Kazakh-Focused Nostrum Shifts Focus
Embattled Kazakhstan-focused producer Nostrum Oil & Gas has been unable to secure a buyer for its business, it said in a statement on January 22, following a seven-month search.
The London-listed company, which has struggled with declining production rates for several years, launched a strategy review in last June. Its management stated at the time that they would consider a whole or partial sale of the company.
“The company continues to work with Goldman Sachs on the formal sales process; however, to-date the company has not received any binding offer for the company or its assets,” Nostrum said.
As such, the company will now shift its focus to commercialising its spare gas processing capacity, lowering reservoir management risks and cutting costs, it said.
Nostrum finally commissioned a third gas treatment unit at its flagship Chinarevskoye oil and gas field in western Kazakhstan in late 2019, three years behind schedule, bringing its processing capacity to 4.2bn m3/yr. Nostrum wants to utilise as much of this capacity as possible by processing third-party gas. It has already cut a deal to take 500mn m3/yr of gas from junior producer Ural Oil & Gas, and is in talks with other suppliers.
Nostrum has also decided to halt all drilling in 2020, following difficulties with well productivity, “whilst it carries out further analysis to identify viable technologies to mitigate sub-surface risk.” It will also reclassify some of its reserves as “contingent resources,” resulting in a “significant downgrade” in proven and probable reserves.
As part of efforts to reduce costs, Nostrum will review its purchase of Kazakh firm Positive Invest, owner of the Stepnoy Leopard licences, announced last year.
“Following a period of intense review of all aspects of our business on how to maximise value for all stakeholders, we have embarked on a strategy to transform the business by seeking to commercialise our world-class infrastructure, adopting a lower-risk sub-surface work programme and an aggressive approach to cost management,” Nostrum chairman Atul Gupta said in a statement. “Whilst continuing to explore a full sale of the company, we see significant value in our unique infrastructure and we also recognise the need to prudently manage risk and liquidity.”
Nostrum expects to produce 20,000 barrels of oil equivalent/day in 2020, down from an average of 28,877 boe/day in the first nine months of last year.