Nostrum confirms stellar fourth quarter as it completes drilling projects

Independent oil and gas company Nostrum Oil & Gas announced its operational update for the year to 31 December 2016 on Tuesday, with average daily production of 40,351 boepd during the year, just ahead of guidance for 40,000 boepd.

The FTSE 250 firm said that during the fourth quarter, average daily production was 44,708 boepd.

During the second half, the company successfully completed its 2016 drilling programme, including the commissioning of three new production wells at Chinarevskoye, while construction of its third gas treatment unit was progressing on budget and on schedule for completion in 2017.

The KazTransOil pipeline connection also remained on track for commissioning by the second quarter, which would bring “significant reductions” to crude oil transportation costs, according to the board.

Looking at the books, Nostrum said revenue for the year was expected to be in excess of $340m, and its cash position was above $100m on 31 December.

Total debt remained at $960m, and net debt was around $860m on the same day.

Payments in excess of $27m were received over the year from the hedge entered into in December 2015, the board said, with 15,000 boepd hedged at $49.16 through to December 2017.

“The fourth quarter of 2016 was the best quarter of the year for us, with the highest average daily production against a backdrop of improving oil prices,” said CEO Kai-Uwe Kessel.

“We have successfully reached our production target for the full year, averaging over 40,000 boepd, and continue to produce in line with guidance.

“We also completed our drilling programme as expected, with better results than anticipated from two out of the three production wells.”

Kessel confirmed GTU3 was on track for delivery during 2017, and would more than double Nostrum’s production capacity to above 100,000 boepd.

“Meanwhile, we are close to completing the KTO connection pipeline, which will allow us to realise significant savings to exported crude oil transportation costs, and continue to seek to reduce costs across the business.

“We look forward to communicating our financial results for the year in March and updating the market on the forthcoming completion of the KTO pipeline and of GTU3.”