Tough trading conditions sees revenue fall at Nostrum

Independent oil and gas company engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin, Nostrum Oil & Gas, announced its full-year financial results for the 12 months to 31 December on Tuesday, with revenue falling more than $100m to $348.0m, from $448.9m.

The FTSE 250 firm reported EBITDA of $194.3m, down from $229.4m, and an EBITDA margin of 56.0%, compared to 51.1% in the prior year.

Net income was a loss of $81.9m, narrowing from the $94.4m loss reported for the 2015 financial year.

The company said net operating cash flows were $206.5m, up from $153.3m, and at year-end it held cash of $101.1m, compared to $165.6m.

Net debt stood at $857.9m, up from $785.9m, and its net debt-to-EBITDA ratio was 4.4x, against 3.4x in 2015.

Payments in excess of $27m were received over the year from the company's 15,000 boepd hedge with a strike price of $49.16, the board said, and it achieved a reduction in operating costs by 14% to $3.70 per barrel in 2016 from $4.30 per barrel in 2015.

It also achieved a reduction in transport costs by 19% to $5.10 per barrel in 2016 from $6.30 per barrel in 2015

On the operational front, Nostrum said 2016 total production 2as 14.8 mmboe, with average daily production 40,351 boepd, in line with the 40,391 boepd reported for 2105.

Its drilling programme for 2016 was completed by end of the third quarter, with three production wells brought online in the fourth quarter.

The construction of the third gas treatment unit was continuing in line with budget guidance, the board said, with completion expected during the second half of this year.

It also said the KazTransOil pipeline connection remained on track for commissioning by the second quarter, bringing significant reductions to crude oil transportation costs at a cost of less than $10m.

The company said it planned to drill seven wells at Chinarevskoye in 2017, including one appraisal well, and had confirmation of material 2P reserves of 466 mmboe as at 1 January 2017 following the Ryder Scott independent reserve audit.

Nostrum also reported identification of material contingent resources of 118 mmboe of liquids and 622 billion cubic feet of sales gas.

“Nostrum has not wavered during one of the most challenging years for the oil and gas industry in over a decade,” said chairman Frank Monstrey.

“We have navigated 2016 with caution and great care to ensure our vision remains intact.

“As a result, we can continue to target our aim of becoming one of the leading independent oil and gas companies in the FSU.”

While many in the industry had to change course, Monstrey said, Nostrum remained on track to deliver the board’s main objectives.

“We are making good progress to complete our third Gas Treatment Unit, which will double production capacity to over 100,000 boepd.

“Additionally, we continue to seek expansion of our reserve base through appraisal work at Chinarevskoye, our core producing asset, and our three neighbouring fields.”

Monstrey said the company was maintaining its “clearly defined” strategy of balancing organic growth with carefully considered expansion through acquisitions.

“Our main priority remains to continue to deliver value to all stakeholders in a responsible and efficient manner.”