TIDMNOG
RNS Number : 3563Y
Nostrum Oil & Gas PLC
21 August 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, 21 August 2018
Financial Results for the First Half and Six Months ending 30
June 2018
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 six-month period ending 30 June 2018.
Highlights:
Financial:
-- Revenue of US$191.5 million (H1 2017: US$210.0 million)
-- Net operating cash flows(1) of US$99.9 million (H1 2017: US$116.8 million)
-- EBITDA(2) of US$113.2 million (H1 2017: US$120.6 million)
-- EBITDA margin of 59.1% (H1 2017: 57.4%)
-- Closing cash(3) for the period of US$127.6 million (Q1 2018: US$132.3 million)
-- Total debt of US$1,127.9 million and net debt of US$1,000.2 million as at 30 June 2018
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 current production over 1,000 boepd
-- Well 40 producing stable volumes averaging over 1,500 boepd since early July
-- Current sales volumes in excess of 32,500 boepd
Kai-Uwe Kessel, Chief Executive Officer of Nostrum Oil &
Gas, commented:
"The first half of 2018 was challenging from an operational
perspective. The critical focus for the team was on demonstrating
we can stabilise production. I am delighted to show the first steps
of this initiative coming to fruition. We have had a positive
result on the deepening of well 40 in the northern area of the
field. With production currently over 2,000 boepd of gas-condensate
with a high condensate yield this could have the potential to open
up a new area for us to develop in our Chinarevskoye field. Newly
drilled well 201 also came on line in the Biski North East
reservoir.
I am also delighted that we have signed our binding agreement
with UOG to purchase and process their hydrocarbons from the
Rozhkovskoye field. This is an important initial step to
demonstrate the value our infrastructure can generate in the
future. I believe this is an excellent deal for both parties and we
will continue to look for other value accretive deals in the
region. We are now in the final stages to achieve completion of
GTU3 before the end of 2018. We are at a very exciting stage of
Nostrum's development and we are committed to realising its full
potential going forward."
Other News
Binding agreement with Ural Oil & Gas LLP
On 2 August 2018 Nostrum announced that through its subsidiary
Zhaikmunai LLP it entered into binding agreements to purchase and
process third party hydrocarbons delivered by Ural Oil & Gas
LLP ("UOG").
UOG is a company that is owned by KazMunaiGas ("KMG") (50%),
Sinopec (27.5%) and MOL Group ("MOL") (22.5%). According to the
2017 KMG Annual Report, the Rozhkovskoye field has 196 million boe
2P reserves booked. Research produced by Wood Mackenzie states that
the company has already drilled and completed eight wells in the
Rozhkovskoye field. The Rozhkovskoye field is within 20km of
Nostrum's Chinarevskoye field.
Once UOG has obtained all necessary internal approvals they will
fund the infrastructure required to deliver the hydrocarbons to the
boundary of the Chinarevskoye field. The high level commercial
terms comprise of two parts. Firstly, a tolling fee for the
stabilisation of liquid condensate which will be US$8 per barrel
and secondly the purchasing of raw gas from UOG at a price to be
paid at the point of delivery at entry gate of our GTU's.
Sales volumes
The sales volumes split for H1 2018 was as follows:
Products H1 2018 sales volumes H1 2018 Product
(boepd) 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 North
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 currently above 2,000 boepd, of which
roughly 1,500 boepd was condensate. We will keep testing the well
until August 24(th) when we will undergo another pressure build up.
Application to the Ministry of Energy has been made for
prolongation/extension of our license 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 for
the location of this 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
from Chinarevskoye and surrounding licences. 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 before the end
of Q3. 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 to be made
excluding VAT on GTU3.
Remaining GTU3 Cash Spend (excl US$31 million
VAT)
as at 30 June 2018
Conference call
Nostrum's management team will present the H1 2018 Financial
Results and will be available for a Q&A session with analysts
and investors today at 14.00 pm BST, 21 August 2018. If you would
like to participate in this call, please register by clicking on
the following link and following instructions: Results Call
Download: H1 2018 Results Presentation
Download: H1 2018 Interim Management Report and Reviewed
Financial Statements
Download: Q2 2018 Interim Management Report and Unreviewed
Financial Statements
Disclosure of inside information in accordance with Article 17
of Regulation (EU) 596/2014 (16 April 2014) relating to Nostrum Oil
& Gas PLC and Zhaikmunai LLP
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
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). 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.
H1 2018: Nostrum Financial Results
In millions of US$ (unless H1 2018 H1 2017 Variance Variance
mentioned otherwise) in %
Revenue 191.5 210.0 (18.5) (8.8)
-------- -------- --------- ---------
EBITDA 113.2 120.6 (7.4) (6.1)
-------- -------- --------- ---------
EBITDA margin (%) 59.1 57.4 - -
-------- -------- --------- ---------
In millions of US$ (unless H1 2018 Q1 2018 Variance Variance
mentioned otherwise) in %
Cash Position 127.6 132.3 (4.7) (3.6)
-------- -------- --------- ---------
Net Debt 1,000.2 971.9 28.3 2.9
-------- -------- --------- ---------
Revenue, EBITDA and Profit for the Period
Revenue from sales of crude oil, stabilised condensate, LPG and
dry gas over the period amounted to US$191.5 million, down 8.8% on
the same period last year due to lower sales volumes. EBITDA was
US$113.2 million with an EBITDA margin of 59.1%. Loss for the
period was US$1.9 million.
Cost of sales
The cost of sales was US$82.8 million, a decrease from the H1
2017 figure of US$88.4 million. This is partially due to reductions
in depreciation and repair and maintenance.
Cash resources and Net debt
The Group ended the period with US$127.6 million in cash and
cash equivalents (Q1 2018: US$132.3 million). Net debt at the end
of the period was US$1,000.2 million (Q1 2018: US$971.9
million).
Hedging
On 4 January 2018, Nostrum entered into a hedging contract
equating to production of 9,000 barrels of oil per day. The hedging
contract is a zero-cost capped collar with a floor price of
US$60.0. The Group has covered the cost of the floor price by
selling a number of call options with different strike prices for
each quarter; Q1:US$67.5; Q2:US$64.1; Q3:US$64.1; and Q4:US$64.1.
The amount of upside given away has been capped through the
purchase of a number of call options with different strike prices:
Q1:US$71.5; Q2:US$69.1; Q3:US$69.6; and Q4:US$69.6. There were no
upfront costs to the Company for the hedging contract. The hedging
contract matures on 31 December 2018 and is settled in cash on a
quarterly basis.
The average Brent price during Q1 2018 resulted in no
settlements taking place between Nostrum and its hedging
counterparty during this period (Q1 2018 average Brent price =
US$67.2/bbl, Q1 2018 low strike price =US$67.5/bbl). During Q2 2018
the Company was required to make a payment of US$4.1 million as the
average Brent price was above the higher call strike price (Q2 2018
average Brent price = US$75.0/bbl, Q2 2018 high strike price =
US$69.1/bbl. The Company remains hedged on 9,000 barrels of oil per
day at a floor price of US$60.0.
(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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SEMFUSFASEFA
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