25 May 2017

JKX OIL & GAS PLC

("JKX" or "the Company")

NOTICE OF 2017 ANNUAL GENERAL MEETING

JKX Oil & Gas plc announces that the notice of the Annual General Meeting ("AGM") is being mailed to the registered shareholders of JKX Oil & Gas plc. JKX will hold its AGM at 10.00am on Friday 30 June 2017 at the premises of Herbert Smith Freehills LLP, Exchange House, Primrose Street, London, EC2A 2EG.

In addition to routine resolutions from the Board, resolutions have also been proposed by Eclairs Group Limited ("Eclairs"), a member of the Company holding 27.5% of the total voting shares, which propose substantial changes to the current Board.  As announced on 19 May 2017, the Company has also been informed that Proxima Capital Group ("Proxima"), the Company's 19.9% shareholder, and its two nominee directors, no longer support the current composition of the Board. If passed, the Eclairs resolutions will see the departure of all executive and independent directors of the Company.

No proposals have been made public by either Eclairs or Proxima as to how they would see the future direction and management of the Company.

When the current Board was elected in January 2016 it was with a mandate to:

·     provide a greater level of transparency and governance to all stakeholders,

·     resolve the Company's historic legal disputes, reduce costs, and

·    drive the business forward with a new strategy to unlock the potential reserves in our key operating assets. 

The Board believes it has delivered, and is continuing to deliver, on each of these core objectives. It believes that the proposals by Eclairs, combined with Proxima's apparent intention to either support these proposals and/or propose other board changes, would significantly compromise the independence of your Board, damaging the governance and development plans of the Company at a critical juncture of its turnaround plan.  Accordingly, the Board strongly recommends shareholders to vote as recommended in the Chairman's letter to shareholders.

A full copy of the letter to shareholders follows.  The full notice for the 2017 AGM is available for download on the Company's website at http://www.jkx.co.uk/investor-centre/investor-download-centre.aspx and a copy of the notice and the form of proxy have been submitted to the National Storage Mechanism and will be available to view shortly.

ENDS

JKX Oil & Gas plc                                         +44 (0) 20 7323 4464

Russell Hoare, Chief Financial Officer

Stockdale Securities                                    +44 (0) 20 7601 6100

Robert Finlay, Daniel Harris

EM Communications                                    +44 (0) 20 3709 5711

Stuart Leasor, Jeroen van de Crommenacker

CHAIRMAN'S LETTER

To the holders of Ordinary Shares and persons with information rights

Notice of Annual General Meeting

Dear Shareholder

I am writing to give you details of our Annual General Meeting ("AGM") to be held on Friday 30 June 2017 at 10.00am at the premises of Herbert Smith Freehills LLP, Exchange House, Primrose Street, London, EC2A 2EG. The formal notice of AGM, which includes a copy of the resolutions to be considered and voted on is enclosed.

In order to retain the independence of the Board, transparent governance befitting a premium listed company, and continued pursuit of the so-far successful turnaround of the Company, the Board recommends that shareholders reject the changes proposed by Eclairs Group ("Eclairs") (set out below) and reject the attempts of Proxima Capital Group ("Proxima") to change the composition of the Board.

If passed, these proposals will see the departure of all executive and independent directors of the Company. No proposals have been made public by either Eclairs or Proxima as to how they would see the future direction and management of the Company.

Eighteen months ago, on 28 January 2016 the result of the Extraordinary General Meeting ("EGM") marked an inflection point for the Company when the long-standing Board of Directors was replaced through a successful activist campaign led by Proxima on the promise of installing an independent and professional leadership team with a more dynamic managerial approach to halt the destruction of value and rebuild the Company for the benefit of all shareholders.

When you then overwhelmingly voted in favour of appointing the new Board, it was a mandate to provide a greater level of transparency and governance to all stakeholders, resolve the Company's historic legal disputes, reduce costs and drive the business forward with a new strategy to unlock the potential reserves in our key operating assets. We promised to steer JKX away from the legal battles that dominated its previous strategy, and return the Company's focus back to the business of oil and gas production. We believe we have delivered, and are continuing to deliver, on each of these core objectives.

We believe that the proposals by Eclairs to remove the independent management and board, and to elect a representative of Eclairs to the Board, combined with Proxima's apparent intention to either support these proposals and/or propose other board changes, would significantly compromise the independence of your Board, damaging the governance and development plans of the Company at a critical juncture of its turnaround plan.

The production and development strategy implemented by the new Board is working. Eclairs and Proxima have proposed no alternative strategy.

In 2016 we increased year-on-year group production by 12%, reduced operating and administration costs by $5.4 million, improved the loss from operations (before exceptional items) by $6.8 million, increased cash flow from operations by $4.2 million and generated total operating cash flow before exceptional items and legal costs of $30.0 million on revenues of $73.8 million. This progress was achieved in (a) a lower oil and gas price environment (b) with minimal capital expenditure and (c) all while maintaining a clean health and safety record, as disclosed in our recently released Annual Report.

Over 20 enhancement projects completed from the beginning of 2016 to date in Ukraine and Hungary contributed an estimated 1,200 boepd to our production in April 2017. The $2.8 million spent on these completed enhancements has not only returned invested capital, but had also generated estimated pre-tax cumulative free cash flow of $7.3 million by April 2017 and are expected to generate a total of $15 million - more than five times the initial investment.

While production gains from our enhancement program have been on a small scale so far, we believe that our acreage in Ukraine in particular has the potential to deliver similar returns to shareholders at much larger scale. We have invested considerable time and expertise into a development plan for the Rudenkivske field, and have very recently launched a major fracture program, now underway in Poltava, Ukraine.

We selected Schlumberger to stimulate 11 wells in 48 stages in the second and third quarters of this year, and began fracturing operations on 21 May 2017. This fracture campaign will be among the largest ever in Ukraine, and one of the most technical. With good execution, this campaign has the potential to significantly improve production in 2017. To prepare for the fracture campaign, we have leased 16 existing well bores on our license area from Ukrainian State companies, and have worked them over in preparation for fracturing. While fracturing soviet-era well bores is neither technically simple nor risk-free, achieving the production gains of multi-stage fracturing without the large capital expenditure of drilling new wells creates an opportunity for very compelling investment returns to shareholders. Our fracturing campaign is the launch-pad for returning JKX to growth and profitability, and we will be reporting initial results in the next few weeks.

In the last month we have also demonstrated the effects of 'technology transfer' with the work-over of well R25 having achieved a depth of 3,707 metres in 5 days. Work-over operations at PPC now not only far exceed any performance seen in its more than 20-year history, they also exceed, as far as we are aware, the work-over performance of any other company operating in Ukraine.

We undertook to bring Texan technology to Poltava, Ukraine. It was never going to be easy, but we are already beginning to see concrete, demonstrable results and we are excited about the prospects to scale up these initial successes to a large scale field development program. 

Inherited legal and financial hurdles are being overcome

We inherited many legal and financial obstacles to full field development during 2016, and have overcome most of them. 

We settled historical legal disputes with shareholders and restructured the convertible bonds (liabilities for which posed a significant "going concern" risk) using bond repurchases that generated additional cost savings for the Company of
$2.6 million and return of 83% assuming the bonds were put in February 2017 (or $5.7 million and 29%, respectively, if bonds were held until maturity in February 2020).

We renewed disputed licenses in Ukraine and reduced tax liabilities by approximately $6.0 million. We've successfully defended the Company from various legal attacks by local authorities through open, transparent communication with the Government of Ukraine and with the support of the UK and US embassies.

We received the result of the long-standing Hague Arbitration in February 2017, enabling the Company to engage with the Government of Ukraine with a view to reaching a mutually acceptable settlement. We acknowledge that the Hague Arbitration award was received much later than we had originally expected and was not, on balance, a positive result for the Company. What might have become a significant asset instead became a net liability, when combined with the outstanding litigation in the Ukrainian courts against PPC. 

Throughout last year, before the Hague result, we engaged publicly with the Ukrainian government to attempt to settle all claims, stop litigation, and return to investing in the business of oil & gas. The negotiations were premised on the Company acting as an independently-controlled, UK publicly-listed investor, one trying to implement modern technology transfer to increase production on a scale which will benefit not just the Company's shareholders but also Ukraine and its future energy security. With this premise now cast into doubt by the recent actions of Eclairs and Proxima, discussions have stalled, creating new uncertainties in what was already a challenging situation.

Eclairs' request, and Proxima's support of that position, risks derailing the strategy

At the EGM in January of 2016, we stated that we would undertake to restore professional relations with all stakeholders of JKX. On this point, it would seemingly appear that some think we have underperformed.

Last year, we held extensive discussions with both Proxima and Eclairs as to how best to comply with the governance standards applicable to a premium listed company, while, at the same time, respecting the significant rights of these shareholders. The unanimous position of the non-aligned board members was that a balanced board of seven, with one member from each of Proxima and Eclairs, was the right construct for JKX. We further proposed that both shareholders enter into a relationship agreement with the Company on customary terms, to make clear all their rights and obligations as major shareholders, while safeguarding the continue independence of the Company. Ultimately, both Eclairs and Proxima have rejected the idea of relationship agreements, and of a balanced board of seven.

On 18 April 2017 the Company received a request from Eclairs to put Michael Bakunenko, its nominee, up for appointment to the Board at the AGM. This follows a similar attempt in 2013 which was resisted by the previous Board, resulting in legal action between the Company and Eclairs that was eventually decided at the Supreme Court in London.

It also follows a meeting of the Nominations Committee in January 2017 at which an informal request from Eclairs was considered and a decision taken that the appointment of Mr Bakunenko to the Board was not in the best interests of the Company at that time. Over the past year, we have been informed by many banks, brokers and other potential service providers that Eclairs' substantial shareholding would prevent the Company from passing their Know-Your-Client ("KYC") procedures. This fact, combined with the risk to the negotiations with the Ukrainian government convinced the Nominations Committee that the appointment of Mr Bakunenko to the Board in the absence of a either a Relationship Agreement or a balanced position with other major shareholders, would not be in the best interest of the Company. Eclairs have chosen to ignore the rationale for the decision of the Nominations Committee (which was communicated to them several times), resulting in the request from them on 18 April 2017.

On 5 May 2017 Eclairs further requested that ordinary resolutions to remove the seven current Directors from the Board be proposed at the AGM, despite the fact that two of the Directors, Alan Bigman and Bernie Sucher, would already have been up for election and the Company had already publicly confirmed that it would comply with the original request to propose Mr.Bakunenko for election.

Noting the apparent inconsistency between the outcome of the above resolutions being passed (i.e. Mr.Bakunenko becoming the sole Director of the Company) and the requirements of both UK companies' legislation and the Company's constitution for there to be at least two Directors at any time, the Company sought clarification from Eclairs.

In response, on 11 May 2017 Eclairs notified the Company of its intention to amend its previous requests by withdrawing those proposed resolutions to remove Paul Ostling, Vladimir Tatarchuk, Alan Bigman and Bernie Sucher as directors of the Company but confirming its requisition under section 338 of the Companies Act to appoint Mr.Bakunenko as a Director and remove Russell Hoare, Thomas Reed and Vladimir Rusinov as directors of the Company. It should be noted that notwithstanding this revised requisition, the Company is obliged to propose Alan Bigman and Bernie Sucher for
re-election to the Board in any event, on the basis that they were appointed by the Board following the AGM in 2016. 

Proxima Capital Group's intention is unclear as both directors and shareholders

Following the request from Eclairs (see above) and in the context of needing to revise the proposed slate of resolutions to be put to shareholders to accommodate this request, Proxima, whose representatives on the Board had previously approved all draft AGM resolutions, communicated to the Board that it no longer supported several of the AGM resolutions. The Proxima Directors, Mr Vladimir Tartarchuk and Mr Vladimir Rusinov, communicated to the Board that while they were prepared to recommend to shareholders to vote in favour of the resolutions in their capacity as Directors, this would not necessarily translate into support from Proxima for the resolutions in its capacity as shareholder. This underlines the conflict of interest inherent in a large shareholder holding seats on a publicly listed Board and demonstrates why investor bodies such as the Investment Association have advised against such representation.

Upon receipt of the amended resolutions from Eclairs, the Proxima directors further informed the board that in the context of the new Eclairs proposals, they no longer support the current Board or executive management team. Proxima added that, in its view, the Board would be enhanced by the addition of new directors with Russian or Ukrainian experience. Proxima also noted that it may not object to the appointment of Mr Bakunenko.

In response, the Executive and Independent Directors (such Executive and Independent Directors being Thomas Reed, Russell Hoare, Alan Bigman, Bernie Sucher and myself) informed Proxima that they could not support any proposal which would serve to weaken the independence of the Board, or increase the degree of influence of any shareholder, and any such change would lead to the departure of all Executive and Independent Directors. Having considered its position, Proxima notified the Board on 18 May 2017 that it would be pursuing a wholesale, but as yet unspecified, restructuring of the Board, and that in effect it has withdrawn its support for the current composition of the Board.

It is presently unknown to the Board whether Proxima and Eclairs are acting in concert for the purpose of pursuing a 'board control seeking' proposal for the purposes of the Takeover Code, or have otherwise sought to co-ordinate their positions with respect to the upcoming AGM.

The Choice for shareholders

The Executive and Independent Directors are convinced that an independent, professional board executing our current oil and gas development strategy represents the best prospect of delivering on the turnaround strategy already underway, thereby creating the most value for all shareholders. We have told the market many times of our intent to resolve the Company's various historic problems and return to profitable oil and gas development, giving regular and detailed updates on the steps we have taken along that path. We have made significant progress on those inherited problems, built an ambitious Field Development Plan and an international team of top oil and gas professionals, and have just launched an exciting growth phase of that plan with our large scale well-stimulation program in Poltava.  Production over the year is up and costs are down. We are executing exactly the plans we proposed before the January 2016 EGM and which shareholders broadly supported with their votes at that time.

We have engaged with each of Proxima and Eclairs regularly and intensively throughout the last year. We have heard each of them articulate the view that new Board candidates nominated by each of them would strengthen the Board. We have suggested, on numerous occasions, that the presence of either Proxima or Eclairs on the Board should be accompanied by a relationship agreement - a customary legal agreement which would govern an arm's length relationship between the shareholders and Company, as well as ensure its compliance with the independence standard of the Listing Rules. As previously stated, both Proxima and Eclairs have refused to sign up to such agreements.

While the demands from Proxima and Eclairs have grown louder, they have come without any stated strategic vision, operational plan or any other meaningful contribution towards the further development of the business of the Company. We can therefore only assume that they are intended to strengthen the degree of influence or control which Proxima and Eclairs individually or collectively would seek to exercise over your Company. In that context, the Executive and Independent Directors cannot recommend that shareholders support the resolutions proposed by Eclairs.

We readily acknowledge that, without the voting support of Eclairs or Proxima, your current board and management is likely to be replaced. Further, in the event that one or more independent or executive members of this board are not re-elected at our upcoming AGM, all of the Executive and Independent Directors expect to stand down, as none of us are willing to serve on a Board of directors which is effectively controlled by Proxima and/or Eclairs. Ongoing division and lack of strategic clarity would not, in our judgement, be beneficial to shareholders as a whole. In that event, we would do our best at that time to ensure the uninterrupted continuing operations of the Company and a prompt orderly transition to a new management team.

Proxima have suggested that, in anticipation of possible voting by Proxima and Eclairs at the upcoming AGM, they expect certain of the Executive and Independent Directors may wish to step down ahead of the AGM. We consider that inappropriate. We have concluded that, irrespective of any probable outcome, the Executive and Independent Directors should stand before all shareholders at our meeting to give a full accounting of a record of considerable achievement since January 2016. We are disappointed that Eclairs and Proxima are seeking to prevent us from delivering on the turnaround strategy we have designed and are implementing, but for so long as we are directors, we will each continue to promote the best interests of the Company, and shareholders as a whole, in the open and transparent manner we have consistently applied since joining the Board.

Shareholders have significant rights in publicly listed Companies enshrined by law and we encourage all shareholders to exercise these rights to legitimately express their opinions and wishes. Indeed, encouraging as large a turnout as possible is the main purpose of this letter. We have respected the right of Eclairs to propose their own resolutions and vote their shares, regardless of our professional opinion. However we would emphasize that it is the collective responsibility of the Board to promote the success of the Company and its shareholders as a whole, and that all Directors, including shareholder representatives, owe the same duties to the Company, including the duty to exercise independent judgement. Therefore it is our view that the presence on the Board of one or two specific shareholders, who do not share the same vision for the business as the Executive and Independent Directors (put in place as an independent and professional leadership team mandated to drive value and rebuild the Company), is not conducive to meeting adequate standards of corporate governance within the Company. Accordingly, we consider that at present only a Board of Executive and Independent Directors can best serve the interests of the Company and shareholders as a whole, and we therefore recommend that you vote against the appointment to the Board of any nominee from either of Eclairs or Proxima.

We wish to be completely transparent with all shareholders and so want to be clear that if the independence of this Board is compromised by the changes proposed by Eclairs, and possibly supported by Proxima, each of the current Executive and Independent Directors remaining on the Board after the AGM vote will be compelled to resign, including myself.

To support your Executive and Independent Directors, please vote in favour of resolutions 1-13 and against resolutions 14-16. 

Yours faithfully

Paul Ostling

Chairman