Nostrum Oil & Gas : Fourth Quarter and Full Year 2014 Operational Update

Amsterdam, 28 January 2015

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 operational update for the Fourth Quarter and Full Year ended 31 December 2014. This update is being issued in advance of the release of its audited and consolidated accounts for the same period. The information contained in this update remains subject to review by the independent auditors.

Highlights:

Financial

• Revenue expected to be in excess of US$770m
• Cash position in excess of US$400m (including short-term deposits) and net debt of approximately US$560m
• Fully funded capex programme both to maintain current production in 2015 and 2016 and complete construction of the GTU3 in 2016 at a breakeven oil price of US$31
• 32% of liquids production (7,500 bopd) hedged at US$85 until February 2016

Operational

• Average daily production of 44,400 boepd
• 2015 production to maintain existing guidance of around 45,000 boepd
• GTU3 progressing on time and on budget, completion expected before end of 2016

• 2015 drilling: complete 8 wells (6 production and 2 appraisal)
  

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

 "I am pleased with Nostrum's operational performance in 2014. The combination of our continued production performance, our hedge at US$85, strong cash balance and low operating costs have combined to ensure we can comfortably continue to deliver GTU3 in 2016 and maintain our existing production in the current oil price environment.

We have considerable flexibility in our exploration and production schedule and in the ramp-up of GTU3 to cope with a prolonged period of low prices. We will also focus on our operational expenses over the coming 12 months with the intention of further reducing our breakeven prices.

At the same time as delivering our major infrastructure project by the end of 2016, given our strong liquidity position, we will also consider opportunities to add additional reserves to our current portfolio where this will deliver enhanced shareholder value." 

Operational Update

Nostrum's operational results reflect another successful twelve months. The performance was underpinned by steady production at the Chinarevskoye field and the consistent performance of the existing gas treatment facility. We are looking forward to delivering the next Gas Plant on time and on budget and delivering further production growth in 2017. 

Production Split

The product split for FY 2014 was as follows:

Current product destinations

Nostrum's primary export destinations for 2014 were as follows:

• Crude oil - Neste Oil's refinery in Finland
• Condensate - Russian Black Sea port of Taman
• LPG - Russian Black Sea ports

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

Drilling

2014 Drilling overview

• 18 oil wells and 16 gas condensate wells were producing at the Chinarevskoye field
• 4 drilling rigs and 1 work-over rig were in operation at the Chinarevskoye field
• 8 wells have been drilled during the 12 months to December 2014

2015 Drilling schedule

Our drilling capex is scalable, based on oil prices. Under the current oil price, our base case drilling programme for 2015 is to complete 8 wells at a total cost of approximately US$90m:

• 3 wells currently being drilled - 2 of them are expected to be completed before the end of the first quarter
• 3 new production wells will be drilled during 2015 (Chinarevskoye Field)
• 2 appraisal wells will be drilled during 2015 (Chinarevskoye and Rostoshinskoye fields)

Revised production schedule

Based on the current drilling programme stated above 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 on an annual basis. 

• 2015 - Approximately 45,000 boepd
• 2016 - Approximately 45,000 boepd
• 2017 - Approximately 70,000 boepd
• 2018 - Approximately 100,000 boepd

Progress on development of GTU3

Nostrum's expansion plan for GTU3 remains on time for completion by the end of 2016, on budget to be below US$500m, and is fully financed.

Nostrum has concluded the majority of the procurement process in relation to GTU3. The total commitments entered into by Nostrum in relation to procurement are approximately US$150m.

In addition to the procurement costs on 28 July 2014, Nostrum entered into a US$150m construction contract for GTU3, approved by vote of its shareholders, with JSC "OGCC KazStroyService".

Completion of GTU3 is on track to be completed before the end of 2016. Expenditure on GTU3 over 2015 and 2016 is planned as follows:

Hedging 

On 14 February 2014, Nostrum entered, at nil upfront cost, into a new hedging contract covering oil sales of 7,500 bopd, or a total of 5,482,500 boe running through 29 February 2016. Based on the hedging contract, a put was bought at US$85/bbl, which protected against any fall in the price of oil below US$85/bbl.  

Reserves 

We expect to announce the 2014 Ryder Scott reserve update in the coming weeks.

Further information
For further information please visit www.nog.co.uk
Further enquiries
Nostrum Oil & Gas PLC - Investor Relations
Kirsty Hamilton-Smith
Bruno G. Meere
+44 203 740 7430
ir@nog.co.uk

Instinctif Partners - UK
Tony Friend
David Simonson
Anca Spiridon
Catherine Wickman
+ 44 (0) 207 457 2020

Promo Group Communications - Kazakhstan
Asel Karaulova
+ 7 (727) 264 67 37

About Nostrum Oil & Gas
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 Oil & Gas PLC 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 Oil & Gas 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 Partnership 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.