Q1 Financial Results

RNS Number : 1672O

Nostrum Oil & Gas PLC

26 May 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
	Chinarev-skoye	3 licenses	Total	Chinarev- skoye	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: http://www.rns-pdf.londonstockexchange.com/rns/1672O_1-2015-5-25.pdf

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

[phone]

[e-mail]                                                                                                    

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.

 

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