90 2011 2010 Note $000 $000Cash flows from operating activities Cash generated from operations 29 124,150 146,271Interest paid (2,416) (32)Income tax paid (22,737) (28,526)Net cash generated from operating activities 98,997 117,713Cash flows from investing activitiesDeferred payment on Russian acquisition 11 (2,214) (3,000)Interest received 724 749Purchase of intangible assets (12,836) (8,345)Purchase of property, plant and equipment (149,873) (164,499)Net cash used in investing activities (164,199) (175,095)Cash flows from financing activities Proceeds from issue of ordinary shares 121 58,359Restricted cash (9,777) -Repayment of borrowings (10,000) -Funds received from borrowings (net of costs) 49,500 -Dividends paid to shareholders 28 (7,207) (13,159)Net cash generated from financing activities 22,637 45,200Decrease in cash and cash equivalents in the year (42,565) (12,182)Effect of exchange rates on cash and cash equivalents (331) (168)Cash and cash equivalents at 1 January 62,018 74,368Cash and cash equivalents at 31 December 1019,12262,018Group financial statementsConsolidated statement of cash flowsfor the year ended 31 December

JKX Oil & Gas plc Annual Report 201191At a glance01-17Board statements18-23Operational review24-36Financial review37-47CSR review48-61Directors' reports62-83Financial statements84-1361. General informationJKX Oil & Gas plc (the ultimate parent of the Group hereafter, 'the Company') is a public limited company listed on the London Stock Exchange which is domiciled and incorporated in England and Wales under the UK Companies Act. The registered number of the Company is 03050645. The registered office is 6 Cavendish Square, London, W1G 0PD and the principal place of business is disclosed in the introduction to the Annual Report. The principal activities of the Company and its subsidiaries, (the 'Group'), are the exploration for, appraisal and development of oil and gas reserves. 2. Basis of preparationThe Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, International Financial Reporting Interpretations Committee (IFRIC) interpretations and the Companies Act 2006 applicable for Companies reporting under IFRS and therefore the consolidated financial statements comply with Article 4 of the EU IAS Regulations. The principal accounting policies adopted by the Group are set out below. The disclosed policies have been applied consistently by the Group for both the current and previous financial year with the exception of the new standards adopted.The Directors have reviewed the Group's forecast cash flows for the next twelve months and through to the end of 2013. Capital and operating costs are based on approved budgets and latest forecasts in the case of 2012 and current development plans in the case of 2013. In addition the Directors have made enquiries into and considered the Ukrainian and Russian business environments and future expectations regarding country and currency risks that the Group may encounter. Having considered the sensitivities and potential outcomes relating to these country and currency risks, the Group's ability to change the timing and scale of its discretionary capital expenditure if required and the Group's ability to draw up to net $10m on the credit facility in Ukraine which is currently available until 30 June 2012, the Directors consider that the Company and Group have adequate resources to continue for the foreseeable future. The going concern basis for the accounts has therefore continued to be adopted.The critical accounting estimates and management judgements used in preparing these financial statements are Recoverability of tangible and intangible oil and gas costs, Carrying value of intangible exploration and evaluation expenditure, Depreciation of oil and gas assets, Decommissioning, Taxation and Derivatives, further details of which can be found in note 3. There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2011 that would be expected to have a material impact on the Group.The following new and amended standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2011 but are not currently relevant to the Group financial statements:? IAS 24 (revised), 'Related party disclosures'? IAS 32 (amendment), 'Classification of rights issues'? IFRIC 14 (amendment), 'Prepayments of a minimum funding requirement'? IFRIC 19, 'Extinguishing financial liabilities with equity instruments'? Improvements to International Financial Reporting Standards 2010.The following new standards, amendments and interpretations are issued but not effective for the financial year beginning 1 January 2011 and the Group has not early adopted them:? IFRS 9, 'Financial instruments'*? IFRS 10, 'Consolidated financial statements'*? IFRS 11, 'Joint arrangements'*? IFRS 12, 'Disclosures of interests in other entities'*? IFRS 13, 'Fair value measurement'*? IAS 27 (revised), 'Separate financial statements'*? IAS 28 (revised), 'Associates and joint ventures'*? IFRIC 20, 'Stripping costs in the production phase'*Amendments to IAS 12, 'Income taxes'*, IAS 19*, 'Employee benefits', IFRS 7, 'Financial instruments: Disclosures', IAS 1, 'Financial statement presentation'* and IFRS 1, 'First-time adoption of international financial reporting standards'*.The Group is evaluating the impact of the above pronouncements. The above changes are currently not expected to be material to the Group's earnings or to shareholders' funds but will result in further disclosure requirements. Where a change in presentation between the prior year and current year financial statements has been made during the period, comparative figures have been restated accordingly. During the year Restricted cash of $0.5m previously included in Cash and cash equivalents has been reclassified (note 10). In the prior year, $0.5m of Restricted cash was included in Cash and cash equivalents. Group financial statementsNotes to the financial statements* Subject to endorsement by the EU