Full Year Results for the Year Ending 31 December 2018

  • Mar 26, 2019
  • Nostrum

London, 26 March 2019

Full Year Results for the Year Ending 31 December 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 full year financial results for the twelve months ending 31 December 2018, together with the publication of the 2018 Annual Report for Nostrum and its subsidiaries taken as a whole (“the Group”).

2018 Financial and Operational highlights of the Group:

Operational

2019 average daily production above 32,500 boepd

2018 average daily production of 31,254 boepd (2017: 39,199 boepd) corresponding to average daily sales volumes of 29,516 boepd (2017: 37,844 boepd)

Mechanical completion of the third Gas Treatment Unit (“GTU3”) in December 2018, with full commissioning expected before the end of Q3 2019

Completed drilling of Well 40 with stable test production over 1,500 boepd

45 wells producing at the Chinarevskoye field as at 31 December 2018 – 20 oil wells and 25 gas condensate wells

Total Group 2P reserves of 410mmboe as at 1 January 2019 following Ryder Scott independent reserve report and total Group contingent resources of 249 mmboe

Financial

Revenue of US$389.9 million (2017: US$405.5 million)

EBITDA1 of US$231.2 million (2017: US$232.0 million)

EBITDA margin of 59.3% (2017: 57.2%)

Net operating cash flows2 of US$214.0 million (2017: US$182.6 million)

12% reduction in operating costs3 to US$49.9 million (2017: US$56.6 million)

Over 30% reduction in general & administrative costs4 to US$20.3 million (2017: US$31.0 million)

Transport costs reduced to US$4.6/boe (2017: US$4.8/boe)

Closing cash5 for the period of US$121.8 million (2017: US$127.0 million)

Net debt of US$1,007.8 million (2017: US$960.9 million)

Total debt6 of US$1,129.6 million (2017: US$1,087.9 million)

Net debt / LTM EBITDA ratio of 4.4x (2017: 4.1x)

US$150 million impairment from 78mmboe reduction in Group 2P reserves

1 Defined as profit before tax net of finance costs, foreign exchange loss/gain, ESOP, depreciation, interest income, other income and expenses.

2 IFRS term based on indirect cash flow method

3 Cost of sales net of depreciation

4 General & administrative expenses net of depreciation

5 Defined as cash and cash equivalents including restricted cash, current and non-current investments

6 Defined as total debt minus cash and cash equivalents

2019 Drilling and sales volume guidance

With two drilling rigs we will be able to drill up to six wells during 2019

The first two wells are in the Northern area of the field around well 40 (wells 41 and 42)

The location of additional wells will be finalised once we have completed the evaluation of wells drilled during 2018 and those currently being drilled

2019 production guidance remains unchanged at 30,000 boepd, corresponding to sales volumes of 28,000 boepd. Given that we are not drilling in proven areas of the field there is a range of possible outcomes from the Northern wells and therefore, the above production guidance does not include any additional production from new wells planned this year

Other

Binding agreements 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. Research by Wood Mackenzie states that the field has eight wells drilled and completed. 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:

a tolling fee for the stabilisation of liquid condensate at US$8 per barrel; and

the purchase of raw gas from UOG.

Strategic focus for 2019:

Maintain stable production levels at Chinarevskoye while operational issues are addressed

Optimise Group cost profile with a focus on operating costs, G&A, and drilling capex

Appraise the Northern area discovery

Access resources in the region to maximise the value of our infrastructure

Focus on expanding QHSE policies and developing GHG reduction strategies

Foster diversity at all levels of the Group

Kai-Uwe Kessel, CEO of Nostrum Oil & Gas commented:

“Looking forward to 2019 I want to ensure we continue the positive trend we set in Q4 of stabilizing production combined with some of the lowest drilling costs we have ever achieved. I am optimistic that we can grow production based on the lessons we have learnt and the results of the Schlumberger study due in the third quarter of 2019. We currently have two rigs drilling in the North and have access to more rigs when the time comes to accelerate drilling.”

Conference call

Nostrum’s management team will present the FY 2018 Results and will be available for a Q&A session with analysts and investors today at 2:00 pm UK time, 26 March 2019. If you would like to participate in this call, please register by clicking on the following link and following instructions: Results Call

Download: Results PRESENTATION

Download: Consolidated Group Financials

Download: 2018 Annual Report

Download: Ryder Scott Report

LEI: 2138007VWEP4MM3J8B29

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

London, 26 March 2019

Full Year Results for the Year Ending 31 December 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 full year financial results for the twelve months ending 31 December 2018, together with the publication of the 2018 Annual Report for Nostrum and its subsidiaries taken as a whole (“the Group”).

2018 Financial and Operational highlights of the Group:

Operational

2019 average daily production above 32,500 boepd

2018 average daily production of 31,254 boepd (2017: 39,199 boepd) corresponding to average daily sales volumes of 29,516 boepd (2017: 37,844 boepd)

Mechanical completion of the third Gas Treatment Unit (“GTU3”) in December 2018, with full commissioning expected before the end of Q3 2019

Completed drilling of Well 40 with stable test production over 1,500 boepd

45 wells producing at the Chinarevskoye field as at 31 December 2018 – 20 oil wells and 25 gas condensate wells

Total Group 2P reserves of 410mmboe as at 1 January 2019 following Ryder Scott independent reserve report and total Group contingent resources of 249 mmboe

Financial

Revenue of US$389.9 million (2017: US$405.5 million)

EBITDA1 of US$231.2 million (2017: US$232.0 million)

EBITDA margin of 59.3% (2017: 57.2%)

Net operating cash flows2 of US$214.0 million (2017: US$182.6 million)

12% reduction in operating costs3 to US$49.9 million (2017: US$56.6 million)

Over 30% reduction in general & administrative costs4 to US$20.3 million (2017: US$31.0 million)

Transport costs reduced to US$4.6/boe (2017: US$4.8/boe)

Closing cash5 for the period of US$121.8 million (2017: US$127.0 million)

Net debt of US$1,007.8 million (2017: US$960.9 million)

Total debt6 of US$1,129.6 million (2017: US$1,087.9 million)

Net debt / LTM EBITDA ratio of 4.4x (2017: 4.1x)

US$150 million impairment from 78mmboe reduction in Group 2P reserves

1 Defined as profit before tax net of finance costs, foreign exchange loss/gain, ESOP, depreciation, interest income, other income and expenses.

2 IFRS term based on indirect cash flow method

3 Cost of sales net of depreciation

4 General & administrative expenses net of depreciation

5 Defined as cash and cash equivalents including restricted cash, current and non-current investments

6 Defined as total debt minus cash and cash equivalents

2019 Drilling and sales volume guidance

With two drilling rigs we will be able to drill up to six wells during 2019

The first two wells are in the Northern area of the field around well 40 (wells 41 and 42)

The location of additional wells will be finalised once we have completed the evaluation of wells drilled during 2018 and those currently being drilled

2019 production guidance remains unchanged at 30,000 boepd, corresponding to sales volumes of 28,000 boepd. Given that we are not drilling in proven areas of the field there is a range of possible outcomes from the Northern wells and therefore, the above production guidance does not include any additional production from new wells planned this year

Other

Binding agreements 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. Research by Wood Mackenzie states that the field has eight wells drilled and completed. 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:

a tolling fee for the stabilisation of liquid condensate at US$8 per barrel; and

the purchase of raw gas from UOG.

Strategic focus for 2019:

Maintain stable production levels at Chinarevskoye while operational issues are addressed

Optimise Group cost profile with a focus on operating costs, G&A, and drilling capex

Appraise the Northern area discovery

Access resources in the region to maximise the value of our infrastructure

Focus on expanding QHSE policies and developing GHG reduction strategies

Foster diversity at all levels of the Group

Kai-Uwe Kessel, CEO of Nostrum Oil & Gas commented:

“Looking forward to 2019 I want to ensure we continue the positive trend we set in Q4 of stabilizing production combined with some of the lowest drilling costs we have ever achieved. I am optimistic that we can grow production based on the lessons we have learnt and the results of the Schlumberger study due in the third quarter of 2019. We currently have two rigs drilling in the North and have access to more rigs when the time comes to accelerate drilling.”

Conference call

Nostrum’s management team will present the FY 2018 Results and will be available for a Q&A session with analysts and investors today at 2:00 pm UK time, 26 March 2019. If you would like to participate in this call, please register by clicking on the following link and following instructions: Results Call

Download: Results PRESENTATION

Download: Consolidated Group Financials

Download: 2018 Annual Report

Download: Ryder Scott Report

LEI: 2138007VWEP4MM3J8B29

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