Nostrum Oil and Gas revenue grows but cuts to its drilling programme send investors running
Nostrum Oil and Gas has announced it will cut back its number of drilling rigs next year, causing shares plunge 20 per cent this morning.
In its third quarter report the Kazakhstani firm reported rising year-on-year revenues but a decline in production for the nine months ending 30 September.
The figures
Revenue grew steadily to $311.4 million, up from $303.7 million for the same period last year. Profit was $12.4m, up from a loss of $8.7m last year, while cash flow was $151.3m, up from from $135.2m for the period in 2017.
Net debt broke the $1bn threshold, at $1.005bn up from $912.6m last year.
The company produced 31,757 barrels of oil equivalent per day, down from 44,879 last year.
Why it’s interesting
While the company has produced a set of healthy financial figures, declining production has forced Nostrum to reduce the number of active drilling rigs to two from three, with plans to drill up to six wells next year, an announcement which sent shareholders running this morning.
Average sales volumes also dropped to 30,523 barrels equivalent daily, down from 39,600 for the same period last year.
Nostrum said it has 42 wells currently in production at the Chinarevskoye oil field in Kazakhstan, 23 of which are oil wells and 19 of which are gas-condensate.
In the third quarter, the company had three rigs operating on the field, which is set to drop.
What Nostrum said
Chief executive Kai-Uwe Kessel said:
“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.
“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.
“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.”