Financial Results for the first quarter ending 31 March 2023

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 in respect of the three months ended 31 March 2023. 

Q1 2023 Highlights:

Financial

• Revenues of US$17.4m (Q1 2022: US$60.2m). Although revenues decreased in Q1 2023, the management expects H1 and FY sales and revenues to remain in line with targets and expectations. Decrease in revenues resulting from declining production and relatively lower average product prices was in line with management expectations, while temporary oil inventory build-up of 254,000 boe (or equivalent of 2,822 boepd) due to transition to new offtake agreements and delivery destinations was realised in Q2 2023 and relevant revenues of approximately US$15 million recognised in that period.
• EBITDA¹ of US$4.6m (Q1 2022: US$40.5m) with EBITDA¹ margin of 26.4% (Q1 2022: 67.3%). Both EBITDA and EBITDA margin have been affected by the temporary oil inventory build-up mentioned above and the relevant H1 figures are expected to recover accordingly.
• The Group’s unrestricted cash position as at 31 March 2023 was US$191.8m (31 December 2022: US$233.6m), excluding restricted cash of US$22.6m as at 31 March 2023 (31 December 2022: US$31.0m).
• The Group continues to focus on cost optimisation to help manage liquidity.

 Operational

• Daily production after treatment for Q1 2023 averaged 10,479 boepd (Q1 2022: 14,683 boepd).
• Daily sales volumes for Q1 2023 averaged 7,278 boepd (Q1 2022: 14,059 boepd). Oil inventory as at quarter-end totalled approximately 254,000 boe which were sold in Q2 2023.
• The Group continues its well and reservoir management strategy through well workovers and rigless well intervention in 2023.
• The Group is continuing to progress with a tie-back project, budgeted for c.US$5m of capital expenditures. It will allow for the first ever third-party feedstock from Ural Oil & Gas LLP (“Ural OG”) to be received for treatment in the Group’s facilities with an expected start in Q4 2023.
• The Group, whilst not itself a target of sanctions imposed in connection with the conflict in Ukraine, continues to monitor the current and evolving lists of individuals and entities who are subject to sanctions with a view to compliance by the Group with all applicable sanctions and to ensuring that the Group’s ongoing activities are not materially affected by such sanctions.
• The Group continues to prioritise the safety of all staff and contractors as well as focussing on conducting sustainable operations.

Restructuring

On 9 February 2023, the Group completed the implementation of the restructuring initially announced on 23 December 2021 (the “Restructuring”) and the related lock-up and forbearance arrangements were terminated. The principal elements of the Restructuring are as follows:

• exchange of a portion of the Group’s legacy Notes Debt for the issuance to each Noteholder of a pro rata allocation of the New Notes, comprising US$250 million of new senior secured notes (the “SSNs”) and US$345 million of senior unsecured notes (the “SUNs”);
• conversion of the remainder of the Notes Debt into fully paid ordinary shares (the “New Shares”), resulting in the Noteholders holding 88.89% of the Enlarged Share Capital of the Company;
• issuance of the New Warrants, to be held by the Warrant Trustee on behalf of the holders of the SUNs from time to time, exercisable in full by a majority of such holders upon the occurrence of certain events to increase their holding of the Company’s Enlarged Share Capital to 90.00%; and
• certain new governance and cashflow arrangements.

Pursuant to the terms of the Restructuring the interest accrued on the SSNs and the SUNs from 1 January 2022. Accordingly, cash interest accrued to 9 February 2023 in the amount of US$17.5 million was paid in cash to the Noteholders upon the issuance of the SSNs and the SUNs. The next semi-annual cash interest payment is scheduled for 30 June 2023.

Further details of the Restructuring are contained in the prospectus dated 14 October 2022 (as supplemented) which is available on the Company’s website at https://www.nostrumoilandgas.com/investors/documents-circulars/. 

Sustainability

• Zero fatalities among employees and contractors during operations in Q1 2023 (Q1 2022: zero).
• Zero Lost Time Injury (“LTI”) in Q1 2023 (Q1 2022: zero)
• Zero Total Recordable Incidents (“TRI”) in Q1 2023 (Q1 2022: one).
• 1,113 tonnes of air emissions emitted in Q1 2023 against 6,309 tonnes permitted for 2023 under the Kazakhstan Environmental Code.

Positive Invest

• In March 2023, the Company agreed, subject to certain conditions, to acquire 80% of Positive Invest LLC  (“Positive Invest”), the company which holds the subsoil use rights to the contract No. 25 for estimation, development and production of hydrocarbons for the area “Kamenskoe” and the development area “Kamensko-Teplovsko-Tokarevskoe” (the “Stepnoy Leopard Fields”) in the West Kazakhstan region of the Republic of Kazakhstan (the “Positive Invest Contract”), for US$20 million (less a modest amount of  debt owed to Nostrum Oil & Gas Coöperatief U.A) (the “Proposed Acquisition”).
• Management estimates that the Stepnoy Leopard Fields hold between 50 mmboe and 150 mmboe of recoverable volumes which are considered contingent resources, with over 20% estimated to be liquids. Hence, the Proposed Acquisition will enable Nostrum to tie-in further resources in the region that can be processed at the Company’s gas treatment facilities. Upon completion of the Proposed Acquisition an affiliate of the Company will be appointed as the operator of the Stepnoy Leopard Fields under the Positive Invest Contract.
• The Sale and Purchase Agreement for the Proposed Acquisition has a long stop date of 30 June 2023, by which time all conditions precedent in relation to the Proposed Acquisition must be fulfilled or waived and the Proposed Acquisition completed. One regulatory condition precedent to completion has not yet been fulfilled and both parties are seeking to fulfil such condition so that completion may occur as soon as possible.

 Arfan Khan, Chief Executive Officer of Nostrum Oil & Gas, commented:

“The reduction in revenue in Q1 2023 was caused by the natural decline in the production as well as temporary oil stock build-up, which was realised in Q2 2023, and our FY 2023 production and sales volumes forecast remain on target. We continue to focus on cost optimisation to help manage liquidity.

As at 31 March 2023, the Group’s unrestricted cash position was in excess of US$191m and US$17.5 million was paid in cash to the Noteholders in the process of Restructuring. The next semi-annual cash interest payment is scheduled for 30 June 2023.

We are working on completion of the acquisition of the Stepnoy Leopard Fields and will update the market as soon as it occurs.

We will continue to build on the momentum achieved so far to capitalise on opportunities to add value to our assets.”

Sales volumes

The sales volume split for Q1 2023 was as follows:

The difference between production and sales volumes is primarily due to the internal consumption of gas.

Notes to press release

¹ EBITDA is defined as profit before tax + non-recurring expenses + finance costs + foreign exchange loss/(gain) + employee share-option adjustments + depreciation – interest income + other expenses/(income).

LEI: 2138007VWEP4MM3J8B29

Further information

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

Further enquiries

Ulugbek Makhmadiyarov – Head of Finance

ir@nog.co.uk

Instinctif Partners – UK

Tim McCall

Galyna Kulachek

Vivian Lai

+ 44 (0) 207 457 2020

nostrum@instinctif.com

Notifying person

Thomas Hartnett

Company Secretary

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) and the Astana International Exchange (ticker symbol: NOG). The principal producing asset of Nostrum Oil & Gas PLC is the Chinarevskoye field, which is operated by Zhaikmunai LLP, a wholly-owned subsidiary of Nostrum Oil & Gas PLC and the sole holder of the subsoil use rights with respect to the development of the 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 Company 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 nor 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 relevant 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.