News 2017

23 May 2017

Financial results for the three-months ending 31 March 2017

Amsterdam, 23 May 2017

Nostrum Oil & Gas PLC (LSE: NOG) (“Nostrum” or “the Company”, and together with its subsidiaries the “Group"), an independent oil and gas company engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin, today announces its financial results for the three months ending 31 March 2017.

Highlights:

Financial

  • Revenue of US$111.9m (Q1 2016: US$73.9m)
  • Net operating cash flows1 of US$69.8m (Q1 2016: US$27.0m)
  • EBITDA2 of US$68.7m (Q1 2016: US$51.7m); EBITDA1 margin of 61.4% (Q1 2016: 70.0%)
  • Transport/boe of US$4.0/bbl (Q1 2016: US$4.6/bbl)
  • Opex/boe reduced to US$3.4/bbl (Q1 2016: US$3.5/bbl)
  • Net income of US$13.6m (Q1 2016: US$(12.3)m)
  • Net debt3 decreased to US$841.3m from US$857.9m as at 31 December 2016
  • Closing cash4 of US$122.8m (as at 31 December 2016: US$101.1m)

1 IFRS term based on indirect cash flow method
2 Defined as profit before tax net of finance costs, foreign exchange loss/gain, ESOP, depreciation, interest income, other income and expenses.
3 Defined as total debt minus cash and cash equivalents
4 Defined as cash and cash equivalents including current and non-current investments and excluding restricted cash

Operational

  • Average daily production for the three-month period ending 31 March 2017 was 48,743 boepd.
  • Average daily sales volumes for the three-month period ending 31 March 2017 was 43,279 boepd (Q1 2016: 38,754).
  • 43 wells currently producing at the Chinarevskoye field - 22 oil wells and 21 gas condensate wells.
  • Following Board approval, the GTU3 budget has increased to a total of US$532m. This is a result of the requirement to increase resources at the field site in order to ensure the completion of GTU3 and first gas through the plant before the end of 2017.
  • The KazTransOil (“KTO”) pipeline connection has been completed by Nostrum, and successful practical internal functioning tests having been performed. The finalisation of the tie in to the KTO pipeline is awaiting execution from KTO systems and a required adjustment of the KTO automation systems. This is due to be carried out by KTO in late May based on an agreed schedule with KTO and we anticipate being able to use this facility imminently.
  • An extension to the exploration license has been submitted for the Rostoshinskoye field and an appraisal well at Rostoshinskoye is pending a flaring permit before testing can start.

Kai-Uwe Kessel, Chief Executive Officer of Nostrum Oil and Gas PLC commented:
“Q1 was an excellent quarter with strong cash generation following a very consistent quarter of production and strong product prices relative to 2016. In addition to the strongest revenues we have had for over a year, I am pleased that operating costs remain below US$4 per barrel which is allowing us to maintain healthy margins. We will continue to keep operating costs at a minimum to ensure the business is protected in the event oil prices fall back below US$50 in the near future. As we get closer to the deadline for GTU3 we have been analysing the project to ensure it can have first gas running through it before the end of the year. The Board has approved an increase in the budget by US$34m to ensure sufficient resources are available to achieve this. We remain focused on delivering GTU3 before year-end and will ensure we keep costs to an absolute minimum to meet our objectives.”

Q1 2017: Nostrum Financial Results

In millions of US$ (unless mentioned otherwise)

Q1 2016

Q1 2017

Variance

Variance in %

Revenue

73.9

111.9

38.0

51.4

EBITDA

51.7

68.7

17.0

32.9

EBITDA margin

70.0%

61.4%

-

-

In millions of US$ (unless mentioned otherwise)

YE 2016

Q1 2017

Variance

Variance in %

Cash Position

101.1

122.8

21.7

21.5

Net Debt

857.9

841.3

16.6

1.93

Other news

Progress on the development of GTU3
Nostrum continues to make steady progress on GTU3. In order to ensure we achieve our deadlines, the Board has approved an additional spend of US$34m predominantly to increase resources at the field site.

GTU3 Cash Spent (excl VAT)

as at 31 March 2017

Expenditure to date

US$399m

Expenditure pre-completion

US$82m

Expenditure post-completion

US$51m

Total:

US$532m

Board changes
Mr Atul Gupta was appointed by the Board as its Chairman on 25 April 2017. Mr Gupta replaces Mr Mark Martin who was appointed as a temporary Chairman from 18-25 April 2017, and who returned to his position as a Senior Independent Director after this time. Mr Gupta previously served as a director of the Company from 30 November 2009 and Chairman of the Audit Committee from 31 December 2016. Mr Gupta has worked for 25 years in the international upstream oil and gas business and has a degree in chemical engineering from Cambridge University and a Masters in petroleum engineering from Heriot Watt University, Edinburgh. Mr Gupta looks forward to serving Nostrum during a crucial growth phase for the company in 2017. For further information please see: Board Changes and Changes to Board Committee Composition.

Annual General Meeting
Nostrum’s Annual General Meeting will be held at 11:30 am BST on 26 June 2017 at the offices of White & Case LLP, 5 Old Broad St, London EC2N 1DW. For more details please see here.

Conference call
Nostrum’s management team will present the Q1 2017 Financial Results and will be available for a Q&A session with analysts and investors today at 14.00 pm BST, 23 May 2017.

If you would like to participate in this call, please register by clicking on the following link and following instructions: Results Call

Download: Q1 2017 Results Presentation

Download: Q1 2017 Consolidated Group financials

Further information
For further information please visit www.nog.co.uk

Further enquiries
Nostrum Oil & Gas PLC – Investor Relations
Kirsty Hamilton-Smith
Amy Barlow
+44 203 740 7433
ir@nog.co.uk

Instinctif Partners - UK
David Simonson
George Yeomans
+ 44 (0) 207 457 2020

Promo Group Communications – Kazakhstan
Asel Karaulova
Irina Noskova
+ 7 (727) 264 67 37

About Nostrum Oil & Gas
Nostrum Oil & Gas PLC is an independent oil and gas company currently engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin. Its shares are listed on the London Stock Exchange (ticker symbol: NOG). The principal producing asset of Nostrum Oil & Gas PLC is the Chinarevskoye field, in which it holds a 100% interest and is the operator through its wholly-owned subsidiary Zhaikmunai LLP. In addition, Nostrum Oil & Gas holds a 100% interest in and is the operator of the Rostoshinskoye, Darinskoye and Yuzhno-Gremyachenskoye oil and gas fields through the same subsidiary. Located in the pre-Caspian basin to the north-west of Uralsk, these exploration and development fields are situated approximately 60 and 120 kilometres respectively from the Chinarevskoye field.

Forward-Looking Statements
Some of the statements in this document are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of the Partnership or its officers with respect to various matters. When used in this document, the words “expects,” “believes,” “anticipates,” “plans,” “may,” “will,” “should” and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements.

No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity, and shareholders of the Company are cautioned not to place undue reliance on the forward-looking statements. Save as required by the Listing Rules and applicable law, the Company does not undertake to update or change any forward-looking statements to reflect events occurring after the date of this announcement.

Q1 2017: Nostrum Financial Results

In millions of US$ (unless mentioned otherwise)

Q1 2016

Q1 2017

Variance

Variance in %

Revenue

73.9

111.9

38.0

51.4

EBITDA

51.7

68.7

17.0

32.9

EBITDA margin

70.0%

61.4%

-

-

In millions of US$ (unless mentioned otherwise)

YE 2016

Q1 2017

Variance

Variance in %

Cash Position

101.1

122.8

21.7

21.5

Net Debt

857.9

841.3

16.6

1.93

Revenue, EBITDA and Profit for the Period
Revenue from sales of crude oil, stabilised condensate, LPG and dry gas over the period amounted to US$111.9m, up 51.4% on the same period last year. EBITDA stood at US$68.7m while a net income of US$13.6m was recorded for the period.

Cost of sale
Cost of sales increased 8.6% to US$50.3m for the period (Q1 2016: US$46.3m).

Cash resources and Net debt
The Group ended the period with US$122.8m in cash and cash equivalents, an increase from US$101.1m as at 31 December 2016. Net debt at the end of the period was US$841.3m.

Hedging
In December 2015, Nostrum rolled its pre-existing hedge into a new hedge of 15,000 boepd with a strike price of US$49.16 per barrel. The cost of the hedge was paid entirely from the sale of the Company’s previous hedge for US$92m. The new hedge has a 24-month tenor, maturing in December 2017, with cash settlements on a quarterly basis.

Sales volumes
The sales volumes split for Q1 2017 was as follows:

Products

Q1 2017 sales volumes

(boepd)

Q1 2017 Product Mix (%)

Crude Oil & Stabilised Condensate

17,180

40

LPG (Liquid Petroleum Gas)

5,350

12

Dry Gas

20,749

48

Total

43,279*

100


The difference between true production and the sales volumes are as a result from part of the dry gas being used for internal consumption (power generation), gas lift and some losses during raw gas treatment.

Current product destinations
Nostrum’s primary export destinations remain as follows:

  • Crude oil – A combination between Finland, Belarus and Azerbaijan. 85% is exported and 15% is sold domestically
  • Condensate – Russian Black Sea port of Taman, 100% is exported
  • LPG – Russian Black Sea ports, Central Asia and Eastern Europe
  • Dry gas – All gas is sold at the connection point to the Intergas Central Asia pipeline

Drilling

  • 43 wells currently producing at the Chinarevskoye field - 22 oil wells and 21 gas condensate wells
  • An extension to the exploration license has been submitted for the Rostoshinskoye field and an appraisal well at Rostoshinskoye is pending a flaring permit before testing can start
  • The 2017 drilling programme is under way with a plan to drill 7 wells during 2017 (6 production wells and 1 appraisal well)

Production schedule

  • 2017: average above 44,000 boepd; exit rate between 50,000 and 60,000 boepd
  • 2018: 50,000 – 80,000 boepd
  • 2019: 80,000 – 100,000 boepd

Should oil prices deviate materially the production guidance will be updated accordingly.