Nostrum Oil & Gas Revenue Declines But Hedges Against Low Oil Prices

Nostrum Oil says GTU3 delays will hurt annual production in 2017, 2018

Nostrum Oil & Gas’ revenue declined as it hedged prices to mitigate against the falling price of oil.

Currently Brent crude and West Texas Intermediate prices are hovering around $48 per barrel as OPEC members consider a cap on production.

For the nine months ended 30 September, revenue fell 35% to $245.1m, compared to the same period last year.

Earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 30% to $142.6m, but the EBITDA margin grew to 58.2% from 54.1%.

Opex per barrel of oil equivalent decreased about 15% to $3.5, while transportation costs per barrel of oil equivalent boe was $5.2, down 16%.

At the end of September, the company had $94.3m in cash and a net debt to EBITDA ratio over the last twelve months of 5.1.

The company received in excess of $27m from the hedge entered into in December 2015.

A total of 15,000 barrels of oil equivalent per day was hedged with a strike price of $49.16 until December 2017.

Construction of GTU3, the third unit of the gas treatment facility, is progressing on budget, and expected to be completed next year, while the connection to the KazTransOil pipeline is due for completion by the second quarter of 2017.

Due to the fall in oil prices, the company chose to phase payments of GTU3 over 2016 and 2017 in order to match the hedge on prices it made.

Average daily production for the nine month period was 38,901 barrels of oil equivalent per day, down from 44,042, last year, and production guidance for 2016 remains at 40,000.

Chief executive Kai-Uwe Kessel said: “Our cost cutting programme has yielded further success and we look forward to realising a significant decrease in transportation costs once the KazTransOil pipeline connection is complete by the second quarter next year.

“Our hedge of 15,000 barrels of oil equivalent per day, secured in December last year, has allowed us to execute GTU3 while maintaining the company’s liquidity position. Our focus now turns towards the 2017 drilling programme and delivering our major infrastructure project, GTU3, on time and on budget.”

Shares in Nostrum Oil & Gas were down 0.06% to 429.75p at 1444 GMT.

About Nostrum

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 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 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.