Nostrum Oil & Gas (LON:NOG) revealed it has moved to cushion itself against the worst of the oil price decline, with new hedging arrangements.
The Kazakhstan based oil producer has locked in a sales price of US$49.16 for some 15,000 barrels of oil per day for a two year period, until December 2017.
Kai-Uwe Kessel, Nostrum chief executive, said: "With the continued fall in the oil price and the increased belief that the low oil prices will last beyond Q1 2016 we have taken steps to ensure Nostrum is well positioned to prosper under any oil price environment through 2016 and 2017.”
This new hedging arrangement, currently valued at US$150mln, was facilitated by the US$92mln sale of a previous hedge.
In 2015, the group produced an average of 40,402 barrels of oil equivalent per day, which was below target due to unexpected repair work on an export pipeline. And, this year it expects to maintain an average of about 45,000 boepd.
It told investors that full year revenue for 2015 is expected to be in excess of US$445mln, and at the end of the year it had US$170mln of cash. Total debt amounted to US$960mln, and net debt was US$790mln.
Nostrum says its cash operating break-even is approximately US$20 per barrel, though it aims to reduce this below the US$20 threshold by mid-2016.
It said the 2016 drill programme is being scaled back to just three new production wells which will allow the operation to maintain flat production rates for the year. An appraisal well on the Rostoshinskoye field will still go ahead, it added.
Also, the company intends to conserve cash by phasing the ongoing GTU3 development until mid-2017 when the project will reach ‘mechanical completion’.
“These steps will ensure that Nostrum has a stable financial base during any prolonged downturn in oil prices,” Kessel added.
“Furthermore we have ensured that Nostrum has the flexibility to react extremely quickly to any increase in the oil price whereby drilling can be increased to allow for a quicker ramp up in GTU3."