News 2015

26 May 2015

Financial results for the First Quarter ending 31 March 2015

Financial results for the First Quarter ending 31 March 2015

Amsterdam, 26 May 2015

Nostrum Oil & Gas PLC (LSE: NOG) (“Nostrum”, or “the Company”), an independent oil and gas  company engaging in the exploration, development and production of oil and gas in the pre- Caspian Basin, today announces its results for the quarter ended 31st March 2015.

Financial highlights from the quarter

  • Revenue of US$100m, down 38% from Q4 2014 (US$161.6 million); additional revenue from  Q1 to be recognised in Q2 of approximately US$13m from export gas sales. The  transportation contract allowing the export of our dry gas sales was only signed in Q2  preventing us booking the additional revenue in Q1.
  • EBITDA of US$48 million, down 41% compared to Q4 2014 (US$81.5 million)
  • EBITDA margin remains strong at 49% (Q4 2014 – 50.4%)
  • Cash position of US$318 million and net debt of US$632 million
  • Fully funded capex programme both to maintain current production in 2015 and 2016 and to  complete construction of GTU3 in 2016
  • 32% of forecast liquids production (7,500 bopd) hedged at US$85 until February 2016

Operational highlights from the quarter

  • Total average daily production of 45,479 boepd, increase of 8.3% from Q4 2014 (42,011  boepd)
  • 2015 production guidance remains at 45,000 boepd
  • Total transport costs reduced by 34% from US$7.9 / boe in Q4 2014 to US$5.2 / boe in Q1  2015
  • Opex reduced by 19% from US$5.3 / boe in Q4 2014 to US$4.3 / boe in Q1 2015
  • GTU3 progressing on time and on budget; completion expected before end of 2016
  • On track for 2015 drilling target to complete 8 wells (6 production and 2 appraisal)

New Developments

  • The Board recommended that the shareholders approve the payment of a final dividend of  US$0.27 per Ordinary Share for the year ended 31 December 2014.

Kai-Uwe Kessel, CEO of Nostrum Oil & Gas commented:

“Q1 has been a challenging quarter financially as we have experienced far lower prices for our  products as compared to Q1 2014. However, the lower liquids price has been partially offset by  our improved gas sales revenues as a result of a new contract to export the majority of our dry  gas. This is the first year we are exporting our dry gas. I believe that the ability to do so will allow  Nostrum to realise a higher dry gas price on an annual basis than we have been able to achieve  in 2014. From an operational perspective I am very pleased. We continue to produce at 45,000  boepd and have made good progress on many of the key KPIs we targeted from the end of last  year. Our focus continues to be on optimising costs and ensuring the GTU construction on site takes place smoothly and without delay. We remain on track to complete the GTU by the end of  2016 and look forward to doubling our production capacity.”

Q1 2015: Nostrum’s resilient results

US$ million

Q1 2015

Q4 2014

Change

Revenue

100.3

161.6

(37.9)%

EBITDA

49.6

81.5

(39.2%)

EBITDA Margin

49.4%

50.4%

(2.0%)

US$ million

Q1 2015

FY 2014

Cash balance

318.3

400.4

Net debt

632.0

544.8


Hedging

On 14 February 2014, Nostrum entered, at a nil upfront cost, into a new hedging contract  covering oil sales of 7,500 bopd, or a total of 5,482,500 boe running through 29 February 2016.  Based on the hedging contract, a put was bought at US$85/bbl, which protected against any fall  in the price of oil below US$85/bbl.

OPERATIONS

Nostrum’s operational results reflect another successful first quarter. The performance was  underpinned by continued steady production at the Chinarevskoye field and the consistent  performance of the existing gas treatment facility. We are looking forward to delivering the next  Gas Plant on time and on budget, as well as further production growth in 2017.

Production Split

The product split for Q1 2015 was as follows:

PRODUCTS

Q1 2015 Average  Production

Q1 2015   Product Mix %

Crude Oil & Stabilised Condensate

18,547

41%

LPG (Liquid Petroleum Gas)

4,790

10%

Dry Gas

22,141

49%

TOTAL

45,479

100%



Current product destinations

Nostrum’s primary export destinations for Q1 2015 were as follows:

  • Crude oil – Neste Oil’s refinery in Finland
  • Condensate – Russian Black Sea port of Taman
  • LPG – Russian Black Sea ports

The Company has no current plans to change any of these export destinations.

Drilling

Q1 2015 Drilling Overview

  • 18 oil wells and 17 gas condensate wells were producing at the Chinarevskoye field
  • 2 gas condensate wells have been completed during Q1 2015

2015 Drilling schedule

Our drilling capex is scalable, based on oil prices. Under the current oil price, our base case  drilling programme for the remainder of 2015 is to complete a further 6 wells:

  •  2 gas condensate wells currently being drilled
  • 1 oil well currently being drilled
  •  1 new production wells will be drilled during 2015 (Chinarevskoye Field)
  • 2 appraisal wells will be drilled during 2015 (Chinarevskoye and Rostoshinskoye fields)

Production schedule

Based on the current drilling programme stated above and taking into account the current oil  price we can provide the following production guidance. Should oil prices deviate materially the  production guidance will be updated accordingly on an annual basis.  

  • 2015 – Approximately 45,000 boepd
  • 2016 – Approximately 45,000 boepd
  • 2017 – Approximately 70,000 boepd
  • 2018 – Approximately 100,000 boepd

Progress on development of GTU3

Nostrum’s construction of GTU3 pursuant to its fully financed expansion plan continues on  budget for completion on time by the end of 2016, with construction costs below US$500m.

Highlights from the 2014 Ryder Scott Reserves report:

  • Proved reserves (1P) at 192.2mm boe
  • Production of approximately 21mm boe since the last report, with a proven reserve  replacement ratio of over 65%
  • Proved + Probable reserves (2P) remained above 550mm boe at 571.1mm boe (2013:  582mm boe). The reduction was primarily a result of production exceeding Proved +  Probable reserves (2P) growth
  • The 3 additional licenses’ reserves have remained unchanged at 98.2mm boe

31 August 2013

31 December 2014

Chinarevskoye

3 licenses

Total

Chinarevskoye

3 licenses

Total

Proven

199

0

199

192

0

192

Probable

284

98

382

281

98

379

2P

483

98

581

473

98

571

Exploration license extension

The supplementary exploration extension licence for the Rostoshinskoye field is pending. The  extension is expected to be obtained by the end of H1 2015.

Analyst and investor call

Nostrum's management team will be available for a Q&A session for analysts and investors on  the day of the announcement (Tuesday, 27 May 2014), at 14:00 UK time (GMT+1). A  presentation will be available online in advance of the call.

If you would like to participate in this call, please register by clicking through the following link in  advance. Conference call registration

A presentation will also be available online to accompany the call at www.nog.co.uk.

Download the financial statements: 1Q 2015 Consolidated Financial statements

Further information

For further information please visit www.nog.co.uk
Further enquiries
Nostrum Oil & Gas PLC – Investor Relations
Kirsty Hamilton-Smith
Bruno G. Meere
+44 203 740 7430
ir@nog.co.uk

Instinctif Partners - UK
Tony Friend
David Simonson
Anca Spiridon
Catherine Wickman
+ 44 (0) 207 457 2020

Promo Group Communications – Kazakhstan
Asel Karaulova
+ 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.