Q1 Financial Results

RNS Number : 1929Z

Nostrum Oil & Gas PLC

25 May 2016

Amsterdam, 25 May 2016

First Quarter 2016 Financial Results

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 results in respect of the three month period ended 31 March 2016.

Highlights:

Financial

· Revenue for the period of US$73.9m (Q1 2015: US$100.3m)

· EBITDA¹ for the period was US$51.7m (Q1 2015: $49.6m)

· EBITDA margin of 70% (Q1 2015: 49%)

· Opex / boe² reduced significantly to US$3.5 / boe (FY 2015: US$4.5 / boe)

· First quarterly payment in excess of US$19m received from new hedge entered into in December 2015

· Closing Cash³ for the period of US$137.1m; Net Debt / LTM EBITDA ratio of 3.5x

Operational

· Average daily production for the three month period ending 31 March 2016 was 38,754 boepd (including one week of scheduled maintenance at the end of March)

· Production guidance for the full year remains at approximately 40,000 boepd

· On track to fulfil 2016 drilling programme of three production wells and one appraisal well

· Fully funded capex programme both to maintain current production in 2016 and 2017 and complete construction of the GTU III during 2017

Kai-Uwe Kessel, Chief Executive Officer of Nostrum, commented:

"We have made a steady start to the year both financially and operationally. Operating costs have been reduced to US$3.5 / boe, from US$4.5 / boe last year and we look forward to completing negotiations to open up the possibility of transporting our crude oil through the KTO pipeline, thereby further reducing our crude oil transport costs. Whilst the oil price continues to be volatile, our hedge provides us with security against any falling oil price and allows us to focus on the completion of GTU3 in 2017, and subsequent ramp-up of production to 100kboepd. With our significant reserve base, low cash operating costs and prudent approach to balance sheet management I remain confident Nostrum is well placed to deliver on its growth strategy in the current environment."

1 Defined as Profit Before Tax + Finance Costs + Foreign Exchange Loss / (Gain) + ESOP + Depreciation - Interest Income + Other Expenses / (Income) + Cash Received from Hedge

2 Opex is defined as COGS less depreciation, less royalties, less government profit share, less change in stock

3 Defined as Cash & Cash Equivalents + Current Investments

Conference Call

Nostrum's management team will present the Q1 2016 Results and will be available for a Q&A session with analysts and investors today at 14.00 GMT, 25 May. Please click on the following link to register for the call: Conference call registration ID: 11869376

Publications

Download: Nostrum's Q1 2016 Results Presentation

Download: Nostrum's Q1 2016 Financial Statements

Further information:

For further information please visit www.nog.co.uk

Further enquiries:

Nostrum Oil & Gas PLC - Investor Relations

Kirsty Hamilton-Smith

Rachel Pescod

ir@nog.co.uk

+ 44 (0) 203 740 7430

Instinctif Partners - UK

David Simonson

Catherine Wickman

George Yeomans

+ 44 (0) 207 457 2020

Promo Group Communications - Kazakhstan

Asel Karaulova

+ 7 (727) 264 67 37

About Nostrum

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 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 holds a 100% interest in and is the operator of the Rostoshinskoye, Darinskoye and Yuzhno-Gremyachenskoye 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 Group 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.

Q1 2016: Nostrum Financial Results

In millions of US$ (unless mentioned otherwise)	Q1 2016	Q1 2015	Variance	Variance in %
Revenue	73.9	100.3	(26.4)		(26.3%)
EBITDA	51.7	49.6	2.1		4.2%
EBITDA margin	70%	49%	21%
Cash Position	137.1	318.3	(181.7)		(56.9%)
Net Debt	819.6	632.0	187.6		29.7%

Revenue, EBITDA and Profit for the Period

Revenue from sales of crude oil, stabilised condensate, LPG and dry gas over the three month period amounted to US$73.9m, down 26.3% on the same period last year. The average Brent crude oil price during the three months ended 31 March 2016 was US$35.2, down 37.0% year on year (Q1 2015: US$55.9). Despite the lower oil price environment this quarter compared to the first quarter of 2015, EBITDA stood at US$51.7m, an increase of 4.2% year on year. This was primarily due to reduced Opex and G&A and the income received from the hedge. A loss of US$12.4m was recorded for the period.

Cost of Sales

Cost of sales was flat at US$46.3m for the three months (Q1 2015: US$46.1m) while opex / boe decreased from US$4.5 in FY 2015 to US$3.5 in Q1 2016.

Cash

The Group ended the three month period with US$137.1m in cash, which includes US$25.0m of current investments (Q4 2015 US$165.6m, including US$42m current investments).

Hedging

On 14 December 2015, Nostrum entered, at cost of US$ 92m,into a long-term hedging contract covering oil sales of 14,674 bbls/day for the first calculation period and 15,000 bbls/day for the subsequent calculation periods or a total of 10,950,000 bbls running through 14 December 2017. The counterparty to the hedging agreement is VTB Capital Plc. Based on the hedging contract Nostrum bought a put, which protects it against any fall in the price of oil below US$ 49.16/bbl.

Production

The product split for Q1 2016 was as follows:

PRODUCTS	Q1 2016 Average Production (boepd)	Q1 2016 Product Mix (%)
Crude Oil & Stabilised Condensate	15,557	40
LPG (Liquid Petroleum Gas)	4,373	11
Dry Gas	18,824	49
TOTAL	38,754	100

Current Product Destinations

Nostrum's primary export destinations for Q1 2016 were as follows:

• Crude Oil - Neste Oil in Finland and Socar in Azerbaijan

• Condensate - Russian Black Sea port of Taman

• LPG - Russian Black Sea ports and Bulgaria

• Dry Gas - Sold for export markets

The Company has no current plans to change any of these export destinations.

Q1 2016 Drilling Overview

• 21 oil wells and 17 gas condensate wells are currently producing at the Chinarevskoye field

• The Chinarevskoye drilling programme continues on target to complete 3 new production wells in 2016

• The Rostoshinskoye appraisal well has reached a target depth of 5050 metres

2016 Drilling Programme

• 2016 production drilling capex remains on target for 2016

• Maintaining flexibility in drilling activity to respond to oil price fluctuations

• A sustained improvement in the oil price environment could increase drilling activity in 2017 which would increase available feedstock for GTU III in 2018

Production schedule

Based on the current drilling programme and taking into account the current oil price we can provide the following production guidance. Should oil prices deviate materially the production guidance will be updated accordingly:

• 2016 - Approximately 40,000 boepd

• 2017 - Approximately 40,000 - 60,000 boepd

• 2018 - Approximately 60,000 - 90,000 boepd

• 2019 - Approximately 90,000 - 100,000 boepd

Progress on Development of GTU3

Nostrum continues to make steady progress on GTU3. Following the continued fall in the oil price in 2015, Nostrum took the decision to phase the payments of GTU3 over 2016 and 2017 in order to match the payment profile of the new hedge. Completion is now expected during 2017. The phasing of payments will involve no additional cost for Nostrum and the total budget remains at US$500m. The phasing of the payments will allow for a continued preservation of cash on Nostrum's balance sheet during this period of low oil prices.

The below figures reflect all GTU3 cash payments made and future cash payments excluding VAT.