Nostrum Oil Lifts Earnings And Revenue, Pledges More Funds To GTU3

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

LONDON (Alliance News) – Nostrum Oil & Gas PLC on Tuesday said a rise in revenue offset tighter margins in the first quarter of 2017, resulting in higher earnings, as it pledged an additional USD34 million to its major GTU3 project.

Nostrum shares were up 0.3% on Tuesday at 495.54 pence.

The company said production in the first three months of the year rose to an average of 48,743 barrels of oil equivalent each day from 38,754 barrels per day the year before, with sales volumes rising to 43,279 barrels daily versus 38,754 barrels daily.

43 wells are currently producing at the Chinarevskoye field in Kazakhstan – 22 oil wells and 21 gas condensate wells.

That resulted in a lift in revenue during the period to USD111.9 million from USD73.9 million, up 51%. Nostrum’s operating costs remain impressively low at USD4.0 per barrel including transport costs, down from USD4.90 per barrel a year earlier.

Excluding transport, operating costs averaged USD3.4 per barrel from USD3.5 per barrel the year before.

“First quarter was an excellent quarter with strong cash generation following a very consistent quarter of production and strong product prices relative to 2016. In addition to the strongest revenues we have had for over a year, I am pleased that operating costs remain below USD4 per barrel which is allowing us to maintain healthy margins,” said Chief Executive Kai-Uwe Kessel.

“We will continue to keep operating costs at a minimum to ensure the business is protected in the event oil prices fall back below USD50 in the near future,” he added.

That helped push earnings before interest, tax, depreciation and amortisation to USD68.7 million, 33% higher than USD51.7 million the year before, despite the Ebitda margin tightening to 61.4% from 70.0%.

Cash at the end of March had risen to USD122.8 million from USD101.1 million at the end of 2016 while net debt dropped to USD841.3 million from USD857.9 million.

“As we get closer to the deadline for GTU3 we have been analysing the project to ensure it can have first gas running through it before the end of the year. The Board has approved an increase in the budget by USD34 million to ensure sufficient resources are available to achieve this. We remain focused on delivering GTU3 before year-end and will ensure we keep costs to an absolute minimum to meet our objectives,” said Kessel.

A total of USD399 million has been spent on GTU3 to date from a total budget of USD532 million, with the extra funding mainly to be used to increase resources at the field site. The original total budget was thought to be no more than USD500 million.

GTU3 represents the development of a third unit at the gas treatment facility.