performance by increasing overall realisations.