Nostrum Oil Swings To Loss, Plans To Lift Output And Refinance Bonds

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

LONDON (Alliance News) – Nostrum Oil & Gas PLC on Tuesday said a large loss its hedging contract and a big drop in revenue caused the company to turn to a loss in 2016, but it said production should be higher in 2017, when it will also look to refinance some of its bond debt.

Nostrum shares were up 2.2% at 429.30 pence per share on Tuesday.

The oil and gas producer said revenue fell to USD348.0 million in 2016 from USD448.9 million the year before, as production dipped to 40,351 barrels daily from 40,391 barrels in the previous year. Despite the fall in revenue, cost of sales rose to USD199.5 million from USD186.6 million.

That resulted in gross profit of USD148.5 million versus USD262.3 million in 2015.

The major difference in costs during the year was a USD63.2 million loss from the fair value of the hedging contract covering oil sales, whereas last year it booked a USD37.1 million gain.

Nostrum turned to a pretax loss of USD64.5 million in 2016 from the USD72.3 million profit reported in 2015.

No dividend was declared. The dividend in 2015 was USD0.27 per share.

Net operating cashflows in 2016 were USD206.5 million compared to USD153.3 million the year before, and cash at the end of the year stood at USD101.1 million after falling from USD165.6 million a year earlier. Net debt at the close of the year was USD857.9 million, up from USD785.9 million. Net debt is now 4.4 times higher than annual earnings before interest, tax, depreciation and amortisation, whereas last year it was 3.3 times higher.

Nostrum said it reduced operating costs by 14% in 2016 while transport costs were down 19%.

The company plans to drill seven wells at Chinarevskoye in Kazakhstan in 2017, including one appraisal well. The construction of the third gas treatment unit continues in line with budget guidance with completion expected during the second half of 2017.

The aim is to keep production above 44,000 barrels daily in 2017 while completing GTU3, which will more than double its gas processing capacity in the second half of the year, it said.

Nostrum said it plans to keep a minimum of USD50.0 million on the balance sheet “at all times”, while it will look to refinance all or part of its outstanding bond debt.

By Joshua Warner;; @JoshAlliance

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