Financial Results for the Third Quarter and Nine Months ending 30 September 2020

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, 17 November 2020

 Financial Results for the Third Quarter and Nine Months ending 30 September 2020

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 financial results in respect of the nine-month period ending 30 September 2020.

Highlights:

Financial

• Revenues of US$135.8 million (9M 2019: US$250.3 million).
• Net operating cashflows¹ of US$68.0 million (9M 2019: US$160.2 million).
• EBITDA² of US$60.3 million (9M 2019: US$162.1 million).
• EBITDA margin on 44.4% (9M 2019: 64.8%).
• Closing cash³ for the period of US$88.7 million (December 31, 2019: US$93.9million).
• Total debt⁴ at 30 September 2020 of US$1,163.0 million, including accrued interest of US$57.1 million.  Net debt of US$1,074.3 million at 30 September 2020.
• Continued focus on cost optimization to help manage the Company’s liquidity.

Operational

• COVID 19 is of utmost concern.  Actions taken to protect the safety of all staff and contractors and mitigate any impact on operations. In particular, stringent testing and follow-up procedures are in place for all field personnel. To date, no production has been lost because of COVID 19.
• 9M 2020 average production after treatment of 23,129 boepd with average sales volumes for the period of 22,269 boepd.  We revise our guidance for the average daily sales volumes for 2020 from 19,000 boe to 20,000 boe.
• As previously reported, drilling has been halted for 2020. The successful workover and well intervention activity, completed in August 2020, has reduced the rate of decline previously expected in the field.
• Continuing our focus on monetizing spare capacity in the gas treatment facility through processing third party volumes.
• On 8 October 2020, the Company announced the disposal of the Darinskoye and Yuzhno-Gremyachenskoye licences.

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 cash and cash equivalents including current and non-current investments and excluding restricted cash}
4. ^{Total debt does not include finance lease liabilities under IFRS16 Leases}

Bond Restructuring

• As previously announced, Rothschild & Cie were appointed as financial advisers and White & Case as legal advisers to assist the Company in the restructuring of the 0% Senior Notes due 2022 and 7.0% Senior Notes due 2025 (together, the “Notes”) issued by Nostrum Oil & Gas Finance B.V.
• PJT Partners (UK) Limited were appointed as financial advisers and Akin Gump Strauss Hauer & Feld as legal advisers to an informal ad hoc committee of holders of the Notes.
• On 24 July 2020, Nostrum announced that it planned to utilise the applicable grace periods for the interest payments due on 25 July 2020 and 16 August 2020 with respect to the Notes. The 30-day grace period allowed the Company to continue active discussions with the financial and legal advisers to an informal ad hoc committee of holders of the Notes with a view to entering into a forbearance agreement with the holders of the Notes in relation to those interest payments.
• On 23 October 2020, the Company announced that, together with certain of its subsidiaries (the “Note Parties”), the Company had entered into a forbearance agreement (the “Forbearance Agreement”) with members of an informal ad hoc committee of holders of the Notes (the “AHG”). The forbearance period initially expires at 4 p.m. GMT on 20 December 2020 (the “Initial Expiration Date”), but the Initial Expiration Date is automatically extended to 4 p.m. GMT on 18 February 2021 and then again to 4 p.m. GMT on 20 March 2021 unless the Forbearance Agreement has been terminated by a majority decision of the forbearing members of the AHG. A final extension period from 20 March to 19 May 2021 requires the approval of all of the forbearing members of the AHG. Pursuant to the Forbearance Agreement, members of the AHG have agreed to forbear from the exercise of certain rights and remedies that they have under the indentures governing the Notes. The agreed forbearances include agreeing not to accelerate the Notes’ obligations as a result of the missed interest payments (or the next missed interest periods if they occur prior to the expiry of the Forbearance Agreement).
• The Forbearance Agreement is subject to certain conditions, including:
  • Any representation or warranty made by any of the Note Parties under the Forbearance Agreement continuing to be true and complete in all material respects as of the date of the Forbearance Agreement;
  • A portion of the missed interest payments will be paid into a secured account opened for the benefit of the holders of the Notes;
  • The appointment by the AHG of an observer who shall be entitled to attend and speak, but not vote, at any meetings of the Board or Committees of the Company where certain defined matters are to be discussed;
  • The engagement of certain professional and technical advisors on behalf of the AHG;
  • The observance by the Company and its subsidiaries of certain operating and other restrictions and limitations; and
  • The provision of certain financial and operating information to the advisors of the AHG.
• The Company has also agreed to pay, or procure the payment by the issuer of, certain consent fees in cash (the “Consent Fees”) to each forbearing holder. The Consent Fees are payable by reference to the total aggregate principal amount of the Notes outstanding. The first Consent Fee for the first 90 days is 29.7866 basis points, then 19.8577 bps for the following 60 days and 9.9288 bps for the subsequent 30 days. The Consent Fees will be paid on a rolling basis.  In this regard, the Company has communicated, through the clearing systems, an announcement inviting all other holders of the Notes to join the Forbearance Agreement within a limited period of time.

Atul Gupta, Chief Executive Officer of Nostrum Oil & Gas, commented:

“The operating environment remains challenging. Low prices for our products, especially gas, are likely to continue into 2021 and, whilst we have not to date lost any production due to the pandemic, the threats posed by COVID 19 both to the health and safety of our people and contractors, and to our operations, are of utmost concern. We continue to exercise extreme caution to ensure the safety of our people and contractors. 

The signing of the Forbearance Agreement enables us to work with our bondholders and shareholders to restructure the debt and so secure the future of the Company. Our continued discussions with third parties to secure additional volumes to commercialise our world class infrastructure remain a priority.

I would like to thank our people and our contractors for their understanding, dedication and flexibility that have enabled us to keep operating throughout the pandemic.”  

Sales volumes

The sales volumes split for 9M 2020 was as follows:

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

Reserves

The Company has carried out an internal review of its reservoir and production data which indicates that its undeveloped reserves are subject to significant productivity risk. Furthermore, the outlook for hydrocarbon product prices at which the Company sells its products, particularly gas, remains challenging. Against this background the Company believes that the 2020 independent reserves audit, which is currently underway and scheduled to complete in 1Q 2021, may lead to a material downgrade in the Company’s Proven and Probable reserves.

9M 2020 Well Stock

• As at 30 September 2020, the Company had 46 wells in production (24 oil wells and 22 gas-condensate wells).

 2020 Drilling and sales volume guidance

• The Company has halted all drilling in 2020.
• 2020 production forecast increased to 21,000 boepd, corresponding to sales volumes of 20,000 boepd.

Summary of the financial Results for 9M to 30 September 2020

Conference Call

 Nostrum’s management team will present the 9M 2020 Financial Results and will be available for a Q&A session with analysts and investors today, 17 November 2020, at 1400 GMT.  If you would like to participate in this call then please register by clicking the following link and following instructions: Results Call

Download: Q3 2020 Results Presentation

Download: Q3 2020 Financial Statements

LEI: 2138007VWEP4MM3J8B29

Further information

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

Further enquiries

Martin Cocker – Chief Financial Officer
ir@nog.co.uk

Instinctif Partners – UK
Mark Garraway
Sarah Hourahane
Galyna Kulachek
+ 44 (0) 207 457 2020
nostrum@instinctif.com

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 oil and gas field through the same subsidiary. Located in the pre-Caspian basin to the north-west of Uralsk, this exploration and development field is situated approximately 100 kilometres 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 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 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.