TIDMNOG
RNS Number : 5537I
Nostrum Oil & Gas PLC
27 November 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, 27 November 2018
Financial Results for the Nine Months ending 30 September
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 nine-month period ending 30 September 2018.
Highlights:
Financial:
-- Revenue of US$311.4 million (9M 2017: US$303.7 million)
-- Net operating cash flows(1) of US$151.3 million (9M 2017: US$131.7 million)
-- EBITDA(2) of US$187.7 million (9M 2017: US$171.5 million)
-- EBITDA margin of 60.3% (9M 2017: 56.5%)
-- Closing cash(3) for the period of US$102.4 million
-- Total debt of US$1,107.4 million and net debt of US$1,005.0 million as at 30 September 2018
Operational:
-- 9M 2018 average sales volumes of 30,523 boepd (9M 2018 field production: 31,757 boepd)
-- 42 wells currently producing at the Chinarevskoye field - 23
oil wells and 19 gas-condensate wells
-- The third Gas Treatment Unit ("GTU3") to be mechanically
complete by the end of December 2018 with commissioning to be
finished in 2019 at an extra cost of US$30 million.
Kai-Uwe Kessel, Chief Executive Officer of Nostrum Oil &
Gas, commented:
Q3 saw the first quarter-on-quarter increase in the Company's
sales volumes since Q1 2017. Over that period, we have faced
unexpected challenges in our primary gas condensate producing
reservoir (Biyski North-East) with increased water inflow to
existing wells on the flanks of the structure. In addition, the
first production well (224) drilled in the reservoir this year,
also a flank well, encountered water. The combined effect of these
events and the natural decline have reduced forecast average daily
sales volumes from the main producing reservoir by more than 10,000
boepd over the last 18 months. Furthermore, operations at well 234
targeting 92m barrels of probable reserves in the West of the field
(Biyski West) are currently under technical review following a
wellbore collapse during the final stages of drilling.
We are continuing to evaluate the water issues in the Biyski
North-east reservoir and also the best way forward to complete the
multi-frac appraisal well 234 in the West of the field. The
technical work required to be able to move forward with further
drilling activities in both of these areas will take approximately
9-12 months. As a result, the drilling programme for H1 2019 will
focus on the Northern area of the field where we will look to
appraise and develop the discoveries made in 2017 and 2018 with
well 40 and well 724.
With drilling in H1 2019 just focusing on the Northern area we
will be conducting the 2019 drilling programme with only two rigs.
With two rigs on site for 2019 we will not be able to drill as many
wells as we had previously forecast. In addition, the Northern area
is not yet fully appraised so carries greater uncertainty in
predicting potential production volumes. As a result we are
changing our approach to production guidance so as not to include
any appraisal wells to be drilled in 2019. This means that the
average forecast field production for 2019 will be 30,000 boepd
corresponding to sales volumes of approximately 28,000 boepd. (The
difference of 2,000 boepd between the field production and sales
volume is largely the amount of produced gas that is consumed
within our extensive processing facilities).
From a financial perspective the Company maintains a solid cash
position due to continued cost reduction across the business and
improved prices for our sales products during 2018. At the close of
Q3 2018 we had US$102m of cash on our balance sheet with a large
US$64m receivables balance due in October from product sales,
including two cargos of condensate. At the end of November, we
expect to have over US$130m of cash on our balance sheet following
the unwind of this receivables balance. The Company will aim to
hold over US$100m of cash on our balance sheet throughout 2019. We
continue to look at hedging options to help reduce any exposure to
falls in the oil price during 2019. Capital preservation during
2019 needs to remain a priority for the Company while we work
through the challenges we face at the Chinarevskoye field.
Sales volumes
The sales volumes split for 9M 2018 was as follows:
Products 9M 2018 sales volumes 9M 2018 Product
(boepd) Mix (%)
Crude Oil & Stabilised Condensate 12,217 40
--------------------- ---------------
LPG (Liquid Petroleum Gas) 3,891 13
--------------------- ---------------
Dry Gas 14,415 47
--------------------- ---------------
Total 30,523 100.00
--------------------- ---------------
Q3 2018 Drilling
-- Currently three rigs operating on the Chinarevskoye field
with wells 228 and 231 nearing completion and expected to come on
stream in the next six weeks. In addition one new appraisal well
has been spudded (well 703) to target the Vorobyovski horizon in
the Northern part of the licence area.
-- Workover activity continued in Q3 2018 on well 45 on an
Electric Submersible Pump (ESP) replacement and to repair the
annulus in well 40.
2019 Drilling and sales volumes guidance
-- In 2019 the number of active drilling rigs will be reduced from three to two rigs.
-- With two rigs we will be able to drill up to six wells during 2019.
-- The first two wells will be in the Northern area of the field around well 40.
-- The location for additional wells will be provided after we
have more data from the wells currently being drilled.
-- For 2019 production guidance we are assuming a base case of
just the existing producers that will be on line at the end of
2018. Given the fact we are not drilling in proven areas of the
field and the range of possible outcomes from the Northern wells is
extremely wide we have decided not to include them in our guidance
figures. Therefore taking in to account two new producers in the
next six weeks and then the natural decline of the field, we are
guiding average production of 30,000 boepd in 2019 corresponding to
sales volumes of 28,000 boepd. The difference of 2,000 boepd
between the field production and sales volumes is largely the
produced gas that is used as fuel within the production facility
and is expected to increase relative to previous years as we start
up GTU3.
-- Beyond 2019 we are not in a position to guide until we have
completed the drilling in the Northern area and received the final
technical review on the Biyski West and North-East reservoirs.
-- On the Trident licences we received an extension of
Darinskoye licence by four years until end of the year 2022 and are
in the process of applying for a further extension of the
Rostoshinskoye licence for four years.
Progress on the development of GTU3
GTU3 is forecast to be mechanically complete in December 2018.
The storage facilities for Liquefied Petroleum Gas are finished and
ready for use. The central heating system has also been
successfully commissioned. The compressor buildings are finished,
and the compressors are ready for commissioning. The remaining
areas awaiting completion are all linked to a delay in welding at
the site. This has been due to a lack of skilled welders being
available over the summer to perform welding operations on the
stainless steel pipes. Given the delays we will not be able to
start commissioning until Q1 2019. Initial estimates for the cost
of fully commissioning the plant following mechanical completion,
including remaining retention amounts, is an additional US$30
million.
The below figures reflect all future cash payments expected to
be made (excluding VAT) on GTU3 to achieve mechanical completion as
at 30 September 2018.
Remaining GTU3 Mechanical completion US$13.3 million
Cash Spend (excl VAT) as at 30
September 2018
Significant events after the reporting period
Nostrum is pleased to announce that Mr Atul Gupta, who has
served as the Company's Chairman since 25 April 2017, has been
appointed by the Board as Executive Chairman as of 27 November
2018.
Mr Gupta is a UK national who was appointed as a director of the
Company on 30 November 2009 and as Chairman of the Audit Committee
on 31 December 2016. Mr Gupta has over thirty years of upstream oil
and gas industry experience, including at Charterhouse Petroleum,
Petrofina, Monument and previously as the CEO of FTSE-250 listed
Burren Energy plc until its sale to ENI in 2008. Mr Gupta graduated
from Cambridge University with a degree in Chemical Engineering and
Heriot Watt University with a Masters degree in Petroleum
Engineering.
Effective upon his appointment as Executive Chairman Mr Gupta
has stepped down from the Board's Nomination and Governance
Committee.
Conference call
Nostrum's management team will present the 9M 2018 Financial
Results and will be available for a Q&A session with analysts
and investors today at 14.00 pm GMT, 27 November 2018. If you would
like to participate in this call, please register by clicking on
the following link and following instructions: Results Call
If you are unable to access the registration link please use the
following: http://emea.directeventreg.com/registration/6469239
Download: 9M 2018 Results Presentation
Download: 9M 2018 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-Gremyachinskoye 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.
9M 2018: Nostrum Financial Results
In millions of US$ (unless Variance
mentioned otherwise) 9M 2018 9M 2017 Variance in %
Revenue 311.4 303.7 7.7 2.5%
-------- -------- --------- ---------
EBITDA 187.7 171.5 16.2 9.4%
-------- -------- --------- ---------
EBITDA margin (%) 60.3% 56.5% - -
-------- -------- --------- ---------
In millions of US$ (unless 9M 2018 H1 2018 Variance Variance
mentioned otherwise) in %
Cash Position 102.4 134.5 (32.1) (23.8%)
-------- -------- --------- ---------
Net Debt(4) 1,005.0 993.4 11.6 1.2%
-------- -------- --------- ---------
Revenue, EBITDA and Profit/Loss for the Period
Revenue from sales of crude oil, stabilised condensate, LPG and
dry gas over the period amounted to US$311.4 million, up 2.5% on
the same period last year due to higher sales prices. EBITDA was
US$187.7 million with an EBITDA margin of 60.3%. Profit for the
period was US$12.4 million.
Cost of sales
The cost of sales was US$125.8 million, a decrease from the 9M
2017 figure of US$131.2 million. This is partially due to
reductions in depreciation, repair and maintenance, other
transportation costs and materials and supplies.
Cash resources and Net debt
The Group ended the period with US$102.4 million in cash and
cash equivalents4 (H1 2018: US$134.5 million). Net debt4 at the end
of the period was US$1,005.0 million (H1 2018: US$993.4
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. During Q3 2018 the Company was required to make a
payment of US$4.6 million as the average Brent price was above the
higher call strike price (Q3 2018 average Brent price =
US$75.8/bbl, Q3 2018 high strike price = US$69.6/bbl). The Company
remains hedged on 9,000 barrels of oil per day at a floor price of
US$60.0 until the end of the year.
(1) IFRS term based on indirect cash flow method
(2) Defined as the results of operating activities before
depreciation and amortisation, share-based compensation, fair value
gains and losses on derivative instruments, foreign exchange
losses, finance costs, finance income, non-core income or expenses
and taxes, and includes any cash proceeds received or paid out from
hedging activity
(3) Defined as cash and cash equivalents including current
investments and including restricted cash
(4) Defined as cash and cash equivalents including current
investments and including restricted cash
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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