News 2018

31 Jul 2018

Operational Update for the Six Months ending 30 June 2018

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

London, 31 July 2018

First Half 2018 Operational Update

Nostrum Oil & Gas PLC (LSE: NOG) (“Nostrum”, or “the Company”), 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 operational update in respect of the six-month period ending 30 June 2018. This update is being issued in advance of the release of Nostrum’s consolidated accounts for the same period. The information contained in this update remains subject to review by the Company’s independent auditors.


Highlights:

Operational

  • H1 2018 average production after treatment of 32,524 boepd
  • H1 2018 average sales volumes of 29,886 boepd
  • Well 201 on line as of 30 July with initial production over 1,000 boepd
  • Well 40 producing stable volumes over 1,500 boepd for the last four weeks
  • Current sales volumes as of 30 July in excess of 32,000 boepd

Financial

  • Revenues expected to be in excess of US$190 million (H1 2017: US$210 million)
  • Cash position in excess of US$125 million (Q1 2018: US$127 million)
  • Total debt expected not to exceed US$1,125 million and net debt expected not to exceed approximately US$1,000 million as at 30 June 2018


Kai-Uwe Kessel, Chief Executive Officer of Nostrum Oil & Gas, commented:

“I am delighted to report some positive drilling results during Q2. With successful completion of drilling operations at well 40 in the northern part of the Chinarevskoye exploration license area we confirmed the discovery made in well 724 at the end of last year in the upper Devonian formation. Well 40 has been tested with flow rates exceeding 1,500 boe per day and is currently undergoing long term testing and detailed investigations to determine reserves and production capabilities. This is a very significant result as it can potentially open up a new area in the Chinarevskoye field that is rich in hydrocarbons and of material scale. This is one of our highest yielding condensate wells in the field’s history. We will now deepen another old well, 52, in order to try to test the productivity of the same reservoir further to the east. We are focused on low cost ways to increase near term production and open up the potential of the northern area of our field. I am pleased that we have now brought well 201 on line. This is producing from the Biski reservoir in the east where we have recently encountered issues with water inflow to some wells. Drilling of two additional production wells in the same reservoir has started and well 234 has reached the Biski reservoir in the western part of the licence area.


Sales volumes
The sales volumes split for H1 2018 was as follows:

Products

H1 2018 sales volumes

(boepd)

H1 2018 Product Mix (%)

Crude Oil & Stabilised Condensate

11,636

39

LPG (Liquid Petroleum Gas)

3,878

13

Dry Gas

14,372

48

Total

29,886

100

The difference between production after treatment and sales volumes is due to part of the dry gas being used for internal consumption (power generation), gas lift and some losses during transportation.


Drilling

  • As of 30 June 2018, 44 wells producing at the Chinarevskoye Field - 23 oil wells and 20 gas condensate wells, in addition to one appraisal well undergoing production testing
  • Our third rig has arrived at field site and we are currently drilling well 234 in the Biski West, well 228 in the Biski East and well 52 in the North East corner of the field to further see if we can extend the discovery made in the Northern Upper Devonian reservoirs we encountered in wells 40 and 724.
  • Well 40 has been successfully deepened and has undergone pressure build up followed by an open hole production test with an 8 mm choke. We have had the well for more than a month in test operations with production above 1,500 boepd, of which over 1,250 boepd was condensate. We will keep testing the well until August 24th when we will undergo another pressure build up. Application to the Ministry of Energy has been made for extension of a production permit to the north to cover the area of the newly made discoveries.
  • Well 201 has been drilled and completed. The well has been put in stable production above 1,000 boepd as of July 30 2018.
  • We plan to drill two further wells (228 and 231) in the Biski East reservoir. This leaves one rig available at the end of Q3 for another well in 2018. We are currently evaluating the options where best to place such well.


Production guidance

  • Production guidance remains in line with our Q1 results update. Following the loss of the first production well in Q1 we expect sales volumes to average 32,000 boepd for the year.
  • Given the revision downwards in Q1 of our 2018 production the forecast figures calculated by Ryder Scott will also likely be impacted. We will be providing management guidance for 2019 production in the Q3 results call when we have agreed the drilling plan for 2019.
  • The longer-term guidance of being able to fill both our gas plants once GTU3 is complete remains. Our target is to reach full capacity of 4.2bn cubic metres per annum within the next 3-5 years. The speed at which we ramp up is directly correlated to the speed of drilling and the number of rigs we have on field site. Currently the forecast is to have three rigs in 2019, five rigs in 2020 and six rigs in 2021.


Progress on the development of GTU3

In Q2 2018 all installation work was completed on GTU3 and welding works were substantially completed. The filling of internal columns is underway and is expected to be finished in early August. Final civil works including fencing, construction of roads and paving are well underway. The first units for instrument air and Nitrogen production were successfully commissioned and put in operation.

The below figures reflect all future cash payments expected to be made (excluding VAT) on GTU3.

Remaining cash spend on GTU3 (excl VAT) as at 30 June 2018

US$31 million


Annual General Meeting

On 5 June 2018 the Company held its Annual General Meeting where all resolutions set out in the Notice of Annual General Meeting passed with the requisite majority. For more information please see AGM.


Release of Nostrum’s H1 2018 Financial Results

Nostrum plans to release its audited consolidated accounts for H1 2018 ending 30 June 2018 on 21 August 2018.

LEI: 2138007VWEP4MM3J8B29


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-Gremyachinskoye 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.