Once a constituent of the FTSE 250 index, Kazakh energy play Nostrum Oil & Gas (NOG) is now worth just a fraction of what it was just 12 months ago as it falls a further 47.6% today to 5.5p.

The latest bad news comes from Well 41 where despite extensive testing the company has been unable to sustain a commercial flow of hydrocarbons.

To quote Cantor Fitzgerald, this is ‘a very disappointing result. Hopefully Nostrum can salvage something from the well but shares will take a hit this morning.’

SUBSTANTIAL BORROWINGS

A lot of hopes were pinned on this exploration effort in the northern part of its Chinarevskoye field after the company experienced operational issues in the core producing area of the field in 2017 and 2018. Those hopes now look pretty forlorn given today’s news and an earlier disappointment on Well 42 which also failed to flow at commercial rates.

The company’s net debt totalled just over $1bn as at 30 June 2019 – dwarfing its current market cap of £11.9m and highlighting the seriousness of its situation. The company is set to commence refinancing negotiations on two outstanding bonds in 2020 and this could be very challenging in the current circumstances.

On 24 June Goldman Sachs was engaged to conduct a strategic review of the business and how any value could be salvaged and arguably the results can’t come soon enough.

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Issue Date: 11 Oct 2019