Page 14 - FSUOGM Week 33

FSUOGM PERFORMANCE FSUOGM

Nostrum posts H120 loss

KAZAKHSTAN KAZAKHSTAN-FOCUSED independent Nos- However, the company noted that successful
trum Oil & Gas reported a pre-tax loss for the well intervention and a workover programme
first half of the year on the back of declining nat- had reduced the rate of decline beyond its expec-
ural gas production, sales and prices. tations. As such, it expects to beat its full-year
The company said on August 18 that it had guidance of 20,000 boepd of production and
recorded a pre-tax loss of $51.1mn for the sixth 19,000 boepd of sales.
months to June 30, compared with a profit of Nostrum said it had halted all drilling
$27.1m in the same period of 2019. this year and warned that the dry gas price
Revenue shrank 47% to $92.6mn, down from it receives under its existing sales contract,
$174.2mn a year earlier. Earnings before interest, which has fallen since May, could “remain at
taxes, depreciation and amortisation (EBITDA) a relatively low level for the remainder of the
slid to $38.7mn from $110.2mn a year earlier. year and possibly beyond”.
The company blamed the weaker perfor- Nostrum CEO Kaat van Hecke said: “Our
mance on both the average price of Brent crude focused cost-management initiatives are sig-
plummeting from to $40 per barrel in the first nificantly reducing our cost base and we have
half from $66.2 a year earlier, as well as falling executed a successful well intervention and
sales and production. work-over programme which has reduced the
Nostrum said it had produced 23,528 barrels rate of decline of production above expectation.”
of oil equivalent per day in the first half, while She added: “Both these measures have, and
sales amounted to 22,624 boepd. This was down will continue to, assist us in managing our
from 2019’s full-year production average of liquidity effectively and our cash burn is cur-
28,600 boepd and sales average of 26,700 boepd. rently very low.”™

Tatneft confirms

dividends despite fears

RUSSIA THE board of Russian regional oil major Tatneft
of Tatarstan Republic approved an interim div-
idend for 1H20 of RUB9.94 per share for both
preferred and ordinary shares, the company
announced on August 18. larger of 50% of net income or 100% of available
Tatneft was the first Russian oil major to FCF),” BCS GM analysts believe.
cancel the dividends for 4Q19 due to the coro- Currently BCS GM forecasts that Tatneft will
navirus (COVID-19) crisis, prompting fears of pay a total of about RUB30 per share in 2020, a
across-the-board lower payouts in the Russian conservative estimate based upon the 50% of net
oil and gas equity universe. income parameter, the lowest possible under the
But since then, the company has reiterated its company’s dividend policy.
dividend policy and the latest dividend decision “Therefore, while the resulting 5% [dividend]
further downplays the risk. yield may look miserly, there is upside should
“Today’s interim dividend declaration may FCF [free cash flow] come in higher than that
seem modest, but it occurs [to] maximise the (a distinct possibility),” BCS GM notes, while
payout given legal constraints. We fully expect affirming the Buy recommendation for the name
Tatneft to stick to its generous dividend policy with target prices of $15 for ordinary and $14 for
in future periods,” BCS Global Markets com- preferred shares.
mented on August 18. Overall, for the Russian oil and gas sector,
Company representatives stated that the “the value in Russian oil & gas names is not in
dividend proposed for 1H20 was the maximum 2020 trough-period dividends, but in a much
allowable under Russian law, being a 100% more robust string of future dividends in more
payout of 1H20 net income under the Russian normal commodity markets,” BCS GM believes.
Accounting System (RAS), BCS GM explained. In this perspective, BCS GM expects large
“Therefore, this modest dividend per share earnings and dividend rebounds in 2021 and
(DPS) does not contradict our conviction that 2022 as first oil prices and production recover
Tatneft management will indeed stick with its from the COVID-19 crisis and OPEC+ con-
relatively new, generous dividend policy (the straints respectively.™

P14 www. NEWSBASE .com Week 33 19•August•2020