JKX Oil & Gas plc Annual Report 201131At a glance01-17Board statements18-23Operational review24-36Financial review37-47CSR review48-61Directors' reports62-83Financial statements84-136The Zaplavskoye exploration licence surrounds the Ignatovskoye, Molchanovskoye and Novo-Nikolaevskoye licenses and, following its extension in 2010, now comprises an area of 197.5sq.km and is valid until 2014.Exploration well Z-04 has recently been completed and tested. During a multi-choke test the well flowed at a rate of 20.8 MMcfd of gas and 1,040 bpd of condensate though a 41/64" choke with a flowing wellhead pressure of 2,684 psi. The well was tied back to the main Novo-Nikolaevskoye complex processing facility with a 9km flow line and placed on production. Well Zap-04 was drilled to a total depth of 2,937m and penetrated over 20m of Visean sandstones. The well is located to the northwest of the Novo-Nikolaevskoye group of fields within the recently acquired 41.9sq.km extension of the existing Zaplavskoye exploration licence. Condensate rich gas is being produced for the first time in the Novo-Nikolaevskoye area from this particular Visean reservoir layer. These initial flow rates are expected to decline and the well will be monitored closely as we seek to assess the extent of the accumulation and the potential for further appraisal of this discovery.The Elizavetovskoye exploration licence is located in the central part of the Dnieper-Donets basin and covers an area of 70sq.km. It is approximately 45km from PPC's existing production licences. Three shut-in production wells on the licence are owned by Ukrgasvydobuvannya, a subsidiary of Naftogaz of Ukraine, the state oil and gas company, and are tied into its production facility. 2011 updateAgreement has been reached with Ukrgasvydobuvannya and its associate company KhAS to re-start the three shut-in wells on the basis of a Joint Production Agreement (JPA). PPC will receive 33.3% of the production and control the operation. Operations have commenced on well M-53 and production is expected to start early in the second quarter. Well M-53 will provide valuable reservoir performance data ahead of a decision to complete the remaining two wells and upgrade the temporary facilities.The data will also enable PPC to assess whether it is commercially viable to drill the proposed E-301 well and install its own permanent facility. If successful, PPC would own 100% of gas production from well E-301.Under the terms of the licence renewal, PPC had an obligation to install a hot tap to the nearby gas trunk line together with a short spur line which was completed in 2011.Elizavetovskoye reservesReserves recognised for the Elizavetovskoye Field are restricted to the 2 Bcf gas (0.3 MMboe) representing potential production under the JPA. Further resources can be added once the updated field development plan has been prepared and approved.ZaplavskoyeElizavetovskoyeRemaining reservesas at 31 December 2011 Proved Probable Prov+ProbGas0.0 2.0 2.0(Bcf)Oil + Gas 0.0 0.3 0.3(MMboe)

32Operational review RussiaKoshekhablskoye Fieldkm232.7LICENCE AREAJKX completed the purchase of its wholly-owned Russian subsidiary Yuzhgazenergie LLC ('YGE') in November 2007. YGE holds 100% interest in the licence for the redevelopment of the Koshekhablskoye gas field which is located in the southern Russian autonomousRepublic of Adygea. The licence covers an area of 34.7sq.km.The fi eld was discovered in 1972 and produced a total 89 Bcf of gas before operations were suspended in January 2006. In June 2006, YGE was granted a new 20 year licence to rehabilitate and further appraise and develop the fi eld. Following the acquisition, the detailed technical and environmental re-evaluation by JKX concluded that the existing production facility would have to be completely replaced because it could meet neither the new gas specifi cation required for entry to the Gasprom transit system nor the environmental standard for emissions to the immediate environment.RUSSIAThe Koshekhablskoye field is located in the southern Russian autonomous Republic of Adygea.2011 updateKoshekhablskoye Field redevelopment The Koshekhablskoye Gas Processing Facility (GPF) was designed, fabricated and shipped from Sharjah, United Arab Emirates, in modular form at the end of 2010, arriving at Novorossiysk in January 2011. Heavy rain and landslides delayed its arrival on site until late March. Progress was made with site preparation during this time and the modules were put in place quickly. Hook up of the modules took longer than expected with numerous small modifications required to comply with local regulations and to complete the work. This inevitably led to further delays taking completion of construction to the end of 2011. Remaining reservesas at 31 December 2011 Proved Probable Prov+ProbOil 0.2 0.2 0.4(MMbbl)Gas 114.0 250.8 364.8(Bcf)Oil + Gas19.2 42.0 61.2(MMboe)MaikopKoshekhablskoyeTHEBLACK SEA