UK-listed minnow Nostrum Oil & Gas aims to return to higher profitability in the second quarter of this year now it has succeeded in its attempts to arrange new offtake agreements to make it less dependent on Russian transit to export markets.
Nostrum, which operates the Chinarevskoye oil and gas field in northwestern Kazakhstan and also services another producing asset nearby, said in its first-quarter financial report that it sold its temporary oil inventory buildup of 254,000 barrels of oil equivalent, resulting in revenues of about $15 million.
The company earlier said it had suffered a significant decline in revenues since the beginning of the Russian invasion of Ukraine in February last year following the steep widening of a market discount on Russian oil blend Urals against North Sea benchmark Brent.
Since December last year, Urals has also been subject to a $60 per barrel price cap ceiling approved by G7 countries.
Nostrum has been exporting its oil output via the Atyrau–Samara pipeline link between Kazakhstan and Russia. In the Russian trunkline system, its barrels mingle with Russian oil, making its Kazakh oil undistinguished from Urals when sold at international markets.
Although Kazakhstan’s state-owned oil and gas producer KazMunayGaz was able last year to differentiate its export barrels as Kazakh Export Blend Crude Oil, or Kebco, in the Russian network — fetching a higher price as a result — Nostrum said its exports were still marketed as Urals during the first quarter of 2023.
The company reported a steep decline in revenues in the first quarter of this year to $17.4 million against $60.2 million in the same period of 2022.
About one-third of Nostrum’s hydrocarbon production in Kazakhstan was flowing into storage in the first quarter of this year in anticipation of new offtake contracts that avoid the Urals pricing restrictions, the company suggested.
Nostrum’s daily production for the first quarter of 2023 averaged about 10,500 barrels of oil equivalent per day against 14,700 boepd a year earlier.
However, average daily sales volumes in the first quarter averaged 7,300 boepd against 14,000 boepd in the same period of 2022.
Despite issues with switching away from Urals pricing, Nostrum said it agreed to acquire a prospective oil and gas assets close to its core Chinarevskoye asset.
In March, the company agreed to buy an 80% stake in Positive Invest, which holds the subsoil use rights to oil and gas assets known as the Stepnoy Leopard fields, for $20 million.
Nostrum will become operator after the completion of the transaction.
Nostrum estimates the Stepnoy Leopard fields hold between 50 million and 150 million barrels of oil equivalent in recoverable hydrocarbon resources, with over 20% estimated to be liquids.
Source : UPStream