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Our mixed-asset
energy strategy
in action
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Annual Report & Accounts 2023
Nostrum successfully
commenced execution
of its mixed-asset energy
strategy by implementing
key catalyst projects in a
challenging environment,
while maintaining focus
on ESG matters.
Contents
Strategic report
02 Chairman's statement
06 Market review
10
14
Business model
Chief Executive Officer's
statement
Strategy
Stakeholder engagement
Key performance indicators
18
20
22
24 Operational review
Risk management
32
Principal risks and uncertainties
34
Viability statement
39
41
Financial review
Five-year summary
47
48 Bond restructuring
50
ESG review
75 Climate-related Financial
Disclosures
Corporate governance
82
Introduction to corporate
governance
Board of Directors
Senior management team
84
88
90 Governance framework
93 Audit Committee report
99
Nomination and Governance
Committee report
100 Statement from the Remuneration
Committee Chairman
101 2023 annual report on
remuneration
116 Directors’ report
Financial report
Independent auditor’s report
121
127 Consolidated financial statements
153 Parent Company financial
statements
Regulatory information
Investor information
165
169 Glossary
Additional disclosures
174 GRI content index
178 Structure chart
For more details please visit
www.nostrumoilandgas.com
Delivering our mixed-asset
energy strategy
Upstream
Successful transition from a single-
asset to a mixed-asset company
Midstream
Well-positioned to become
a major third-party gas processor
ESG
Contributing to energy security
and transition to cleaner energy
see page 12
see page 13
see pages 50-54
2023 highlights
Financial
Revenue
US$m
119.6
2022: 199.7
Non-financial
Opex+G&A costs 1
US$m
Production
boepd
Employees
50.2
2022: 43.1
10,091
2022: 13,200
571
2022: 566
EBITDA
US$m
Cash at year end
US$m
LTIR incidents per
million man-hours
42.1
2022: 115.7
161.7
2022: 233.6
0.37
2022: 0
1. Opex excluding DD&A and inventory adjustment. G&A costs excluding DD&A. See page 47 for details.
2. Surplus of GHG emissions as a result of GTU 3 re-start.
Total greenhouse gas
emissions
ktCO2e
158+222
2022: 170
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 01
STRATEGIC REPORT Chairman’s statement
Executing our catalyst projects
This year marks my
inaugural term as
Chairman of the
Nostrum Board, and it is
with great pleasure that
I present the Company’s
Annual Report and
Accounts for 2023.
Stephen Whyte
Chairman and
Non-Executive Director
I am proud that Nostrum has exhibited
operational and financial resilience this
year and taken key steps towards growth,
notwithstanding various challenges. While
we were successful in firming up our core
operations by improving product netbacks,
gaining production through our gas lift
expansion and tight cost control, we also
had to make tough decisions to ensure
compliance with license commitments.
In parallel, several important growth
catalysts were set in motion, such as the
Stepnoy Leopard acquisition, another
upstream asset in our portfolio, the
commencement of processing of gas
from the Ural O&G tie-back and the
successful and safe re-start of GTU-3.
We now look forward to capitalising
on these growth catalysts to maximise
future stakeholder returns.
Stabilising our core operations
The successful completion of the bond
restructuring in early 2023 marked a critical
milestone for the Company’s financial
stability, and a solid foundation for the
delivery of our mixed-asset energy strategy.
We have achieved material production
gains which partially offset natural declines
in the mature Chinarevskoye field by
expanding our gas lift system at a cost
of approx. US$8m. We were pleased to
report 12% quarter-on-quarter production
increase in Q3 2023 as opposed to natural
decline in production of around 8%
reported in Q2 2023 vs Q1 2023.
Despite the continuing Russia-Ukraine
conflict the Company mitigated the
adverse impact on product pricing by
proactively securing alternative delivery
routes and destinations, resulting in
improved netbacks in 2023 and thus
helping to improve liquidity.
Tight cost discipline continued to be a key
focus area for management and the Board
throughout the year. Even though the
global economy has been asserting
extreme inflationary pressures throughout
2022 and 2023, we managed to keep
unchanged our cost base required for
maintaining activities of Chinarevskoye
field and Ural O&G processing.
Notwithstanding the overall production
decline from our mature field, a 20%
year-on-year reduction in average crude
oil prices and strong inflationary pressures
during 2023, all of our above-mentioned
mitigation measures helped the Company
to remain net free-cashflow neutral in 2023,
excluding the impact of any one-off cash
outflows. Non-recurring payments in 2023
included circa US$25m interest and lock-up
fees paid on completion of the bond
restructuring, around US$20m spent on the
acquisition of the Stepnoy Leopard fields,
and approximately US$25m in tax audit
02 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
payments for prior years. All of these
factors led to a reduction in the Company’s
unrestricted cash balance from US$234m
at beginning of the year to US$162m at the
end of 2023.
Meeting our license commitments
and maintaining regulatory
compliance
Ensuring compliance with our license
commitments and various regulatory
requirements was another area of focus
for management and the Board during
the year. After a careful technical risk
assessment of available opportunities, the
Company began a limited two-well drilling
programme at its Chinarevskoye field in
December 2023, which it expects to
complete during 2024. Notwithstanding
the inherent subsurface risks, we believe
it increases our chances of sustaining
production levels and optimising our assets
as well as meeting the Company’s license
commitments.
On the downside, the company’s operating
subsidiary had to accept the results of
the comprehensive tax audit covering
2016-2021 and made relevant payments of
US$25m in taxes and administrative fines.
In addition, the management has continued
to actively manage various other enquiries
and ongoing claims by local authorities.
Mixed-asset energy strategy in
action: executed catalyst projects
2023 was also a year of executing our
strategic catalyst projects in alignment with
our mixed-asset strategy. This strategy
signifies our commitment to evaluate and
invest in both upstream and midstream
opportunities focusing on those where we
see the most favourable risk/reward balance.
This could be either by processing third
party hydrocarbons in our world-class
infrastructure and/or by scaling up our
own production.
The acquisition of the subsoil use rights to
the Stepnoy Leopard fields, a second asset
in our upstream portfolio, is in line with our
commitment to diversify and strengthen
our upstream asset base. Shortly after the
acquisition, the Board reviewed and
authorised a two-well appraisal
programme. High quality appraisal data
has been captured with the flow-rate and
pressure build-up tests confirming high
well productivity potential.
Improving our core operations
See more details on pages 41-47
Balance sheet: optimised with
completion of restructuring and reduced
financing burden, which is helping the
company preserve its liquidity and focus
on strategic initiatives.
US$595m
Debt as at 2023 YE
vs US$1.4bn as at
2022 end
US$162m
Cash balance on
Restructuring
as at 2023 YE
Production gains: on aging
Chinarevskoye field through
expansion of our Gas lift capacities.
20%
increase in Q3 over Q2 production gains
excluding natural decline of 8%
Cost control: addressing inflationary
pressures to keep our costs base under
control and directing resources toward
developing new projects.
Optimising netbacks: addressed
impact of Urals-Brent spread on oil
and gas condensate exports, through
contracting in alternative delivery routes
and destinations and resulting in
improved netback in 2023 vs 2022.
16% decrease in netbacks vs
18% average Brent price decline
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 03
STRATEGIC REPORT Chairman’s statement
Based on this information, in March 2024,
we made a final investment decision for the
initial field development phase with
forecast total capital budget of US$100m.
The project will commence in 2024 and
will include drilling of four development
wells across the key reservoirs targeting
recoverable resource potential of 30-50
mmboe. Early cash generation from end
of 2026 is expected to strengthen the
self-financing capacity.
On the midstream front, a testament to this
strategic direction was the successful
initiation of the Ural O&G tie-back and the
delivery of the first third-party gas to our
treatment facility in late December 2023.
The first well commenced production with
a rate of around 300 thousand m3 of raw
gas per day and Ural O&G expects to put
four additional wells into production in
2024. This pivotal development not only
underscores our achievement but also
positions us to become a major third-party
gas processor in the region.
In addition, as we have successfully
completed the restart of our GTU-3 with
2.5 bcma capacity, this enhances our ability
to capture third party volumes. As we
celebrate this milestone, we recognise the
potential of our underutilised, modern
infrastructure to attract more than 4 bcma
of third-party gas. This capability allows us
to offer accelerated processing solutions at
substantially lower costs compared to other
providers, presenting a unique opportunity
to significantly boost domestic gas supply
by nearly 20%. Through these endeavours,
we are poised to make a substantial
contribution to Kazakhstan’s long-term
gasification plan. Our gas processing
infrastructure with significant available
capacity, located only about 100 km north
of the Karachaganak field, represents a
compelling value proposition to both the
Republic of Kazakhstan and KPO, especially
as an alternative to increasing supplies to or
from Russia.
As a newly appointed Board, we have been
closely and consistently working with the
senior management over the past year to
foster delivering such catalyst projects,
which set the foundation for the future
growth of the Company.
Our regular and ad-hoc Board meetings
ensured that we timely and efficiently
address all matters and provide guidance
to the senior management team in
achieving strategic objectives. Further
details on the Board activities are described
on pages 82-87.
Our progress this year reinforces our
commitment to becoming a key player in
Kazakhstan’s energy sector, driving forward
the nation’s gasification efforts and
supporting the transition to a more
sustainable energy future.
ESG performance
We have advanced our risk rating as
evaluated by Sustainalytics from 40.5,
categorised as severe, at the end of 2022
to 30.1, now positioned in the lower
high-risk category and just one decimal
point away from the medium risk threshold.
This progress has put us to at the upper
10th percentile within the Oil & Gas
Producers industry, in the Sustainalytics
universe, and underscores our continuous
efforts in environmental, social and
governance disciplines.
Unfortunately, on the other hand, despite
several years of operations without
fatalities, a tragic incident occurred during
the year involving a 35-year-old contractor
employee performing services for
Zhaikmunai LLP. While engaged in
insulation works on the stationary platform
at GTU-3 during routine maintenance,
the worker fell into an opening where a
functional guardrail was missing, from a
height of 10 meters, sustaining injuries
which unfortunately proved fatal.
Both a comprehensive investigation of the
incident by the competent governmental
authorities and Nostrum’s own internal
investigation of the incident have been
diligently conducted. Following on from
those investigations Nostrum has promptly
implemented additional occupational
safety measures with greater supervision
to ensure effective implementation of the
“Permit to Work” system. Assessment
of similar hazards was also carried out
field-wide to further mitigate the attendant
occupational safety risks. This occurrence
has underscored Nostrum’s imperative to
reinforce all safety protocols not only for
our employees but also for those of our
contractors.
Investing in license
to operate activities
See more details on page 26, 44, 84-85
Two-well drilling
programme: approved
by the Board to keep the
balance between
investment in risk-based
opportunities and
maintaining our license
commitments for the
Chinarevskoye field.
US$26m
CAPEX
Governance practices:
implemented changes in
the Board structure and
committees post-
restructuring along with
relevant Board activities
to ensure compliance
with relevant guidance
and requirements.
6
3
board
members
including
INEDs and
Warrant
Director
Managing tax and other
regulatory challenges:
following the
comprehensive tax audit
covering 2016-2021 and
relevant payment of
US$25m taxes, fines and
penalties, we continue to
manage various other
enquiries and claims by
local authorities.
US$25m
taxes paid
04 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Executing catalyst projects in
line with our mixed-asset strategy
See more details on page 26
Stepnoy Leopard fields
acquisition: acquisition
completed in line with
expectations earmarking
transition to a multi-asset
company. Appraisal
programme nearly
completed. FID approved
for the initial field
development phase.
50-150mmboe
contingent resources
US$100m
forecast budget
for 2024-2026
Ural O&G tie-back
commenced: received
first third-party gas for
processing at the end
of 2023, representing
a pivotal moment for
Nostrum to launch
midstream activities and
become a true mixed-
asset energy company.
300 th. m3
of raw gas per day – one well
from Dec 2023
1.5mn m3
of raw gas per day – additional
four wells in 2024*
GTU-3 re-start: facilities
are operating as per
design and ready to
accept third-party gas,
and position Nostrum as
a preferred partner for
handling and processing
third-party gas in
Western Kazakhstan.
US$750m
facility
2.5bcma
processing capacity
* According to Ural O&G (MOL) guidance.
Looking to the future
Having set the foundation for the major
growth catalysts as described earlier,
we are now looking forward to further
progressing these initiatives, capitalising
on them to maximise stakeholder returns.
Specifically, in 2024, we anticipate start of
the Stepnoy Leopard field development
and a Competent Person’s Report (CPR) to
reclassify specific resources into reserves,
and continued processing of increasing
volumes of Ural O&G raw gas, while in
parallel we continue to actively search for
additional opportunities to profitably fill the
capacity of our processing facilities.
Following the completion of the debt
restructuring in early 2023, our first
communication of the new mixed-asset
energy strategy was delivered to the
investment community at the Capital
Markets Day in early 2023. Following this
event the management and the Board
continued to engage with the shareholders
and bondholders by arranging bilateral and
multilateral meetings. We have also been
actively engaging with various stakeholders
and actively participating in prominent
industry and leadership conferences to
showcase the advantages of Nostrum’s
assets in Kazakhstan.
With our 4.2 bcm gas processing facilities,
we are strategically placed to leverage the
new energy transition strategy unveiled by
Kazakhstan, which is aimed at achieving
carbon neutrality by 2060. Natural gas, as
a lower-emission fossil fuel, is pivotal for
Kazakhstan’s shift towards a sustainable
energy mix, and is in line with global trends
for cleaner energy sources. At the same
time, demand for marketable gas in
Kazakhstan continues to rise, while resource
levels have remained static primarily due to
underinvestment in both gas processing
facilities and gas exploration. This situation
presents a pressing challenge, with
forecasts predicting a gas shortage
potentially reaching up to 8 billion cubic
meters by 2025. Our existing gas process
infrastructure offers the fastest possible
startup solution at the lowest possible cost
for nearby gas producers, including from
the Karachaganak field.
Last but not least, we must not
underestimate the importance and
magnitude of the various risks and
uncertainties the Company continues to
face. Geopolitical uncertainties, product
price volatility, financial and tax risks, and
other principal risks and uncertainties as
described on pages 34-38 of the report
may have significant impact on the future of
the company. Capital allocation and capital
management challenges in the view of the
future opportunities go hand-in-hand with
the quickly approaching maturity of the
bonds in 2026.
Conclusion
In conclusion, I want to express my sincere
thanks to our investors, our dedicated
employees, and the Government of
Kazakhstan for another year of support
and commitment.
In 2023, Nostrum has experienced its first
successes in execution of its mixed- asset
energy strategy by implementing key
catalyst projects in a challenging operating
and regulatory environment, while
maintaining a steadfast focus on ESG.
Looking ahead, we remain focused on
our strategic direction. We are facing
a year that will surely bring both new
opportunities and challenges, but
with the collective efforts of our Board,
management, and all Nostrum employees,
we look forward to a future of continued
success and sustainable operations.
Stephen Whyte
Chairman and Non-Executive Director
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 05
STRATEGIC REPORT Market review
GRI 2-6
Market trends and our response
Since its independence in 1991, Kazakhstan has established
itself as one of the world’s most prolific hydrocarbon centres.
Key macroeconomic and microeconomic trends
Kazakhstan’s economy
Kazakhstan's economy experienced steady
growth, registering a 5% increase in 2023,
up from 3.2% in 2022. This growth was
driven by both the oil and non-oil sectors,
significantly buoyed by increased
investment in fixed capital, despite global
challenges and a limited impact from the
conflict in Ukraine. The annual inflation rate
in Kazakhstan eased to 9.8%, down from a
peak of 21.3% in February 2022. As inflation
decelerated, the National bank cut the base
rate by 1 percentage point from 16.75% to
15.75% during the year in 2023.
The Kazakhstani Tenge (KZT) appreciated
by 1.7% in 2023, closing the year at
454.56 KZT per US dollar.
What it means for us
Cost optimisation continues to be a critical
focus for our company, aimed at preserving
and enhancing our cash reserves. Despite
our G&A expenses maintaining fairly
consistent levels, we are dedicated to
minimising any necessary cost increases
associated with the development of new
projects, such as Stepnoy Leopard and
Ural O&G.
Kazakhstan
annual GDP
growth
5%
2022: 3.2%
Kazakhstan
annual
inflation rate
9.8%
2022: 21.3%
Oil prices
In 2023, Brent crude oil prices averaged
US$82.5 per barrel, showcasing notable
volatility and a decrease of approximately
18.2% from the previous year, amid
geopolitical tensions and concerns
around crude oil demand and supply.
The escalation in Brent prices following
the Middle East conflict in October 2023
was driven by potential geopolitical
impacts on supply and fears of a global
economic slowdown. However, in
November, several OPEC+ nations
extended and increased their voluntary
production cuts, amounting to 2.2 million
barrels per day. Despite this, and the
interim support in the third and fourth
quarters of 2023 led by Saudi Arabia
and Russia's production and export
reductions, oil prices experienced a
downward trend as the year concluded.
What it means for us
The Group’s annual revenues were
lower in comparison with 2022 due to
the lower commodity prices and
decreased sales volumes in line with
expected production decline from the
maturing Chinarevskoye field.
At the end of 2023 we had cash reserves
in excess of US$161.7m (31 December
2022: US$233.6m) excluding US$16.5m
placed in DSRA account in accordance
with the Notes terms post-restructuring
and US$8.7m of liquidation fund deposits,
which are reserved as required by the
subsoil use rights for abandonment and
site restoration liabilities.
The decline in cash balances year-on-year
was primarily due to the US$19.3m
payment for acquiring an 80% stake in
Positive Invest LLP, US$25m payment for
tax audit and US$25m payment for
finance costs and lock-up fees as a result
of completion of bond restructuring.
Competitive environment
Kazakhstan and Azerbaijan are the two
main oil-producing countries in the
Caspian region whilst Turkmenistan
and Uzbekistan are the predominant
gas producers. Russia plays an important
role in the region by providing a
transportation corridor between the
Caspian Sea and the Black Sea.
As the world’s largest landlocked country,
Kazakhstan depends on an extended
network of pipelines and railways to
deliver its products to export markets.
Pipeline exports are primarily delivered
via Russia (Atyrau-Samara and the
Caspian Pipeline Consortium pipelines);
via Azerbaijan and Turkey (the Baku-
Tbilisi-Ceyhan pipeline); and one via
China (Atasu-Alashankou). Rail exports
utilise Kazakhstan’s extensive rail network,
reaching markets throughout the FSU and
beyond (please refer to page 7 where we
discuss the impact of Russian sanctions
resulting from the Russia-Ukraine conflict
on our business).
What it means for us
Vast distances between Central Asian
markets, long-established trading
relationships and in-place infrastructure
promote co-dependency between FSU
exporters. Kazakhstan naturally benefits
from its geo-strategic position between
Russia and China. Nostrum is situated at
the heart of the export corridor that exists
between Russia and multiple markets to
the west of the Caspian.
Nostrum’s assets are located in the
Pre-Caspian Basin close to the Russian
border and in close proximity to some
of the most significant hydrocarbon
resources in the FSU. This advantageous
position means that the Company has
access to multiple export markets for its
products, as well as labour and specialist
equipment providers. In addition,
Nostrum has a substantial amount of
spare gas processing capacity in a region
where there is a significant amount of
stranded gas with a growing need for gas
processing.
06 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Key macroeconomic and microeconomic trends
Oil prices
Kazakhstan’s economy
Competitive environment
In 2023, Brent crude oil prices averaged
Kazakhstan's economy experienced steady
Kazakhstan and Azerbaijan are the two
US$82.5 per barrel, showcasing notable
growth, registering a 5% increase in 2023,
main oil-producing countries in the
volatility and a decrease of approximately
up from 3.2% in 2022. This growth was
Caspian region whilst Turkmenistan
18.2% from the previous year, amid
geopolitical tensions and concerns
driven by both the oil and non-oil sectors,
and Uzbekistan are the predominant
significantly buoyed by increased
gas producers. Russia plays an important
around crude oil demand and supply.
investment in fixed capital, despite global
role in the region by providing a
The escalation in Brent prices following
the Middle East conflict in October 2023
was driven by potential geopolitical
impacts on supply and fears of a global
economic slowdown. However, in
November, several OPEC+ nations
extended and increased their voluntary
challenges and a limited impact from the
transportation corridor between the
conflict in Ukraine. The annual inflation rate
Caspian Sea and the Black Sea.
in Kazakhstan eased to 9.8%, down from a
peak of 21.3% in February 2022. As inflation
decelerated, the National bank cut the base
rate by 1 percentage point from 16.75% to
15.75% during the year in 2023.
As the world’s largest landlocked country,
Kazakhstan depends on an extended
network of pipelines and railways to
deliver its products to export markets.
Pipeline exports are primarily delivered
production cuts, amounting to 2.2 million
The Kazakhstani Tenge (KZT) appreciated
via Russia (Atyrau-Samara and the
barrels per day. Despite this, and the
by 1.7% in 2023, closing the year at
Caspian Pipeline Consortium pipelines);
interim support in the third and fourth
454.56 KZT per US dollar.
quarters of 2023 led by Saudi Arabia
and Russia's production and export
reductions, oil prices experienced a
downward trend as the year concluded.
What it means for us
What it means for us
Cost optimisation continues to be a critical
focus for our company, aimed at preserving
and enhancing our cash reserves. Despite
our G&A expenses maintaining fairly
The Group’s annual revenues were
consistent levels, we are dedicated to
lower in comparison with 2022 due to
minimising any necessary cost increases
the lower commodity prices and
associated with the development of new
decreased sales volumes in line with
projects, such as Stepnoy Leopard and
expected production decline from the
Ural O&G.
maturing Chinarevskoye field.
via Azerbaijan and Turkey (the Baku-
Tbilisi-Ceyhan pipeline); and one via
China (Atasu-Alashankou). Rail exports
utilise Kazakhstan’s extensive rail network,
reaching markets throughout the FSU and
beyond (please refer to page 7 where we
discuss the impact of Russian sanctions
resulting from the Russia-Ukraine conflict
on our business).
What it means for us
Vast distances between Central Asian
markets, long-established trading
relationships and in-place infrastructure
promote co-dependency between FSU
exporters. Kazakhstan naturally benefits
from its geo-strategic position between
Russia and China. Nostrum is situated at
the heart of the export corridor that exists
between Russia and multiple markets to
the west of the Caspian.
Nostrum’s assets are located in the
Pre-Caspian Basin close to the Russian
border and in close proximity to some
of the most significant hydrocarbon
resources in the FSU. This advantageous
position means that the Company has
access to multiple export markets for its
products, as well as labour and specialist
equipment providers. In addition,
Nostrum has a substantial amount of
spare gas processing capacity in a region
where there is a significant amount of
stranded gas with a growing need for gas
processing.
At the end of 2023 we had cash reserves
in excess of US$161.7m (31 December
2022: US$233.6m) excluding US$16.5m
placed in DSRA account in accordance
with the Notes terms post-restructuring
and US$8.7m of liquidation fund deposits,
which are reserved as required by the
subsoil use rights for abandonment and
site restoration liabilities.
The decline in cash balances year-on-year
was primarily due to the US$19.3m
payment for acquiring an 80% stake in
Positive Invest LLP, US$25m payment for
tax audit and US$25m payment for
finance costs and lock-up fees as a result
of completion of bond restructuring.
Geopolitical uncertainty
Since the beginning of the latest conflict in the Middle East, Brent
prices have been volatile amid potential geopolitical impact on
supply and concerns of slowing global growth. The geopolitical
factors have prominently led to significant fluctuations in oil prices
and market uncertainty.
The ongoing conflict between Russia and Ukraine, which started in
early 2022, continues to be one of the most substantial conflicts in
Europe and has led to widespread sanctions being imposed on
various Russian institutions and individuals. Bodies and nations
imposing sanctions today include the US, UK and EU and these
sanctions have been sequentially expanding.
Due to sanctions, Urals blend has been trading at a significant
discount compared to Brent. Prior to the conflict, the spread
between Brent and Urals was modest, approximately US$3 per
barrel. However, this spread widened dramatically to around
US$35-40 per barrel during 2022, impacting the Company's oil
export prices. In 2023, on average, the spread between Brent and
Urals was US$20.8 per barrel, which would have had substantial
negative impact on the Company’s revenues, if not addressed
actively by management to mitigate these costs related to the
secondary effects of the Russian invasion of Ukraine.
What it means for us
Given the geographical position of the Group’s operations,
there is an impact of the evolving situation in Ukraine on its
business. Whilst Kazakhstan is not directly involved in the
ongoing conflict, nor have any Western sanctions been levelled
at it, the country is connected to Russia through infrastructure,
banking, and other business links. Furthermore, the Company
contracts with a limited number of Russian service companies.
During 2022 Nostrum considered and analysed alternative
export routes where export prices are not linked to Urals
quotation for oil and gas condensate supplies. As a result of this
exercise, in 2023 the Company managed to achieve lower than
average discounts for crude oil and gas condensate.
Nostrum is committed to complying with applicable UK, EU
and US sanctions relating to the Russia-Ukraine conflict. The
Company has obtained advice from external legal counsel on
the requirements for sanctions compliance, maintains and
regularly updates lists of sanctioned persons and entities as
these are supplemented or modified by the relevant authorities
to prevent Group companies transacting with such persons and
entities, has terminated previous commercial relationships that
might be impacted by relevant sanctions, makes enquiries
with commercial counterparties to mitigate risk of sanctions
violations, analyses sanctions restrictions on the sale, export
or shipment of products and consults with legal counsel when
appropriate on questions that may arise in connection with
the foregoing matters.
2023 CRUDE OIL PRICE HISTORY
150
100
50
0
J
Spread
Urals (R’dam)
Brent (DTD)
F
M
A
M
J
J
A
S
O
N
D
Brent (DTD)
Urals (R’dam)
Spread
45
30
d
a
e
r
p
S
15
0
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 07
KAZAKHSTANCHINARUSSIASTRATEGIC REPORT Market review
Contributing to Kazakhstan’s energy
security, transition to cleaner energy
and gas affordability
Kazakhstan is the largest oil producer in Central Asia and
a major gas producer. According to BP’s Statistical Review
of World Energy 2021, Kazakhstan stands among the top
20 nations globally in terms of proven natural gas reserves,
totaling 2.3 trillion cubic meters.
Kazakhstan’s gas industry plays a
vital role in energy security
The bulk of Kazakhstan’s gas reserves lies in
the western region of the country, with
about 85% concentrated in major fields
such as Tengiz, Kashagan, Karachaganak,
Zhanazhol, and Imashevskoye. Most gas is
associated with oil production, and around
one-third is reinjected in order to boost
liquids output.
In July 2022, Kazakhstan adopted a
‘Comprehensive plan for the development
of the gas industry of the RoK for 2022 –
2026’, which aims to enhance the country’s
energy and economic security through
phased reforms and development of
the gas industry by 2030, focusing on
increasing gas resources, modernising
infrastructure, meeting domestic needs,
exporting surplus gas volumes and reforms
in the management of gas industry.
In 2023, the volume of gas production in
Kazakhstan reached 59.1 billion cubic
meters, of which 29.8 billion cubic meters
was marketable gas (which refers to the
volume of gas available for sale after the
processing and purification process is
complete). With such an abundance, the
country’s gas industry plays a vital role in
fueling economic development and
energy security, both domestically and
internationally.
Despite the abundance of gas reserves in
Kazakhstan, meeting domestic demand
remains a significant challenge. President
Tokayev highlighted in 2022 the potential
shortage of commercial gas in the future,
driven by factors such as population
growth, a construction boom, and
industrial development.
The issue lies in effectively extracting,
processing, and commercialising these
reserves.
85% of Kazakhstan's
reserves are concentrated
in major fields in the western
region of the country
Kazakhstan’s transition to
cleaner energy
The Republic of Kazakhstan, as outlined in
the Decree of the President of the Republic
of Kazakhstan from February 2, 2023 № 121,
is committed to achieving carbon neutrality
by 2060. This ambitious goal necessitates a
profound transformation of the country's
energy system, focusing on three main
elements: decarbonisation of primary
energy supply, electricity and heat
production, and high-efficiency energy
end-use in various sectors.
Switching to natural gas is a critical step
for Kazakhstan in achieving low-carbon
development. Natural gas, as a cleaner
fossil fuel, can act as a bridge in the
transition towards a more sustainable
energy mix. It offers a reduction in
emissions compared to coal and oil, and
it aligns with the global trend towards
cleaner energy sources.
Karachaganak
Zhanazhol
K A Z A K H S T A N
Kashagan
Tengiz
Additionally, the use of natural gas can
enhance energy efficiency and reduce
methane leakage in the oil and gas sector.
Gas affordability to meet
domestic demand
To support the domestic shift towards
natural gas, the strategy includes gasification
of regions across Kazakhstan. This initiative
aims to increase the availability and use of
natural gas domestically, reducing reliance
on more polluting energy sources and
supporting the overall goal of carbon
neutrality. The gasification of the domestic
market in Kazakhstan is a crucial aspect of
the country’s energy strategy, with a current
gasification rate of 60% of the population
and a target rate of 65% of population
by 2030.
The consumption of marketable gas in
Kazakhstan is experiencing a steady
increase, highlighting the growing demand
for natural gas within the country. In the
near term, projections indicate a potential
shortage of marketable gas, underscoring
the urgency for additional projects to
enhance production and processing
capacity. According to various sources, by
2025, the expected gas deficit could range
from 3.6 billion cubic meters to as much
as 8 billion cubic meters.
08 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Sources: primeminister.kz, adilet.zan.kz, qazaqgaz.kz
Marketable gas shortage in Kazakhstan
in 2024-2030, bcm
Resource potential, bcm p.a.
Additional Nostrum volumes potential, bcm p.a
Consumption, bcm p.a.
3
4
4
4
39
4
5
3
35
4
1
3
2
4
0
4
30
4
6
2
31
4
7
2
30
4
7
6 2
2
3
3
29
4
5
2
6
3
29
4
5
2
“It is necessary to
accelerate the
construction of new
gas processing
plants and to fully
involve existing
processing
capacities in the
circulation.”
Kassym-Jomart Tokayev
President of the Republic
of Kazakhstan
2024
2025
2026
2027
2028
2029
2030
Source: Comprehensive plan for the development of the gas industry of the Republic of Kazakhstan for 2022 - 2026.
What it means for us
The utilisation of existing capacities, such as the Nostrum GTF, may play a crucial role in mitigating
this shortfall. Nostrum in particular, is anticipated to reduce the deficit by approximately 4 bcm
per annum, providing a significant boost to Kazakhstan’s efforts in addressing the growing gap
between gas supply and demand. This situation underscores the need for strategic investments and
initiatives to ensure a stable and sustainable gas supply that meets the country’s increasing energy
requirements.
Nostrum has a technically
verified project that is
self-funded for receiving and
processing raw gas from the
Karachaganak field, located
only 100 km away, which
currently has its gas re-
injected and exported for
processing at the Orenburg
Gas Processing Plant.
In 2023, Nostrum successful
completion of the re-start of
its GTU-3. The facility is
located at the Chinarevskoye
field, north of Uralsk.
International and domestic
pipelines are located near the
Company’s infrastructure hub,
enabling safe and efficient
transportation of all
processed products.
10%
In 2023, around 10%
of the production
capacity of the GTU was
utilised. The Company
is actively making
efforts to attract
third-party gas to
unlock its full potential.
4.2bcm
The GTU’s total
processing capacity
is 4.2 bcma. Nostrum
can contribute to
meeting Kazakhstan’s
current gas
requirements.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 09
STRATEGIC REPORT Business model
GRI 2-1, 2-6
Mixed-asset energy company
Nostrum is now at the right place at the right
time to participate in Kazakhstan’s transition
to a cleaner energy strategy and to strengthen
its energy security.
Key strengths
Mixed-asset energy framework
Right place, right time
Well located to develop regional resources. Multiple
transportation routes to market and full control of liquid
transportation logistics.
Nostrum’s existing 4.2 bcma dry gas processing
infrastructure is a gamechanger to participate in
Kazakhstan's transition to a cleaner energy strategy
and to strengthen its energy security.
A mixed-asset energy company
Offers an advantageous midstream solution to own and
potential third-party sources of upstream produced raw
gas fields with midstream solutions.
Improved balance sheet, robust cash reserves
Following restructuring, Nostrum has a healthy balance
sheet with significant cash reserves, lower annual coupon
payments, which allow us to focus on future growth.
High-quality local input
A significant number of our contractors and suppliers are
local Kazakhstan entities, meaning that we support the local
economy. This also means that we are well positioned to
maintain operations if access to Kazakhstan is restricted
(e.g. the recent COVID pandemic).
Constantly improving ESG performance
Environment: Highly rated by recognised agencies
ESG Risk Rating is 30.1, placing Nostrum at the lower end of
the “High Risk” category, and in the top 10th percentile of Oil
and Gas producers. Nostrum’ scores for Climate change and
Water Security modules stand at “B-“.
Social: Responsible operations
Safety is a personal and shared responsibility. Everybody
working at or visiting our facilities has a right to return home
safely and to perform their duties under safe working
conditions.
Governance: Experienced Board of Directors and
Senior Management Team
Nostrum’s BoD and Senior Management Team is seasoned,
close-knit and well-integrated across critical disciplines, with
proven skills in project execution and production operations.
10 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Upstream
Nostrum owned/operated and potential
third-party sources of upstream gas fields
Major opportunities in the region to secure
long-term supply of raw gas.
Nostrum asset
1
Chinarevskoye
field
2
Stepnoy
Leopard field
Producing field
1P reserves
of 16.3mmboe
2P reserves
of 23.2mmboe
Third party asset
80% owned field
currently under
appraisal
50-150mmboe
contingent
resources over
20% liquids
3
Rozhkovskoye
field
4
Karachaganak field
and other 3rd Parties
Gas tie-back achieved at
end of 2023
Possible midstream
tie-back opportunities
(Phase I)
Phase II – potential
subject to appraisal/
feasibility assessment
Estimated gross
reserves of over
2.4 billion barrels
of condensate and
16 tcf of gas
Strategically located world-class
gas processing facilities
and export hub
Nostrum asset
Third party asset
2
Stepnoy
Leopard
fields
NOSTRUM OIL
PIPELINE
Rostoshinskoye
RAIL LOADING
TERMINAL
AND CRUDE/
CONDENSATE
STORAGE
CONDENSATE
EXPORTS VIA RAIL
Uralsk
OIL EXPORTS
PIPELINE
Atyrau-Samara
NOSTRUM
PROCESSING
FACILITY
NOSTRUM
GAS EXPORT
PIPELINE
GAS EXPORT PIPELINE
Orenburg-Novopskov
1
Chinarevskoye
field
3
Rozhkovskoye
field
– Sinopec
– MOL Group
– KazMunaiGas
K A Z A K H S T AN
4
Karachaganak
– Shell
– Eni
– Lukoil
– Chevron
– KazMunaiGas
L PG E XP ORTS VIA RAIL
Aksai
Midstream
Well-positioned to become a major third-
party gas processor with an export hub
State-of-the-art 4.2bcm infrastructure hub, 85%
of which is not utilised by our own production.
Strategic location, attractive access to multiple
transportation routes.
Gas treatment
facilities (GTF)
Oil treatment
facility (OTF)
GTU 1&2 – 1.7bcm
400kt
GTU 3 – 2.5bcm
Power generation plant
Storage facilities
Rail loading terminal
Gas and liquids
pipelines
Value we create
Kazakhstan's Energy Sector
Nostrum is a major supplier of commercial processed gas
in Western Kazakhstan for domestic and export markets.
Aiming to be the preferred partner of choice for handling
and processing third-party gas in Western Kazakhstan.
Workforce
We are one of the leading employers in north-western
Kazakhstan, and we hold a valuable key to unlocking future
development of otherwise stranded natural resources.
Investors
In February 2023, Nostrum completed the implementation
of the restructuring after obtaining all required licenses and
approvals. As a result, US$1.125bn of existing notes have
been replaced with US$250m Senior Secured and US$345m
Senior Unsecured notes due in 2026. The remaining portion
of existing notes were converted into the Company’s equity
and the existing ordinary shareholders were diluted to
11.11%, subject to further dilution if the warrants held by
existing noteholders are exercised.
Local communities
We are a proud community partner and strive to foster a
culture of openness and engagement, offering social and
financial support to promote the wellbeing of local residents.
Suppliers, contractors and customers
Deliver on our production and project plans. Constant
communication with our key customers and suppliers.
Governments and regulators
We paid US$59.9m of tax in 2023 to governments. Our gas
process infrastructure with significant available capacity,
located only about 100 km north, offers a compelling value
proposition to both RoK and KPO, especially as an alternative
to increasing supplies to or from Russia.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 11
STRATEGIC REPORT Business model
Executing our strategic
catalyst projects
This strategy signifies our commitment in evaluating and investing
in both upstream and midstream opportunities focusing on those
where we see the most favourable risk/reward balance.
Upstream
Expanding gas lift system Acquisition of new asset
In 2023 we upgraded the gas lift system by
adding a 3rd gas lift compressor, doubling
the capacity from 27,000 to 54,000
standard cubic meters per hour. This
expansion helped to slow down the
production decline from the maturing
Chinarevkoye field, with initial production
gains exceeding management’s
expectations.
Quarter-on-quarter
production increase
in Q3 2023
12%
Stepnoy Leopard fields
In July 2023, Nostrum acquired an 80%
interest in Positive Invest LLP, which holds
the subsoil use right to the Stepnoy
Leopard Fields in the West Kazakhstan
region for US$20m.
Management estimates its recoverable
volumes between 50 mmboe and 150
mmboe which are considered to be
contingent resources.
In 2024, Nostrum approved
US$100m
initial field development
phase for the Stepnoy
Leopard fields
Drilling programme
at Chinarevskoye field
In August 2023, the Company’s Board
approved a limited-scale drilling
programme for the Chinarevskoye field to
be executed over 2023-2024. This adheres
to Zhaikmunai LLP's commitments under
the Field Development Plan and its
production sharing agreement for the
field, aiming to minimise costs by utilising
existing wellbores.
The programme will leverage existing
wellbores to reduce costs and carries a
level of uncertainties and risks as the
planned subsurface targets contain
multiple exploration, appraisal, and
development objectives. In early 2024,
Nostrum completed drilling of well 301,
second well in progress.
12 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Midstream
Start of Ural Oil & Gas
tie-back and first gas to
Chinarevskoye gas
treatment facility
Ural O&G’s Rozhkovskoye field production
start was achieved safely with one well
(U-21), while the other four planned wells
are scheduled to begin operations by
late 2024.
The first well commenced
production with a rate of
c. 300,000m3
of raw gas per day
Completion of the
re-start of GTU-3
In September 2023, Nostrum successfully
completed the re-start of its c.US$750m
state-of-the-art GTU-3 gas plant with a
processing capacity of 2.5 billion cubic
meters per annum. Subsequent to
commissioning and start-up of the plant
in 2019, the Company completed the
modifications and other works on GTU-3,
which also reduced the plant operating
turndown capacity. GTU-3 employs cutting-
edge turbo-expander technology enabling
improved efficiency in the extraction of
LPG, and it is operating as designed
delivering dry gas, LPG, and condensate
to sales specifications.
Total processing capacity
4.2bcm
GTU-3 processing capacity
2.5bcm
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 13
STRATEGIC REPORT Chief Executive Officer’s statement
GRI 2-22, 203-2
Delivering on our promises
2023 has been a
transformative year for
Nostrum, marked by
several key operational
milestones that
underscore the efficacy
of our mixed-asset
energy strategy.
Arfan Khan
Chief Executive Officer
Last year we successfully completed the
restructuring of our bonds, leading to
a strengthened balance sheet and
safeguarded cash reserves. This financial
stability enabled us to expand our
upstream portfolio, notably through the
acquisition of the Stepnoy Leopard fields
and commencement of a limited-scale
drilling program at the Chinarevskoye field.
In our midstream activities, we achieved
a major milestone by starting to process
third-party feedstock in our gas treatment
facility for the first time. Additionally, we
realised considerable improvements in
our ESG risk rating, thereby improving
our standing in the industry.
These accomplishments were made
possible by the invaluable support of
our newly appointed Board of Directors,
following the successful completion of the
Group’s bond restructuring in Q1 2023.
Moving forward we will continue to execute
the strategic catalysts and priorities as
agreed with our exceptional Board, with
razor-sharp focus on controlling costs,
maintaining operational liquidity, and
judicious allocation of capital to progress
value-accreting growth opportunities
across our upstream and midstream
portfolios. Nostrum is well-prepared to face
future challenges and our achievements
to-date demonstrate our commitment to
operational excellence and sustainability.
accomplished by our strategic acquisition
of an 80% stake in Positive Invest LLP, which
holds the subsoil use rights to the Stepnoy
Leopard Fields in the West Kazakhstan.
Located about 100 km west of our
world-class 4.2 bcma full-process
infrastructure, this field represents an
attractive Nostrum-operated upstream
tie-back project that could deliver material
reserves, potentially off-setting the Group’s
depleting resource base at the
Chinarevskoye field.
Strategic pillars in action:
Upstream achievements
Acquisition of Stepnoy Leopard field
Following last year’s significant milestone,
the restructuring of our bonds, Nostrum
has diversified successfully the upstream
portfolio from a single-asset (Chinarevskoye
Field) to a multi-asset company. This was
The Stepnoy Leopard Fields are estimated
to contain substantial proven undeveloped
recoverable resources, ranging from 50 to
150 mmboe, with liquids constituting over
20%. There are eight laterally stacked
gas-condensate reservoirs with over 100
wells drilled during the Soviet era. The
appraisal operations commenced in Q3
2023 with a targeted data gathering
14 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
campaign that includes fluid sampling,
extended well testing, and capturing
reservoir properties. The well appraisal
operations were nearly complete at the
date of release of this report and significant
data has been collected that included well
flow rates, fluid contacts, and fluid and
reservoir properties across a logged
interval with c. 50-meter of net-pay. The
flow-rate and pressure build-up tests
confirm high well productivity potential
with peak rate indications of c. 20 mmcfd
and 600 bcpd in a 3 ½” tubing. We believe
that the positive results obtained to date
support the commercial potential of the
field, hence in March 2024 we made a final
investment decision (“FID”) for the initial
field development phase of the Stepnoy
Leopard Fields with the forecast total
capital budget of US$100 million gross. The
forward plan is to compile a Competent
Person’s Report (CPR) to reclassify specific
resources into reserves.
A tie-back project of this scale and
magnitude will also increase meaningfully
the utilisation of our 4.2 bcma processing
facilities, especially when combined with
the additional production from Ural O&G
that commenced in Q4 2023.
Limited-scale drilling programme
Over the past four years, the Chinarevskoye
field has seen an anticipated annual
production decline of 24%, owing to the
natural depletion of our mature primary
reservoirs. To further evaluate the
remaining reserves development potential
we re-processed the 3D seismic and have
been conducting extensive subsurface
studies since 2022. This has led to the
identification of additional drilling
opportunities that indicate a wide-ranging
risk/reward characteristics. From this
opportunity set, we selected two highly
ranked drilling targets across the primary
Carboniferous and Devonian producing
intervals that are also oil-prone and as such
potentially more robust economically.
Generally, new drill-wells at Chinarevskoye
field can cost US$15-20m to drill and
complete. By utilising existing wellbores to
either drill deeper or to sidetrack out of, the
total costs can be reduced by 20% to 30%.
The two proposed wells although not
risk-free carry reasonable upside and were
approved by the Board, with a combined
estimated costs of US$26m. The first well
(CHN-301) was spudded in December of
2023 with drilling in Q1 2024 to total depth
of 4,980 meters on time and on budget,
and awaiting completion operations with
start-up expected mid-2024. It had multiple
in-fill targets across the Carboniferous and
Devonian age reservoirs. Hydrocarbons (oil,
gas-condensate) have been encountered
across three key intervals. The results are in
line with our expectations of initial well rates
of 400 to 700 boepd. The drilling rig will now
move to well No.41, with expected spud in
late April and start-up in Q3 2024. This well
is a sidetrack and carries a higher level of
geologic risk as it is a step-out from the
existing well control in the targeted
Devonian reservoir. If successful, these
wells will enable a cost-effective means of
converting the field’s 2P reserves to PDP
whilst also complying with Zhaikmunai’s
PSA obligations.
Upstream Operations: with Gas
lift expansion
The annual average production in 2023 was
10,091 boepd. The annualised decline of
24% was greatly improved (by 5-6%) due to
the successful and safe installation in July of
the new compressor that nearly doubled
the total field gas-lift capacity from 500k
m3/day to 900k m3/day. As stated
previously, all of the primary producing
reservoirs have seen rapidly rising water-cut
whilst also experiencing pressure
depletion. This causes wells to decline
faster and die earlier at lower water-cuts
without some form of downhole assistance
to lift the heavier fluid column. Gas-lift and
ESPs are the two main technologies
employed in the field for this purpose with
bulk of the wells on gas-lift. The gas-lift
expansion project has injected a new life
into the ageing wells and with the help of
best-in-class well & reservoir management
is succeeding in slowing the field’s
production decline by at least 5-6%.
The upstream operations also safeguarded
the operational liquidity by controlling
opex and G&A against continued upward
supply-chain pressures and inflation whilst
delivering a solid performance on the
production system availability of better
than 98% with under 4% production
deferment. Further, we completed our
product exports without any disruptions
despite the prolonged conflict in Ukraine
and delivered c. 3.2 mmboe in sales
volumes. Our netbacks also benefited from
the new off-take contracts that significantly
reduced the steep discount to the Urals
oil benchmark.
Strategic pillars in action:
Midstream achievements
Completion of the re-start of GTU-3
The successful commissioning and safe
restart of our US$750m state-of-the-art
GTU-3 gas plant has been a significant
development for Nostrum that underscores
our commitment to innovation and
operational excellence.
Utilising the cutting-edge turbo-expander
technology, the GTU-3, with its annual
processing capacity of 2.5 billion cubic
meters, boasts improved efficiency in the
extraction of LPG by 15 to 20%. Moreover,
the plant’s operating turn-down capacity
threshold has also been further reduced
via installation of a recirculation system,
enabling the plant to operate safely at
much lower production rates.
Since the third quarter of 2023, GTU-3 has
been operational with better than 90%
availability, aligning with design specifications
and efficiently processing dry gas, LPG, and
condensate. Together with GTU-1 & 2, we
are now fully operational with the 4.2 bcma
processing facilities that will support
expansion of the midstream business.
This achievement not only advances our
position in the energy security but also
aligns with Kazakhstan’s broader
energy needs.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 15
STRATEGIC REPORT Chief Executive Officer’s statement
Midstream Operations: Start of Ural
O&G tie-back (Rozhkovskoye Field)
Last year represented a notable
advancement in Nostrum’s midstream
strategy, with tie-back of Ural O&G’s
Rozhkovskoye field and processing the
first-ever third-party feedstock in our gas
treatment facility. This development marks
the beginning of a new phase for our
operations.
We completed on-time and budget the
pipeline installation and the associated
facilities to connect the Rozhkovskoye field
at our southern manifold. Our project and
operations teams worked hand-in-hand
with the Ural O&G project team to achieve
a safe commissioning and startup, ensuring
at all times that the minimum safety
standards related to asset-integrity and
process-safety are adhered to. Production
commenced from U-21 well in December
2023 and continues to ramp-up. The plan is
to connect additional four wells during 2H
2024 with combined throughput to reach
1.5 million m3 per day of raw gas1. Nostrum
is processing the gas under a processing
agreement that covers gas, LPG, and
condensate.
This collaboration with Ural O&G represents
a pivotal moment for us as we expand the
utilisation of our world-class treatment
facilities and position ourselves as a
preferred partner for handling and
processing third-party gas in Western
Kazakhstan. Our state-of-the-art infrastructure
is designed to process up to 4.2 bcm per
annum or more of third-party gas, offering
faster processing solutions at significantly
reduced costs compared to other
alternatives. The realisation of the Ural
O&G tie-back project is a proof-of-concept
for commercialisation of the stranded
gas-fields in West Kazakhstan that would
otherwise not be economic as a stand-
alone development. As such, this presents
a compelling opportunity to unlock
additional value for RoK and to drive a rapid
increase in domestic supply by nearly 20%,
contributing significantly to Kazakhstan’s
long-term gasification plan and the
development of cleaner energy resources.
Karachaganak Tie-Back Studies
We have continued to internally evaluate
various scenarios of connecting nearby
fields, including the giant Karachaganak
gas-condensate field to our 4.2 bcma
processing facilities. Located c.100 km
south of our facilities, the Karachaganak
field with an estimated 60 tcf of gas and
currently producing c. 18 bcma, remains
a strategic opportunity for RoK both in
relation to energy security and transition.
To maximise the condensate recovery,
about half the gas produced from the field
is re-injected and half exported to the
Orenburg Gas Plant (OGP) in Russia.
The field’s commerciality is linked to its
recovery of the liquids via gas re-cycling.
As is normally the case, the reservoirs
undergoing gas re-cycling over time will
begin to dry-out and as such start to
experience rapidly rising producing gas
to condensate ratios. We expect the
field’s overall gas production to increase
substantially from 18 bcma to perhaps
30 bcma in the next few years and as such
substantial additional gas handling
capacities will be required and Nostrum’s
processing facilities can be part of this
solution space. Our state-of-the-art gas
processing infrastructure offers the fastest
possible startup solution at the lowest
possible cost that would benefit both RoK
and the field’s operator KPO, especially as
an alternative to increasing supplies to or
from Russia.
Strategic pillars in action: ESG
achievements
Nostrum’s dedication to ESG principles
continues to be a key focus of our strategy.
As a prominent employer in the West
Kazakhstan region, employing over 500
Kazakh nationals, accounting for more than
92% of our workforce, we are committed
to initiatives that foster human capital
development, combat bribery and
corruption, and maintain high standards
in safety, environmental compliance,
and emissions control.
In 2023, we further strengthened our
ESG task force and enhanced our ESG Risk
Rating, securing a favourable position
within the industry. Our active participation
in the National ESG Club also reflects our
commitment to sustainable development
across Kazakhstan.
As evaluated by Sustainalytics, our ESG
Risk Rating improved to 30.1 from 40.1 last
year, transitioning Nostrum to the lower
spectrum of the “High Risk” category and
nearing the “Medium Risk” classification
by a mere 0.1 point. According to the
Sustainalytics’s rankings, this progress has
also positioned Nostrum among the top
20 companies in the Oil & Gas Exploration
and Production sector.
We remain committed to reducing
greenhouse gas emissions. Our actual GHG
emissions in CO2 equivalent were 180,157
tonnes in 2023, and 6% higher compared
to 2022. A 22 thousand tonnes of CO2
equivalent increase in emissions in 2023 is
due to the re-start of GTU-3 and, as a result,
higher fuel consumption requirement.
As a company focused primarily on gas, we
recognise the substantial opportunity to
support the shift towards a cleaner energy
mix through the utilisation of our world-
class facilities. We are aligning our strategies
with Kazakhstan’s extensive gasification
initiatives, ensuring our position as an
important contributor to the nation’s
energy stability.
HSE
At Nostrum, ensuring the safety and
well-being of our employees and
contractors is of paramount importance.
Our ongoing commitment to occupational
safety is directed towards achieving zero
fatalities and significantly reducing the
Total Recordable Incident Rate (TRIR), Lost
Time Injury Rate (LTIR), and Road Traffic
Incidents (RTI). We have upheld an
exemplary safety record over the past four
years, with no fatalities reported during our
operations. However, I regret to report a
tragic incident in 2023 where we lost a
contractor employee. The incident occured
during steady-state operations and routine
maintenance. The worker who was
conducting thermo-insulation of equipment,
fell into an opening where a functional
guardrail was missing, from a height of
10 meters, sustaining injuries which
unfortunately proved fatal. This loss is
deeply felt and serves as a stark reminder
of the criticality of fostering continuously
safety as a core value. Following this
incident, we conducted thorough
investigations and have taken further
measures to strengthen our occupational
safety rules and oversight, specifically in
relation to the strict adherence to our
“Permit to Work” system.
1. According to Ural O&G guidance.
16 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
The entire senior leadership team remains
engaged at the grass-root level, placing a
high priority on winning hearts & minds,
and helping to promote a mindset of
continuous improvement in the journey
to achieving our collective goal of zero
incidents.
Our efforts succeeded with tangible results
in other ratios, as evidenced by a 52%
y-o-y decline in the TRIR and zero RTI,
highlighting our continuous commitment
to safety improvements, active leadership
engagement, and fostering a culture
where incident reporting and proactive
intervention are encouraged and rewarded.
HSE is a critical element of our strategic and
operational focus, consistently driving me
and my team to maintain the highest safety
standards.
Our financial performance
The financial performance of the Group in
2023 remained relatively buoyant owing to
improved production performance from
the gas-lift expansion, tight cost controls,
and improved net-backs under new off-take
agreements. However, despite all efforts to
improve top-line revenue and margins, the
revenues decreased year-on-year by 40%
due to the continued field-level production
declines of the mature Chinarevskoye field,
in combination with lower average Brent
prices from US$100.9/bbl to US$82.5/bbl.
Consequently, our EBITDA fell to US$42m,
with an EBITDA margin of 35.2%, reflecting
the impact of reduced revenues against a
largely fixed cost structure.
In 2023, with the exceptional focus on
controlling costs and improving efficiencies
across all facets of our business Nostrum
managed to generate US$23m in positive
operating cash flow before payments of
around US$25m taxes and penalties as a
result of tax audit of previous years. Such
cash generation was sufficient to cover
capital expenditures and most of the
coupon payments during the year.
However, non-recurring items of US$25m
paid on completion of the bond restructuring
and US$19.3m payment for 80% stake in
Positive Invest LLP, together with tax audit
payments led to decrease in our cash
balances to US$161.7m from US$233.6m.
Looking ahead, the Company will need
to tap into its existing cash reserves for
potential investments in new projects
and activities, such as the appraisal and
development at the Stepnoy Leopard
fields or the drilling program at the
Chinarevskoye field. Nevertheless, cost
optimisation will remain a critical focus to
preserve our cash reserves for the growth-
oriented programs. While we kept our opex
and G&A expenses under control, we
are also committed to minimising cost
increases necessary for the development
of new projects like Stepnoy Leopard and
Ural O&G, by reallocating and efficiently
utilising our existing resources.
We are diligently working on capital
allocation to ensure the strategic
development of our opportunity funnel,
aiming for maximsing return on investment.
The progression and financial requirements
of the Stepnoy Leopard field will significantly
influence our investment strategy,
determining whether we can self-fund
or need to seek additional investments,
all while maintaining liquidity.
Conclusion
I extend my sincere gratitude to the entire
Nostrum team. Despite the challenges
faced by our company and the broader oil
and gas sector, we have continued to
deliver on our promises.
As we transition into 2024, I am enthusiastic
about the future, the forthcoming
opportunities, and have great confidence
in our resiliency in facing the challenges
head-on. Nostrum is poised to advance
its strategic objectives, contributing to
regional development, supporting
Kazakhstan’s energy transition, and
enhancing value for our investors and
stakeholders.
In closing, I would like to convey my sincere
appreciation for the continuous trust and
support from our investors, the relentless
commitment of our employees, and the
productive engagement by all our partners.
Your collective commitment forms the
foundation of our success.
Arfan Khan
Chief Executive Officer
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 17
STRATEGIC REPORT Strategy
Strategy for the future
Following the completion
of the Restructuring the
Company is now focusing
on unlocking the full
potential and value of its
existing world-class gas
processing infrastructure.
Our purpose
To unlock the value of our full
potential for all our stakeholders
through securing our business
by working as a fully integrated
team across all disciplines.
Our vision
To profitably and materially
contribute to the total
marketable commercial gas
supply in Kazakhstan whilst
strengthening a cleaner
energy mix.
Our values
We are trustworthy and reliable,
take our corporate, social and
ecological responsibilities
seriously, and are dedicated to
the health, safety and wellbeing
of our employees.
Strategic pillars
2024 priorities
KPIs
Risks
Forecasts, objectives and
prospects for 2024-2025
DEVELOPING UPSTREAM
POTENTIAL
• We remain confident in our
long-term growth strategy, while
broadening our opportunities
with investments in future growth
best-in-class facilities and
continuous improvement of our
portfolio in the industry
PURSUING MIDSTREAM
OPPORTUNITIES
• We have developed multiple
strategies to commercialise the
spare capacity in our world-class
gas processing facilities
• Well-positioned to become
a major gas processor
MANAGING OUR CAPITAL
ALLOCATION
• We are structurally addressing
our cost base and building a
cost-conscious culture to support
our growth ambitions, improve
our balance sheet, offset
inflationary pressures
• Cash flow growth through
disciplined capital and cost
management
FOCUSING ON ESG
PERFORMANCE
• Strong ESG performance focus:
contributing to energy security
and transition to cleaner energy
• Strengthening of corporate
governance with new, highly
experienced BoD
• Complete drilling programme
at Chinarevskoye field.
• Continue maintenance and
workovers programme at
Chinarevskoye field.
• Start of the Stepnoy Leopard
field development, CPR to
reclassify specific resources
into reserves.
• Advance ongoing discussions
with third parties interested in
supplying raw gas to take
advantage of the Group’s gas
processing capacity.
• Connect additional four wells
from Ural O&G. Ural O&G
to install a permanent line with
a fiscal metering unit
during 2024.
• Continue to challenge costs
whilst pivoting towards growth
and transitioning into a multi-
asset energy company.
• Evaluate all sales routes for
sustainability and profitability.
• Assessment of the opportunities
and their ranking for most
efficient allocation of capital to
maximise stakeholder returns.
• Safe operations and care for
the environment.
• Fulfilling social responsibility.
• Transparency with all
stakeholders by enhancing
ESG Reporting.
• Board actively involved in the
transformation/transition
• Complete drilling of wells Ch-301 and
• Significant subsurface uncertainties
• Successful and timely completion
Ch-41_1_1 on time and budget.
• Maximise uptime of existing wells
and risks could negatively impact
drilling and appraisal campaigns.
of drilling programme at
Chinarevskoye field.
and production facilities.
• Impact of equipment failure.
• Start of the Stepnoy Leopard field
• Completion of CPR.
• At low production levels, unexpected
sub-surface events could severely
development, CPR to reclassify
specific resources into reserves.
impact the Group’s operating
• Reduce decline rates in existing
cash flow.
production wells.
• Operational readiness for increased
• Ural O&G project execution delays
• Connect additional four wells from
raw-gas supplies from Ural O&G.
with tie-back of additional wells due
Ural O&G midstream project.
• Conclude commercial processing
to weather and installation of fiscal
contracts.
metering.
• Execute binding commercial
contracts to fill the Group’s spare
• Mechanical completion of the Sulphur
Recovery unit upgrade without any
major HSE incident.
• Ongoing negotiations with various
gas processing capacity with
counter-parties are complex and
third-party volumes.
commercially sensitive, and there can
be no certainty that agreement will
be reached.
• Control Opex and G&A.
• Challenges in attracting additional
• Manage “operational” liquidity and
capital for execution of prospective
cash reserves to ensure continuity
• Balance sales mix and maximise
netbacks.
opportunities.
of operations whilst unlocking the
future growth opportunities.
• Sustained higher commodity
prices can lead to cost inflation
in Kazakhstan.
• Further spend on CHN reservoir
development will likely be needed
to satisfy regulatory and licence-to-
operate requirements.
• Total recordable injury frequency.
• Legal framework for environmental
• Execution of the ESG plan.
protection and operational safety still
being developed in Kazakhstan.
• Achieve objectives set in the HSE
plan (HSE Leadership, Incident
management, Personal Safety,
Contractor management, Process
safety/Asset integrity).
• Lost time injury frequency.
• Road traffic incidents.
• Greenhouse gas emissions.
• Focus on improvements across ESG
and ultimate upgrade in rating.
• To further improve overall ESG risk
rating.
18 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
DEVELOPING UPSTREAM
POTENTIAL
• We remain confident in our
long-term growth strategy, while
broadening our opportunities
with investments in future growth
best-in-class facilities and
continuous improvement of our
portfolio in the industry
PURSUING MIDSTREAM
OPPORTUNITIES
• We have developed multiple
strategies to commercialise the
spare capacity in our world-class
gas processing facilities
• Well-positioned to become
a major gas processor
MANAGING OUR CAPITAL
ALLOCATION
• We are structurally addressing
our cost base and building a
cost-conscious culture to support
our growth ambitions, improve
our balance sheet, offset
inflationary pressures
• Cash flow growth through
disciplined capital and cost
management
FOCUSING ON ESG
PERFORMANCE
• Strong ESG performance focus:
contributing to energy security
and transition to cleaner energy
• Strengthening of corporate
governance with new, highly
experienced BoD
• Complete drilling programme
at Chinarevskoye field.
• Continue maintenance and
workovers programme at
Chinarevskoye field.
• Start of the Stepnoy Leopard
field development, CPR to
reclassify specific resources
into reserves.
• Advance ongoing discussions
with third parties interested in
supplying raw gas to take
advantage of the Group’s gas
processing capacity.
• Connect additional four wells
from Ural O&G. Ural O&G
to install a permanent line with
a fiscal metering unit
during 2024.
• Continue to challenge costs
whilst pivoting towards growth
and transitioning into a multi-
asset energy company.
• Evaluate all sales routes for
sustainability and profitability.
• Assessment of the opportunities
and their ranking for most
efficient allocation of capital to
maximise stakeholder returns.
• Safe operations and care for
the environment.
• Fulfilling social responsibility.
• Transparency with all
stakeholders by enhancing
ESG Reporting.
• Board actively involved in the
transformation/transition
Strategic pillars
2024 priorities
KPIs
Risks
• Complete drilling of wells Ch-301 and
Ch-41_1_1 on time and budget.
• Maximise uptime of existing wells
• Significant subsurface uncertainties
and risks could negatively impact
drilling and appraisal campaigns.
and production facilities.
• Impact of equipment failure.
• Completion of CPR.
• At low production levels, unexpected
sub-surface events could severely
impact the Group’s operating
cash flow.
Forecasts, objectives and
prospects for 2024-2025
• Successful and timely completion
of drilling programme at
Chinarevskoye field.
• Start of the Stepnoy Leopard field
development, CPR to reclassify
specific resources into reserves.
• Reduce decline rates in existing
production wells.
• Operational readiness for increased
raw-gas supplies from Ural O&G.
• Conclude commercial processing
contracts.
• Mechanical completion of the Sulphur
Recovery unit upgrade without any
major HSE incident.
• Ural O&G project execution delays
• Connect additional four wells from
with tie-back of additional wells due
to weather and installation of fiscal
metering.
• Ongoing negotiations with various
counter-parties are complex and
commercially sensitive, and there can
be no certainty that agreement will
be reached.
Ural O&G midstream project.
• Execute binding commercial
contracts to fill the Group’s spare
gas processing capacity with
third-party volumes.
• Control Opex and G&A.
• Balance sales mix and maximise
netbacks.
• Manage “operational” liquidity and
cash reserves to ensure continuity
of operations whilst unlocking the
future growth opportunities.
• Challenges in attracting additional
capital for execution of prospective
opportunities.
• Sustained higher commodity
prices can lead to cost inflation
in Kazakhstan.
• Further spend on CHN reservoir
development will likely be needed
to satisfy regulatory and licence-to-
operate requirements.
• Total recordable injury frequency.
• Legal framework for environmental
• Execution of the ESG plan.
• Lost time injury frequency.
• Road traffic incidents.
• Greenhouse gas emissions.
• Focus on improvements across ESG
and ultimate upgrade in rating.
• To further improve overall ESG risk
rating.
protection and operational safety still
being developed in Kazakhstan.
• Achieve objectives set in the HSE
plan (HSE Leadership, Incident
management, Personal Safety,
Contractor management, Process
safety/Asset integrity).
See KPIs section on pages 22-23
See Risk Management section
on pages 32-33
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 19
STRATEGIC REPORT Stakeholder engagement
GRI 2-29
Understanding our stakeholders
Continuous engagement is
integral to our day-to-day
operations and working
together towards shared
goals is a key factor in
facilitating, both in the short
and longer term success
of the business. We engage
by providing information
about our activities and
discussing with stakeholders
their interests and concerns.
Understanding what matters
to our stakeholders and their
views is fundamental to
effectively achieving our
corporate goals.
Section 172(1) statement GRI 203-2
The Directors are fully aware of their
responsibilities to promote the success of
the Company in accordance with section
172 of the Companies Act and to have
regard for the interests of the Company’s
employees and other stakeholders,
including the impact of the Company’s
activities on the community and the
environment, when making decisions at
Board level. The Directors, acting in good
faith, consider what is most likely to
promote the success of the Company for
the benefit of its members as a whole,
and in doing so balance the sometimes
competing interests of various stakeholders
including investors, employees, customers,
suppliers and the communities in which the
Company operates.
Read more about our governance
on pages 82-120.
Read more about delivering our
responsible business practices
on pages 50-81.
Key stakeholders
Why we engage
How we engage, key developments and decisions
Workforce
The Group had a workforce of 571 full-time
employees at 31 December 2023, the majority
based in Kazakhstan and of whom 92% were
Kazakhstan nationals.
Investors
Investors and bondholders have provided some of
the financing required for the construction of the
Group’s infrastructure.
Local communities
Nostrum co-exists with diverse communities in
Kazakhstan, and we try to strengthen community
engagement and promote long-term development in
the areas immediately surrounding our operations.
Suppliers and contractors
We are committed to building sustainable
relationships with our suppliers, contractors
and customers.
Governments and regulators
Governments and regulators set the framework
within which we operate and changes to policies,
regulations, legislation and personnel can have
major impacts on the Group’s business.
• The physical and mental well being
• Increased interactions between management
• Annual wage indexation to help alleviate
of our employees is essential to
and the workforce including cooperation
effects of inflation including indexation with
the continued safe operation of
meetings and town hall events.
effect from 1 January 2023.
our Group.
• Maximising stakeholder returns,
• In February 2023 Nostrum completed the
• Financial reports and extensive other
alongside meeting our financial
implementation of the restructuring after
shareholder information, including Russian
obligations and compliance with
obtaining all required licenses and approvals.
translations of all press releases, are available
bond covenants, stands at the
As a result, US$1.125bn of existing notes have
on our website.
forefront of Nostrum’s agenda.
been replaced with US$250m Senior Secured
Engagement with our stakeholders,
and US$345m Senior Unsecured notes due in
including minority shareholders, is
2026. The remaining portion of existing notes
• Our Annual General Meeting provides an
opportunity for all shareholders, including
minority shareholders, to ask questions of
crucial for their understanding of
were converted into the Company’s equity
Nostrum’s plans to monetise its
and the existing ordinary shareholders were
the Board.
infrastructure. Further financing
diluted to 11.11%, subject to further dilution if
capital injection might be required
the warrants held by existing noteholders
if Nostrum is to be successful in
are exercised.
those plans.
• Regular update and disclosure around results
including conference calls and press releases
as and when required.
• In March 2023, Nostrum’s Board and senior
management team held a Capital Markets
Day in London to update investors and
shareholders on the strategy and the
Company’s performance following the
completion of the restructuring.
• To successfully co-exist with the
Throughout 2023, the Company actively
• Acquisition of medical rehabilitation trainers
communities within which Nostrum
interacted with the local community. During
for Daryinsk Social Services Center, charitable
operates, we need to understand
2023, sponsorship and charitable assistance
assistance to Disabled People Society.
what is important to them and how
was provided to various public associations and
we are able to contribute.
local communities. The Company’s support in
2023 is evidenced by the following:
• Construction of a park and planting fruit trees
in the town of Beles.
• Providing funds for repair and improvement
of material and technical base for general
education schools and preschool institutions,
purchase of school supplies for children from
large families and low-income families.
• Providing financial assistance to young
athletes and winners of various intellectual
academic competitions to participate in
international competitions and contests.
• Allocation of funds for children requiring
treatment outside of Kazakhstan.
• Financial support in organisation of the
regional contest of the best health
professionals of West Kazakhstan region.
• Providing support on an as-needed basis to
the region we operate in, such as preventing
natural disasters during severe weather
conditions (blizzards, snowfalls, floods) by
providing special machinery and equipment.
• Our suppliers must meet high
• Where commercially attractive, contracts
• In some cases, contract scopes were split to
safety, legal and ethical standards.
were extended ensuring continuation of
maintain relationships with the service
relationships and building further on raising
providers, in particular in relation to new
HSE and operating standards.
construction projects.
• We recognise our role as a leading
contributor to the local and
national economy, therefore we
continue to engage local suppliers
to meet our operating needs.
• A number of the Board’s decisions
• Formal and informal discussions are held
• With the completion of restructuring in early
require careful consideration
on a regular basis with local and national
2023, the Company is now well-positioned to
of governmental and/or
regulatory issues.
• We pay substantial amounts of
taxes and social contributions.
government, regulatory and tax officials and
move expeditiously to unlock the full
ministers across a variety of levels within
potential and value of its existing world-class
Nostrum. In this way we can be aware of
gas processing infrastructure, acting in the
and responsive to proposed changes in
best interest of our investors and other
legislation or the interpretation of existing
stakeholders, whilst strengthening the
laws and regulations.
energy security of the region.
20 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Key stakeholders
Workforce
The Group had a workforce of 571 full-time
employees at 31 December 2023, the majority
based in Kazakhstan and of whom 92% were
Kazakhstan nationals.
Investors
Investors and bondholders have provided some of
the financing required for the construction of the
Group’s infrastructure.
Why we engage
How we engage, key developments and decisions
• The physical and mental well being
of our employees is essential to
the continued safe operation of
our Group.
• Increased interactions between management
• Annual wage indexation to help alleviate
and the workforce including cooperation
meetings and town hall events.
effects of inflation including indexation with
effect from 1 January 2023.
• Maximising stakeholder returns,
alongside meeting our financial
obligations and compliance with
bond covenants, stands at the
forefront of Nostrum’s agenda.
Engagement with our stakeholders,
including minority shareholders, is
crucial for their understanding of
Nostrum’s plans to monetise its
infrastructure. Further financing
capital injection might be required
if Nostrum is to be successful in
those plans.
• In February 2023 Nostrum completed the
implementation of the restructuring after
obtaining all required licenses and approvals.
As a result, US$1.125bn of existing notes have
been replaced with US$250m Senior Secured
and US$345m Senior Unsecured notes due in
2026. The remaining portion of existing notes
were converted into the Company’s equity
and the existing ordinary shareholders were
diluted to 11.11%, subject to further dilution if
the warrants held by existing noteholders
are exercised.
• Regular update and disclosure around results
including conference calls and press releases
as and when required.
• Financial reports and extensive other
shareholder information, including Russian
translations of all press releases, are available
on our website.
• Our Annual General Meeting provides an
opportunity for all shareholders, including
minority shareholders, to ask questions of
the Board.
• In March 2023, Nostrum’s Board and senior
management team held a Capital Markets
Day in London to update investors and
shareholders on the strategy and the
Company’s performance following the
completion of the restructuring.
Local communities
Nostrum co-exists with diverse communities in
Kazakhstan, and we try to strengthen community
engagement and promote long-term development in
the areas immediately surrounding our operations.
• To successfully co-exist with the
communities within which Nostrum
operates, we need to understand
what is important to them and how
we are able to contribute.
Suppliers and contractors
We are committed to building sustainable
relationships with our suppliers, contractors
and customers.
Governments and regulators
Governments and regulators set the framework
within which we operate and changes to policies,
regulations, legislation and personnel can have
major impacts on the Group’s business.
• Our suppliers must meet high
safety, legal and ethical standards.
• We recognise our role as a leading
contributor to the local and
national economy, therefore we
continue to engage local suppliers
to meet our operating needs.
• A number of the Board’s decisions
require careful consideration
of governmental and/or
regulatory issues.
• We pay substantial amounts of
taxes and social contributions.
Throughout 2023, the Company actively
interacted with the local community. During
2023, sponsorship and charitable assistance
was provided to various public associations and
local communities. The Company’s support in
2023 is evidenced by the following:
• Construction of a park and planting fruit trees
in the town of Beles.
• Providing funds for repair and improvement
of material and technical base for general
education schools and preschool institutions,
purchase of school supplies for children from
large families and low-income families.
• Providing financial assistance to young
athletes and winners of various intellectual
academic competitions to participate in
international competitions and contests.
• Acquisition of medical rehabilitation trainers
for Daryinsk Social Services Center, charitable
assistance to Disabled People Society.
• Allocation of funds for children requiring
treatment outside of Kazakhstan.
• Financial support in organisation of the
regional contest of the best health
professionals of West Kazakhstan region.
• Providing support on an as-needed basis to
the region we operate in, such as preventing
natural disasters during severe weather
conditions (blizzards, snowfalls, floods) by
providing special machinery and equipment.
• Where commercially attractive, contracts
were extended ensuring continuation of
relationships and building further on raising
HSE and operating standards.
• In some cases, contract scopes were split to
maintain relationships with the service
providers, in particular in relation to new
construction projects.
• Formal and informal discussions are held
on a regular basis with local and national
government, regulatory and tax officials and
ministers across a variety of levels within
Nostrum. In this way we can be aware of
and responsive to proposed changes in
legislation or the interpretation of existing
laws and regulations.
• With the completion of restructuring in early
2023, the Company is now well-positioned to
move expeditiously to unlock the full
potential and value of its existing world-class
gas processing infrastructure, acting in the
best interest of our investors and other
stakeholders, whilst strengthening the
energy security of the region.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 21
STRATEGIC REPORT Key performance indicators
Tight financial discipline and
responsible, safe operations
CASH AT THE YEAR END
OPERATING COSTS
US$161.7m
US$/boe9.93
2023
2022
2021
2020
2019
161.7
2023
9.93
233.6
2022
6.47
165.2
78.6
93.9
2021
2020
2019
5.13
3.91
3.98
G&A COSTS
SELLING AND TRANSPORTATION COSTS
US$/boe3.70
US$/boe3.83
2023
2022
2021
2020
2019
2.47
1.92
1.72
1.86
3.70
2023
2022
2021
2020
2019
3.83
4.36
3.84
3.57
4.25
Our key performance
indicators provide a
balanced set of metrics that
emphasise both financial
and non-financial measures.
These assist the Board in
evaluating our Company's
performance.
Financial KPIs
Whilst Nostrum has successfully
built infrastructure and produced
over 100 mmboe from the
Chinarevskoye field, it has
incurred substantial debt and
faces declining production from
its producing field. In 2023 the
Group has restructured its debt
and reinforced its tight financial
discipline to maintain liquidity
and safeguard our core business.
Cash and cash equivalents
decreased in 2023 mainly due
to payments associated with
completion of the Restructuring,
tax audit payments and
acquisition of Stepnoy
Leopard fields.
Increases in Opex and G&A
expenses in 2023 were necessary
for enabling growth opportunities
such as Ural O&G processing,
Stepnoy Leopard appraisal and
project development. On a per
barrel basis these costs also
increased due to the decline
in production volumes.
Selling and transportation costs
decreased on a per barrel basis
following the changes in offtake
agreements and delivery
destinations.
22 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Non-financial KPIs
Performing responsibly and
safely is integral to our strategy
and to the sustainability of our
business. We believe that long-
term value comes from seeing
success as a part of a bigger
picture, encompassing people
and the environment. We have
set ourselves specific non-
financial KPIs to track our
progress, as we believe this to
be the best way to monitor our
achievements in relation to
environmental, social and
governance matters. In 2023,
Nostrum ESG KPI targets were:
• Reduce GHG emissions
with 5% of 2022 actual
CO2 equivalent level.
• HSE KPIs:
• Achievement of the
approved 2022 HSE Plan
(provided that there have
been no fatalities).
SALES VOLUMES
HAZARD OBSERVATION CARDS
8,874boepd
930 units
2023
2022
2021
2020
2019
8,874
12,524
15,330
21,514
2023
2022
2021
2020
930
1,746
1,278
665
26,671
2019
216
ROAD TRAFFIC INCIDENT FREQUENCY
LOST TIME INJURY FREQUENCY
Zero incidents1
2023
0.00
2022
0.00
2021
2020
2019
0.37 incidents2
2023
0.37
2022
0.00
0.72
0.72
1.46
2021
2020
2019
0.81
0.84
1.39
TOTAL GREENHOUSE GAS EMISSIONS
TOTAL RECORDABLE INCIDENT RATE
180ktCO2e
2023
2022
2021
2020
2019
0.75 incidents2
2023
0.75
2022
2021
2020
1.56
2.42
3.80
223
2019
2.96
180
170
187
188
1. Per million km driven.
2. Per million hours.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 23
STRATEGIC REPORT Operational review
GRI 2-6
Our products
Nostrum’s production portfolio comprises crude oil, stabilised condensate,
LPG, and dry gas. In addition, starting from December 2023 the Group
launched processing of third-party hydrocarbons. Further details about
our products are provided in the table below.
Crude oil
Stabilised condensate
y Density – 0.834g/cm3
t
i
l
a
u
Q
s
e
l
a
S
API – 38.2 degrees
Average sulphur – 0.55%
PSA requires at least 15% to be sold domestically
with remaining 85% exported
In 2023, 23.8% was sold domestically and the
remaining volumes exported in accordance with
the PSA, which is in line with the past few years
and expectations (i.e. up to 25% of crude oil
could be supplied to the domestic market)
g Brent and Urals based pricing for pipeline exports
n
i
c
i
r
P
n
o
i
t
a
t
r
o
p
s
n
a
r
T
Domestic sales at over 50% discount
Prices negotiated directly with the purchaser
During 2023, all exported crude oil volumes were
sold through the KazTransOil (KTO) pipeline
Crude exports are delivered to the KTO pipeline
through an extension to our own 120 km pipeline
from the field site. From here the crude is
delivered via trunk pipelines
Density – 0.755g/cm3
API – 55.9 degrees
Average sulphur – <0.06%
100% exported
Destinations include the Kazakhstan port of
Aktau with further shipment to Baku and BTC
pipeline to Mediterranean
Brent based pricing, negotiated directly with the
purchaser
Sent through our own 120 km pipeline from
the field site to our own rail loading terminal
in Uralsk
From here it is loaded onto railcars and sent to
Aktau by rail for further transshipment
CRUDE AND STABILISED CONDENSATE PRODUCTION (BOEPD) AND PRODUCT SPLIT (%)
2023
2022
2021
2020
2019
4,630
5,696
6,877
8,476
46%
43%
40%
38%
9,798
34%
24 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
LPG
y Field-grade quality
Dry gas
t
i
l
a
u
Q
s
e
l
a
S
g
n
i
c
i
r
P
n
o
i
t
a
t
r
o
p
s
n
a
r
T
No olefins and low sulphur content
100% exported
100% sold to NC QazaqGaz
Destinations include the Russian Black Sea ports,
Ukraine and Poland
International Mediterranean LPG price Sonatrach
for Black Sea deliveries
Brent based price formula agreed until the end
of 2024
Argus quotations for specified destinations
(Ukraine, Tajikistan and Poland)
Loaded onto LPG trucks at the field site and
trucked to the third-party rail loading terminal
located in Zhelaevo
From here, the LPG is loaded onto railcars and
sold to third parties
Sent through our own 17km pipeline from the
field site to the connection point with the Intergas
Central Asia gas pipeline
Sold at the connection point
LPG PRODUCTION (BOEPD) AND PRODUCT SPLIT (%)
DRY GAS PRODUCTION (BOEPD) AND PRODUCT SPLIT (%)
2023
2022
2021
2020
2019
1,287
1,650
2,065
2,795
13%
2023
13%
2022
12%
2021
13%
2020
4,174
5,854
41%
44%
48%
50%
8,090
11,065
3,569
13%
2019
15,173
51%
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 25
STRATEGIC REPORT Operational review
2023 developments
Production in 2023 was 10,091 boepd, which represents a
23.5% decline compared to 2022, and slightly higher than
expectations, mainly because of the successful project
implementation of additional gas-lift. Chinarevskoye field
average daily production for 2024 is forecast to be in the
range of 7,000-8,000 boepd.
Drilling and workover operations
at the Chinarevskoye Field
In August 2023, the Company’s Board of
Directors approved a limited-scale drilling
programme for the Chinarevskoye field to
be executed over 2023-2024, in line with
the license commitments and field
development plan of the Company’s
subsidiary Zhaikmunai LLP. The programme
will leverage existing wellbores to reduce
costs and carries a level of uncertainties
and risks as the planned subsurface targets
contain multiple exploration, appraisal,
and development objectives.
The total rig workover campaign in 2023
consisted of 5 interventions on a range
of horizons for oil and gas-condensate
wells. As in 2022, rigless re-completions,
additional perforations and acid stimulations
were also carried out on a number of oil,
gas-condensate and water-injection wells.
Gaslift was successfully introduced in gas
condensate wells allowing continuation of
production and additional candidates will
be targeted in 2024.
As noted in the Reserves section,
extraction of 2P volumes will require further
interventions (side-tracks, new drilling and
workovers) up to 2026. More workover
activities are planned in 2024 with drilling
operations re-commenced in 2023 as it
was planned. However, execution of the
programme to recover the 2P reserves
is dependent on Nostrum successfully
identifying low risk drilling targets, and
to this end seismic and geological work
is ongoing. There is no guarantee that
Nostrum will be able to achieve such
de-risking, which could have a material
impact on Nostrum’s ability to develop the
remaining Proven and Probable Reserves
at Chinarevskoye.
In 2023 the uptime of the processing
facilities was 99.2% for oil and 99.7% for
gas processing. Planned downtime of the
plant was 75% lower than expected with
maintenance of oil treatment plant causing
a three-day and 20K boe of deferred
production. Unplanned plant downtime,
primarily due to a fire in the 10KV
substation, was less than a day and a
deferment totaling 12K boe. The autumn
compressor maintenance incurred only a
7K boe deferment with no plant shut down.
As of 31 December 2023, the Company
had 44 production (28 oil and 16 gas
condensate) wells in operation in the
Chinarevskoye field.
Completion of the re-start
of GTU 3
In September 2023, Nostrum announced
the successful completion of the re-start
of its c.$750 million state-of-the-art GTU-3
gas plant, with 2.5 billion cubic metres
per annum gas processing capacity. The
Company completed the modifications
and other works on GTU-3 subsequent to
its commissioning and start-up in 2019.
The plant employs cutting-edge turbo-
expander technology enabling improved
efficiency in the extraction of LPG; the
upgrades also reduced the plant operating
turndown requirements. GTU-3 is
operating as per design and delivering
dry gas, LPG, and condensate to sales
specifications.
Acquisition of Stepnoy
Leopard fields
In July 2023, Nostrum acquired an 80%
interest in Positive Invest LLP, which holds
the subsoil right for the Stepnoy Leopard
fields in the West Kazakhstan region.
Zhaikmunai LLP was assigned as operator
for the field.
The acquisition price was US$20 million
(less a modest amount of debt owed to
Nostrum Oil & Gas Coöperatief U.A.).
Management estimates that the Stepnoy
Leopard Fields hold between 50 mmboe
and 150 mmboe of recoverable volumes
which are considered contingent resources,
with over 20% estimated to be liquids.
There are eight fields covered by the
licenses with over 100 wells drilled in
the Soviet era which have confirmed
hydrocarbons to be present. The resources
are considered by management to be
contingent due to the appraisal and
development risks, noting the fields have
not previously been developed in part
due to the lack of needed infrastructure.
In September 2023 the Company
commenced appraisal campaign at the
Stepnoy Leopard fields to re-enter two
existing wells in the Teplovskoye reservoir
to take representative fluid samples and
conduct extended well testing. In 2024,
the well appraisal operations are nearly
complete and the FID made for the initial
field development phase.
Additional third-party volumes
Start-up of Ural O&G tie-back and
first gas to Chinarevskoye gas
treatment facility
The core strategy for Nostrum to
create value for its stakeholders is to
commercialise the investment made in
its infrastructure, the focus being on
filling the spare capacity with third-party
hydrocarbons. A significant milestone in
this strategy was reached in 2023 with the
initiation of the Ural Oil & Gas LLP (Ural
O&G) tie-back project.
Agreements were signed in 2018 with Ural
O&G for processing their hydrocarbons at
Nostrum's Chinarevskoye gas processing
facility. The partnership focused on
leveraging spare capacity and tapping
into Ural O&G's Rozhkovskoye field,
which is situated less than 20 km from
the Chinarevskoye field.
Ural O&G’s Rozhkovskoye field production
start was achieved safely with one well
(U-21), with the remaining planned four
wells to commence in 2024. The system is
currently utilising a temporary line and a
three-phase separator for measurement.
During 2024, a permanent line with fiscal
metering unit will be installed by Ural O&G
as per contract.
Ural O&G, is a company owned by
KazMunaiGas (KMG) (50%), Sinopec
(27.5%) and MOL Group (MOL) (22.5%).
Nostrum is also focused on entering into
additional agreements which can fill all
the remaining capacity at its GTF.
26 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Reserves
The Chinarevskoye field (Chinarevskoye)
is the only producing field owned by the
Group. Its governing PSA dates from 1997
and the licence is valid until the end of
2031. Initial hydrocarbon discoveries at
Chinarevskoye were made during the
Soviet era. There have been 103 wells and
side-tracks drilled under the PSA between
2004 and 2023. The licence is 100% owned
by Zhaikmunai, the Group’s principal
Kazakhstan operating company.
Chinarevskoye is a multi-layer structure with
17 reservoirs and 53 compartments spread
over three areas. Commercial hydrocarbons
have been found in the Lower Permian,
Bashkirian, Bobrikovski, Tournaisian,
Frasnian, Mullinski, Ardatovski, and
Biyski-Afoninski reservoirs.
Group management provided an estimate
of the Chinarevskoye Proven, Probable and
Possible reserves as of 31 December 2023,
which was internally prepared under the
guidelines set forth in the 2018 Petroleum
Resources Management System (SPE-
PRMS) and was not subject to an external
audit as no material change in the reserves
development was made. The internal
reserves estimation workflow covered
volumes of reserves, production and
discounted future net income estimated
by management.
Production and future net income were
derived from a drilling and well intervention
program to extract the estimated Proven,
Probable and Possible reserves at a
long-term Brent benchmark average oil
price of US$75 for 2024 and US$70 from
2025 onwards. However, execution of the
program to recover the 2P reserves is
dependent on Nostrum successfully further
identifying low risk drilling targets, and to
this end seismic and geological work is
ongoing. There is no guarantee that the
Group will be able to achieve this, which
could have a material impact on the
Group’s ability to develop the remaining
Proven and Probable Reserves at
Chinarevskoye.
Total 2P (Proven plus Probable) reserves are
23.2 mmboe as of 31 December 2023 after
adjusting for reservoir production of
3.7 mmboe in 2023. The net reduction in
reserves of 1.4 mmboe in the year is due to
poorer-than-expected production from the
Biyski- Afoninski North-East and Ardatovski
North-East gas reserves but being partially
offset by better production associated from
other producing horizons and the 2023
workover and rigless intervention
campaign. The Proven and Probable
reserves volume requires 14 CAPEX
interventions, with an additional 11
OPEX well interventions for production
maintenance (2022: 28.3 mmboe
requiring 17 CAPEX interventions).
Management’s estimates of reserves of
31st December 2023 and a comparison
with the reserves of 31st December 2022
are summarised in Table 1. Please refer to
page 135 for more details on estimation
uncertainties.
The Total 1P (Proven) reserves for
Chinarevskoye at December 31st 2023 was
16.3 mmboe or 3.9 mmboe down year-on-
year due to 2023 production and poorer
than expected performance in the
Biyski-Afoninski North-East and Ardatovski
North-East gas condensate reservoir which
was partially offset by a positive revision in
other reservoirs due to well performance
and successful workovers and rigless
interventions. 1P reserves volumes are
comprised of 15.1 mmboe for Proven,
Developed Producing (PDP) from 44
current wells and 1.2 mmboe for the
Proven, Undeveloped (PUD) category
which assumes the deepening of one well,
the sidetracking of another and one
workover.
The current Probable Undeveloped case
assumes 9 rig-assisted interventions
including four workover recompletions,
side-tracking of four existing wells, and
one new vertical well in the Bashkirian
reservoir. After a three-year break, which
was bridged with a targeted well workover
and rigless well intervention program to
offset some of the field production decline,
the Company started a two-well drilling
program in December 2023 to be executed
over 2023-2024.
In 2024, Nostrum plans to continue this
workover and well intervention programme
by targeting a limited number of reserves
development wells along with production
maintenance, and continue the drilling
programme. This programme, together
with the 44 existing producers, cover the
estimated 2P reserves as at 31 December
2023. It should also be noted that there
has been some decrease in volumes in
undeveloped reservoirs associated with
delays in the re-start of the drilling
campaign.
Possible reserves of 8.2 mmboe as at
31 December 2023 (2022: 8.5 mmboe) are
attributed to lower declines than the Proven
and Probable cases in existing producers
and 10 well interventions (3 WO, 5
sidetracks, 2 new wells).
Table 2 shows the breakdown of each
reserves category by products.
Reserves by reservoir
The breakdown by reservoir is given in
Table 3. A summary and comparison of the
workover and drilling programme by
reservoir is given in Table 4.
Biyski-Afoninski North-East
2P reserves are estimated at 7.15 mmboe,
down 2.75 mmboe compared to 2022-year
end (9.9 mmboe) which includes
1.4 mmboe of production in 2023 and a
1.35 mmboe negative revision due to
observed gas production performance
in 2023.
Gas lift was introduced into 4 more wells
in 2023 to maintain production with
increasing water-gas ratio and a further
2 wells are planned in 2024, predominantly
through low cost rigless interventions and
using the expanded Gas lift system
commissioned in July 2023.
Probable and Possible Developed volumes
are attributed to existing producing
wells, with lower declines interpreted
respectively. No new drilling is planned in
this reservoir. The 2019 Schlumberger study
concluded that the potential of further infill
drilling is limited, which corresponds with
management’s opinion.
Tournaisian North-East, West
and South
The Tournaisian North-East has a total 2P of
8.5 mmboe at 2023-year end, representing
a 1.3 mmboe decline year-on year, including
1.26 mmboe production and a 0.05 mmboe
negative revision to reflect recent well
performance.
Proven Undeveloped volumes are
associated with one deepening and one
sidetrack well in 2024-2025 whilst Probable
Undeveloped Reserves are associated
with one idle well workover in 2024, one
sidetrack producer in 2026, one water-flood
sidetrack in 2026 and two workover
recompletions for the extension of
the water-flood in 2025. Production
maintenance workovers are planned
in the reservoir in the years up to and
including 2027.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 27
STRATEGIC REPORT Operational review
Reserves continued
Table 1 – Nostrum Reserves, mmboe
Total PDP
Total PUD/PDNP
Total 1P
Total Probable
Total 2P
Possible
Total 3P
2023
15.1
1.2
16.3
6.9
23.2
8.2
31.4
2022
19.0
1.2
20.2
8.1
28.3
8.5
36.8
Change
-3.9
—
-3.9
-1.2
-5.1
-0.3
-5.4
Note: Barrel of oil equivalent (boe) totals are management estimates using a conversion factor of 5.327 mcf/boe.
Table 2 – Nostrum Reserves, by product and by reserves category
Fluid
Oil/condensate
Plant products (LPG)
Gas (after shrink)1
Gas (after shrink)
Total
Unit
barrels
barrels
mmcf
boe
boe
Proven
Producing
(PDP)
6,754,782
1,711,341
35,232
Proven
Non-Producing &
Undeveloped
(PDNP & PUD)
Total Proven
(1P)
Probable
(P2)
Total Proven
plus Probable
(2P)
Possible
(P3)
Total Proven,
Probable and
Possible (3P)
909,411
7,664,193
3,471,879
11,136,072
4,469,489 15,605,561
87,922
1,799,263
647,198
2,446,461
785,976
3,232,437
1,228
36,460
14,919
51,379
15,576
66,955
6,614,329
230,591
6,844,920
2,800,831
9,645,750
2,924,159 12,569,909
15,080,452
1,227,924 16,308,376
6,919,907 23,228,283
8,179,624
31,407,907
Table 3 2 – Comparison of reserves by reservoir 2023 versus 2022
Reservoir
Biyski/Afoninski NE
Tournaisian NE
Frasnian N
Ardatovski NE
Filippovski
Tournaisian South
Mullinski NE
Bashkirian NE & W
Tournaisian West
Mullinski South
Bobrikovski South
Ardatovski S
Mullinski North
Total
31 December 2023
31 December 2022
Change
Proven,
mmboe
Probable,
mmboe
Possible,
mmboe
3P,
mmboe
Proven,
mmboe
Probable,
mmboe
Possible,
mmboe
3P,
mmboe
Proven,
mmboe
Probable,
mmboe
Possible,
mmboe
3P,
mmboe
6.1
6.1
0.4
1.5
0.2
0.3
0.6
0.5
0.3
0.0
0.1
0.1
0.0
16.3
1.0
2.4
1.1
1.6
0.2
0.1
0.0
0.2
0.1
0.0
0.1
0.0
0.0
6.9
0.8
1.3
2.5
0.1
0.8
0.7
1.1
0.0
0.0
0.7
0.0
0.0
0.0
8.2
7.9
9.8
4.0
3.2
1.2
1.2
1.8
0.7
0.4
0.7
0.2
0.2
0.0
7.9
7.3
0.6
2.0
0.2
0.3
0.6
0.6
0.3
0.0
0.1
0.2
0.0
31.4
20.2
2.0
2.5
1.0
1.8
0.2
0.1
0.0
0.2
0.1
0.0
0.1
0.0
0.0
8.1
1.8
1.4
2.6
0.1
0.8
0.7
0.4
0.1
0.1
0.4
0.0
0.0
0.0
11.7
11.2
4.2
4.0
1.2
1.1
1.0
0.9
0.5
0.4
0.3
0.2
0.0
-1.8
-1.2
-0.2
-0.5
0.0
0.0
0.0
-0.1
-0.1
0.0
0.0
0.0
0.0
-1.0
-0.1
0.1
-0.2
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-1.0
-0.1
-0.1
0.0
0.0
0.0
0.7
0.0
0.0
0.2
0.0
0.0
0.0
-3.7
-1.4
-0.2
-0.8
0.0
0.1
0.7
-0.1
-0.1
0.2
-0.1
-0.1
0.0
8.5
36.8
-3.9
-1.2
-0.3
-5.4
1. Not included in the total.
2. Some differences due to rounding.
28 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Tournaisian West 2P is 0.34 mmboe despite
0.11 mmboe production as the well Ch-204
was connected to GL in the second half of
2023 showing stabilised production
performance.
In the Tournaisian South, there are limited
PDP volumes associated with the three
remaining producers and Possible reserves
associated with one new well planned
for 2026.
Ardatovski North-East and South
Proven Producing volumes are associated
with three current producers. One Probable
Undeveloped side-track well is planned
for the Ardatovski North-East reservoir in
2026. No further reserves development is
planned for the Ardatovski South reservoir,
beyond the current producer.
Frasnian North
2P reserves are estimated at 1.51 mmboe
at year end 2023, despite 0.21 mmboe of
production in 2023; the better than
expected well performance is reflected in
the slight reserves increase by 0.08 mmboe
of the existing producer Ch-40_1. Probable
Undeveloped reserves being attributed to
well Ch- 41_1_1, with a drilling start in Q2
2024 and expected to be online before
end of 2024.
The development plan still foresees three
additional Possible Undeveloped side-
tracks planned for 2025-2026, depending
on the success of Ch-41_1_1, which the
geological model is expected to confirm.
Mullinski North-East, North
and South
Proven Developed Producing reserves
remain for three wells, two in the North-
East and one in the North respectively.
Proven Undeveloped volumes are
attributed to one new well in the North-East
block and planned for drilling in 2024.
Two Possible Undeveloped category well
locations have been identified in the
North-East block and are side-tracks of
existing wells, while one new Possible well
is planned for drilling in the Mullinski South.
All three wells are planned for 2025-2026.
Bashkirian North-East & West
PDP reserves remain for two wells
produced via Electric Submersible Pumps
(ESPs). One Probable Undeveloped new
vertical well is proposed in the Bashkirian
North-East from 2026.
Filippovski
Five low-cost workover recompletions (one
Probable and four Possible) have been
identified for the Filippovski reservoir.
These are planned, subject to further
technical and economic evaluation, to
be carried out in 2025-2026.
Table 4 – Summary of the 31 December 2023 well programme supporting the reserves estimates compared
to the previous year (excluding rigless interventions)
Reservoir
Biyski/Afoninski NE
Tournaisian NE – oil
Tournaisian NE – WI
Tournaisian South
Tournaisian West
Mullinski South
Mullinski North
Mullinski NE
Bashkirian NE & W
Ardatovski NE
Ardatovski S
Frasnian N
Filippovski
Bobrikovski South
Appraisal
Total
31 December 2023
31 December 2022
Proven
wells
Probable
wells
Possible
wells
Total
Proven
wells
Probable
wells
Possible
wells
Appraisal
Total
—
2
1
−
−
−
−
1
−
−
−
−
−
−
−
4
−
2
3
−
−
−
−
−
1
1
−
1
1
1
−
−
−
−
1
−
1
−
2
−
−
−
3
4
−
−
10
11
−
4
4
1
−
1
−
3
1
1
−
4
5
1
−
25
1
2
−
−
−
−
−
1
−
−
−
−
−
−
−
4
−
1
3
−
−
−
−
−
1
1
−
1
1
−
−
8
−
−
−
1
−
1
−
2
−
−
−
3
4
−
−
11
−
−
−
−
−
−
−
−
−
−
−
−
−
−
—
—
1
3
3
1
−
1
−
3
1
1
−
4
5
−
23
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 29
STRATEGIC REPORT Operational review
GRI 2-6
Showcasing our infrastructure
6
4
5
2011
3
2
1
2019
1
2
GTU 3: 2.5 BCMA
LPG Storage and
loading
3
4
Power plant: 26mwh
GTU 1&2: 1.7 BCMA
5
6
Oil/Cond. storage
Oil Treatment unit (OTU)
With the re-start of GTU 3,
complementing the previous
gas processing trains, we have
built a world-class infrastructure
processing hub that is currently
under-utilised but with the
potential to support the
production and sale of billions
of cubic meters of gas in north-
western Kazakhstan for years
to come.
Oil Treatment Facility
The oil treatment facility (OTF) has a
maximum throughput capacity of 400,000
tons per annum. The OTF associated
infrastructure includes a gas-lift facility that
was commissioned in 2015 and a liquid
hydrocarbons pumping station transferring
crude oil and stabilised condensate via the
liquids pipeline to the rail loading terminal.
In 2023, 1.039 mmboe of oil and 0.692
mmboe of condensate was transferred
through the pipeline. After the installation
and commissioning of an additional gas lift
compressor in 2023, a total of up to
950,000 cubic meters of recycled lift-gas
per day has been compressed and made
available to enhance oil production, with
modifications to the existing system.
Raw Gas Treatment Facility
The gas treatment facility (GTF) is designed
to treat raw gas from gas condensate
reservoirs (and the associated gas coming
from the OTF) into condensate, LPG and
dry gas with a by-product of granulated
sulphur. The gas treatment facility includes
three gas treatment units (GTU1,2 & 3)
which have the capacity to treat 4.2 billion
cubic meters of raw gas per annum.
In mid-2023, GTU 3 was started again after
the turbo expander re-installation,
modifications on the hot oil system and
installation of a gas re-circulation system
ensuring sufficient feedstock. The 3rd train
was used to process the raw gas for the
remainder of 2023 and demonstrated
functionality and efficiency with higher-
than-expected LPG yields.
Low-pressure system
A low-pressure system has been installed
to facilitate the reduction of the GTF inlet
pressure from 42 to 8 bar, so as to prolong
the run-life of wells, primarily gas-
condensate. Installed capacity of gas
compression is 48,000 standard cubic
meters per hour in total with 19 wells
flowing through the low-pressure system
as of the end of 2023.
Gas lift system
In 2023 we upgraded the gas lift system by
adding a 3rd gas lift compressor, doubling
the capacity from 27,000 to 54,000
standard cubic meters per hour. Currently,
the compressors are running at 40,000
standard cubic meters per hour, limited
by total gas lift system constraints which
require further de-bottlenecking.
30 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Oil
Gas
Crude
oil wells
Oil treatment
facility (OTF)
400kt
Oil
Storage
5km3
Gas
condensate
wells
Third-party
hydrocarbons
Gas treatment
facilities (GTF)
GTU 1&2: 1.7bcm
H2S 2,500ppm: LPG 65%
GTU 3: 2.5bcm
H2S 450ppm: LPG 95%
Stabilised condensate
Storage
25km3
DRY GAS PRODUCTION (BOEPD) AND PRODUCT SPLIT (%)
2023
2022
2021
2020
2019
4,174
5,854
41%
44%
48%
50%
8,090
11,065
15,173
51%
Dry gas
LPG
Storage
10km3
3km3/d
Water
injection
1,200km3/d
Gas lift
48m3/h
Low-pressure
system
41MHw
Power
generation
Power generation plant
The gas-fired power generation plant is
linked to the GTF and has an electrical
power output capacity of 26 MW. The
generated capacity of the plant is sufficient
to meet the existing and the maximum
future need. Backup generation capacity
of up to 15 megawatts is available at the
processing facilities.
Storage facilities
Nostrum has over 35,000 cubic meters of
storage capacity for liquids at its field site
and rail loading terminal.
Gas pipeline
Nostrum has its own 17 km dry gas pipeline
which is linked to the Orenburg-Novopskov
gas pipeline. The pipeline has sufficient
capacity to export the entire GTF maximum
production capacity dry gas volumes.
Liquids pipeline
Nostrum has its own 120 km liquids
pipeline that runs from the field to the
Company’s rail loading terminal in Beles
(near Uralsk). The pipeline has a maximum
daily throughput capacity of 3,500 t/d.
Rail Loading Terminal
Nostrum has its own automated rail loading
terminal at Beles, located near the city of
Uralsk, that receives all produced crude oil
and condensate and has a daily capacity
of 5,000 t/d.
KTO pipeline connection
Nostrum has constructed a secondary
crude oil pipeline to enable export sales
from its rail loading terminal via the
Atyrau-Samara export pipeline operated by
KazTransOil (KTO). The connection to the
KTO pipeline has enhanced the Company’s
ability to maximise crude oil netbacks
through the commodity cycle.
Sulphur Recovery Unit and Incinerator
In 2023, modifications commenced on the
Sulphur Recovery Unit to handle higher
H2S levels, necessary for processing
third-party gas like UOG. This enables H2S
processing using either the direct oxidation
or Claus process. These modifications are
expected to be completed in 1Q 2024.
During 2023 facility inspection, serious
cracks at various heights of the 62-meter
incinerator chimney were identified,
necessitating urgent repair. After evaluating
several repair options, the only HSE
acceptable method was building
scaffolding. Expert consultation supported
this methodology and design was
approved. While installing the scaffolding
at 33 meters, two damaged scaffolding
poles led to a suspension of work. Support
to continue the work was obtained with
confirmation that the structure remains
within the safe operating range that was
assessed by an independent expert
inspector in the first quarter of 2024.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 31
STRATEGIC REPORT Risk management
Risk management
The Group has a system of internal controls consisting of its governance framework,
segregation of authorities and duties, various policies and procedures, training, supervision
and internal communications as well as monitoring by senior management and the
Board of the planning and decision-making processes. The risk management system is
embedded in these components of the system of internal controls in order to identify,
manage and report on the relevant risks that may impact achievement of the Group’s
strategic objectives,and ensure compliance with applicable regulatory requirements.
Risk management framework
The Board, supported by the Audit
Committee and senior management,
has ultimate responsibility for risk
management and internal control, including
responsibility for the determination of the
nature and extent of the principal risks it is
willing to accept to achieve its strategic
objectives, and for ensuring that an
appropriate risk-awareness culture has
been embedded throughout the Group.
Operational day-to-day risks are inherent
in the various business functions and
processes of the Group. These are
categorised as business function risks and
are identified and managed by the relevant
staff and managers in the course of their
activities to ensure safety, compliance,
and efficiency. The members of the
Senior Management Team have overall
responsibility for managing such business
function risks aggregated at the level of
their functional responsibility, but can
delegate such responsibilities to their direct
reports. At the highest level the identified
risks are aggregated and categorised into
the following categories of principal risks
and uncertainties: strategic, operational,
financial, compliance and other, which are
respectively managed and monitored at
Board level.
Based on risk registers, related analysis and
discussions, senior management and the
Board periodically review previously
identified significant risks, update their
understanding of the likelihood of
occurrence and potential impact, and
identify potential new significant risks.
These significant risks are discussed in
more detail below in the Principal Risks
and Uncertainties section.
In 2023, the processes related to risk
management and internal control systems
were consistent with the UK Corporate
Governance Code and FRC Guidance on
Risk Management, Internal Control and
Related Financial and Business Reporting
issued in September 2014. The Board
and Audit Committee are aware of the
additional requirements related to the
risk management and internal control
framework as set out in the UK
Corporate Governance Code 2024.
During 2023 the Group did not have a
dedicated internal audit function, as was
the case for the past few years where the
Group has relied on third party audits
and ad-hoc audits/process reviews
performed by employees and overseen
by management with results reported into
the relevant Board committee. The Board
and Audit Committee obtain assurance
on the effectiveness of the internal control
framework through: (a) upholding a regular,
detailed and timely system of internal
operational and financial reporting against
key performance targets, historical trends
and industry norms and the investigation
of any material deviations or failures, (b)
obtaining independent expert opinions
on matters of importance, including
any changes or disputes in the legal or
regulatory environment, (c) visits to
the company’s place of operations in
Kazakhstan and enquiries of local staff
and management, (d) reinforcement of
the internal system of Whistleblowing, (e)
evaluating all material investment policies
and proposals, and (f) seeking external
professional advice on the company’s risk
register and Board assurance framework.
Following the end of 2023, the Board
continues to monitor closely internal control
over financial reporting and the related party
identification and disclosure processes. More
detailed information on the Whistleblowing
Policy and Workforce representation can be
found on pages 62-63.
Environmental, social and
governance (ESG) matters
ESG matters form an integral part of the
areas covered by the Group’s systems of
risk management and internal controls, and
the Board recognises their significance and
importance. Identified ESG risks and
related responses can be seen within
Operational, Climate Change and Other
risks in the “Principal risks and uncertainties”
disclosure on pages 34-38.
The Board receives appropriate information
for managing such risks. Management is
responsible for ensuring that systems of risk
management and internal control are in
place to effectively manage and monitor
energy risks and other ESG matters. More
detailed disclosure on the established
policies and procedures in these areas
can be found on pages 50-81.
Changes from prior-year
risk assessment
In 2023, the principal risks and uncertainties
managed and monitored by the Board and
senior management included most of the
risks for 2022 and for which the related risk
assessments did not change significantly.
32 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Risk management framework
Strategic goals/KPIs
Reports
Risk universe
Roles and responsibilities (The Three Lines of Defence)
Principal risks and
uncertainties
Board (supported by Audit Committee)
Directors’ risks
register
Senior management team
1st line of defence
2nd line of defence
3rd line of defence
Business
function
risks
Heads of
business
sub-functions
Risk
management
Compliance,
QHSE, Security,
Controlling
Internal
audit, process
audits and
investigations
Risk management process
1. Risk identification
2. Risk assessment
3. Risk response (tolerate, treat,
transfer, terminate)
4. Resourcing controls
5. Reaction planning
6.
Reporting
and
monitoring
7.
Reviewing
risk
management
framework
The Board oversees the design
and implementation of systems
of risk management and internal
control and manages and reports
on principal risks.
The Senior Management Team
supports the Board in its oversight
and monitoring role and perform
management and reporting on
the level of Director’s risks.
Heads of business functions, being
the 1st line of defence, own and
manage operational risks related
to their respective area of activity.
2nd line of defence has a general
oversight function to ensure that
the risk management practices
followed are effective.
Internal audit, acting as the
3rd line of defence, provides
independent assurance over the
effectiveness of the systems of risk
management and internal control.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 33
STRATEGIC REPORT Risk management
Principal risks and uncertainties GRI 201-2, 205-1
Risk management
Nostrum’s Senior Management Team is pro-actively engaged with key
stakeholders among state authorities to address and resolve any potential issues at
early stages. In addition, the Group endeavours to identify legislative changes at
early stages before their introduction and to the extent possible participate in the
relevant working groups engaged in development of such changes.
To mitigate geopolitical, regional and customer risks, the Group continues to
strengthen customer relationships through establishing long-term off-take
agreements whilst also looking at possibilities to geographically diversify its
customer portfolio.
The Group has implemented robust internal controls and procedures to ensure
compliance with international sanctions on Russian and Belarus individuals,
organisations and supplies of goods and services, including the evaluation of
counterparties and their banks, contract procedures, and liaising with external
legal advisers. The Group regularly updates lists of all persons/entities and
products sanctioned in order to ensure Nostrum does not enter into transactions
with any sanctioned persons or entities.
The Group quarterly revisits the product price assumptions used in its short-term,
medium-term and long-term financial models, and performs stress testing of such
forecasts to fluctuations in product prices and these are monitored by senior
management and the Board.
The Group continues to take prudent actions to protect liquidity, including
identifying reductions in operating costs, general and administrative, and selling
and transportation costs that could be implemented without having a negative
impact on production or operations in the going concern period.
Senior management constantly monitors the Group’s exposure to foreign currency
exchange rate changes and makes plans for necessary measures. In addition, the
Group maintains its relationships with multiple financial institutions should it need
to implement commodity price hedging contracts. No such contracts were
entered into in 2023.
Description of risk
Strategic risks
Geopolitical factors
The Group’s operations are exposed to risks associated with the
political and business environment in Kazakhstan, being the Group’s
sole country of commercial operations, as well as its neighbouring
countries.
Nostrum has historically benefited from its geo-strategic position in
the heart of an export corridor between Russia and markets to the
west of the Caspian, however, the Group remains exposed to the risks
of the ongoing economic and political impact on Russia of its actions
in Ukraine, being reliant on its transport routes and ports. Ongoing
severe sanctions and trade restrictions imposed by, among others,
the US, UK and EU on Russia, have increased the economic and
political uncertainty and may have a material adverse impact on the
Group’s business, results of operations, financial condition and
prospects.
Product price volatilities
The Group’s operations and financial performance are exposed to
changes in the market prices for its products driven by external
business and political factors, which are outside the Group’s control.
Oil and gas prices are subject to volatility due to a variety of factors
beyond the Group’s control. Factors affecting crude oil prices include
supply and demand fundamentals, economic outlooks, production
quotas set by OPEC and political events.
Since the domestic selling price of dry gas is directly dependent on
the price of crude oil and the price of oil is volatile, the Company
could also face volatility in the price of dry gas. Also, the Group
could be compelled by governmental authorities, purportedly acting
based on RoK legislation, to sell its oil, condensate, LPG and gas
domestically at prices determined by the RoK Government, which
could be significantly lower than prices which the Group could
otherwise achieve.
Lower oil and gas prices may reduce the economic viability of the
Group’s operations and proposed operations and materially
adversely affect its business, results of operations, financial
condition and prospects. In particular, the Group’s ability to produce
economically from the Chinarevskoye Field or any prospective fields
will be determined, in large part, by the difference between the
revenue received for its products and the operating costs, taxation
costs, royalties and costs incurred in transporting and selling those
products.
34 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Description of risk
Risk management
Filling the spare gas processing capacity
The Chinarevskoye field is a mature declining asset with a proved
and probable reserves base at a level that will produce volumes of
hydrocarbons including raw gas sufficient to utilise less than 15
percent of capacity available at the Group’s gas treatment facilities,
which have a combined 4.2 billion cubic meters capacity per annum.
At the end of 2023, Ural OG production came onstream from its
Rozhkovskoye field, increasing the capacity utilisation to 30 percent.
The plan is to increase even more with connecting additional wells
from Ural OG. The agreement for the purchase of gas and processing
of condensate from the Rozhkovskoye field is for a period of four years.
The Company is therefore reliant on acquiring and developing
nearby assets with significant resource potential and/or processing
third party gas through its processing facilities to continue to produce
free cash flows and build sufficient cash reserves to repay future
indebtedness. The ability to negotiate and secure these strategic
acquisitions is highly uncertain and the ability to fund the development
of such projects, the costs of which may be substantial and require
external funding, may not materialise.
Oil and gas exploration and production activities are capital intensive
and subject to financing limitations and inherent uncertainty in their
outcome. Further, significant expenditure is required to establish the
extent of oil and gas reserves through seismic re-processing and
mapping, other surveys as well as drilling. Therefore, there can be
no certainty that further commercial quantities of oil and gas will be
discovered at Chinarevskoye or acquired by the Group to enable it
to utilise the spare capacity in its treatment facilities.
Operational risks
Oil and gas reserves and production
Estimating the value and quantity of economically recoverable oil and
natural gas reserves and resources, and consequently the rates of
production, necessarily depend upon a number of variables and
assumptions, such as ultimate reserves recovery, interpretation of
geological and geophysical data, marketability of oil and gas, future
product prices, operating costs, development and production costs
and workover and remedial costs, all of which may vary from actual
results, which would affect the Group’s financial performance and
achievement of strategic objectives. The re-classifications of
significant amounts of reserves from 2P to contingent resources
in 2020-2021 were the result of crystallising of such risks.
Even if the Group is able to discover or acquire commercial quantities
of oil and gas in the future, there can be no assurance that these will
be commercially developed. Appraisal and development activities
involving the drilling of wells across a field may be unpredictable and
may not result in the outcome planned, targeted or predicted, as only
by extensive testing can the properties of an entire field be more fully
understood.
Finally, given that the Chinarevskoye reservoir is a mature and
declining asset, the Group has been actively performing well
workover and interventions to reduce the rate of decline of the
reservoirs. In addition the Group has also started its drilling campaign
in December 2023. The initial campaign is for drilling 2 wells (301
deepening and 41 sidetrack) as part of the SA20 obligations. Such
activities, as well as construction, operation and maintenance of
surface facilities, are subject to various risks, including the availability
of adequate services, technologies and expertise, which may
adversely affect the fulfillment of the Group’s strategic objectives.
From the end of 2019, the Board came to the conclusion that diversification of its
sources of feed stock to the processing facilities would provide the Group with an
opportunity to gain from expanding the use of available capacities, technological
resources and human capital, and ultimately benefit from its under-utilised
infrastructure.
The GTU 3 plant was upgraded and made ready for receiving future gas. The
Sulphur Recovery Unit upgrade will be completed by May 2024 allowing treatment
of different concentrations of H2S.
The Group continues to actively engage in discussions with other third parties
interested in supplying raw gas to completely fill its spare processing capacity.
In July 2023, Nostrum acquired an 80% interest in Positive Invest LLP, which holds
the subsoil use right to the Stepnoy Leopard Fields in the West Kazakhstan region
for US$20m. Management estimates its recoverable volumes between 50 mmboe
and 150 mmboe which are considered to be contingent resources. In September
2023 the Company commenced appraisal campaign at the Stepnoy Leopard fields
to re-enter two existing wells in the Teplovskoye reservoir to take representative
fluid samples and conduct extended well testing.
Also, the Group has a number of additional area-wide opportunities under review
that may serve to strengthen the Group’s upstream and midstream portfolio in the
coming years.
The Group has a department of geologists and reservoir engineers who perform
periodic assessments of its oil and gas reserves in accordance with international
standards on reserve estimations and prepare production forecasting using
advanced exploration risk and resource assessment systems. The results of the
assessments are audited periodically by the Group’s independent reserves
consultant, Ryder Scott.
For drilling and well workover activities, the Group engages skilled personnel
and leading service suppliers, as well as employing internationally accredited
operations and cost monitoring systems, based on which management oversees
the work progress. The Group continued its well workover and intervention
programme in 2023 to minimise the production decline and this will be continued
in 2024 as the field gets older and equipment requiring more regular maintenance.
The gas lift expansion project, requiring an additional compressor to increase lift
gas availability for both oil and gas condensate wells was successfully completed
during 2023 and more than doubled the capacity to support the producing oil and
gas condensate wells, accelerating production.
Maintenance of wells and surface facilities is scheduled in advance, in accordance
with technical requirements, and all necessary preparations are performed in
a timely manner ensuring a high quality of work. In addition, the Group has
emergency response and disaster recovery plans in place and periodically
conducts necessary training and testing procedures.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 35
STRATEGIC REPORT Risk management
Principal risks and uncertainties continued
Description of risk
Cybersecurity risks
Nostrum may be vulnerable to the unauthorised or inappropriate
access to data, or the unlawful use, disclosure, disruption, deletion,
corruption, modification, inspection, recording, or devaluation of
information. Such cybersecurity failures may significantly adversely
affect the Group’s operations and financial results through
disruptions, shutdowns and delays in production and other activities.
Risk management
The Group uses a number of dashboards such as MS Secure and MS Compliance,
which monitor security and compliance, and also help to identify areas where
security might be enhanced. At the start of employment each new employee is
briefed on the Group’s Information Security Policy and signs a confidentiality
agreement. All mailboxes and data are placed on Microsoft servers with
appropriate levels of protection. Passwords have complexity requirement and
double authorisation has been introduced for most users. All data traffic, servers
and computers are subject to scanning and protection by anti-virus software.
Physical access to data storage is restricted to authorised personnel.
Environmental, Social and Governance risks
Risks of incidents, including risk of explosion
The Group’s operations are subject to hazards and risks common in
its industry, including encountering unusual or unexpected rock
formations or geological pressures, fires, explosions or power
shortages, equipment failures or accidents, premature declines in
reservoirs, blowouts, uncontrollable flows of oil, gas or well fluids,
or water cut levels, pollution and other environmental risks.
The Group’s QHSE policies are periodically revised to ensure compliance with
changes and new requirements in this area. Periodic training on the requirements
of policies and regulations is held for employees. Nostrum’s operations are based
on the five QHSE pillars: HSE leadership; rigorous incident investigation; process
safety-critical elements identified and maintained; contractor HSE management;
and environment and climate change.
Failure to prevent or adequately mitigate these hazards can have
a broad range of results, including, but not limited to, injury of
employees or local residents, a partial or total shutdown of
operations, significant damage to equipment, suspension or
withdrawal of licenses and relevant sanctions. Any of the above
could materially and adversely affect the Group’s business, results
of operations, financial condition and prospects.
It should also be noted that the legal framework for operational
safety is not yet fully developed in Kazakhstan and given the changing
nature of environmental regulations, there is a risk that the Group
will not be in full compliance with all such regulations at all times.
Governance risks
Nostrum must adhere to UK corporate governance and reporting
requirements. Governance risk factors are usually related to board
composition and structure, executive remuneration, internal controls
and risk management framework, corporate policies and procedures,
risks of corruption and bribery, and others.
Lack of adequate controls and policies, or a failure of those to operate
effectively, could lead to loss of company resources, non-compliance
with regulations, and respective significant fines, penalties, as well as
reputational damage.
Monthly QHSE reports are issued to communicate HSE performance. Management
KPIs include lost time injury frequency, road traffic injury frequency, total recordable
injury frequency and numbers of Hazard Observation Cards submitted as well as
managing reduction of GHG emissions from our operations.
Through the system of Hazard Observation Cards, employees and contractors
report any unsafe conditions observed in the workplace, which helps to ensure
their awareness of safe working conditions at all times. All incidents are
investigated, their causes identified and corrective action plans developed.
There is a classification of equipment as critical or non-critical. Safety critical
elements are devices, equipment or systems that are required to ensure process
conditions are maintained within safe operating limits, or the purpose of which is
to prevent malfunctioning. For example, devices are installed at well-sites to
automatically close the wells in the case of shutdown, preventing blow-down
by flaring.
Contractor HSE performance is managed by identifying and mitigating risks,
setting HSE performance criteria, monitoring, auditing and reporting HSE
performance, and subsequently using this information for continuous
development and feedback into the process of contractor selection.
As described on pages 90-92, the Group has established a robust governance
framework which covers all aspects of the Group’s activities through respective
Board committees and functional teams under senior management. Although the
composition of the Board and its committees was not ideal during the reporting
period due to the transition period, compensating controls and procedures were
put in place such as additional scrutiny over the Board decisions and more
frequent Board meetings.
The corporate governance framework is supported by an extensive range of
policies and procedures covering division of responsibilities, bribery, corruption
and whistle-blowing, anti-facilitation of tax evasion, as described on page 92 and
various other policies and practices related to social and environmental matters
described across other section of the report. Such policies and procedures are
designed and implemented to ensure that all required compliance obligations
are met.
36 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Description of risk
Environmental risks
Risk management
The Group’s operations are subject to environmental risks inherent
in oil and gas exploration and production industries. Examples of
environmental risks include risks stemming from more intense extreme
weather events, rising energy intensity in the oil and gas industry,
the changing regulatory landscape, the risk of fugitive emissions
and climate change policies driving down demand.
Compliance with environmental regulations may make it necessary for
the Group, at substantial cost, to undertake measures in connection
with the storage, handling, transportation, treatment or disposal of
hazardous materials and waste and the remediation of contamination.
In addition, the legal framework for environmental protection and
operational safety is not yet fully developed in Kazakhstan. Stricter
environmental requirements may be adopted in the near future,
and the environmental authorities may move towards a stricter
interpretation of existing legislation. The costs associated with
compliance with such regulations could have a material adverse
effect on the Group’s business, results of operations, financial
condition and prospects.
Climate change risks
Climate change
Continued attention to climate change issues by governments,
investors and customers and relevant developments in laws and
regulations, investor and customer preferences may have significant
adverse impact on the Group’s business.
New requirements, laws, policies and regulations may result in
substantial additional expenditures on capital construction,
compliance, operations and maintenance. The level of expenditure
required to comply with these laws and regulations is uncertain.
In addition, any perceived weakness in environment related policies,
procedures and efforts, sub-optimal assessment by an ESG rating
agency and comparison to peers, might adversely impact the Group’s
access to capital markets, reduce ability to raise additional financing,
increase financing costs and have a negative impact on the Group’s
business plans and financial performance.
Compliance risks
Subsoil use agreements
As the Group performs exploration, development and production
activities in accordance with related licenses for the oil and gas fields,
there are related risks that the Group might not be able to obtain
extensions or agree amendments to the field development plan,
when necessary, risks of non-compliance with the licence
requirements owing to ambiguities, risks of alteration of the licence
terms by the authorities and others. These risks may result in the
Group’s inability to fulfil scheduled activities; fines, penalties,
suspension or termination of licenses by authorities; and,
respectively, significant and adverse impact on the Group’s
business, financial performance and prospects.
Compliance with laws and regulations
The Group carries out its activities in a number of jurisdictions and,
therefore, must comply with a range of laws and regulations, which
exposes the Group to the respective risks of non-compliance. In
addition, the Group must comply with the Listing Rules, the Disclosure
Guidance and Transparency Rules, FRC guidance and requirements,
as well as requirements in connection with its restructured debt,
in light of its publicly traded shares and notes. Hence, there are
non-compliance risks, including reputational, litigation and
government sanction risks, to which the Group is exposed.
The impact of these risks may vary in magnitude and include
regulatory actions, fines and penalties by authorities, diversion
of management time, and may have an overall adverse effect on
the Group’s performance and activities towards achieving its
strategic objectives.
The Group actively plans and manages projects designed to mitigate certain
environment-related risks. Limiting GHG emissions is a management KPI.
The Group’s operations continuously put effort and commitment into improving
energy efficiency, reducing flaring, venting and leaks, and monitoring and
effectively managing emissions and waste. Also, the Group has recently started
recycling utilised water at the campsite.
The Senior Management Team actively evaluates opportunities to further adapt
and implement cost-effective mitigation measures.
The HSE and ESG Committees currently have responsibility for Environmental
related matters.
In 2023 Company developed Energy management policy and Energy Efficiency
Improvement Plan, HSE policy and QHSE Management System have been revised
as well.
The Group is actively planning and managing projects designed to mitigate
certain climate change related risks. For instance:
• To decrease its exposure to rising fuel prices, drilling rigs have been retooled
to derive more power from electricity rather than diesel;
• In operations there is a permanent effort and commitment to improve energy
efficiency and to reduce flaring, venting and leaks; and
• At campsite most of the water the Group utilises now is recycled.
Climate change is on the Board’s agenda. The Senior Management Team actively
evaluates opportunities to further adapt and implement cost- effective mitigation
measures.
The Group has procedures and processes in place for the timely application for
extension of licence periods or for amendments to the field development plan,
when it is considered appropriate however, uncertainty remains in relation to
timing and results of decisions of authorities. The Group maintains an open
dialogue with RoK governmental authorities regarding its subsoil use agreement.
In the event of non-compliance with a provision of the agreement, the Group
endeavours to have such terms modified and pays any penalties and fines that
may apply.
For the purpose of effective corporate governance and compliance with laws,
regulations and rules, the Group has adopted a number of policies and
procedures, as mentioned above. The Group also performs periodic updates
based on the changes in regulatory requirements and carries out related
communications and training for employees.
Necessary communication lines are established with authorities to ensure timely
and adequate inbound and outbound flow of information. Management and the
Board monitor significant matters related to legal and compliance matters in order
to act promptly in response to any actions. In addition, management maintains
an open dialogue with its sponsors in relation to any matter related to non-compliance
with Listing Rules and other regulatory requirements.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 37
STRATEGIC REPORT Risk management
Principal risks and uncertainties continued
Description of risk
Financial risks
Liquidity risks
Forecasting to maintain an adequate liquidity position is subject to the
risk that inaccurate information or assumptions are used for forecasts,
and to risks of counter-party delay or a counter-party's failure to meet
their contractual obligations owing to severe market conditions.
Moreover, the Group’s current and planned expenditures are subject
to unexpected problems, costs and delays, and the economic results
and actual costs may differ significantly from the Group’s current
estimates. Prices for the materials and services the Group depends
on to conduct and expand its business may increase to levels that no
longer enable the Group to operate profitably.
All the above factors in combination with a significant negative
movement in world energy prices could result in the Group’s liquidity
position becoming more strained than the severe but plausible
downside scenario in the Going Concern assessment.
Refinancing risks
The Group’s Notes will mature in June 2026 and, in the absence of
support from any of the strategic initiatives described on pages 18-19,
there is a risk that the Group will require partial or full refinancing of
SSNs, and repay SUNs in specie through the issuance of new shares
(further diluting the existing ordinary shareholders at the time) or have
their maturity extended through another refinancing or restructuring
exercise.
Tax risks and uncertainties
The uncertainty of application, including retroactive application,
of tax laws and the evolution of tax laws in Kazakhstan create risks
related to additional tax liabilities from assessments and risks related
to the recoverability of tax assets.
Kazakhstan’s tax legislation and regulations are subject to ongoing
changes and varying interpretations. Instances of inconsistent
opinions between local, regional, and national tax authorities are
not unusual. The current regime of penalties and interest related
to reported and discovered violations of Kazakhstan’s tax laws are
severe and where the tax authorities disagree with the positions taken
by the Group the financial outcomes could be material. Fiscal periods
remain open to review by tax authorities for five calendar years
preceding the year of review. Under certain circumstances reviews
may cover longer periods.
Tax risks and uncertainties may adversely affect the Group’s
profitability, liquidity and planned growth.
Other risks
Other significant risks, including emerging risks
Other risks are those that are not specifically identified within any of
the principal risks and uncertainties but may be related to several
such areas or be organisation wide. These include risks related to:
• Fraudulent activities;
• The Group’s supply chains;
• Accounting and reporting management systems; or
• The availability of human resources.
They may also significantly impact the Group’s financial performance,
reputation and achievement of its strategic objectives.
Risk management
Management and the Board constantly monitor the Group’s actual and forecast
liquidity position to ensure that sufficient funds are available to meet any
commitments as they arise.
In addition, management and the Board assess key financial ratios, sensitivity tests
of its liquidity position for changes in crude oil price, production volumes and
timing of completion of various ongoing projects, to understand the resilience of
the business and to be prepared for taking necessary remedies.
Further efforts are made on cost optimisation to reduce capital expenditures,
operating costs and general and administration costs.
The Board notes that uncertainty remains related to the Group’s ability to repay/
meet its liabilities, including the repayment of its Notes due in 2026 and the risk
that the Group may require refinancing in 2026.
Relevant considerations were made as part of the viability assessment as described
on pages 39-40.
The Group has policies and procedures related to various tax assessments and
positions, as well as other control activities to ensure the timely assessment and
filing of tax returns, payment of tax obligations and recovery of tax assets.
The Group regularly challenges, either with the RoK tax authorities or through the
RoK courts, tax assessments that it believes are inapplicable to it, pursuant to the
terms of either its subsoil use agreements or applicable law.
The Group has an Anti-Bribery and Corruption Policy, and provisions relating to
the same are included in the Group’s Code of Conduct. Related training and
updates are periodically provided for employees in relation to their obligations
in this area.
The Group has a wide range of internal controls over its supply chains and
accounting and reporting processes, including policies, procedures, segregation
of duties for authorisation of matters, periodic training for employees and so on.
The Contracts Board was established to meet weekly to review and approve the
placement of contracts or expenditures.
Senior management and the Board stay alert to emerging challenges related
to various management systems and related governance matters and, when
necessary, initiate change initiatives to ensure enhancement and integration
of certain management systems.
The risks listed above do not comprise all those associated with the Group’s business and are not set out in any order of priority.
Additional risks and uncertainties not presently known to management, or currently deemed to be less material, may also have an adverse
effect on the Group’s business. The risks listed above are continuously monitored by the management team and assessed when making
business decisions.
38 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Viability statement
Viability statement
Viability assessment
The three-year financial model used as a
base-case scenario for viability assessment
assumed following:
• Production forecasts reflecting
management’s internal view of
Chinarevskoye production under a no
further field activity scenario. This
production forecast is more conservative
than that used in the impairment testing
process (proved and probable reserves
base used) as the viability assessment
basis is more akin to the proven
developed producing reserves base as
outlined in the Ryder Scott reserves audit
as of 31 December 2022;
• Inclusion of throughput processing
volumes of hydrocarbons from Ural O&G
based on management’s internal view,
and no additional utilisation of the spare
capacity of Gas Treatment Facilities
despite being a key strategic focus of
management for the medium-term
horizon; and
• Product price assumptions based on a
Brent oil price of US$70/bbl throughout
the assessment horizon. This is within the
range of average broker consensus
forecasts as at 31 December 2023.
For the purpose of sensitivity testing,
several principal risks and uncertainties
were selected (from those described on
pages 34-38), which were deemed to have
the highest potential financial impact on
the Group’s future performance, taking
into account prior period assessments.
The effect of those principal risks and
uncertainties or their combination on the
base-case scenario were analysed with the
assumptions as described in the table below.
The Directors also considered severe but
plausible scenarios where a combination of
two or three of the risks shown in the table
below occur together.
The scenarios took into account the
availability and likely effectiveness of any
mitigating actions that might be required
if the Group was exposed in the medium
term to downwards volatility and that are in
place or could be implemented to avoid or
reduce the impact or occurrence of the
underlying risks which would realistically
be available to the Group in such
circumstances. In considering the likely
effectiveness of such actions, the
conclusions of the Board’s regular
monitoring and review of risk and internal
control systems were taken into account.
Principal risk and
uncertainty
Strategic risks
Description
Viability assessment
Deterioration in the business
and market environment and
geopolitical risks
10% reduction in oil, LPG and gas
prices over the period of assessment
Operational risks
Production issues from the
field and/or transportation
issues along the sales routes
10% reduction in forecast production
and sales volumes over the period of
assessment
Liquidity risks
Cost pressures in the
ordinary course of business
supply chain and with Group
personnel
10% increase in capital expenditures
and operating cost over the period
of assessment
Compliance risks Unexpected and
unbudgeted fines and
penalties for various
non-compliance issues
US$5m per annum regulator fines;
and US$10m per annum legal claim
over the period of assessment
We assessed the future medium-term
viability of the Group over a period longer
than 12 months in accordance with
provision 31 of the UK Corporate
Governance Code 2018. The viability
assessment is performed by stress-testing a
medium-term financial model to the
principal risks and uncertainties (described
on pages 34-38) and their combinations.
The key features of the financial model
include the following elements of corporate
planning and modelling process:
• Medium-term development planning
based on three-to-four-year financial
projections, using management’s internal
estimate of forecast production from the
Chinarevskoye field, processing
hydrocarbons from Ural O&G and
development of Stepnoy Leopard fields.
No other third-party volumes or strategic
initiative projects have been included in
the viability assessment as there is
currently no certainty that they will arrive
within the assessment period; and
• Annual budgeting and forecasting
process incorporating preparation of an
annual budget for the following year,
which is reviewed and approved by the
Board, and followed up with quarterly
forecasts, which are monitored by senior
management and the Board.
Viability time horizon
Considering the uncertainties inherent to
the Group’s operations as well as the
medium-term development planning
mentioned above, the Board concluded
that a viability assessment over a three-year
period to 30 June 2027 provides a robust
and realistic evaluation of the Group’s
future performance. With this approach the
Board continues to believe that the
assessment:
• improves the optimal balance between a
reasonable degree of confidence and an
appropriate longer-term outlook;
• is aligned with medium-term
development planning mentioned above;
• is consistent with other current and/or
recent communications (e.g. production
forecasts etc.); and
• is appropriate for the current stage of
development of the Group and gives an
opportunity to reasonably assess
sensitivity of the Group’s performance to
principal risks during the period where
the Group looks to work on implementing
its major strategic objectives (described
on pages 18-19).
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 39
STRATEGIC REPORT Viability statement
Viability statement continued
Climate-related financial
disclosure
As part of the viability assessment the
Directors also performed resilience analysis
as per the requirements of the Taskforce on
Climate-related Financial Disclosure
(“TCFD”). TCFD requires the Directors to
describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario (TCFD Strategy (c)).
The Directors chose the Net Zero Emission
by 2050 Scenario (“NZE Scenario”)
developed by the International Energy
Agency as the reference point in
performing the resilience test and also
took into account Kazakhstan’s Strategy on
Achieving Carbon Neutrality by 2060. NZE
Scenario is aimed at an emissions trajectory
consistent with keeping the temperature
rise in 2100 below 1.5 °C (with at least a
50% probability).
Two key assumptions were taken from NZE
Scenario for the purpose of severe but
plausible development scenario for
stress-testing the company’s resilience:
1) oil prices projections decreasing to
US$42 per barrel by 2030; and 2) carbon
price forecasted at US$25 per tonne of CO2
by 2030. Please refer to page 79 for
further details.
The Group maintains sufficient cash
reserves at the end of the viability period
when sensitising the base case for the
above climate-related assumptions.
Following the assessment, the Directors
confirm the future strategy and future
viability remain resilient against the chosen
climate-related scenario.
Longer term viability
The Directors also considered the viability
of the business beyond the medium term.
The Notes issued by the Group will mature
in June 2026 and, under the base case
scenario in the current viability assessment
model, the Directors have a reasonable
expectation that the Group will be able to
partially repay the SSNs (US$250m) in 2026,
and will require refinancing of the remaining
portion of these notes, and SUNs are
expected to be either repaid in specie
through the issuance of new shares (further
diluting the existing ordinary shareholders
at the time) or have their maturity extended
through another refinancing or
restructuring exercise.
The implementation of the major strategic
initiatives described on pages 10-13 will
inevitably support future long-term viability
of the Group, and the Directors note that
this may reduce the possible requirement
for refinancing of a smaller portion of the
SSN at maturity in 2026 under the base
case scenario, as noted above.
Viability statement conclusion
Considering the above, the following
conclusions can be drawn from the viability
assessment:
• the Group’s viability conclusion is not
exposed to plausible downside risks
arising in isolation relating to the Group’s
strategy, operations, liquidity or
compliance;
• in the event that a combination of any
three of the four considered plausible
downside scenarios arise, the Group’s
may require additional funding to cover
the capital expenditures required for
development of Stepnoy Leopard fields;
• It is not plausible that all four risks would
arise together, since, in the event of the
strategic, operational and compliance
risks manifesting, the Group would take
mitigating actions to reduce costs and
manage liquidity and so the likelihood
of an increase in costs occurring
concurrently with the other three
scenarios is considered remote; and
• Absent support from any of the strategic
initiatives described on pages 18-19, the
Group may need to partially refinance the
SSNs, and either repay the SUNs through
issuance of equity or extend their
maturity through refinancing or
restructuring.
Based on these assessments and other
matters considered by the Board, the
Directors confirm that they have a
reasonable expectation that the Group
will continue in operation and meet its
liabilities as they fall due through the
three-year viability assessment period
ending 30 June 2027, subject to possible
necessity for partial refinancing
or restructuring of its debt.
40 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Financial review
Financial review
GRI 207-4
Results of operations for the years ended 31 December 2023 and 2022
The table below sets forth the line items of the Group’s consolidated statement of
comprehensive income for the years ended 31 December 2023 and 2022 in US Dollars
and as a percentage of revenue.
In thousands of US Dollars
2023 % of revenue
2022 % of revenue
For the year ended 31 December
Revenue
Cost of sales
Gross profit
General and administrative
expenses
Selling and transportation
expenses
Taxes other than income tax
Finance costs
Employee share options – fair
value adjustment
Fair value adjustment on
recognition of debt instruments
119,629
100.0%
(77,628)
42,001
64.9%
35.1%
199,717
(84,053)
115,664
100.0%
42.1%
57.9%
(13,807)
11.5%
(12,076)
6.0%
(12,403)
(14,187)
(102,826)
10.4%
11.9%
86.0%
(19,950)
(19,830)
(123,138)
10.0%
9.9%
61.7%
25
0.0%
38
0.0%
174,426
145.8%
Foreign exchange (loss)/gain, net
(954)
0.8%
Gain on debt-to-equity exchange
769,611
643.3%
Interest income
Other income
Other expenses
2,691
6,430
(14,675)
Income/(loss) before income tax
836,332
2.2%
5.4%
13.2%
698.2%
—
254
—
272
6,806
(29,821)
(81,781)
Income tax expense
(4,674)
3.0%
(34,664)
Profit/(loss) for the year
831,658
695.2%
(116,445)
Currency translation difference
62
0.1%
(490)
0.0%
0.1%
0.0%
0.1%
3.4%
14.9%
40.9%
17.4%
58.3%
0.2%
General note
For the year ended 31 December 2023
(the “reporting period”), the Group
recorded a total comprehensive income
of US$831.7 million, as opposed to
US$116.9 million total comprehensive
loss in 2022. The substantial amounts
of gains followed the completion
of the Restructuring, and included
US$769.6 million gain on debt-to-equity
exchange and US$174.4 million fair value
adjustment on the recognition of SSNs
and SUNs. Further details on the
Restructuring are described on
pages 48-49 of this report.
Other than one-off items described above,
there were also considerable movements in
operational items of the income statement.
Notable 40.1% decrease in revenues was
a combination of 18.2% decrease in
the average Brent crude oil price and
a continuing decline in production of
over 20% from the maturing Chinarevskoye
field, which was slightly offset by Gaslift
expansion in mid-2023. Reductions in cost
of sales (by US$6.5 million), selling and
transportation expenses (by US$7.6 million)
and taxes other than income tax (by
US$5.6 million). These reductions in
costs were accompanied by a decrease
in finance costs (by US$20.3 million),
which was attributed to the restructuring
of the Notes 2022 and Notes 2025.
Total comprehensive income/
(loss) for the year
831,720
695.2%
(116,935)
58.6%
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 41
STRATEGIC REPORT Financial review
Financial review continued
Revenue
The following table shows details of the Group’s revenues by products with
relevant variances:
For the year ended 31 December
In thousands of US Dollars
2023
2022
Variance
Variance, %
Revenue from oil and gas
condensate sales
101,463
158,107
(56,644)
Revenue from gas and LPG sales
18,009
41,578
(23,569)
Revenue from third-party
hydrocarbon processing
Revenue from sulphur sales
156
1
—
32
156
(31)
Total revenue
119,629
199,717
(80,088)
(35.8%)
(56.7%)
100.0%
(96.9%)
(40.1%)
Average Brent crude oil price
(US$/bbl)
82.5
100.9
(18.4)
(18.2%)
The following table shows the Group’s revenue breakdown by export and domestic sales:
For the year ended 31 December
In thousands of US Dollar
2023
2022
Variance
Variance, %
Revenue from export sales
Revenue from domestic sales
Total revenue
105,170
14,459
177,173
22,544
(72,003)
(8,085)
119,629
199,717
(80,088)
(40.6%)
(35.9%)
(40.1%)
The Group’s sales volumes by product categories as well as total production volumes:
For the year ended 31 December
In boe
2023
2022
Variance
Variance, %
Oil and gas condensate
sales volumes
1,704,773
2,252,853
(548,080)
Gas and LPG sales volumes
1,534,256
2,318,291
(784,035)
Total sales volumes
Production volumes
3,239,029
4,571,144
(1,332,115)
3,683,152
4,818,015
(1,134,863)
(24.3%)
(33.8%)
(29.1%)
(23.6%)
Cost of sales
In thousands of US Dollars
2023
2022
Variance
Variance, %
For the year ended 31 December
Depreciation, depletion and
amortisation
Payroll and related taxes
Repair, maintenance and other
services
Materials and supplies
Transportation services
Well repair and maintenance costs
Environmental levies
Change in stock
Other
Total
40,321
16,741
51,682
14,179
(11,361)
2,562
6,558
4,922
2,505
5,027
138
691
725
6,662
4,333
2,285
3,122
79
1,191
520
(104)
589
220
1,905
59
(500)
205
77,628
84,053
(6,425)
(22.0%)
18.1%
(1.6%)
13.6%
9.6%
61.0%
74.7%
(42.0%)
39.4%
(7.6%)
The decrease in Group’s revenue by 40.1%
in 2023 was largely due to 18.2% lower
average Brent crude oil price (US$100.9/bbl
in 2022 vs US$82.5/bbl in 2023), which had
a substantial impact on oil and condensate
revenues as shown in the table above.
Another notable driver of decrease in
revenues was decline in production
volumes (as shown in the table above),
largely due to the natural depletion of the
Chinarevskoye field. However, it should be
noted that the successful start-up of a new
compressor has doubled the Gaslift
capacity, playing a crucial role in slowing
the production decline from mid-2023.
The new line in the Group’s revenue
breakdown showing US$156 thousand for
2023, marks the first-ever processing of
third-party hydrocarbons and reflects
tolling fees earned from treatment of
condensate from Ural O&G, while relevant
revenues from sales of gas and LPG
are combined with revenues from
Chinarevskoye field production. This new
revenue stream represents the initial phase
of collaboration during the last 10 days of
2023, with further wells commencements
expected in late 2024. Such diversification
of Group activities into processing
third-party feedstock signifies a strategic
milestone in expanding the utilisation of
its gas treatment facilities.
Cost of sales for the reporting period
ended 31 December 2023 decreased by
7.6% to US$77.6 million (2022: US$84.1
million). However, on a per barrel of oil
equivalent (boe) basis, cost of sales rose to
US$24.0 from US$18.4 in 2022, and
excluding depreciation, the cost per barrel
increased to US$11.5 from US$7.1.
The main components of the change in cost
of sales are:
Depreciation, depletion, and amortisation
costs decreased by 22.0% to US$40.3
million for the reporting period (2022:
US$51.7 million). This decrease is reflective
of the depletion rate for oil and gas working
assets which was 21.52% in 2023, slightly
lower than the 21.73% in 2022. The
reduction in the depletion expense is
associated with the decreased depreciable
asset base, while the depletion rate was
almost on the same level.
42 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Well repair and maintenance costs
increased substantially by 61.0% to
US$5.0 million (2022: US$3.1 million),
reflecting the Group’s intensified
maintenance efforts to sustain well
productivity.
Repair, maintenance, and other services
slightly decreased by 1.6% to US$6.5 million
(2022: US$6.6 million), which includes costs
associated with the upkeep of the facilities
and the procurement of spare parts
and materials.
Payroll and related taxes increased
by 18.1% to US$16.7 million
(2022: US$14.2 million), influenced
primarily by salary indexation as well
as foreign exchange rate changes.
Materials and supplies expenses
increased by 13.6% to US$4.9 million
(2022: US$4.3 million). This increase is
primarily due to the expansion of the well
maintenance program, the commissioning
of the Gas Treatment Unit 3 (GTU-3), and
the expansion of the gas lift system. These
developments have led to an uptick in
material costs, which has occurred despite
the overall reduction in production
volumes.
General and administrative expenses
For the year ended 31 December
2022
Variance
Variance, %
In thousands of US Dollars
Payroll and related taxes
Professional services
Insurance fees
Business travel
Short-term leases
Communication
Depreciation and amortisation
Materials and supplies
Bank charges
Other
Total
2023
7,622
4,182
427
568
109
159
188
166
29
357
6,634
3,556
577
282
172
180
153
182
47
293
988
626
(150)
286
(63)
(21)
35
(16)
(18)
64
14.9%
17.6%
(26.0%)
101.4%
(36.6%)
(11.7%)
22.9%
(8.8%)
(38.3%)
21.8%
14.3%
13,807
12,076
1,731
Selling and transportation expenses
For the year ended 31 December
In thousands of US Dollars
Transportation costs
Loading and storage costs
Payroll and related taxes
Other
Total
2023
4,914
4,091
1,501
1,897
2022
Variance
Variance, %
8,473
8,094
1,375
2,008
(3,559)
(4,003)
126
(111)
(42.0%)
(49.5%)
9.2%
(5.5%)
12,403
19,950
(7,547)
(37.8%)
Taxes other than income tax
For the year ended 31 December
In thousands of US Dollars
Export customs duty
Royalties
Government profit share
Other taxes
Total
2023
8,154
4,841
1,169
23
2022
Variance
Variance, %
10,014
8,116
1,692
8
(1,860)
(3,275)
(523)
15
(18.6%)
(40.4%)
(30.9%)
187.5%
(28.5%)
14,187
19,830
(5,643)
Transportation services increased by 9.6%
to US$2.5 million (2022: US$2.3 million),
due to lower production levels and cost
optimisation initiatives.
Change in stock had a positive adjustment
of US$691 thousand, reflecting the
inventory changes for the year, in contrast
to a larger positive adjustment in the
prior period.
General and administrative expenses
slightly increased by 14.3% to
US$13.8 million for the reporting period
(2022: US$12.1 million). This was primarily
due to a 14.9% increase in payroll and
related taxes from US$6.6 million to
US$7.6 million and a 17.6% increase in
professional services from US$3.6 million
to US$4.2 million. These were partly
counterbalanced by a 26.0% reduction
in insurance fees, which decreased to
US$0.4 million (2022: US$0.6 million).
Business travel costs notably
increased by 101.4% to US$0.6 million
(2022: US$0.3 million), reflecting the
increased activity of the Group.
Selling and transportation expenses
Selling and transportation expenses for the
year ended 31 December 2023 decreased
by 37.8% to US$12.4 million (2022: US$19.9
million). The decrease was particularly
visible in transportation costs going down
by 42.0% to US$4.9 million, and loading
and storage costs, which saw a 49.5%
decrease to US$4.1 million. These
reductions were largely a result of the
decrease in volumes sold and the changes
in contract terms.
Royalties were significantly lower
by 40.4%, totalling US$4.8 million
(2022: US$8.1 million), a result of the dual
impact of declining market prices and
reduced production volumes.
Government profit share followed this
downward trend, decreasing by 30.9% to
US$1.2 million (2022: US$1.7 million),
aligning with the overall lower revenue
from hydrocarbon production.
Export customs duty for the year ended 31 December 2023 decreased by 18.6% to
US$8.2 million (2022: US$10.0 million). This reduction is directly correlated with the
drop in oil prices over the year, combined with a decrease in production, both of
which are primary determinants of customs duty calculations.
The combined effect of these factors led to
a total tax expense, excluding income tax,
of US$14.2 million, marking a 28.5% decrease
from the 2022 figure of US$19.8 million.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 43
STRATEGIC REPORT Financial review
Financial review continued
Finance costs
For the year ended 31 December
In thousands of US Dollars
2023
2022
Variance
Variance, %
Interest expense on borrowings
95,226
105,411
Other finance costs
5,973
16,986
(10,185)
(11,013)
(9.7%)
(64.8%)
Unwinding of discount on
amounts due to Government of
Kazakhstan
Unwinding of discount on
abandonment and site restoration
provision
654
470
184
39.1%
973
271
702
259.0%
Total
102,826
123,138
(20,312)
(16.5%)
Finance costs for the reporting period ended 31 December 2023 decreased to US$102.9
million, which is was a decrease of 16.5% from US$123.1 million in the previous year. This
was largely driven by 9.7% decrease in interest expense on borrowings to US$95.2 million,
which is attributed to the reduction in the balance of borrowings but was partially offset by
higher effective interest rate on SUNs and SSNs relative to the effective interest rate on the
2022 Notes and 2025 Notes. For further information please refer to Note 14 in the
consolidated financial statements of the Group.
Other finance costs decreased by 64.8%
to US$5.9 million, which in the prior year
included substantial fees incurred by
the Group in relation to the restructuring
process.
The unwinding of discount on amounts
due to the Government of Kazakhstan
and on abandonment and site restoration
provision increased by 39.1% and 259.0%,
respectively, reflecting the relevant updates
of discount rates.
Other expenses
Other expenses for the reporting period
ending 31 December 2023 significantly
decreased to US$14.7 million (2022:
US$29.8 million). This substantial reduction
of approximately 50.8% is primarily due to
one-off US$13 million tax penalties and
fines which were incurred in 2022, while
there were no such significant expenses in
reporting period of 2023.
Income tax
Income tax expense for the year ended
31 December 2023 was US$4.7 million, a
significant reduction from the US$34.7
million recorded in the previous year. This
decrease of US$30.0 million is partly due to
the absence of the prior year’s additional
accrual of US$12.5 million, which was
recognised following tax audit and
reassessments for earlier years. The decline
in income tax expense also reflects changes
in deferred tax as a result of change in the
tax base of property, plant, and equipment
relative to the IFRS base, influenced by
different depreciation rates and
methodologies as well as the Tenge’s
devaluation against the US Dollar.
Liquidity and capital resources
During the period under review, Nostrum’s
principal source of funds was cash from
operations. Since the start of the
negotiations on Restructuring, the focus
of the Group was on preservation of cash
by optimising the spend on capital
expenditures and working capital
requirements. After the completion of the
restructuring the Group continued tight
cost control with the goal to maintain
positive cash flows from operations, and
started allocating available cash reserves
into the growth opportunities, which have
the potential to create value and increase
stakeholder returns.
Cash Flows
The following table sets forth the Group’s consolidated cash flow statement data for 2023
and the prior year:
In thousands
of US Dollars
Net cash flows from operating activities
Net cash used in investing activities
Net cash used in financing activities
Effects of exchange rate changes on cash and cash
equivalents
For the year ended 31 December
2023
2022
(2,221)
102,204
(28,082)
(41,622)
(15,781)
(17,481)
52
(604)
(71,873)
68,338
Net cash flows from operating
activities
Net cash flow from operating activities was
US$2.2 million negative for the reporting
period (2022: US$102.2 million) and was
primarily attributable to:
• Income before income tax for the
reporting period of US$836.3 million
(2022: loss US$81.8 million), adjusted
by a non-cash charge for depreciation,
depletion and amortisation of
US$40.5 million (2022: US$51.8 million),
finance costs of US$102.8 million
(2022: US$123.1 million) and gain
on debt-to-equity exchange of
US$769.6 million (2022: nil) together
with fair value adjustment on recognition
of debt instruments of US$174.4 million
(2022: nil).
44 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
• US$14.0 million increase in working
capital (2022: decrease of US$15.5
million) is mainly attributable to increase
in trade receivables by US$3.1 million
(2022: US$5.7 million), increase in
prepayments and other current assets
of US$3.6 million (2022: decrease
by US$5.0 million), and the decrease
in other accruals and taxes payable by
US$17.6 million as part of the current
liabilities (2022: increase US$28.9 million).
• income tax paid of US$23.0 million (2022:
US$6.3 million).
Net cash used in investing activities
Net cash used in investing activities for the
reporting period was US$28.1 million
(2022: US$15.8 million) due primarily to:
• Payment of US$19.3 million on acquisition
of 80% interest in Positive Invest LLP
(holding rights to Stepnoy Leopard fields)
and further payments of US$3.6 million
related two-well appraisal programme;
• US13.7 million (2022: US14.8 million)
capital expenditures on infrastructure
projects such as Gaslift expansion for
US$3.8 million (2022: US$5.0 million),
modifications and capital repairs at
GTU1-2-3 US$6.4 million (2022:
3.8 million), as well as payments of
expenditures related to well workover
& intervention programme of
US$1.0 million for the reporting
period (2022: US$5.0 million).
• Transfer from restricted cash in the
amount of US$5.8 million was primarily a
net result from refund of the escrow
account in the amount of US$22.8 million
and placement of US$16.5 million on
DSRA account in accordance with the
terms of Restructuring, which was offset
by transfer of US$0.5 million (2022:
US$0.6 million) to liquidation fund as
required by the subsoil use rights for
abandonment and site restoration
liabilities of the Group.
• US$2.7 million (2022: US$0.3 million)
interest received on current bank
accounts and term deposits.
Net cash used in financing activities
Net cash used in financing activities during
the reporting period made up US$41.6
million (2022: US$17.5 million) and was
mainly represented by the payment of
US$31.8 million coupon on SSNs and SUNs
for 2022 and 2023, and US$9.8 million
(2022: US$17.5 million) payments of lock-up
fees on completion of the Restructuring
and related advisor fees.
Commitments
Liquidity risk is the risk that the Group will encounter difficulty raising funds to meet commitments associated with its financial liabilities.
Liquidity requirements are monitored on a regular basis and management seeks to ensure that sufficient funds are available to meet any
commitments as they arise. The table below summarises the maturity profile of the Group’s financial liabilities as at 31 December 2023
based on contractual undiscounted payments (as audited):
In thousands of US Dollars
As at 31 December 2023
Borrowings
Trade payables
Other current liabilities
Due to Government of Kazakhstan
On demand
Less than 3
months
3-12 months
1-5 years
More than 5
years
Total
—
10,305
12,936
—
23,241
—
—
—
258
258
16,489
805,097
327
—
773
—
—
—
—
—
821,586
10,632
12,936
7,474
4,124
2,319
17,589
809,221
2,319
852,628
Capital commitments
During the reporting period, Nostrum’s
cash used in capital expenditures for
purchase of property, plant and equipment
(excluding VAT) was approximately US$13.7
million (2022: US$14.8 million). This mainly
reflects costs associated with gaslift well
infrastructure development, modification
and capital repairs of GTU 1/2/3, other field
infrastructure development projects and
well workover and intervention.
The Group has also initiated a two-well
drilling programme at the Chinarevskoye
field, with an estimated investment of
US$26 million. This programme is set to
enhance production capacities over the
2024-2025 period. These operational
improvements are expected to provide a
more robust production outlook.
Stepnoy Leopard development
In Q1 2024 the Group made a final
investment decision (“FID”) for the initial
field development phase of the Stepnoy
Leopard Fields with first production
targeted for the end of 2026. During the
initial development phase, the Company is
planning to drill four development wells
across the key reservoirs, targeting
recoverable resource potential between 30
mmboe and 50 mmboe. The wells are
expected to produce raw sour gas and
liquids with full-well-stream to the
Company’s Chinarevskoye processing
facilities via a 120-km multiphase trunkline.
The forecast total capital budget for this
initial field development phase is US$100
million gross. The full amount (including
20% minority partner carry) is planned to
be financed from the Company’s own cash
reserves and forecast project cashflows.
The project related capital expenditures
and contractual commitments will
commence later in 2024 and ramp-up
gradually over the 3-year execution period
prior to startup at the end of 2026. Early
cash generation will also strengthen the
self-financing capacity and help spur
further development of the remaining
resource base.
Dividend policy
The Group currently pays no dividend and
has not done so since 2015, as the Board
determined it was not in the Company’s
best interests to do so. This will be reviewed
annually by the Board.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 45
STRATEGIC REPORT Financial review
Financial review continued
Going concern
The Group monitors on an ongoing basis
its liquidity position, near-term forecasts,
and key financial ratios to ensure that
sufficient funds are available to meet its
commitments as they arise and liabilities as
they fall due. The Group reforecasts its
rolling 24-month cashflows on a quarterly
basis and stress tests its future liquidity
position for changes in product prices,
production volumes, costs and other
significant events. Whilst looking for new
opportunities to fill the spare capacity of
the Group’s infrastructure, the Directors are
also focused on a range of actions aimed at
improving the liquidity outlook in the
near-term. These include the ongoing
efforts on further cost optimisation to
reduce capital expenditures, operating
costs and general and administration cost.
The Directors’ going concern assessment is
supported by future cash flow forecasts for
the going concern period to 30 June 2025.
The Group had unrestricted cash balances
of over US$162 million as at 31 December
2023 and over $16 million in DSRA account.
The base case going concern assessment
reflects production forecasts consistent
Alternative performance
measures
In the discussion of the Group’s reported
operating results, alternative performance
measures (APMs) are presented to provide
readers with additional financial
information that is regularly reviewed by
management to assess the financial
performance or financial health of the
Group or is useful to investors and
stakeholders to assess the Group’s
performance and position.
However, this additional information
presented is not uniformly defined by all
companies including those in the Group’s
industry. Accordingly, it may not be
comparable with similarly titled measures
and disclosures by other companies.
Certain information presented is derived
from amounts calculated in accordance
with IFRS but is not itself an expressly
permitted IFRS measure. Such measures
should not be viewed in isolation or as an
alternative to the equivalent IFRS measure.
with the Board approved plans and
published guidance and assumes a Brent
oil price of $75/bbl. Also, the forecast
investing cashflows take into account
two-well drilling programme at the
Chinarevskoye field with total cost of
US$26 million and initial capital
expenditures related to development of
Stepnoy Leopard fields. Under the base
case going concern assessment to the
period to 30 June 2025, the Group is
forecast to have total cash reserves of over
U$$130 million. The base case scenario has
also been tested for sensitivity against the
key assumptions including 10% reduction
in product prices, 10% reduction in forecast
production and sales volumes, 10%
increase in capital expenditures and
operating cost over the period of
assessment and unexpected fines and
penalties by regulators, consistent with the
sensitivities applied for viability assessment
as described on pages 39-40. Considering
such sensitivity analysis conclusion was
made that the Group is not exposed to
downside volatility of these key
assumptions individually or in aggregate.
After careful consideration, the Directors
have a reasonable expectation that the
Group and Company have sufficient
resources to continue in operation for the
going concern period to 30 June 2025. For
these reasons, in accordance with provision
30 of the UK Corporate Governance Code
2018, the Directors consider it appropriate
to adopt the going concern basis of
accounting in preparing the financial
statements. Accordingly, the consolidated
financial statements accompanying this
report do not include any adjustments to
the carrying amount or classification of
assets and liabilities that would result if the
Group were unable to continue as a going
concern.
Notwithstanding that the going concern
period has been defined as the period to
30 June 2025, the Directors have
considered events and conditions beyond
the period of assessment which may cast
doubt on the Group’s ability to continue as
a going concern. The Directors draw
attention to the Viability Statement on
pages 39-40 which highlights a potential
necessity in the future for partial or full
refinancing or restructuring of the Group’s
debt.
EBITDA
EBITDA is defined as the results of
operating activities before depreciation
and amortisation, share-based
compensation, fair value gains and losses
on derivative instruments, foreign
exchange losses, finance costs, finance
income, non-core income or expenses and
taxes, and includes any cash proceeds
received or paid out from hedging activity.
This metric is relevant as it allows
management to assess the operating
performance of the Group in absence of
exceptional and non-cash items.
Operating costs
Operating costs are the cost of sales less
depreciation and change in stock. This
metric is relevant as it allows management
to see the cost base of the Company on a
cash basis.
46 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Five-year summary
In millions of US$ (unless mentioned otherwise)
2023
2022
2021
2020
2019
EBITDA reconciliation
Profit/(loss) before income tax
Add back
Finance costs
Impairment change
Gain on debt-to-equity exchange
Fair value adjustment on recognition of debt instruments
Employee share options-fair value adjustment
Foreign exchange loss/(gain), net
Interest income
Other expenses
Other income
Depriciation, depletion and amortisation1
Purchase of derivative financial instruments2
EBITDA
Operating costs reconciliation
Cost of sales
Less:
Depreciation, depletion and amortisation
Change in stock3
Operating costs
G&A reconciliation
836.3
(81.8)
5.6
(401.8)
(1,343.1)
102.8
123.1
—
(769.6)
(174.4)
—
0.9
(2.7)
14.7
(6.4)
40.5
—
42.1
—
—
—
—
(0.3)
(0.3)
29.8
(6.8)
51.8
—
116.7
(74.2)
—
—
(0.2)
0.3
(0.3)
13.2
(5.9)
57.3
—
115.7
112.5
102.1
286.6
43.0
1,354.7
—
—
(0.5)
1.8
(0.3)
7.6
(4.8)
89.8
—
80.5
—
—
0.6
(0.4)
(0.1)
12.5
(7.2)
143.3
(3.7)
199.6
77.6
84.1
87.8
125.4
172.0
(40.3)
(0.7)
36.6
(51.7)
(1.2)
31.2
(55.6)
(0.4)
31.8
(86.3)
(7.3)
31.8
(136.8)
6.2
41.4
General and administrative expenses
13.8
12.1
12.1
14.7
21.4
Adjusted for:
Depreciation and amortisation
G&A
Net debt reconciliation
Long-term borrowings
(0.2)
13.6
(0.2)
11.9
(0.2)
11.9
(0.6)
14.1
(2.0)
19.4
471.7
—
—
—
1,100.5
Current portion of long-term borrowings
—
1,396.5
1,289.6
1,186.3
35.6
Less:
Cash and cash equivalents
Net debt
Net cash flows from operating activities
Net cash used in investing activities
Net cash used in financing activities
EBITDA margin4
Share price at end of period (US$)
Shares outstanding (`000s)
Options outstanding (`000s)
161.7
310.0
(2.2)
(28.1)
(41.6)
35.2%
0.09
233.6
165.2
78.6
93.9
1,162.9
1,124.4
1,107.7
1,042.2
102.2
(15.8)
(17.5)
57.9%
0.03
117.4
(19.8)
(10.9)
82.7
(40.1)
(58.4)
57.6%
0.07
45.7%
0.10
196.8
(121.0)
(103.7)
61.9%
0.22
169,382
188,183
188,183
188,183
188,183
2,948.9
3,432
3,432
3,432
3,432
1. Depreciation as it applies to operating assets only.
2. Purchase of derivative financial instruments represents the cash paid under the hedging contract which in accordance with IAS7 Statement of Cash Flows is included
within operating cash flows. While this item is not required to be presented in the Consolidated Income Statement, we have included this in our definition of EBIT and
EBITDA in order to better align these non-GAAP measures with our operating cash flows.
3. Due to materiality the change in stock was introduced in the opex reconciliation from 2019, and comparatives have been adjusted accordingly for consistency purposes.
4. EBIDTA margin is calculated as EBITDA divided by total revenue.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 47
STRATEGIC REPORT Bond restructuring
Completion of bond restructuring
The successful completion
of the restructuring has now
positioned the Company
to focus on growth and
maximise returns for its
stakeholders.
Restructuring terms
Partial
reinstatement
of notes
• US$250m Senior Secured Notes (SSN) – 5% cash coupon, interest
accrues from 1 January 2022.
• US$345m Senior Unsecured Notes (SUN) – 1% cash coupon,
13% payment in kind, interest accrues from 1 January 2022.
• New notes mature on 30 June 2026.
• If not repaid in cash at maturity, the SUNs will be repayable in specie
through the issuance of equity of the Company based on the value of
the SUNs outstanding on the issuance date as a percentage of the
fair market value of the Company (up to a maximum of 99.99% of the
Company’s fully diluted equity.
Conversion
to equity
• Remaining notes and accrued interest converted to equity.
• Existing ordinary shareholders diluted to 11.11%.
• Issue of warrants to new noteholders, which may further dilute
existing ordinary shareholders to 10.00%.
• Cash sweep mechanism to debt service retention account.
• Transfer to Standard Listing segment of the London Stock Exchange.
• Board to consist of 6 Directors (previously 5).
Corporate
Governance
Arrangements
Exchange
Key steps in 2023:
January 2023
February 2023
The Company received the required
license from the Office of Financial
Sanctions Implementation.
• The restructuring was implemented on
the key terms as agreed under Lockup
Agreement, and pursuant to the terms
of the Scheme sanctioned by the Court
on 26 August 2022.
• 150,563,304 new shares were listed
Nostrum announced admissions to the
London Stock Exchange (LSE) and
Astana International Exchange (AIX).
The Company approved the delisting of
ordinary shares from the official list of
the Kazakhstan Stock Exchange (KASE)
with effect from 14 March 2023.
48 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Simplified group structure post bond restructuring
Key shareholders:
• ICU Trading
• RD Energy
• Amundi
New Shareholders/
Noteholders
New Warrants
Equity
Entitlement
11.11%
Shareholders
Listed on LSE with
symbol: NOG
Listed on AIX with
symbol: NOG
US$250m
5.00%
2026 SSNs
US$345m
1% cash;
135 PIK
2026 SUNs
Nostrum
Oil & Gas Plc
Nostrum Oil & Gas
Finance B.V.
Zhaikmunai
LLP
November 2023
December 2023
Nostrum Oil & Gas Finance B.V.
announced that it has commenced a
consent solicitation in respect of its
US$250m SSN – 5% cash coupon, due
2026 and US$345m SUN – 1% cash
coupon, and 13% payment in kind due
2026 in order to:
• permit the investment of cash from the
Company into certain investment
products approved by the Board of
Directors of the Company in order to
give the Nostrum Oil & Gas Finance B.V.
greater flexibility to make investments
in cash equivalents to receive higher
returns;
• amend the warrant instrument such that
the Company would not require further
consent from the warrant holders to
delist its shares from the AIX.
The Company’s ordinary shares were
delisted from the official list of the AIX.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 49
STRATEGIC REPORT ESG review
Our ESG strategy and targets
Pivoting towards cleaner energy and positive impact on society
Our Commitments
Alignment with the UN SDGs
Environmental
Play our role in the
transition to cleaner
energy and minimise
the environmental
impact of our operations
Social
Create a safe, diverse
and inclusive working
environment and promote
local economic growth
and social development
Governance
Have a robust corporate
governance, strict
compliance and an
ethical business culture
50 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Our medium-term
goals and targets
• Maintain strong Health, Safety,
Environmental and Security
leadership
• Invest in best-in-class emission
reduction technologies
What we did in 2023
What we plan to do in 2024
• In 2023 we achieved our target with actual GHG emissions in CO2 equivalent of
• Not to exceed GHG emissions set by
180,157 tonnes as compared to 169,630 in 2022. The increase in GHG emissions is
the National GHG allocation plan
due to re-start of GTU-3 in 2H 2023
(203 562 tons of CO2)
• Invest in workforce skills to
support the Energy transition
• Continue to provide funding
and support to local
communities
• TRIR was 0.75 in 2023 (compared to a TRIR of 1.56 in 2022), target TRIR was less than
• TRIR – less than 1.9
1.9 for 2023. All of Nostrum’s total recordable injuries occurred in Kazakhstan
• LTIR for 2023 was 0.37, compared to an LTIR of zero for 2022. target LTIR for 2023 –
• LTIR – less than 1.05
• RTI – less than 0.75
• Align Senior Management
Team incentivisation with
ESG targets
• Strengthen ESG and climate
reporting
• The implementation of the Action
Plan to further improve the ESG rating
• Continue to train employees on ESG
topics, and cover more than 90% of
the staff with an ESG training
program
• Greater company's transparency on
ESG topics by expanding ESG
reporting to communicate our
progress and performance in ESG
• Nostrum obtained “B-” score for the climate change module and “B-” for water
security module as well
• As part of the Company's Environment Protection Plan and in support of the
Republic of Kazakhstan's ecology improvement objectives, over 400 trees have
been planted in October in Beles and 800 trees were provided to Beles akimat that
were planted as well
• An inventory of biodiversity at the Chinarevskoye oil and gas condensate field was
conducted during the autumn period to assess its current state. The study included
an examination of water ecosystems as well as flora and fauna
• Approved new Energy Management Policy
less than 0.85
• RTI rate was 0, target RTI – less than 0.75
• Annual contractor HSE forum dedicated to Road Safety Rules compliance was held
in October 2023 and performed twelve external contractor HSE management
audits to test compliance with our HSE management system.
• All vessels and main flow lines were inspected according to international and RoK
standards at the frequencies described (2, 5 or 10 years). Female representation is
22% at Group level. We also reduced the pay discrepancies between male and
female employees
• Approved new Local Communities Relations Policy
• Approved new Personnel Performance Development Review Policy
• Developed Inclusive Buddy Program Guidelines
• Developed Inclusive Hiring Practices – Targeted Recruitment Program for Diversity
• Updated the following Group policies: HSE Policy, QHSE management system
• Held several trainings on ESG in general, and with in-depth insights into various ESG
topics like Anti-Bribery and Corruption, Human Rights, Diversity and Inclusion
Updated the following Group policies:
• Equality and diversity policy
• Whistleblowing policy
• In 2023 we significantly improved our ESG Risk Rating from the international agency
Sustainalytics. Our current ESG Risk Rating is 30.1 which places the Company on the
very low end of the “High Risk” category, and only 0.1 point separate us from the
“Medium Risk” category on the ESG Risk Rating scale. Nostrum has scored amongst
the top 20 companies within the Oil & Gas Exploration and Production industry
assessed by Sustainalytics
• Nostrum joined the National ESG-Club in 2023 which unites companies that are
leaders in ESG transformation in their industries and who actively promote the
principles of sustainable development in Kazakhstan
Our Commitments
Environmental
Play our role in the
transition to cleaner
energy and minimise
the environmental
impact of our operations
Social
Create a safe, diverse
and inclusive working
environment and promote
local economic growth
and social development
Governance
Have a robust corporate
governance, strict
compliance and an
ethical business culture
Our medium-term
goals and targets
• Maintain strong Health, Safety,
Environmental and Security
leadership
• Invest in best-in-class emission
reduction technologies
• Invest in workforce skills to
support the Energy transition
• Continue to provide funding
and support to local
communities
• Align Senior Management
Team incentivisation with
ESG targets
• Strengthen ESG and climate
reporting
Pivoting towards cleaner energy and positive impact on society
Alignment with the UN SDGs
What we did in 2023
What we plan to do in 2024
• In 2023 we achieved our target with actual GHG emissions in CO2 equivalent of
180,157 tonnes as compared to 169,630 in 2022. The increase in GHG emissions is
due to re-start of GTU-3 in 2H 2023
• Not to exceed GHG emissions set by
the National GHG allocation plan
(203 562 tons of CO2)
• Nostrum obtained “B-” score for the climate change module and “B-” for water
security module as well
• As part of the Company's Environment Protection Plan and in support of the
Republic of Kazakhstan's ecology improvement objectives, over 400 trees have
been planted in October in Beles and 800 trees were provided to Beles akimat that
were planted as well
• An inventory of biodiversity at the Chinarevskoye oil and gas condensate field was
conducted during the autumn period to assess its current state. The study included
an examination of water ecosystems as well as flora and fauna
• Approved new Energy Management Policy
• TRIR was 0.75 in 2023 (compared to a TRIR of 1.56 in 2022), target TRIR was less than
• TRIR – less than 1.9
1.9 for 2023. All of Nostrum’s total recordable injuries occurred in Kazakhstan
• LTIR for 2023 was 0.37, compared to an LTIR of zero for 2022. target LTIR for 2023 –
less than 0.85
• RTI rate was 0, target RTI – less than 0.75
• Annual contractor HSE forum dedicated to Road Safety Rules compliance was held
in October 2023 and performed twelve external contractor HSE management
audits to test compliance with our HSE management system.
• All vessels and main flow lines were inspected according to international and RoK
standards at the frequencies described (2, 5 or 10 years). Female representation is
22% at Group level. We also reduced the pay discrepancies between male and
female employees
• Approved new Local Communities Relations Policy
• Approved new Personnel Performance Development Review Policy
• Developed Inclusive Buddy Program Guidelines
• Developed Inclusive Hiring Practices – Targeted Recruitment Program for Diversity
• Updated the following Group policies: HSE Policy, QHSE management system
• Held several trainings on ESG in general, and with in-depth insights into various ESG
topics like Anti-Bribery and Corruption, Human Rights, Diversity and Inclusion
Updated the following Group policies:
• Equality and diversity policy
• Whistleblowing policy
• In 2023 we significantly improved our ESG Risk Rating from the international agency
Sustainalytics. Our current ESG Risk Rating is 30.1 which places the Company on the
very low end of the “High Risk” category, and only 0.1 point separate us from the
“Medium Risk” category on the ESG Risk Rating scale. Nostrum has scored amongst
the top 20 companies within the Oil & Gas Exploration and Production industry
assessed by Sustainalytics
• Nostrum joined the National ESG-Club in 2023 which unites companies that are
leaders in ESG transformation in their industries and who actively promote the
principles of sustainable development in Kazakhstan
• LTIR – less than 1.05
• RTI – less than 0.75
• The implementation of the Action
Plan to further improve the ESG rating
• Continue to train employees on ESG
topics, and cover more than 90% of
the staff with an ESG training
program
• Greater company's transparency on
ESG topics by expanding ESG
reporting to communicate our
progress and performance in ESG
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 51
STRATEGIC REPORT ESG review
Material ESG issues GRI 3-1, GRI 3-2
2023 highlights
Fatalities
One
Road traffic
accidents
Zero
Lost time
incidents
0.37
Increase in
GHG emissions1
Employees
6%
571
Our reporting framework
Current ESG rating
Climate Change
Water Security
B-
B-
To coordinate all processes related to ESG,
the Senior Management level specialised
committees have been established within
the Company – the ESG Committee and the
HSE Committee, overseen by the CEO and
led by the Head of ESG and Group Head of
HSE, respectively, to engage on ESG issues
with all the stakeholders. These committees
define Nostrum’s ambitions and vision in
the ESG domain, monitor the Company’s
compliance with national and international
standards, and address the requirements
of external stakeholders. Both have
responsibility for the HSE and ESG-related
matters including the execution of HSE and
ESG-related targets and projects which fall
under all material ESG topics of the
Company.
In order to enact the principle of senior
management engagement in sustainable
development management issues, key
performance indicators (KPIs) were
sanctioned specifically pertaining to
ESG performance. See page 23.
1. The increase in GHG emissions is due to re-start of GTU 3 in 2H 2023.
At Nostrum, we annually report on our
sustainability performance using
internationally recognised reporting
standards and frameworks. Our reporting
follows guidelines, indicators, and
terminology established by prominent
organisations such as TCFD, IPIECA, and
the Global Reporting Initiative (GRI)
Standards 2021.
Furthermore, we consistently provide data
to CDP for climate change and water
security assessments, and engage with
Sustainalytics for evaluations of our ESG
performance and ratings. This report has
been meticulously prepared with reference
to the Global Reporting Initiative (GRI)
Standards 2021.
Management of Material Topics
In order to ensure that our ESG reporting
aligns with the concerns that are of greatest
importance to our stakeholders, we
conduct routine assessments of materiality.
The insights gained from these assessments
serve as the foundation for shaping our
ESG reporting.
We have identified seven key ESG material
topics that we consider essential for
implementing our strategy. The material
topics assessment helped identify and
prioritise the reporting topics about our
business as it relates to ESG. Following
the principle of double materiality, to
reflect both the impact of sustainable
development on the organisation
and the impact of the organisation on
sustainable development, these are
subjects that could have a substantial
influence on either our financial and
operational performance or on the
societies and ecosystems in the regions
where we conduct our activities. Material
ESG topics directly translate into ESG
risks for our organisation.
ESG Management
Management of ESG material topics and
the integration of the ESG agenda into
the Company’s activities are significant
elements of Nostrum’s corporate
governance system.
Promoting sustainable development
practices within the Company not only
aids in adapting to the strategic landscape,
addressing market changes, and enhancing
risk management efficiency but also
cultivates a corporate culture that is
motivating and innovation-oriented.
This, in turn, facilitates the establishment
of positive relationships with stakeholders.
For the effective integration of sustainable
development principles across all areas of
activity at Nostrum, more than 20 internal
documents have been adopted.
52 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Material ESG issues
i
h
g
h
y
r
e
V
e
t
a
r
e
d
o
M
l
s
r
e
d
o
h
e
k
a
t
s
s
’
m
u
r
t
s
o
N
o
t
e
c
n
a
t
r
o
p
m
I
Community relations
Climate action/GHG
emissions/energy efficiency
Occupational
health and safety
Emissions, effluents,
waste and resource use
Human capital
Land use and
biodiversity
Bribery and
corruption
Moderate
Very high
Impact on Nostrum’s business
Key ESG material topics
Focus area
Material topic
Sustainable Development Goals – the United Nations
Climate change and energy
Climate action/GHG emissions/
Energy efficiency
Environment
Safety, health and security
Emissions, effluents, waste and
resource use
Land Use and Biodiversity
Occupational Health
and Safety
Social
Community Relations
Human Capital
Business Ethics
Bribery and Corruption
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 53
STRATEGIC REPORT
ESG review
ESG ranking
In 2023, Nostrum once again received
an ESG Risk Rating from Sustainalytics.
Covering more than 16,000 companies,
Morningstar Sustainalytics has the widest
coverage of analyst-based ESG Risk Ratings
in the market. The Sustainalytics ESG Risk
Ratings measure a company’s exposure to
industry-specific material ESG risks and
how well a company is managing those
risks. Company ratings are categorised
across five risk levels: negligible (below
10 points), low (10-20 points), medium
(20-30 points), high (30-40 points), and
severe (above 40 points).
The updated ESG Risk Rating for Nostrum
by Sustainalytics stands at 30.1 points,
placing us in the high-risk zone and on the
brink of transitioning to the medium-risk
category. The previous ESG Risk Rating in
2022 was 40.5 points, placing us in the
severe risk category according to
Sustainalytics’ methodology. Our efforts
throughout 2023 to improve ESG risk
management have yielded significant
results, reflected in a notable improvement
in the Company’s rating.
We would like to highlight the following
rating outcomes:
Our exposure to ESG risks remains high,
considering the industry, geographical
factors, and other conditions under which
we operate – scoring 73.2 points. This
surpasses the average susceptibility to risks
of Oil & Gas Producers peers, which stands
at 69.9 points. Furthermore, our ESG risk
management grade is also very high at
Nostrum, significantly outperforming our
market cap peers in risk management.
Specifically, Nostrum’s ESG risk management
level is rated at 69.6 points, categorised as
Strong Management compared to our
market cap peers with scores of 22 points
or below, indicating Weak Management.
We rank at the 10th percentile among
oil & gas producers in the Sustainalytics
universe. The majority of companies in the
Oil & Gas Producers Industry have ESG Risk
Ratings categorised as Severe, scoring
40 points or higher.
The most significant improvements in 2023
regarding the rating are observed around
the following material topics: Emissions,
Effluents and Waste, Community Relations,
Carbon – Own Operations, Land Use and
Biodiversity, and Resource Use.
Several processes have been enhanced
within the company, including Environmental
Policy, Environmental Management System,
Biodiversity Programmes, Effluent
Management, Emergency Response
Programme, Non-GHG Air Emissions
Programmes, Water Management
Programmes, Political Involvement Policy,
Diversity Programmes, Human Capital
Development, Human Rights Programme,
and Community Development &
Involvement Programmes.
Our company has not recorded any
controversy events or allegations, while the
most frequent event categories among our
peers in the Oil & Gas Producers Industry
are Business Ethics, Emissions, Effluents
and Waste, Occupational Health and
Safety, and Community Relations.
ESG risk rating significantly improved
In 2023 we continued to enhance our ESG task
force and have made significant strides in improving
our ESG Risk Rating. Our current ESG Risk Rating
is 30.1, placing Nostrum at the lower end of the
“High Risk” category, with a minimal difference
of 0.1 point separating us from being classified
as “Medium Risk” on the ESG risk rating scale.
30.1
High Risk
as at 2023
40.5
Severe Risk
in 2022
Negligible
Low
Medium
High
Severe
10th percentile in the Oil & Gas Producers industry
Ratings of IOCs operating
in RoK and local oil majors
Total Energies
27.1
KazMunayGas
32.3
Shell PIc
33.7
Chevron Corp.
36.8
Materiality Assessment Process
STEP 1: Analyze the internal
and external environment
Regulatory and Industry Analysis
Engagement with stakeholders
• Regular direct engagement with
stakeholders
• Oil and gas industry associations (IPIECA,
• Membership in industry associations
API, IOGP)
• Environmental, labour laws, safety
standards, national reporting
requirements
Internal Data Collection
• Environmental reports, records
• Safety records
• Governance practices
Analysis of international standards and ESG
rating agencies
• Rating agencies (Sustainalytics, MSCI,
Refinitiv, EcoVadis, ISS)
• Global reporting initiatives (GRI, SDGs,
TCFD, CDP, SASB)
(KazEnergy, ESG-Club)
Benchmarking
• 15+ Global leading Oil and Gas
companies
Analysis of media, research, consulting,
audit companies
• Articles
• Researchers, consultants, auditors
(McKinsey, KPMG, EY, PWC, BCG,
S&P, etc.)
54 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
STEP 2: Identify actual and
potential impact
Forming a pool of 36 topics that reflect the
industry’s characteristics
• 8 topics on environment, 19 topics on
society, 9 corporate governance topics
STEP 3: Assess the significance of
the impact
• Business relevance assessment
• Stakeholder impact assessment
STEP 4: Select material issues for
reporting
• Final prioritisation, testing
• Review and approval
STEP 5: Performance, reporting,
periodic updates of the materiality
analysis
Health and safety
At Nostrum, our safety and environmental
practices are based on four key pillars: HSE
leadership, incident investigation, process
safety and asset integrity, and contractor
HSE management. Each pillar is fundamental
to maintaining a safe, secure, and
environmentally aware workplace. HSE
leadership blends safety into every level
of our company, while rigorous incident
investigation enables us to learn from past
experiences and continuously improve
our processes.
Process safety keeps our operations
safe, while effective contractor HSE
management aligns everyone with our
safety values. These pillars form the
foundation of our comprehensive approach
to HSE, reflecting our dedication to
upholding the highest standards of safety,
health, and environmental stewardship.
Beyond these, we enforce “Golden Rules”,
provide extensive straining on safety
practices and apply a comprehensive
Governance framework as outlined in the
TCFD Governance recommendations on
pages 75-76.
GRI 403-2
Incidence rates
and investigation
In 2023, our Total Recordable Incidents
Frequency rate dropped to 0.75 per million
man hours, a 52% decrease from 2022.
The Lost Time Incidents Frequency rate
was 0.37, and there were no Road Traffic
Incidents in 2023 for both Nostrum and
our contractors’ operations.
Regrettably, we experienced a contractor
fatality in a height-related incident. Prior to
this, we had maintained a record of five years
without any fatalities. We undertook
comprehensive investigation and
implemented measures to avoid such
incidents in the future.
Nostrum notes that its activities are
potentially hazardous. The Group’s
management, employees and contractors
are trained to understand that no accidents
are inevitable as we strive to inculcate an
environment in which safety consciousness
and mitigating actions are such that zero
incidents are possible and achievable.
For all incidents, we follow our incident
investigation procedure based on the
“five whys” and “why tree” methodology
to determine the root causes and apply
SMART principles to mitigate future risks.
GRI 2-8
Contractors
We require our contractors and suppliers
to work to the same high standards as our
employees, therefore effective contractor
selection, communication and training in
our safety culture and practices as well as
strong monitoring are essential to maintain
the high level of safety embraced by
Nostrum.
Manhours worked in 2023
Nostrum employees: 1,060,864
Contractors: 1,617,146
Percentage
of total
40%
60%
In 2023, we continued with our contractor
HSE management implementation and
performed twelve external contractor HSE
management audits to test compliance
with our HSE management system.
Nostrum seeks to promote safe behaviour
among its contractors and has established
a wide range of methods to ensure that
operations at facilities are carried out in full
compliance with local legislation as well as
Nostrum rules and regulations. In addition
to the measures already discussed,
Nostrum continues to use the hazard
observation cards initiative introduced in
2019 (described more fully on page 57).
The safety of our employees and
contractors is a top priority for
Nostrum, and we are dedicated
to upholding the highest
international health and safety
regulations. We aim to foster
a strong culture of safety
throughout our operations
every day.
Safety Culture
At Nostrum, fostering a strong safety
culture is essential for the well-being
of our employees, the efficiency of our
operations, and the integrity of our
brand. Prioritising safety underscores our
dedication to ensuring a secure and
healthy workplace for all stakeholders. This
commitment not only minimises workplace
accidents and injuries but also builds trust
and confidence within our team. Moreover,
adopting a safety culture contributes
to increased productivity, reduced
operational expenses, and a boost in
overall morale. In essence, cultivating and
upholding a comprehensive safety culture
signifies our unwavering commitment to
employee welfare and business
sustainability.
TOTAL RECORDABLE INCIDENTS RATE
TOTAL RECORDABLE INCIDENTS RATE
Incidents per million man-hours
incidents per million man-hours
LOST TIME INCIDENTS RATE
LOST TIME INJURY INCIDENTS (LTIS)
incidents per million man-hours
incidents per million man-hours
ROAD TRAFFIC INCIDENTS RATE
ROAD TRAFFIC INCIDENTS RATE
incidents per million km driven
incidents per million km driven
2023
0.75
1.9
2023
0.37
0.9
24%
2022
2021
2020
2019
1.56
2.0
2022
0
1.0
2.42
3.0
2021
0.81
1.3
3.80 3.5
2020
0.84
1.5
2.96
3.0
2019
1.39
2.0
0
0
2023
2022
2021
2020
2019
0.75
0.8
0.8
1.46
1.2
1.5
0.72
0.72
TRIR
Target TRIR
LTIR
Target LTIR
RTI
Target RTI
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 55
STRATEGIC REPORT
ESG review
Health and safety continued
Our annual contractor HSE forum
dedicated to Road Safety Rules compliance
was held in October 2023. General
directors and HSE Representatives from
main contractors gathered to discuss
their HSE performance results with the
Company’s management. This year, we
focused on HSE Golden rules and Road
Safety compliance. The forum allowed
for open discussions aiming to boost
our shared dedication to a safe work
environment. We are committed to
ongoing dialogue and support to improve
our HSE practices and achieve the highest
standards of safety for all individuals
involved in our operations.
In order to effectively manage the
“Golden Rules”, Nostrum applies rigorous
consequence management which means
that we take a risk-based approach to guide
people and leaders through the processes
required when they witness or have
reported to them inappropriate behaviour
in the workplace. For serious violations
of safety rules, staff and contractors risk
immediate dismissal. For that purpose,
consequence management is split into
two categories. The more serious category
which results in immediate dismissal is
applied in case of alcohol/drug abuse.
Less severe cases, such as safety belt
violation, result initially in a warning
followed by dismissal if a repeat violation
is observed.
Golden Rules
1. Seatbelts must always be worn by
the driver and all passengers.
2. Do not exceed the speed limit and
reduce speed for impaired road
conditions.
3. Do not use phones or operate devices
while operating a motor vehicle
4. Alcohol and drugs of any kind
(excluding approved medicines)
are forbidden.
5. Where required, work with a valid permit
6. Obtain authorisation before entering
a confined space.
7. Confirm that hazardous energy sources
have been isolated, enclosed and
tagged.
8. Obtain authorisation before overriding
or disabling safety controls.
9. Never walk under a suspended load
10. Protect yourself against a fall when
working at heights.
In our operations there are several stages
to ensure contractor compliance with HSE
spanning from pre-contract award to
contract close-out with significant roles
for the contract owner, contract holder,
contracts and procurement and HSE staff.
This process is more fully described below:
Pre-Award
Stage 1 – Vendor Qualification
To be a qualified bidder, vendors must
meet our qualification standards, which
include five fundamental HSE criteria.
This process is meant to help us select
those vendors that both adhere to and
support our basic HSE culture.
Stage 2 – Scope of Work preparation
by contract holders
Our procurement group has developed a
standard checklist which is used by contract
holders in compiling specifications for
scope of work/services. This checklist
includes HSE issues identified by contract
holders as mandatory and which must be
complied with by the selected contractor.
The depth of these questions depends
on the complexity and risk profile of
the services to be provided with more
comprehensive questioning of potential
contractors that would be engaged in
safety critical operations or where the HSE
risk is considered high. HSE risk ratings
(ranging from high to low) are assigned to
all services to be tendered. The contracts
and procurement department ensures all
these requirements are properly addressed
in the Invitation to Tender (ITT) Package.
Stage 3 – Tender
Our standard ITT Package includes:
• Tender Evaluation Questionnaire, with
appropriate HSE related questions
depending on the HSE risk rating.
• Standard Model Contract with HSE
Schedule. Tenderers must confirm in
writing their acceptance of the terms of
this Schedule when submitting their
Tender Proposal, otherwise they are
automatically disqualified.
Stage 4 – Contract execution
The selected contractor signs the contract
which incorporates an Appendix with HSE
Requirements as an integral part.
Post-Award
Stage 5 – Contract Performance
The contract holder, with support of HSE
representatives, is responsible for the
management of HSE performance of
the Contractor.
All new contractors start their engagement
with Nostrum with kick-off meetings
organised by the contract supervisor and
supported by HSE representatives, at which
Nostrum’s expectations are explained in
detail. Further topics of discussions are
clear identification of KPIs related to HSE,
introduction of HSE responsible staff
from both sides, and induction into the
Company’s procedures and regulations.
Road Safety
In 2023, Nostrum continued to implement
the following activities carried out over
the years:
• Planned /unplanned inspections of the
technical conditions of the vehicles at
Nostrum facilities by our employees
and Contractor representatives.
• Road safety inductions, training and
safety stand-downs are being held on
a permanent basis with Contractor
personnel.
• Ad-hoc inspections on road safety
compliance (speeding, safety belt
use, etc.) are held regularly.
• Nostrum ensures compliance with Road
safety procedure, Journey management
plan and procedure for organising and
carrying out transportation of oversized
cargo in order to ensure road safety
compliance to the Company rules.
• The Routes for the transportation
of oversized cargo are coordinated
(accompanied if necessary) to ensure
road safety along the route of movement
of oversized cargo on the territory of
Nostrum facilities.
• The passage of a medical pre-trip
inspection by drivers of the Company and
contractors is systematically controlled.
• Checks are being made of the safe
condition for traffic of the carriageways of
public roads, bridges, railway crossings
and road structures on the territory of the
facilities and along the route to Nostrum
production facilities and back.
56 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
GRI 403-2
Hazard Observation
Cards
As part of promoting a safety culture
among our employees and contractors,
Nostrum continues to implement a hazard
observation card process. This initiative was
launched in 2019, when all employees and
contractors were encouraged to report
any unsafe conditions observed in the
workplace. This helps to ensure that our
employees and contractors are always
mindful of safe working conditions and
continuously help to improve the safety
of our operations.
GRI 403-5
In-house HSE training
and examination process
Nostrum provides in-house HSE training
and examination designed to improve the
HSE competencies of both Nostrum and
contract personnel performing safety-
critical activities. To facilitate this, Nostrum
acquired an industrial safety accreditation
which allows the Group to conduct
in-house HSE training and examination in
areas such as industrial and labour safety.
Group employees are continuously trained
in labour safety, industrial safety and H2S
rules. During 2023, 802 employees took
advanced HSE training.
IN-HOUSE HSE TRAINING
IN-HOUSE HSE TRAINING
2023
265
284
253
802
2022
254
238 223
715
2021
2020
329
263 224
816
311
318
344
973
H2S rules
Industrial safety rules
Labour safety rules
GRI 403-5
HSE communication
and awareness
In 2023, HSE Workshops were carried out
for field personnel to promote awareness
on the following topics:
• Work at Height
• First Aid in case of heart attack
• Permit to work
• Emergency Response
• Fire Safety
• Personal Protective Equipment
Additional 2023 initiatives include:
• A pop-up window appeared on the
screens when logging in every day with
a safety reminder from the QHSE
department.
• HSE Posters printed and displayed
in prominent locations.
• Monthly QHSE Reports are issued to
communicate HSE performance.
GRI 403-3,
403-7
Process safety
In 2023, no Tier 1 or Tier 2
process safety incidents were recorded at
Nostrum’s production sites. According to
the American Petroleum Institute’s
definition, a Tier 1 and Tier 2 safety incident
is an unplanned or uncontrolled release of
any substances, including non-toxic and
non-flammable materials, from a process
that results in one or more of the following
consequences:
• An employee, contractor or
subcontractor incurs days away from
work, injury and/or fatality.
• A hospital admission and/or fatality
of a third party.
• An officially declared community
evacuation or community shelter put
in place, including precautionary
community evacuation or community
shelter in place.
• Fire or explosion damage of at least
US$100,000.
The selection of appropriate maintenance
strategies and the classification of
equipment as safety critical or non- critical,
is based on the impact that such equipment
failure has on safety. Nostrum employs
a specific safety critical equipment
maintenance program whereby resources
are allocated in order of priority with
critical systems taking precedence.
Vessel and Flow-line inspection
programme
All vessels and main flow lines were
inspected according to international and
RoK standards at the frequencies described
(2, 5 or 10 years). No defects were identified
during the internal and external inspections.
From 2023 onwards, all vessels and flow
lines will require yearly inspection but this
can be done externally without necessary
shutdowns as was the case for internal
inspections. The inspection will be focused
on wall thickness and, as such, provides the
same information as before.
Emergency response, Civil
Protection Planning and Prevention
In 2023, no industrial accidents or oil spills
were recorded at Nostrum’s operations.
The Company has established and
successfully exercises an emergency
response system and undertakes measures
to prevent oil and oil product spills.
GRI 2-25
Emergency response
and accidents preparatory activities
The Company has emergency response
plans to improve our capacity to swiftly
address unexpected occurrences, thus
preserving operational continuity and
mitigating adverse effects on individuals,
the environment, our physical infrastructure,
and our reputation. These plans are
effectively communicated to our workforce,
and those involved in emergency response
undergo training to ensure proficiency in
fulfilling their emergency responsibilities.
We remain committed to upholding asset
integrity and managing operations to
effectively mitigate all significant risks
throughout every phase of our activities.
Specifically, in 2023 emergency training
of personnel has been conducted on
a quarterly basis in order to prevent
accidents and emergencies as well as to
train personnel in emergency response
in case of their occurrence according to
Emergency Response Plans emergency
scenarios at all hazardous production
facilities. In 2023, we maintained
emergency response training and exercises
involving credible emergency ERP
scenarios at all hazardous production
facilities.
Hazardous production facilities at
Nostrum include:
• Oil Terminal and Transfer Point in Beles
• CF-Rostoshi Oil Trunk Pipeline
• CF-ICA Gas Trunk Pipeline (GTP
Orenburg-Novopskov)
• OTU and gaslift system
• CGTU-1,2 and LPG -1,2
• Well Operations and gathering system
• GTU-26
• MTS and RPMS
• Waste disposal area
• GTU-3 and LPG-3
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 57
STRATEGIC REPORT ESG review
Health and safety continued
During training drills at every facility, the
emergency operations center organised
and coordinated possible emergency
prevention and responses to accidents,
as well as to ensure fire safety. During
quarterly drills held at the facilities – EOS,
the whole range of issues related to
accidents and emergency prevention and
elimination procedures was considered.
Overall control of all emergency drills was
overseen by the Field Director, who is
responsible for the implementation of
industrial and fire safety measures.
We believe that these actions help maintain
the proper level of skills and competencies
among employees and executives and
ensure compliance with legal process
safety requirements and corporate
standards.
Oil spill prevention
GRI 2-25,
The Group strives to have zero
206-3
operational spills. Nostrum continues to
undertake initiatives to prevent and reduce
spills that include drills and training
teams, timely maintenance, repair and
replacement of equipment, monitoring
of problem oilpipeline areas, etc.
Oil Spill Response Plan
We continue to enhance our spill response
capabilities in accordance with the Oil
Spill Response Plan (“OSRP”) within the
Company’s production facilities.
This plan sets our response strategies and
techniques, available equipment, and
trained personnel and contracts and
includes the following measures:
• signal receiving action and notification
scheme for rescue services;
• notification procedure for the Company's
contractors, state bodies and local
authorities;
development, and also makes a forecast
of possible consequences for production
facilities associated with accidental oil spills.
• responsibility allocation for rescue units
organisation and management, and;
• measures to be taken to ensure people’s
safety and other actions.
Following directives from Oblast Akim in
2023, we conducted an extensive Oil Spill
Emergency Response drill in May at the
Terminal and oil pipeline with the
participation of the Company Emergency
Response Team, and emergency response
teams from Baiterek district, West
Kazakstan Oblast. Ansar-S-group LLP, our
contractor supplied the main equipment to
the training site, conducted three drills for
collecting of the spilled oil from the ground
and water surface and one drill focused on
extinguishing oil fires. The Asnar S Group
staff received training on using the oil
collecting equipment effectively. The
standout results were recognised and
the Company Managers received
Certificates of Appreciation from the
Head of WKO Department of Emergency
Situations.
In addition, an annual monitoring of
hazardous sections of pipelines, preparation
for autumn-winter season and spring floods
is made, especially in areas located in a
possible flooding area. Monitoring of their
condition is organised by contractors –
Nysan Korgau andAnsar-S Group.
The OSRP has been annually reviewed
and updated to consider the regulatory
requirements, availability of resources to
be involved. The OSRP gives substantiation
of a possible emergency level, analyses
scenarios of their occurrence and
Introduction of emergency response plans
and OSRP for Nostrum’s production and
engineering personnel is documented
in the briefing log at the workplace. In
accordance with Industrial Control Charter
the Facilities Manager and Field Director
are responsible for the due and correct
preparation of ERPs, and ensure compliance
with safety requirements is controlled
on a regular basis. If non-compliance is
identified, corrective and preventive action
plans are developed and implemented.
Boosting readiness of emergency
rescue teams
To respond to emergencies, Nostrum
established civil defence teams, whereby
120 employees on a voluntary basis
(60 people in each shift), are engaged
to ensure the safety of the production
facilities. In 2023, regular drills with civil
defence staff were conducted as per drill
plans. The staff included to Civil Defence
Teams was trained in 2023 at the facility of
Ak-beren blow out elimination service in
Burlin District WKO.
To maintain and conduct emergency
rescue operations, the Company has
long-term contracts with professional ERT
– Ak-Beren LLP (gas rescue service) and
Ansar-S-Group LLP (firefighters-rescuers).
Ak-Beren, a professional blowout
elimination service, is responsible for
accident prevention at oil and gas
wells, which is fully compliant with the
requirements for oil, petroleum product,
and other hydrocarbon spill response.
Contained and non-contained oil spills
In 2023 there were no oil spills. A table below shows data for 2019-2023:
Period
2019
2020
2021
2022
2023
Total
Contained oil
spills
Non-contained
oil spills
Volume of the
oil spills in
cubic meters Note
0
1
0
0
0
1
1
0
0
0
0
1
0.045
In February 2019, there was a minor fuel spill of 45 litres of diesel when an LPG
truck tipped over.
0.05
There was an oil spill inside the pump station of the Terminal without any leak
to the open ground surface.
0.095
58 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Materials and equipment available to the
emergency response and rescue teams
are certified and compliant with all
requirements.
A high degree of readiness for the ERT is
supported by regular drills and training, as
well as theoretical knowledge. Drills and
training are held on a quarterly basis at all
facilities. Special attention during the
ongoing emergency drills was given to
those facilities where gas and oil contain
hydrogen sulfide. All Emergency Response
Plans were reviewed, updated and
approved with Ak-Beren emergency
response service and Ansar-S Group.
Commanders of voluntary rescue and fire
teams were additionally trained under the
training program for unit commanders to
maintain levels of skills and competence,
particularly in relation to safety-critical roles.
The non-government fire service of
Ansar-S-Group LLP, which has had a service
agreement with Nostrum since 2022,
was also involved several times (under
our contract) in providing emergency
responses in Baiterek during the elimination
of the consequences of spring floods and
summer steppe fires at the request of local
executive bodies. Thus, Nostrum provides
assistance to the administration and
residents of Baiterek on an ongoing basis.
Organisation of communication
with contractors on emergency
response and prevention of
possible emergencies
A significant part of preventive and
emergency organisation is performed by
contractors for Nostrum. In order to ensure
a high level of preparedness for emergency
response, all drills and training were made
with the participation of the following
organisations:
• Ansar-S-Group LLP – fire prevention.
• Ak-Beren LLP – blowout prevention,
gas rescue.
• Nysan-Korgau – the organisation of
access control and protection of an
accident zone from unauthorised
individuals.
HSE personnel assigned to each hazardous
facility perform permanent control over
work plans implementation by contractors
as well as requirements of industrial safety
standards. To achieve this, the Company
uses checklists containing the entire range
of issues under consideration – starting
from document maintenance to work
quality and safety. The HSE Department
organises regular control field inspections
at production facilities.
The control teams include representatives
responsible for occupational health, safety
and emergency response.
• The most pressing issues are discussed
with all contractors and facilities. Joint
work on quality improvement of safety
methods is organised on a permanent
basis.
• Representatives of contracting
organisations participating in all
emergency drills regularly held by
Nostrum, have an opportunity to master
up-to-date methods of emergency rescue
operations and develop common rules for
solving emerging problems taking into
account available information on best
practices in the oil and gas industry.
Alert system for employees and
communities located near the
Chinarevskoye Field
The Company is constantly improving
internal procedures aimed at alerting and
preventing emergency response cases, and
in 2023 the Company maintained alert
systems at Nostrum production facilities.
The duty dispatch service promptly
transmits information about the occurrence
of accidents and emergencies to EOS-1 and
EOS-2 to notify the management of the
Company and government agencies.
In the event of an emergency, at the first
level of emergency response, regular
employees and contractor personnel
located at Nostrum production facilities, as
well as emergency response teams involved
in the accident response are notified. High
priority rescue and evacuation activities are
performed to protect them. Territorial
executive authorities (akimats) are notified
of an accident in accordance with the
notification scheme in case of a threat
of the spread of adverse factors.
In the event of major accidents, operational
teams of the second level are organised at
the Company’s office in Uralsk. If necessary,
the evacuation of personnel and
communities is organised.
Firefighting activities arrangement
The Company systematically arranges
operational control over compliance with
industrial safety requirements, internal
audits of the management system,
conducts analyses of and processes the
results of incidents and inspections,
develops and monitors the implementation
of corrective and preventive actions.
All Nostrum facilities at Chinarevskoye
Field and Terminal are fire and explosion
hazardous. Therefore, fire safety rules were
developed for all facilities and controls over
compliance with the rules are in place.
These activities include:
• obligatory preventive inductions, fire
safety training, control by line supervisors
and responsible persons over the
performance of work,
• inspection of Ansar-S-group by a
governmental authorised body and fire
inspectors,
• project expertise as to compliance with
fire safety requirements during the
reconstruction and technical upgrade of
production facilities,
• timely maintenance and function control
of systems and fire protection means of
facilities (by contractor – Batys Energon
LLP), and;
• continuous control of serviceability of
fire- and explosion-hazardous process
equipment and compliance with process
flow charts.
Civil defence and emergency
prevention measures
In 2023, in line with RoK legislative
requirements, Civil Defence Plan annexes
were revised. Training in civil defence for
personnel training was organised at the
Company’s offices. A special tactical
exercise was conducted with the office staff
on emergency evacuation in case of fire
and the provision of medical assistance. In
2023, 100% of office staff were provided
with civil gas masks GP-7 with “Breeze”
filter boxes.
In 2023, the West Kazakhstan Emergency
Situations Department held annual
inspection of the Chinarevskoye field and
the office on fire safety. As a follow-up to
the state field inspection on fire safety
compliance the Company has developed
an action plan and regularly provide
information to authorities on its execution.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 59
STRATEGIC REPORT ESG review
Our people GRI 2-7
This is why we dedicate special attention to
the ongoing enhancement of diversity and
inclusion within our Company.
NUMBER OF EMPLOYEES
NUMBER OF EMPLOYEES
AS AT 31 DECEMBER
as at 31 December
2023
2022
2021
2020
2019
571
566
559
564
668
GRI 401-3,
405-1
Strength through
diversity
At the end of 2023, Nostrum's workforce
stood at 571 employees, with 78% being
male and 22% female (2022: 78% male and
22% female employees). The Company
remains steadfast in its commitment to
establish key performance indicators (KPIs)
for its HR department, specifically focusing
on advancing diversity across all levels of
the organisation. Particularly in the domain
of diversity metrics, we aim to distinguish
ourselves by increasing female
representation across various tiers.
Nostrum has consistently upheld a
corporate Equality and Diversity Policy for
several years, underscoring our unwavering
dedication to these principles. At the end
of 2023, 21% of Group employees based
in Kazakhstan were female, a figure that
remains consistent with 2022. Furthermore,
in the UK, 67% of employees were female
(2022: 50%).
GENDER DIVERSITY
GENDER DIVERSITY
as at 31 December
2023
2022
2021
2020
2019
78%
22% 571
78% 22%
566
77%
23%
559
77%
23%
564
75%
25%
668
Male
Female
We take pride in our unwavering
commitment to cultivating a workplace
that celebrates diversity and fosters
inclusiveness. Our core belief is anchored
in recognising and appreciating the unique
contributions of every team member,
irrespective of their background or identity.
Acknowledging the continuous need for
progress, the Board continues to prioritise
diversity in upcoming appointments, with
a specific focus on ensuring robust
representation of Kazakh nationals in senior
roles. Presently, 29% of department heads
are female (2022: 32%). As at 2023
year-end, our Senior Management Team
comprises 27% females, marking an
increase from the 20% recorded in 2022.
We are targeting to further increase female
representation at the senior management
and at the department head level as
possible. We actively advocate for
female promotions in cases of parity in
competencies and capacities. However,
swift progress is impeded by the shortage
of qualified female candidates willing to
work in field-based roles, where a majority
of our positions are situated, involving
rotational shifts. And whilst we are
encouraged by our diversity at Board level,
we do recognise that diversity remains an
ongoing issue in the oil and gas industry,
particularly with regard to gender diversity.
Our Human Resources department actively
promoted internal growth and worked to
develop a diverse workforce at all levels of
our organisation. In 2023, 25% of Group
recruitment was female, a substantial
increase from the 7.27% recorded in 2022.
In 2023, five employees took parental
leave and eight employees returned
from parental leave, all females.
The Company prioritises diversity in terms
of nationalities, maintaining a diverse
management team with representation
from six different nationalities. Among
the eleven members of the Senior
Management Team, five are Kazakh
nationals as at 31 December 2023.
Additionally, there were no reported
incidents of discrimination raised by
any Group employees in 2023.
We believe diversity and inclusion are
essential components to our business
strategy. The company acknowledges that
a diverse and inclusive workplace fosters
better decision-making, stimulates
innovation, and ultimately enhances
business performance. We are committed
to fostering an environment where every
employee can thrive and achieve their full
potential. We recognise that diversity goes
beyond nationalities and encompasses a
wide range of backgrounds, experiences,
perspectives, and identities.
Promoting diversity and
inclusion stands out as a crucial
challenge and opportunity in the
contemporary world. Businesses
hold a significant responsibility
in this regard, acting as
influential proponents of positive
principles and serving as
commendable role models.
Enhancing inclusion and
diversity within our Group goes
beyond mere correctness; we
firmly believe it fortifies the
qualities that contribute to the
overall strength and
improvement of companies
through the creation of
synergies.
Fundamentally, this effort revolves around
recognising, respecting, and appreciating
our unique differences. It transcends mere
tolerance, delving into a profound
understanding of each individual and an
exploration of the factors that set us apart.
Inclusive societies cultivate a profound
sense of meaningful belonging, fostering
support and value for individuals—integral
elements crucial for the success of our
organisational structure at Nostrum. We
take pride in cultivating a diverse and
inclusive workforce, providing a home for
individuals from various backgrounds.
Undoubtedly, our people constitute the
cornerstone of our success. Actively
engaging with individuals possessing
diverse assessments and perceptions leads
to superior decision-making, increased
innovation, and a more profound
commitment in the workplace.
60 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
GENDER DIVERSITY, 31 DECEMBER 2023,
%
Male
5
Board
Female
1
17%
(2022: 20%)
SMT (other than Directors)
Males
Males
8
20
Male
419
Females
3
27%
(2022: 20%)
Department heads
Females
8
29%
(2022: 32%)
Employees
Female
113
21%
(2022: 21%)
GRI 405-1
Diversity Action plan
This year once again, we have endeavoured
to enhance and progress in our promotion
of diversity and inclusion within our
organisation. Several initiatives have
been improved, and others have been
implemented.
Among them, a program aimed at
addressing the under representation
of certain disadvantaged groups, the
“Targeted Recruitment Program” has been
created. This initiative focuses on attracting
and hiring individuals from diverse
backgrounds, such as women, minorities,
and individuals with disabilities.
To reach that goal, concrete measures have
been put in place, like discussing with
external organisations and networks for
collaboration to broaden our talent pool
and ensure equal opportunities for all, as
well as training our HR team to conduct
inclusive recruitment interview and write
an inclusive job advert.
We have developed the Company’s
Inclusive Buddy Program, designed to
establish a framework that facilitates the
integration of new hires through mentoring
experiences. Our aim is to foster a
welcoming, friendly, and respectful
work environment for all members.
We have established comprehensive D&I
training programs aimed at raising
awareness and providing knowledge
on various topics, including equity and
equality, stereotypes and biases,
discrimination and prejudice, sexism and
disability in the workplace, culture, and
microaggressions. By embracing this
approach, the organisation seeks to
create a workplace where every employee
feels valued and respected, fostering a
collaborative and innovative atmosphere.
This, in turn, will enhance employee
engagement and satisfaction, ultimately
contributing to long-term growth
and success.
We have proposed the institution of a
zero-tolerance approach to discrimination,
harassment, and bullying, indicating that
any documented incidents of harassment,
discrimination, bullying, or victimisation will
be treated seriously and could potentially
lead to disciplinary action, including
dismissal, with or without notice. This
policy is currently under review and
pending final validation.
Through our endeavours, we have
observed a significant rise in the interest
regarding diversity within our workforce,
evidenced by an increased number of
employees actively participating in our
surveys and e-learnings and engaging in
discussions with the Human Resources
Department.
Moving ahead, we are dedicated to
boosting diversity and inclusion in our
organisation. For 2024, we plan to hold
monthly onsite training sessions led by a
dedicated coach three times a month as
part of our D&I program. Our focus will be
on creating mentoring programs linked to
our Targeted Recruitment initiative to offer
guidance, networking opportunities and
professional growth to underrepresented
groups.
We will closely monitor the Buddy Program
and its implementation to ensure seamless
integration of new hires, while also
gathering feedback from employees
and their assigned buddies. Additionally,
we plan to create a user-friendly and
comprehensive on-boarding manual to
assist new team members during their
first days.
Furthermore, we plan to establish employee
affinity groups, diversity councils, and
networking groups to support
underrepresented members of our
workforce. These initiatives will offer
networking, mentoring, and career
development opportunities, thus
cultivating an inclusive environment that
promotes a sense of belonging for all
individuals within our organisation.
Regarding anti-discrimination measures,
the Nostrum Code of Conduct safeguards
all employees and contractors from
unlawful discrimination based on aspects
such as ethnicity, sexual orientation,
disability, socio-economic background,
age, gender, educational and professional
backgrounds.
BREAKDOWN OF EMPLOYEES
AND TOP MANAGEMENT BY AGE,
31 DECEMBER 2023 (%)
6%
5%
35%
20%
34%
<30
30–39
40–49
50–59
60+
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 61
STRATEGIC REPORT
ESG review
Our people continued
Succession Planning Policy
The Company has implemented Succession
Planning Policy that aims to identify future
staffing needs and employees with the
skills and potential to be developed for
carrying out future management roles.
GRI 404-2
Education and training
Investing in the development of our people
is crucial for fostering economic self-
sufficiency within the local communities
where we operate. Under the terms of the
PSA, we are required to spend 1% of our
annual Chinarevskoye field development
costs towards education and training.
In 2023, 500 employees benefited from
education and training programmes
(2022: 507 employees). Our total Group
training costs in 2023 were US$0.6m
(2022: US$0.4m) and the total number
of training days in 2023 was 5,702 days
(2022: 6,961 days).
In 2023, Nostrum supported numerous
educational programs, including MBA in
Global Banking & Finance, ESG reporting:
GRI Standards-Oil and Gas course,
Document control foundation course,
Oil Field Management Production
Performance and Forecasting Analysis
course, Mayekawa equipment. Module-unit
based on a screw compressor course,
Installation and programming of Danfoss
frequency converters, Internal auditor of an
integrated management system according
to ISO 9001:2015, ISO 14001:2015, ISO
45001:2018, root cause analysis for incident
investigation (TapRoot Why Tree, 5 Why)
course training was undertaken by
operational and head office teams,
department heads, specialist engineers
and other technicians at different levels
across the organisation.
HSE training (including fire safety) is carried
out at least annually in accordance with our
operating practices and as required by
the PSA.
Employee relations and
social guarantees
Nostrum prides itself on being an integral
community partner and one of the largest
employers in western Kazakhstan, with 98%
of Group employees hired locally and 92%
of all employees being RoK nationals. As at
31 December 2023, Nostrum had a total of
571 employees from 12 countries.
We offer all staff members competitive
benefits and remuneration packages in
compliance with all regulatory, guidelines
and requirements, which (to the extent
applicable) are also applied to those hired
as temporary or part-time employees.
In an effort to promote gender equality,
we continued to monitor gender pay
discrepancies. Emphasis has been placed
on supporting female advancement,
resulting in promoting seven females for
their competences. In 2023, we continued
to conduct our own gender pay
discrepancy review with a grouping of
employees based on their job function,
seniority, location and other factors. As
a result of this analysis, the following
observations were drawn:
1. Roles with higher pay are male-
dominated (C-suite)
2. We have seen that the gender pay gap
has further narrowed in 2023 as
compared to 2022, the average
employee salary in Kazakhstan was
2.6% higher for males (2022: 3.3 %
higher for males) and the median
employee salary in Kazakhstan was
5.3% higher for females (2022: 1.4%
higher for females). At certain levels
female pay exceeds their male
counterparts (Office), while in the Field
the remuneration is higher for males
than females.
Despite short-term variations, our
commitment remains steadfast towards fair
and balanced recruitment and promotion
practices along with consistent skills
evaluation. We aim to increase the
presence of women in senior roles and
areas of our businesses where they are
currently under-represented, with the
long-term goal of eliminating the gender
pay gap. The Board will continue to monitor
any gender pay discrepancy by defining
targets and activities to address any
inequalities discovered.
GRI 401-1
Hiring and staff
turnover
As part of the Company’s costs optimisation
plan, in 2023, 48 employees (of which
36 males and 12 females) were released
or agreed to voluntarily resign, and their
positions were not filled (2022: 48
employees). This was the main cause of
staff turnover. The number and percentage
of new employees hired in 2023 was 52 or
9.1% (of which 13 were females and 39
were males).
GRI 2-26,
2-29
Workforce
representation
In 2018, the Company put collective
agreements in place to provide for
workforce representation. In 2023,
Chris Hopkinson was appointed as the
Company's non-executive director
designated with the task of obtaining the
views of the Company's workforce and
feeding these into the Board's decision-
making processes. In November 2023,
Chris Hopkinson met with members of the
workforce in Kazakhstan and obtained
feedback regarding various matters of
importance to the workforce.
The Board of Directors strives to adopt
best practices in corporate governance,
including engagement with the Group’s
workforce. In particular, the Board wishes
to understand the views of the Group’s
workforce and to take such views into
consideration in Board discussions and
decision-making. Communication between
the workforce and the Board is often
referred to as the “employee voice”, and it is
hoped that a wide selection of views from
the workforce can be gathered through a
range of formal and informal channels.
Such channels are intended to help the
workforce share ideas and concerns with
senior management and the Board. This
communication provides useful feedback
about business practices from those
delivering them and can help empower
colleagues. The Board encourages
individuals to raise any concerns they may
have. Doing so acts as an early warning
system for actual or potential problems and
helps to manage risk. The Board actively
listens to workforce concerns and
subsequently provides feedback on how
the matter raised has been considered,
including any action taken. The Board
emphasised that the workforce should
feel safe to raise concerns.
62 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Nostrum Code of Conduct
Nostrum is committed to maintaining a
Group-wide culture that recognises
international standards of human rights.
A copy of the Code is available on the
Group’s website in both Russian and
English and can be downloaded from our
website: www.nostrumoilandgas.com.
GRI 2-23
Human Rights Policy
Throughout 2023, the Group had a Human
Rights Policy which reflects the desire to
comply with industry best practice and the
HR department has raised its awareness on
the numerous benefits and interests that
our Human Rights Policy provide to our
organisation.
First and foremost, a Human Rights
Policy demonstrates our commitment to
upholding fundamental principles of
human dignity, respect, and equality. By
establishing a framework that promotes fair
treatment of employees, stakeholders, and
communities, we can enhance our position
as a responsible and ethical business that
contributes positively to the social and
economic development of the regions
where we operate.
In addition to these ethical considerations,
there are practical benefits. By promoting
diversity, inclusion, and non-discrimination,
we can attract and retain a more diverse
and talented workforce. Furthermore, a
Human Rights Policy can help to mitigate
legal, financial, and reputational risks
associated with human rights violations.
Moreover, a Human Rights Policy can
also enhance our relationships with key
stakeholders, including customers,
investors, regulators, and civil society
organisations. By engaging in transparent
and constructive dialogue about human
rights issues, we can build trust, and
credibility.
The Human Rights Policy is in addition to
the Nostrum Code of Conduct (Code),
which defines the principles that guide
business conduct and provides a non-
exhaustive outline of what Nostrum
considers permissible conduct by its
employees. These principles include
provisions relating to human rights and
diversity in the workplace, insider dealing
and insider information.
GRI 2-23
Modern Slavery
Act Statement
There are no divisions of the Group (or its
vendors) believed to have significant risk
of child/forced labour/hazardous work
performance by young employees.
Under the Group’s standard supply
contracts, the Group is entitled to require
suppliers to demonstrate compliance
with the Code and to hold its suppliers
responsible for compliance by their supply
chain with equivalent terms.
A copy of our Modern Slavery and
Transparency Statement is available on our
website: www.nostrumoilandgas.com.
GRI 2-26
Whistleblowing Policy
We have a Whistleblowing Policy which
takes into account the Whistleblowing
Arrangements Code of Practice issued by
the British Standards Institute and Public
Concern at Work, and which applies to all
individuals working for the Group at all
levels and grades.
The Whistleblowing Policy sets out details
of two compliance liaison officers who
speak a variety of languages for the
purposes of reporting any concerns. The
Whistleblowing Policy is also mentioned in
the Code, and a person who reports any
matter in good faith will be protected
against any sanctions. More information
on this matter is provided on page 92.
The updated version of the Whistleblowing
Policy, revised in August 2023, is available
on the Company’s website. At the time of
writing, we have received no reports under
our Whistleblowing Policy of forced/
involuntary labour or human trafficking in
relation to our business or supply chains.
For further details, please see our website:
www.nostrumoilandgas.com.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 63
STRATEGIC REPORT ESG review
Social responsibility
During 2023, Nostrum continued to actively
perform charitable activities to support
local communities, particularly in the
territory of its operations.
The Company's main activities were
to support local communities in the
healthcare system, in projects aimed at
supporting cultural, sports and educational
programs and to involve new communities
in the social development of the region
(Establishment of the Public Council of
Gorbunovo village). In 2023, the company's
charitable expenditures in support
of the local communities exceeded
US$0.4m. The company's most significant
investments in support of local
communities in 2023 were as follows:
Contribution to regional development
• construction of a park in Beles and the
planting of fruit trees;
• assisting neighbouring communities to
prevent natural disasters during severe
weather conditions (blizzards, snowfalls,
floods) by providing special machinery
and equipment.
Supporting schools
• providing funds for repair and
improvement of material and technical
base for general education schools and
preschool institutions, purchase of school
supplies for children from large families
and low-income families.
Promotion of sports
• providing financial assistance to young
athletes and winners of various
intellectual academic competitions to
participate in international competitions
and contests.
Supporting healthcare
• acquisition of medical rehabilitation
trainers for Daryinsk Social Services
Center, charitable assistance to Disabled
People Society;
• allocation of funds for children requiring
treatment outside of Kazakhstan;
• financial support in organisation of the
regional contest of the best health
professionals of West Kazakhstan Region.
Nostrum takes pride in being
an active partner within the
community, dedicated to
cultivating an atmosphere of
openness, engagement, and
the highest level of social
responsibility. Our commitment
extends to providing both social
and financial support aimed at
enhancing the well-being of
local residents. This includes our
efforts in advocating for
environmental sustainability,
upholding ethical standards,
engaging in philanthropy, and
demonstrating economic
responsibility.
Over
US$1.2bn
taxes paid since inception
Zhaikmunai has paid over US$1.2bn
of taxes since inception to the local
and federal government authorities
of the Republic of Kazakhstan.
GRI 413-1
Philanthropy: 2023
key initiatives
We recognise that we must manage and
mitigate any potential risks and impacts
associated with our activities to support the
communities that may be affected by our
operations.
GRI 207-4
Civil duty: Payment
to governments
Nostrum is committed to transparency in
its business activities and payments to
governments. We have a formal public
relations and government relations
procedure that regulates our relationships
64 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
with the local community and with
government, and details how and why we
engage with various stakeholder groups.
The Company realises the importance of
social partnership between business and
society for the sustainable development
of the regions of its operation and makes
a contribution to ensuring favourable
conditions and quality of life in the areas
of its core business.
In 2023, a total of US$59.94m (in 2022:
US$31.87m) was paid to governments by
Nostrum and its subsidiaries. We will report
on 2024 payments to governments
in the first half of 2025. For more details,
please see the Governance page of
our website.
Nostrum takes this civic responsibility
seriously with the knowledge that paying
the right amount of taxes is directly linked
to local economic development and the
ability of local government to support its
residents.
Economic responsibility: GRI 204-1
Spend with local suppliers
We are committed to partnering with local
companies and in 2023 we spent 74.89% (in
2022: 54.25%) of our supplier budget on
RoK national suppliers. The increase in
percentage is primarily attributed to the
relatively lower restructuring advisor fees
incurred in 2023 as compared to 2022. In
addition, activities such as GTU3 re-start
and appraisal programme on the Stepnoy
Leopard fields, further contributed to the
heightened proportion of spending on RoK
national suppliers.
Environmentally friendly:
Liquidation fund contribution
Under the terms of the Chinarevskoye PSA,
Nostrum is obliged to accumulate a cash
reserve liquidation fund which by the end
of the PSA should total US$12.0m
earmarked for the elimination of
environmental consequences of our
operating activities. At the end of 2023,
US$8.6m had been accumulated (2022:
US$8.2m).
High ethical standards:
Anti-Corruption and Bribery Policy
For more information on the Group’s
Anti-Corruption and Bribery Policy, please
see page 92.
Environment
Nostrum acknowledges its
environmental footprint and is
committed to transitioning to
a more sustainable energy
mix. Our primary focus is on
operating responsibly,
structuring our activities to
minimise negative impacts
on the environments in which
we operate. We adhere to the
environmental regulations
of RoK, which are aligned with
international standards, and we
are actively pursuing initiatives
to reduce emissions and waste.
In 2023, there were no fines or
sanctions against the Group
for non-compliance with
environmental regulations.
Furthermore, we recognise the
importance of climate change
and are committed to mitigating
our greenhouse gas emissions.
Climate change
Nostrum acknowledges the extent and
significance of its operational impacts
and aligns them with the significance of
sustainable use of natural resources,
environmental preservation and
mitigation of climate-related risks.
As a producer, our operational activities
contribute to greenhouse gas (GHG)
emissions, and we recognise the
responsibility to minimise our impact
on the climate in a responsible manner.
Reducing emissions is a corporate goal
of top importance.
We understand that hydrocarbon
exploration and production significantly
contribute to GHG emissions, and
therefore, we are committed to addressing
climate change. In 2023, one of our primary
corporate social responsibility goals was to
minimise the impact of our operations on
climate change, which continues to be a
key focus for Nostrum.
Nostrum organises its operations to adhere
to the emissions limits specified in the
Environmental Emissions Permit issued by
Kazakhstan and establishes internal targets
that are significantly stricter than those
approved by the authorities.
When applying for an Environmental
Emissions Permit, preliminary standards
for maximum permitted emissions are
determined, based on the previous
2-3 years of historical data.
The Board is responsible for ensuring that
Nostrum complies fully with Listing Rule
14.3.27R and Listing Rule 9.8.6R(8) in this
annual report. Moreover, the Board is also
responsible for the governance, strategies,
risk assessment, management systems and
KPIs relating to climate change and GHG
emissions.
GRI 305-1,
305-2
GHG emissions
reporting approach
Nostrum seeks to minimise all GHG
emissions and remains committed to
investing in new technologies to enhance
its GHG emissions performance. Nostrum
fully complies with GHG emission
regulations in the UK and Kazakhstan and
has been monitoring and reporting GHG
emissions since 2011.
The objective is to improve surveillance,
increase transparency, develop a data-
driven culture that provides employees with
the ability to identify and act on insights,
targeting maximum energy efficiency with
a minimum carbon footprint through
proper monitoring, process digitalisation,
further process optimisation.
The Company’s GHG reporting period is
aligned with the period in respect of which
the Directors’ Report is prepared.
The majority of our emissions stem from the
combustion of fuel gas within gas turbine
units, boilers, process heaters, and
compressors. Additional emissions occur
during flaring, when no other alternatives
are available. Our emissions levels are
steadily decreasing year by year, excluding
one-off items, as shown in the chart on
page 66.
According to the new 2022-2025
Kazakhstan National GHG allocation Plan,
206,650 tonnes of CO2e were allocated to
Nostrum. Our actual CO2 emissions in 2023
were 176,277 tonnes and our actual GHG
emissions in CO2 equivalent were 180,157
tonnes, which include three other gas types
as provided in Table 5 on page 72.
It is important to note that an active energy
policy with the implementation of many
initiatives was conducted during 2023,
however several crucial moments
influenced the increase in emissions in
the second half of the year. While flawless
hot commissioning and re-start of third
technological gas treatment line in terms of
quality and safety took place, since August
the increase in emissions was inevitable
due to the larger amount of equipment in
operation and significantly higher fuel
consumption requirement. In addition,
since the 19th of December, the Company
received the first gas from Ural O&G for
processing, this third party feedstock has
also contributed to the higher fuel
consumption.
More detailed information on GHG
emissions in 2023 are presented on
pages 70–72.
As part of the RoK regulations on
production and emission reporting as well
as for improving the transparency of all
related business processes and KPIs
monitoring, in the first half of 2023,
Nostrum has completed expansion of its
“Automated Reporting System phase III”
(“ARS”) by including approximately 1,000
“tags” in the process calculations, allowing
real time readout of data.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 65
STRATEGIC REPORT ESG review
Environment continued
AIR EMISSIONS ACTUAL/PERMITTED (Tonnes)
GHG EMISSIONS FOR
GHG EMISSIONS FOR
SCOPE 1 & SCOPE 2 (TCO2E)
SCOPE 1 & SCOPE 2 (tCO2e)
2023
2022
2021
4,413
6,322
4,186
6,426
4,305
6,609
2023
2022
2021
2020
2019
Surplus of GHG emissions
as a result of GTU 3 re-start
21,891
158,266
180,157
169,630
187,479
187,667
223,305
Petroleum hydrocarbons
(C2-C19)
Carbon monoxide (CO)
Methane (CH4)
Nitrogen oxides (NOx)
Sulphur dioxide (SO2)
Dust, suspended solids,
particulate matter (PM)
Volatile organic
compounds (VOCs)
Metals and inorganic
compounds (Metals)
Permitted
Acids and other organic
chemicals (Organics)
Hydrogen sulphide (H2S)
Package for ARS Phase III Project included
Operational Intelligence Environment on
the following systems which has referenced
as Inside Battery Limits (ISBL) units within
the Chinarevskoye Field (Data related to
Production reporting and GHG/emissions
Modules):
• Gathering System;
• Gas Lift System
• GTU-1/2
• OTU
Commissioning and start-up of phase III has
been performed successfully, however,
modules calibration that was expected in
Q3 2023 was not accomplished fully due to
hydrocarbon feed-stocks transfer to GTU-3
and addition of Ural O&G third party
feed-stock (out of ARS phase III scope). To
be ready, we proceeded to train personnel
and prepare for phase IV.
The fourth phase is ongoing and predicts
the build up and running of full scale live
Chinarevskoye field modules, adding and
integrating Ural O&G third party feed stock
and GTU-3 plant data into the existing
system. In parallel, work is underway to
introduce additional functionality with
scope based on new government
requirements regarding full gas balances,
Sulfur Recovery Unit and CEMS (Continuous
Emissions Monitoring System) data
(gas turbine exhaust system) into its
reporting portal.
GRI 305-5
Current and future GHG
reduction initiatives
Nostrum continues to invest in current and
future technological advancements in
order to effectively detect, monitor and
prevent GHG emissions. The Company has
the following technology in place to
proactively monitor, limit and reduce
its GHG emissions:
• 397 methane detectors to monitor
equipment maintenance and pressure
valve replacement exercises;
• Mobile methane detectors in
gas flowlines;
• Use of cross exchangers in all Gas
Treatment Units to pre-heat cold streams
entering a heated process system by use
of heat from hot streams exiting the
system and requiring cooling;
• Waste heat recovery system at CGTU-3
– exhaust gases from the compressor
units are used for heating the buildings
and preheating the utility fluids in the
plant, resulting in reduced fuel gas
consumption;
• Vapour Recovery Systems (VRS) installed
in oil and condensate tanks to inhibit
hydrocarbon evaporation during storage
and transfer;
• Hydrocarbon Recovery System (HCRS)
installed in LPG loading terminal to
prevent hydrocarbon ‘bleeding’ into the
atmosphere;
• 26 MW power station generates
electricity for use in the field and
therefore limits the use of diesel-powered
heaters;
66 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
GAS UTILISATION AND FLARING
(MCM)
ACTUAL GHG EMISSIONS 2023
(tCO2e)
100
50
0
81.3
77.6
74.0
63.9
59.9
17.7
11.7
15.3
6.5
8.3
2019
2020
2021
2022
2023
25,000
20,000
15,000
10,000
5,000
0
0
9
3
5
1
,
8
7
8
4
1
,
2
2
8
3
1
,
2
5
6
3
1
,
3
9
8
3
1
,
8
4
2
9
,
J
F M A M J
0
1
0
8
,
J
9
3
0
2
2
,
6
3
3
6
1
,
4
1
0
7
1
,
5
7
4
7
1
,
4
4
2
8
1
,
A
S
O N
D
Gas Flaring
Gas Utilisation
Linear (Gas Utilisation)
Total
Linear (Total)
• Well stock has local skids that will
automatically shut-in the well bore to
prevent full blowdown of the surface lines
and resultant GHG emissions;
• CEMS (Continues Emission Monitoring
System) has been successfully installed at
Gas turbine unit 26MW in 2023. CEMS
integration into the ARS through
corporate network and related SIT (Site
Integration Test) to be conducted in H1
2024 following with data integration in
government AEMS (Automated Emission
Monitoring System);
• Installation of automated flowmeter-
measurement on flare-lines on Oil
Treatment Unit successfully completed in
Q4 2023.
In recent years, the Company has
implemented a number of projects which
have had a continuous GHG reduction
effect, such as:
• Well automation flaring prevention on
three wells during processing – 1,983.61
tCO2 e /year;
• Electric driven LPS compressor instead of
fuel gas driven – 1,697.76 tCO2 /year;
• Waste Heat Recovery project at GTU-3
with an annual GHG reduction of 2,072
tonnes of CO2;
• Flaring reduction to the minimum due
to proper production optimisation
management, real time production
monitoring and by shutting down the
wells during any intervention with annual
GHG reduction 4,000+ tonnes of CO2.
It should be noted that GTU-3 hot
commissioning/re-start and acceptance
of Ural O&G third party feedstock have
been done seamlessly with almost
absence of hydrocarbons flaring and
additional carbon footprint thanks to
good preparation and execution of
subject processes;
• Implementation of some smaller
initiatives took place in 2023 as well:
Replacement of existing light sources
with more efficient ones, automatisation
of hot water boilers in field buildings,
improvement of thermal insulation of the
field pipelines and boiler system piping.
The Company is also appraising and
investing in the following technologies
to assist in the proper identification,
accounting, and mitigation/reduction
of GHG emissions:
• Full asset digitalisation – Integrated
production accounting and GHG
emission quantification tools that give a
holistic view of the entire hydrocarbon
value chain as well as forecasting
capabilities. Support digital transformation
initiative of our assets;
• Perform digitalisation of all our assets and
business processes, data collection and
reporting systems by 2026;
• Perform Digital transformation of our
company, by 2035;
• Several projects that aim reduction
of the fuel gas consumption are being
evaluated targeting substantial reduction
of GHG Emissions and None GHG Air
Emissions: Installation of a Waste Heat
Recovery Boiler for amine regeneration
heat and technology line requirements;
• To reduce our dependence on fossil fuels
by investing in renewable energy, the
company is currently investigating the
different options like application of
thin-film PV (Powerfoil) as solar solution
for storage tanks and roofs.
The technology for GHG detection and
quantification is constantly evolving,
however, the Company continues to
explore key technologies that will assist
with the objective of GHG emissions
reduction.
In order to further reduce GHG emissions,
employees working at production facilities
are transported via buses instead of using
personal vehicles.
Nostrum is also considering various
additional GHG reduction initiatives for
2024 and future years.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 67
STRATEGIC REPORT ESG review
Environment continued
Climate disclosures
In 2023, we participated in the CDP
(formerly Carbon Disclosure Project) for
the fifth year in a row, a key medium for
companies to disclose their environmental
impact and risk management as well as
continue to focus on GHG emission
reduction strategies. An independent
assessment of our Climate Change
response led to Nostrum achieving a “B-”
score for the second consecutive time since
joining the project. The Water management
section also received a “B-” rating,
consistent with our 2022 score. These
scores enabled us to meet our 2023 KPI
target, elevating our status from the
previous Awareness Band (“C/C-” score)
to the Management Band (“B/B-”) in the
Climate Change module. The result also
demonstrates that the policies and
procedures we have developed in recent
years are positioning the Company to
effectively address the issue of climate
change in the present and future.
Furthermore, our “B-” score places
Nostrum ahead of the average “C” score
of its’ peers in the oil and gas industry.
Decommissioning
According to the regulations on subsoil
use, it is required that all production
facilities owned by subsoil users and the
associated land be brought to a condition
that ensures the safety of life, public
health, and environmental protection.
Furthermore, the consequences of subsoil
users' activities must be resolved as
outlined in the legislation of the Republic
of Kazakhstan. The closure of subsoil use
objects follows the guidelines laid out in a
Liquidation Project, which is prepared by a
design organisation holding a valid license
for environmental protection services. All
necessary decommissioning actions are
detailed in the Liquidation Project created
by NIPI Neftegas.
Waste, water and
soil management
Nostrum's operational activities are subject
to thorough environmental monitoring,
which includes detailed management
systems for waste, water, and soil. The
company conducts testing of air, soil, and
sub-surface water to ensure compliance
with sanitary and epidemiological
standards as stipulated in Kazakh
legislation.
Nostrum consistently monitors its
regulatory responsibilities and is equipped
with systems to monitor and report on
these obligations and commitments
through regular environmental
assessments of waste, water, and soil
at the Chinarevskoye field.
Waste management GRI 306-1, 306-3
Waste management
includes the daily control of sites for
temporary storage of production and
consumption waste, accounting,
transportation and transfer
to a third-party contractor.
All generated waste is transferred under
a contract to the following third-party
specialised organisations:
• West Dala LLP
• Help Ecoil LLP
• TuranPromResurs LLP
• Oral Tazalyk KZ LLP
In 2023, the volume of waste generated at
the Company’s facilities totalled 2,747
tonnes, consisting of 40 different types of
industrial (used filters, cartridges, medical
wastes, batteries, etc.) and domestic waste
(plastic bottles, used paper), 46% of which
was transferred for processing by the above
mentioned companies.
Drilling waste was processed in the Field by Help Ecoil. Soil and water survey results
demonstrated compliance with all applicable environmental legislation.
Year
Waste generated, tonnes
Transferred for processing, tonnes
2020
2,151
1,496
2021
2,876
2,699
2022
2,865
2,462
2023
2,747
1,262
Transferred for processing, %
69.50%
93.80%
85.93%
45.95%
GRI 303-1, 303-2, 303-3
Water management
In meeting our environmental responsibilities, we recognise the importance
of water resources in areas with limited water supply, and we acknowledge
the importance of having access to fresh water.
It is paramount for us to effectively manage water consumption and we strive to deploy the
most efficient water management techniques to handle fresh water in a balanced and
sustainable manner. We seek to fully understand and minimise our operational water
footprint and manage our activities in a way that protects our shared water resources.
We aim to comprehensively minimise our operational water footprint while safeguarding
our shared water resources. We are dedicated to establishing robust water management
practices across all our assets and conduct thorough assessments, target setting,
monitoring, and corrective actions.
68 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
FORMATION WATER PRODUCTION AND AVERAGE DAILY WATER PROFILE
(MCM)
1,600
1,200
800
400
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
AvgWatProd m3/d
AvgWatInj m3/d
Nostrum’s water injection requirements are
up to 1,200 m3 per day (average injection
approximately 700-800 m3 per day), of
which 400-550 m3 per day are injected from
formation water production. The deficit is
compensated through production from
water wells. None of these water wells
competes with fresh water supply to nearby
communities. Five out of seven injectors are
currently in operation with one disposal
well used as a backup. The current system
has sufficient capacity and flexibility to
handle forecast water injection volumes.
The Company has initiated a series of
measures to improve formation water
treatment and injection processes. These
measures include focusing its resources on
process improvement in the treatment of
water used in upstream operations which
will lead to combating corrosion, reducing
oil contamination, reducing growth of
sulfate, reducing bacteria and the
formation of inorganic scale. A full review
was initiated in 2021-2022 on process
effectiveness and chemical efficiencies and
mitigating actions taken ensure compliance
with Kazakhstan’s environmental
regulations and has the additional benefit
of reducing water treatment costs.
Water Treatment & Injection System
Upgrade Phase I project has been
completed, achieving some modest
improvement by modifying injection points
of applied chemicals and adding a second
water storage tank (less suspended solids
in water). Field trials by different vendors
did not provide expected results. Project
phase II has been initiated in 2023 scoping
low-cost modification/adjustment of the
existing treatment system. Longer term
options will follow after further review.
• ESG friendly solution – less waste (oil
sludge) generation and utilisation, less
volatile HC evaporation.
Currently testing of results is ongoing
accompanied with fine tuning of
technology. Preliminary good results
have been achieved.
Wastewater discharges
GRI 303-4
Reasonable and careful conservation of the
ecosystem with clean water and access to
water resources is one of the main factors of
sustainable development. The Company's
main approach to solving the problem of
rational water use is to use water recycling
and reuse systems, increasing the degree
of wastewater treatment and reducing
water abstraction from natural sources.
To prevent the negative impact of
wastewater on the environment, we process
wastewater using special artificial reservoirs
such as evaporation ponds, filtration fields
and a landfill for formation water and
industrial wastewater.
We have the following artificial ponds:
• Evaporation ponds GTP-1,2,3
“conditionally clean” storm wastewater;
• Polygon for formation water and
industrial wastewater disposal;
• Filtration fields, domestic wastewater
after treatment at the liquid mud plant.
WATER WITHDRAWALS – VOLUMES
(%) by source
0.03%
0.01%
665
216
99.96%
Recycled processed water
Dedicated ground water wells
Rainwater harvesting streams
Phase II has foreseen modification inside
the existing Oil Treatment Unit – utilisation
of condensate storage tank V-32220 as
water settlement tank. The following was
used as background information:
• confirmed better injected water quality
by this option in 2018. It is expected
further improvement, unlike in 2018, two
water storage tanks would now be used
for separation and oil skimming, and a
new 5000 m3 tank for sedimentation.
Provides sufficient capacity for future
third party water addition.
• much better performance of downstream
equipment, no danger of fines related oil
and suspended solids as proactive results
driven approach will be demonstrated.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 69
STRATEGIC REPORT ESG review
Environment continued
Disposal of Domestic and Sanitary Wastewater in 2020-2023
Disposal indices
Permitted
Actual
Permitted
Actual
Permitted
Actual
Permitted
Actual
Disposed Sanitary Wastewater, m3
85,775
25,090
85,775
26,188
85,775
26,191
58,100
26,820
Discharges to ponds evaporators, m3 GTU-1,2,3
Drilling wastewater and associated water, m3
84,810
45,900
21,398
84,810
22,338
84,810
44,748
84,810
43,059
1,740
45,900
4,573
35,000
2,757
4,572
2,787
2020
2021
2022
2023
For more detailed information, please visit our website at www.nostrumoilandgas.com.
Energy and resource efficiency policy and methane emissions management policy
The Company strives to use energy in the most efficient, cost effective, and environmentally responsible manner possible. Nostrum
committed to consider energy efficiency as a factor in production operations development, in process and facility design and in the
procurement of goods and services, whether it is further development of existing assets, appraisal of new upstream assets or midstream
tiebacks.
In 2023, the Company has demonstrated full compliance to active Energy Management. During 2023, the Company published the
“Methane Statement” and developed an “Energy Efficiency report” with short, medium and long term ESG targets. Nostrum continues to
review and expand on metrics for reporting environmental, social, and governance (ESG) performance. A set of short/long-term actions
with accountable metrics and interim targets has been established in 2023 addressing all areas and entities of energy efficiency
improvement. Additionally, the Company developed an “Energy Management Policy” which includes not just regulatory compliance
requirements, but striving towards achieving lower carbon targets.
Based on 2023 approved project list and production forecast:
2021
2022
2023
2024
2025
2026
Projected specific GHG emissions (Sc1+Sc2) tCO2e per kboe of
production feed-stock
Projected specific Air emissions t per kboe of production feed-stock
Projected specific waste generation t per kboe of production
feed-stock
29.5
0.7
34.6
0.9
47.2
1.2
30.0
0.7
30.0
0.7
30.0
0.7
0.5
0.6
0.7
0.5
0.5
0.5
Renewable energy use GRI 302-1
In 2023, in accordance with the Rules of Determination of Rate for Support of Renewable Energy Resources (RES), Nostrum purchased
1,015 thousand kWh of electricity from environmentally safe RES for own needs, representing 1.15% of Nostrum’s total electricity
consumption. The RES are provided by “Settlement and Financial Center to Support Renewable Energy Sources” LLP.
Table 1: Volume and % of renewable energy use
Year
2018
2019
2020
2021
2022
2023
Total energy
use, kWh
Renewable
energy use,
kWh
% of
renewable
energy use
155,938,801
536,242
110,007,715
2,122,070
97,611,929
2,064,228
93,236,708
2,156,969
92,702,024
1,580,212
88,440,944
1,014,826
0.34%
1.93%
2.11%
2.31%
1.70%
1.15%
In 2024, we will continue to take action for developing renewable energy sources of energy saving and energy efficiency.
GHG emission results GRI 305-1, 305-2
Kazakhstan signed the Paris Agreement on August 2, 2016 and ratified it on November 4 of the same year. All Parties to the Paris Agreement
have their own commitments to reduce greenhouse gas emissions. Kazakhstan has set itself an ambitious unconditional goal – by 2030 to
reduce greenhouse gas emissions by 15% from the 1990 level. In February 2023, Kazakhstan adopted a strategy to achieve carbon neutrality
by 2060, which outlines a series of essential measures aimed at reducing emissions and achieving de-carbonisation in the economy.
Starting from 2021, quotas are based entirely on the application of the benchmarking method. Greenhouse gas emission quotas in the
National GHG allocation plan for 2021 were calculated by multiplying the benchmarks by the average value of production for 2017-2019.
In the National GHG allocation plan for 2022-2025 quotas to companies were also calculated entirely by applying the benchmarking
method. Carbon credits in the National GHG allocation for 2022-2025 were calculated by multiplying the benchmarks by the average
value of production for 2017-2019.
70 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
The following GHG quotas have been set for Nostrum in a National GHG allocation plan for 2022-2025.
2022
2023
2024
2025
209,803
206,650
203,562
200,495
Direct GHG emissions (Scope 1) sources are flares, heaters, incinerators, boilers, gas turbine plants, electric power stations and
compressors.
Total direct GHG emissions (Scope 1) subdivided by gas types and by sources are summarised below in Tables 2 and 4. No further
ecological data is available for publication. Consequently, additional disclosures in relation to materials used, products and services,
waste management, water consumption, energy consumption and energy efficiency, emergency and intermittent pollution episodes,
wastewater discharges, atmospheric emissions of greenhouse gases and other pollutants, environmental protection and biodiversity are
not possible.
The Company carried out works on preparing an analysis and calculations for Scope 3 GHG emissions for three categories “Waste
generated in operations” – 289 tons of CO2, “Capital goods” – 150 tons of CO2 and “Goods and Services” – 1,430 tons of CO2. (352 tons
of CO2 for one category in 2022). In total Scope 3 emissions were in amount of 1,868 tons of CO2. This is the Company's second step in
disclosing Scope 3 emissions. Detailed results of Scope 3 calculations will be covered in CDP submission for 2023.
Table 2: Scope 1 GHG emissions subdivided by gas type (tCO2e)
2016
2017
2018
2019
2020
2021
2022
2023
Carbon dioxide
195,453
242,276
244,379
213,520
180,527
180,922
165,995
176,277
Methane
Nitrous oxide
Hydrofluorocarbons
10,817
1,046
34
10,723
1,305
28
8,436
1,304
37
8,429
1,034
25
6,133
917
28
5,614
903
28
3,600
3,824
7
23
11
23
Total
207,350
254,332
254,156
223,008
187,599
187,467
169,625
180,136
A breakdown of GHG emissions by gas type is shown in Table 2. The GHG emissions predominantly consisted of carbon dioxide and
methane. Scope 1 emissions are generated directly by equipment owned and operated by the Group. The equipment includes boilers,
heaters, diesel stations, gas turbine units and compressors. Scope 1 emissions also include flaring and hydrofluorocarbons emitted by
refrigeration units and climate control systems, such as air conditioners.
Table 3: Scope 3 GHG emissions subdivided by categories (tCO2e)
Waste generated in operations
Capital goods
Goods and services
Total
2022
352
n/a
n/a
352
2023
289
150
1,430
1,869
Table 4: Scope 1 GHG emissions subdivided by source types (tCO2e)
2016
2017
2018
2019
2020
2021
2022
2023
Stationary combustion
195,576
243,001
245,362
214,536
181,403
181,765
166,284
176,954
Mobile combustion
758
435
Fugitive sources
11,016
10,896
105
8,536
89
8,359
66
6,130
86
5,616
112
3,229
48
3,134
Total
207,350
254,332
254,003
223,008
187,599
187,467
169,625
180,136
Stationary combustion sources formed the majority of emitted GHGs.
Indirect GHG emissions (Scope 2)
Nostrum does not use purchased steam, heating or cooling. Electrical power is the only purchased power related to indirect GHG
emissions and it is supplied to Nostrum facilities via the Zelenovskaya distribution network (ZapKazREK JSC), through its subsidiary
Batys Energoresursy LLC. The regional emission factor (0.27086 tCO2/MWh) was calculated using Methodological Guidelines for the
Calculation of GHG Emissions from Electrical Power Stations and Boiler Houses (Astana, 2010) and the regional net thermal efficiency
of Urals Natural Gas Fired Power Plants (73.3%).
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 71
STRATEGIC REPORT ESG review
Environment continued
Total direct and indirect GHG emissions (Scope 1 and Scope 2) and total GHG emissions are summarised in Table 5.
Table 5: Scope 1, Scope 2 and total GHG emissions (tCO2e)
2016
2017
2018
2019
2020
2021
2022
2023
Direct energy (Scope 1)
207,350
254,332
254,156
223,008
187,599
187,467
169,625
180,136
Indirect energy (Scope 2)
2,263
640
559
297
68
12
5
21
Total
209,613
254,972
254,715
223,305
187,667
187,479
169,630
180,157
Emissions intensity ratio GRI 305-4
Tonnes of CO2 per tonne of output is a recommended intensity ratio for the oil and gas sector, as per Appendix F of the UK Government’s
Defra Environmental Reporting Guidelines (2013). Taking into account the variety of products of Nostrum – crude oil, stabilised condensate,
LPG and dry gas – the chosen intensity ratio is expressed in metric tonnes of CO2e (mtCO2e) per tonne of oil equivalent (mmboe).
Table 6 shows intensity ratios for total (Scope 1 and Scope 2) emissions in the period 2016-2023.
Table 6: Emissions intensity ratios for total GHG emissions
2016
2017
2018
2019
2020
2021
2022
2023
Production, tonnes of oil
equivalent (toe)
tCO2/toe
Production, mmboe
tCO2/mmboe
2,156,171
2,088,917
1,878,026
1,520,928
1,186,383
907,648
703,430
537,740
0.097
14.8
0.122
14.3
0.136
12.9
0.1
10.0
0.2
8.1
0.2
6.2
0.2
4.8
0.3
3.6
14,193
17,820
19,801
21,434
23,094.8
30,157
35,207
48,913
Table 7: Global GHG emissions and energy use data
Gross emissions of air pollutants into atmosphere
2019
0.0037
2020
0.0035
2021
0.0048
2022
0.0060
2023
0.0082
Current reporting year 2023
Comparison reporting year 2022
Global (excluding
UK and offshore)
169,625.0
4.9
169,629.9
No data collection
No data collection
377,037,468.4
Emissions from activities which the
Company owns or controls, including
combustion of fuel & operation of
facilities (Scope 1) tCO2e
Emissions from purchase of
electricity, heat, steam and cooling
purchased for own use (Scope 2,
location-based) tCO2e
UK and
offshore 1
No data
collection
No data
collection
Global (excluding
UK and offshore)
UK and
offshore 1
180,136.0 No data
collection
20.7 No data
collection
Total gross Scope 1 + Scope 2
emissions tCO2e
No data
collection
180,157.0 No data
collection
Energy consumption used to calculate
Scope 1 emissions: kWh
No data
collection
No data collection No data
collection
Energy consumption used to calculate
Scope 2 emissions: kWh
No data
collection
No data collection No data
collection
377,095,765.4 No data
collection
Total energy consumption used to
calculate Scope 1 and Scope 2
emissions: kWh
Intensity ratio: tCO2e
(gross Scope 1 + 2)/ mmboe
Methodology
No data
collection
No data
collection
No data
collection
Principal measures taken for the
purpose of increasing the Company’s
energy efficiency.
None
47,616.0 No data
35,207.0
collection
No data
collection
Kazakhstan methodical
guidelines. KwH calculated
based on 1.36E+15 J own
generated energy plus
purchased electricity.
None None
Kazakhstan methodical guidelines.
KwH calculated based on 1.36E+15 J
own generated energy plus purchased electricity.
Nostrum replaced oil heaters with heaters powered by gas;
installed devices at well-sites to automatically close the wells
in the case of shutdown, preventing blowdown by flaring;
and installed measuring devices in flowlines and other
devices allowing for future optimisation. Following an
energy efficiency audit, Nostrum replaced 115 fluorescent
lamps with LED lamps.
1. In Belgium, the Netherlands and the UK, the Group rents serviced office space but the owner does not collect the data required to be reported.
72 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
In-process control in canteens
Quarterly inspections are carried out in
Nostrum canteens, during which samples
of prepared meals, salads, wash water, and
water are collected for bacteriological and
chemical analysis. Additionally,
assessments of lighting, workplace
microclimate, noise levels, and ventilation
system operations are conducted. Any
instances of non-compliance are addressed
through corrective actions, such as
replacing lighting equipment, repairing
air conditioners, and installing a new
bactericidal lamp in the water
treatment system.
In-process control of labour
conditions at production facilities
To identify any discrepancies in the
workplace, assessments were conducted to
measure air quality, lighting, microclimate,
noise levels, vibrations, electromagnetic
fields, and power stations. Specialised
contractor companies with the required
permits and accreditation certificates were
responsible for conducting these necessary
measurements and investigations at
Nostrum facilities. The results of the
in-process control are reported to the
relevant regulatory authorities, and an
industrial environmental control report is
uploaded to an electronic environmental
portal.
In-process control, monitoring
and health protection
The primary focus of the Company is to
adhere to all legal regulations in the
Republic of Kazakhstan concerning
environmental protection, labour
conditions at production facilities, and
health protection. In this respect, Nostrum
conducts ongoing monitoring and control
across various areas.
Industrial environmental
monitoring (IEM) and control
IEM has been performed under the
Industrial Environmental Monitoring
Program developed based on
requirements of RoK Environmental Code
and other environmental regulatory &
procedural documents and instructions.
The program provides for environmental
emissions monitoring and environmental
medium impact monitoring of Nostrum
operations.
Ambient air sampling Industrial
emissions measurements
Ambient air quality study was made in
Beles, Sulukol, Chinarevo villages at
Chinarevskoye Field sanitary protection
zone (hereinafter “CF”), Camp-3, transfer
point at Terminal and sanitary protection
zone of Oil Loading Terminal.
Water samples were taken from
Yembulatovka River, evaporation ponds
at GTU-1/2 and GTU-3 and from sewage
treatment plant of Camp-3. Soil samples
were taken once a year at sanitary
protection zone: CF, Oil Terminal, transfer
point, Camp-3.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 73
STRATEGIC REPORT ESG review
Non-financial and Sustainability
information statement
This section of the strategic report constitutes the Company’s Non-financial and Sustainability Information Statement, produced to
comply with sections 414CA and 414CB of the Companies Act. The information is incorporated by cross reference.
Reporting requirements
Policies and standards which govern our approach
Information necessary to understand our business and
its impact, policy due diligence and outcomes
Environmental matters
Annual environmental objectives
Environment, pages 65-73
Liquidation fund contribution in accordance with
the PSA
Communities and social review, pages 64
Employees
Group Code of Conduct and Human Rights
Our people, pages 60-63
Whistleblowing policy
Health and Safety policy
Health and safety, pages 55-59
Total Recordable Injury Frequency, page 55
Respect for human rights
Modern Slavery Statement
Our people, pages 60-63
Equality and Diversity Policy
Social matters
Sponsorship of community events
Communities and social review, pages 64
Anti-corruption and anti-bribery
Anti-corruption and bribery policy
Communities and social review, pages 64
Anti-facilitation of tax evasion policy
Our Governance Framework, pages 90-92
Payments to governments
Description of principal risks
Principal risks and uncertainties, pages 34-38
Description of the business model Business model, pages 10-11
Non-financial key performance
indicators
Key performance indicators, pages 22-23
Our strategic priorities, pages 18-19
TCFD Recommendation
TCFD Recommended Disclosure
Where reported
Governance
Disclose the organisation’s governance
around climate related risks and
opportunities.
a)
Describe the board’s oversight of climate-related risks and opportunities.
• Page 75
b)
Describe management’s role in assessing and managing climate-related
risks and opportunities.
• Page 76
Strategy
Disclose the actual and potential
impacts of climate-related risks and
opportunities on the organisation’s
business, strategy, and financial
planning where such information
is material.
a)
b)
c)
Describe the climate-related risks and opportunities the organisation has
identified over the short, medium, and long term.
Describe the impact of climate-related risks and opportunities on the
organisation’s business, strategy, and financial planning.
Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario.
• Pages 77
• Pages 78
• Pages 79
Risk management
Disclose how the organisation
identifies, assesses, and manages
climate-related risks.
a)
Describe the organisation’s processes for identifying and assessing
climate-related risks.
• Page 80
b) Describe the organisation’s processes for managing climate-related risks.
• Page 80
c)
Describe how processes for identifying, assessing, and managing climate-
related risks are integrated into the organisation’s overall risk management.
• Page 80
Metrics and targets
Disclose the metrics and targets used to
assess and manage relevant climate-
related risks and opportunities where
such information is material.
a)
b)
c)
Disclose the metrics used by the organisation to assess climate-related risks
and opportunities in line with risk management process.
• Page 81
Disclose Scope 1, Scope 2 and if appropriate, Scope 3 GHG emissions, and
the related risks.
• Page 81
Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
• Page 81
74 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Climate-related Financial Disclosures
GRI 2-14, 201-2
Climate-related
Financial Disclosures
We continued our journey
of improving our disclosures
and reporting in order to
adhere as much as possible
to TCFD’s recommendations,
taking into account
Nostrum’s operations
and strategies.
Governance
TCFD recommendation:
Disclose the organisation’s
governance around climate
related risks and opportunities.
Read more about our strategy
on pages 18-19.
a) Describe the board’s oversight
of climate-related risks and
opportunities.
Following are some examples where the
Board and its committees considered
climate-related issues in 2023 and 2024
to date:
Board of Directors
The Board and its committees, where
appropriate, have oversight of climate-
related matters, which include climate risks
and opportunities. Material issues and
principal risks, including climate change
indicators, are reviewed by the Board and
committees.
Monitoring and performing management
The Board recognises that there may be
potential financial implications in the future
from changes in legislation and regulations
intended to address climate change risk. In
relation to these matters the Board also:
• Reviews material issues and principal
risks, including climate change indicators;
• Sets general policy related to climate
risks and opportunities, identifies where
further actions are required and
delegates authorities accordingly;
• Approves material issues and principal
risks, including climate change indicators
and progress against those KPIs monitored.
See pages 18-19 on Company KPIs and
pages 103 and 108, where CEO KPIs
include GHG emissions related targets.
TCFD Statement
We are working towards making our
climate-related financial disclosures fully
compliant with the TCFD Recommendations
and Recommended Disclosures and hence
compliant with FCA Listing Rule 9.8.6R (8)
and UK Climate-Related Financial
Disclosures (CFD).
We have made below disclosures against
each TCFD Recommendation and
Recommended Disclosure – noting where
the Company is in full or partial compliance
or where further work is planned to be
undertaken to report in the 2024 Annual
Report & Accounts.
Risk Management
ESG matters are integrated in each
applicable area covered by the Group’s
systems of risk management and internal
controls, and the Board recognises their
significance and importance. Further
details on the identified ESG risks and
related responses are disclosed within
“Principal risks and uncertainties” section
on pages 34-38.
The Management is responsible for ensuring
that systems of risk management and
internal control are in place to effectively
manage and monitor climate-related risks
and other ESG matters. Periodic updates are
provided to the Board on such risks and
relevant mitigating actions.
Capital or operating expenditure
Capital and operating expenditures, which
are relevant to mitigating climate-related
risks and other ESG matters, are budgeted
and given highest priority in execution.
Audit Committee
Following areas of the Audit Committee
responsibilities are relevant for the
climate-related matters:
• Oversight of management’s process for
identifying ESG risks and internal controls
processes to ensure the accuracy and
completeness of ESG information;
• Monitoring of the performance against
agreed and defined KPIs in respect
of the Group’s ESG financial reporting
disclosures and seeking independent
assurance on behalf of the Board,
where appropriate;
• Review of the Company’s disclosures in
the annual report in relation to the TCFD
Disclosures and climate-related
emerging risks.
Read more on pages 93-98
When making assessments and preparing
disclosures we have considered whether
particular issues and related information
may influence the economic decisions of
the stakeholders. Such approach is in line
with guidance and recommendations
provided by TCFD in relation to materiality
of information. Furthermore, the process of
assessment of risks and their potential
financial impact involved use judgements
and estimates, which we believe are
consistent with the TCFD Recommendations
and Recommended Disclosures.
Strategy Committee
Emerging risks are identified, assessed and
monitored at the HSE and ESG Committees
led by CEO, and further escalated by CEO
to the Strategy Committee of the Board,
where necessary.
The Strategy Committee is responsible for
advising the Board on short-term, medium-
term and long-term strategic decisions of
the Company (horizons defined on page
78), including following activities relevant
for addressing climate-related risk and
other ESG matters:
• Supporting the Board and Senior
Management in formulating the overall
strategy for the Company, with particular
emphasis on horizon scanning, priorities,
activities and outcomes.
• Considering reports on overall
performance in respect of the achievement
of the objectives and outcomes contained
within the Corporate Strategy.
• Reviewing determined KPIs to assess
performance with respect to the Group’s
strategy.
Read more on pages page 87
Remuneration Committee
Annual KPIs relating to climate change and
emissions targets are approved by
reviewed by the Remuneration Committee
and upon its recommendation approved by
the Board. The progress against those KPIs
monitored and reported to the
Remuneration Committee and the Board.
See pages 101-108 for more details.
Read more on pages 100-115
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 75
STRATEGIC REPORT Climate-related Financial Disclosures
Governance continued
Management of climate-related matters – organisational structure
Board of Directors of
Nostrum Oil & Gas
Strategy
Committee
Remuneration
Committee
Audit
Committee
Nomination &
Governance
Committee
Chief Executive
Officer
ESG Committee
Health, Safety,
Environment
Committee
Senior
Management
Functional
leaders & staff
b) Describe management’s role in
assessing and managing climate-
related risks and opportunities.
Since the completion of the bond
restructuring in early 2023, the newly
formed HSE and ESG committees deal with
various matters including among others
climate-change related issues and
execution of ESG-related targets and
projects. Both committees are sponsored
and chaired by the Chief Executive Officer,
with meetings held prior to each Board
meeting.
The Chief Executive Officer reports at the
Board meetings on HSE and ESG matters
including performance against climate-
change related KPIs. The Chief Operating
Officer is responsible for day-to-day
operations, including the identification
and evaluation of climate-related risks
and opportunities. The Group Head of
QHSE is responsible for the day-to-day
management of HSE matters including
climate-change related risks. Both the Chief
Operating Officer and Group Head of
QHSE report directly to the Chief
Executive Officer.
The Chief Executive Officer, Chief
Operating Officer and Group Head
of QHSE together with appropriate
operational staff meet at least four times
a year at HSE Committee meetings. The
committee monitors all HSE matters
including those relating to climate-change,
monitoring and reducing emissions,
progress against KPIs, water and waste
management, compliance with RoK
statutory emissions, the climate-related
impact of any significant capex or operating
expenditure and identifying and agreeing
on the course of action on climate-related
initiatives, including energy reduction/
transition, emission management and
prevention of unnecessary flaring.
The HSE Committee also assesses
preparedness and ensures focus in respect
of statutory reporting requirements and
changing legislative environments
and investor requirements in the UK,
Kazakhstan and internationally. Climate-
related matters discussed at the HSE
Committee drive climate related KPIs
proposed by management to the Board
(see pages 103 and 108 for more details).
The Company also considered the
climate-related matters in the process of
due diligence prior to acquisition of the
Stepnoy Leopard field, and given the
limited prior activities on these fields,
there was not sufficient basis to make
assesements material climate impact. After
the acquisition, the entity and the fields are
integrated into the Group systems of
controls and procedures on all matters,
including climate-related disclosures.
76 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Strategy
TCFD recommendation:
Disclose the actual and
potential impacts of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning
where such information is material.
Read more about our strategy
on pages 18-19.
a) Describe the climate-related
risks and opportunities the
organisation has identified over
the short, medium, and long term.
The Company’s principal risks and
uncertainties as described through the risk
management process as described on
pages 32-38. In the context of those
key risks, the following climate-related
transition and physical risks as well as
opportunities were identified as relevant
to Nostrum. Given that there were no
significant changes in the Company’s
principal risks and uncertainties, the
climate-related risks have also remained
largely unchanged compared to previous
reporting period.
Policy and legal risks which Nostrum is
facing are similar to other players in the oil
& gas industry:
• Changes in state regulations may lead to
increased costs for the business through
carbon taxes, punitive flaring fines or
outright bans, as well as potential
additional costs for litigations relating
to climate change.
• New and evolving RoK reporting
obligations may lead to higher
compliance costs.
• Risks of early asset retirement due to
certain policy changes, such as emissions
targets making it impossible to continue
operations, or carbon pricing making
operations commercially unviable.
We believe these risks are relatively low in
the short-term but become more material
over longer horizon as the global
movement towards net zero strengthens.
In addition, according to our materiality
assessments under ESG umbrella, the GHG
emissions and gas flaring were identified as
significant climate-related topics. These
areas may pose potential risks to Nostrum’s
business and stakeholders due to penalties
for permit violations and non-compliance
with environmental legislation.
Technology risks are considered relevant in
the medium and long-term. As global and
jurisdictional legislation evolves, we may
need to allocate capital into emissions
reduction investments such as carbon
capture and storage, which may be
non-value accretive, i.e. do not provide
direct revenue, and therefore may impact
the medium-long term value of the
Company.
Market risks for the Company are mostly
reflected in reduction in global demand for
hydrocarbon products and volatility of
product prices, which may directly impact
our revenues, across all time horizons. In
addition, increase in cost of raw materials
due to climate-related supply disruptions
may not only increase the cost base, but
also cause delays and disrupt operations,
which would lead to lost production and
revenues. On the opposite, demand and
product prices may remain at relatively
higher than expected levels in the short
and medium term, which may create
opportunities for the Company to generate
higher returns.
Reputational risks include risks of
stakeholder concerns and disengagement
as a result of the other climate-related risks,
and also increasing difficulty in accessing
capital markets for future growth
opportunities. We believe these risks
are less of a concern in the short-term since
the Company has longstanding relations
with its key shareholders and noteholders.
However, these may become bigger
risk in medium and long term.
Physical risks which may affect the
Company and its operations include acute
risks such as floods from local rivers and
chronic risks such as severe rain and/or
snow conditions.
As climate change continues on the path it
is today, we believe these severe weather
events may occur more regularly and
during unexpected periods of time
and may further impact the business
operationally and financially. Today, we
operate successfully in the middle of winter
where temperatures on the ground can
drop to -30C. Although, Kazakhstan
has a sharply continental climate and
large diurnal and annual temperature
fluctuations, such temperature changes are
usually gradual. However, if temperatures
were to change sharply within short period
of time due to climate change, this could
impact operations negatively, e.g. by
reducing equipment productivity due to
overheating, increasing fire risk, or on the
opposite causing thermal expansion of
pipelines and systems due sudden extreme
temperatures.
Seismic activity in Western Kazakhstan is
relatively low, according to the Institute of
Geophysical Research of the Republic of
Kazakhstan and global seismic bulletins.
Hence, risks of earthquakes affecting our
business are considered low.
Further, flood events with overflowing
riverbanks can severely impact our ability to
transport LPG to the market and hence
reduce our revenues.
Opportunities exist for the Company
through resource efficiency and energy
source. For the past several years the
Company has been using own gas to
generate electric power and using it for
own operations. The Company is planning
to continue this practice in the medium
and longer-term to be as resourceful as
possible. Financially, this saves us money by
not purchasing electricity from the grid. As
opportunities come up, the Company may
look into investment in new technologies to
become more energy efficient and reduce
its GHG emissions.
From a resource efficiency perspective the
Company looks into reduced water usage
and consumption which can lead to
reduced operating costs. Also making our
offices more energy efficient has been
identified as another initiative for the
medium-to-long term, including
improvements in the heating and
lighting systems.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 77
STRATEGIC REPORT Climate-related Financial Disclosure
Strategy continued
The Board and Senior Management
continuously monitor planning and
decision-making processes over
short-term, medium-term and long-
term horizons, which also cover relevant
climate-related risks and opportunities
as described below.
Short term: three-year period to the end
of 2026 over which the management
and the Board monitor the Company’s
liquidity and viability. The Company has
a detailed financial plan which is actively
managed and adapted according to
changes in external circumstances. The
climate-related risks are deemed to
affect the Company in the short-term
but are not as prevalent as they would
be in the medium and long term.
Medium term: eight-year period to the
end of 2031, which covers the full term
of the PSA and used in relevant valuation
models. Climate-related risks are
factored into these models, and
scenario analysis are performed using
various hydrocarbon prices and off-take
demand scenarios to support the Board
in decision-making for field investment
proposals in line with the Group’s
strategy.
Long term: period covering beyond
2031. This is defined by opportunities
identified in line with the Group’s
strategic initiatives, which are mostly
affected by climate-related risks. These
include risks associated with access to
financial and capital markets as well as
the ability obtain insurance, which may
leave the Company exposed to extreme
negative events. These other risks are
further described below.
All transition risks are provided in equal
weighting in our future business, strategy
and financial planning. For physical risks,
while important from a governance
perspective, we apply a slightly lower
weighting in our planning. Whilst present,
we deem the financial and operational
impact to be lower as we currently operate
successfully in extreme weather today and
believe we will do so going forward.
We take a conservative approach in our
forward planning and therefore do not
factor in opportunities that may arise in
the short, medium or long-term through
climate change.
As described in the Governance section,
we have a robust climate-change
governance matrix in place to consider
these risks widely. We have now devoted
more resources into this governance matrix
(including reporting) and these feature in
our future strategic and financial planning.
The matrix looks at the strength of the risks
and opportunities identified in section
a) above across the short, medium and
long-term and assesses which of those
risks has a direct financial impact.
In our CDP Climate Change submission for
2023, we estimated the financial impact of
several of the transition and physical risks
outlined above. Our ambition is to upgrade
the climate disclosure area and CDP rating
for our Climate Change response and Water.
Based on the results of the disclosure of data
on the use and conservation of water
resources the CDP climate rating has been
improved to “B-” in 2022 from “C” in 2021,
which is in line with the global industry
indicator, and it was maintained at this level
in 2023.
b) Describe the impact of climate-
related risks and opportunities on
the organisation’s businesses,
strategy, and financial planning.
We acknowledge that the transition to a
lower carbon economy presents both risks
and opportunities for Nostrum. As
described above, the impact on our
short-term strategy and financial planning
remains minimal, but we have in place the
necessary flexibility to adapt as and when
we see the risks evolve. In respect of
medium term and long-term financial
planning, we are cognisant of the climate-
related risks and our ability to execute
various projects. Hurdle rates have
increased on various investment proposals
with carbon intensity, stressed hydrocarbon
price scenarios and energy demand
scenarios are factored into decision papers.
With respect to physical risks, we have
factored this into our strategic planning
through extended and more frequent
maintenance periods. This reflects a period
of downtime during which operations and
revenues cease.
We deem all transition risks (policy and
legal, market, technological and reputation)
to be material for the business in our
strategic and financial planning. The
transition risks, as outlined in (a) above,
impact:
i. reduced demand and lower pricing for
our final products – resulting in lower
future revenues,
ii. higher supply and material costs in our
supply chain as suppliers shift away from
servicing the oil and gas industry leaving
a small number of viable options,
iii. high investment spend relating to
climate risk mitigation activities through
increased spend on climate-related
research and development and
operationally through increased
downtime due to extreme weather
events.
78 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
c) Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower scenario
For the current year analysis and reporting
on climate risk we studied various scenarios
suggested by different international
organisations and agencies and decided
to refer Net Zero Emission by 2050 Scenario
(“NZE Scenario”) developed by the
International Energy Agency, and also
took into account Kazakhstan’s Strategy on
Achieving Carbon Neutrality by 2060.
Nostrum considered the commitment of
the government of the UK (where Nostrum
is headquartered) to a net zero economy,
but determined that such commitment was
not relevant, because the overwhelming
majority of Nostrum’s emissions do not
count towards UK emissions.
The Net Zero Emissions by 2050 Scenario is
normative, in that it is designed to achieve
specific outcomes – net zero emissions from
the energy sector by 2050 without offsets
from other sectors, an emissions trajectory
consistent with keeping the temperature
rise in 2100 below 1.5 °C (with at least a
50% probability) with limited overshoot,
universal access to modern energy services
by 2030 and major improvements in
air quality – and shows a pathway to
reach them.
As such, NZE Scenario outlines a course
for attaining net zero emissions from the
worldwide energy system by 2050, and
assumes a transition based on three pivotal
shifts across the global energy landscape:
extensive electrification, unparalleled
enhancements in energy intensity,
and widespread international policy
collaboration. In this scenario, the global
economy shifts away from a predominantly
fossil fuel-powered model to one primarily
fuelled by renewable energy. Concurrently,
the reduction in demand for oil and gas
exerts downward pressure on prices.
As for Kazakhstan Strategy on Achieving
Carbon Neutrality by 2060, it implies
increase of the share of renewable energy
sources in the country’s total energy
balance to 15% by 2030 and reduction
of GHG emissions by 15% by December
2030, compared with 1990.
Taking these into account the company
used the base-case scenario as described
below, and a severe but plausible scenario
for the purpose of testing its resilience
across short-term and medium-term
horizons:
1. Base-case scenario (high carbon
climate scenario – more than 4°C) –
business development that implies a
gradual attainment of carbon neutrality,
taking into account a moderate pace
of economic decarbonisation. This
case is considered consistent with the
base-case scenario used in the viability
assessment (see pages 39-40).
2. Severe but plausible development
scenario whereby extreme changes
happen in global economy and drastic
measures are implemented towards
Kazakhstan’s achievement of NZE (very
low carbon climate scenario – less
than 1.5°C).
The base-case scenario involves
implementing energy efficiency measures
to achieve the goal of reducing greenhouse
gas emissions each year by 5% of actual
emissions compared to the previous year.
This scenario includes a list of measures for
energy efficiency improvement, among
which are the implementation of projects
such as assets digitalisation and Automated
Reporting System implementation,
automated emission monitoring system at
emission sources, installation of automated
flowmeter measurement on flare-lines on
the Oil Treatment Unit, Water Production &
Injection System planning, Water Treatment
& Injection System upgrade, replacement
of existing light sources with more efficient
ones and trees planting.
For the purpose of severe but plausible
development scenario aimed at stress-
testing the company’s resilience we used
two major assumptions:
1. The first assumption centres around
a downtrend in oil prices, which are
projected under NZE Scenario to drop
to US$42 per barrel by 2030 and further
decrease thereafter, reaching US$25
per barrel by 2050.
2. The second assumption revolves
around carbon prices, which were
taken also from the NZE Scenario for
emerging market and developing
economies (without net zero emissions
pledges), whereby carbon price are
forecast at US$25 per tonne of CO2 by
2030, US$85 per tonne of CO2 by 2040
and US$180 per tonne of CO2 by 2050.
We have examined various forecasts of
carbon prices to stress-test our strategy.
While analysing these forecasts, our focus
has predominantly been on the NZE
Scenario. Taking into account Kazakhstan’s
strategy aimed at achieving carbon
neutrality goals, the most relevant
reference point under NZE Scenario would
be carbon price forecasts for emerging
market and developing economies with
net zero emissions pledges, under which,
carbon prices are projected to rise
significantly by 2030, reaching an average
of US$90 per tonne of CO2. However,
according to the World Bank, the current
carbon price in Kazakhstan is notably low,
with projections indicating a carbon price
of US$20 per tonne of CO2 by 2030 would
be necessary to achieve just over half of the
abatement target.
Given the multitude of predictions
regarding carbon prices, ranging from very
high to relatively low, we have decided to
apply the middle point in our modelling
and settled on the carbon price forecasts
under the NZE Scenario for emerging
markets and developing economies
without net zero emissions pledges.
These assumptions were applied to the
three-year financial model to evaluate the
resilience of Nostrum’s strategy amidst the
challenges and opportunities posed by
climate change in the short-term pursuant
to the NZE Scenario and the Kazakhstan
Strategy on Achieving Carbon Neutrality by
2060. Building upon this evaluation, we also
refer to the Viability Statement on pages
39-40 of this report, where we consider the
resilience of the company to various
principal risks and uncertainties.
Stressing our short-term financial
projections for these high-level
conservative policy measure assumptions
demonstrates that the Company in the
short-term is resilient considering a 1.5°C
climate-related scenario. Furthermore, it
is our view that the Company has a solid
financial base and sufficient flexibility in
its business plan to be able to adjust
adequately to extreme climate-related
impacts.
Our strategy is validated annually by the
Board of Directors to ensure it remains
relevant and resilient. Please refer to the
Governance process for further details.
The strategy will be adjusted if there are
significant changes in the wider global
environment.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 79
STRATEGIC REPORT Climate-related Financial Disclosure
Risk Management
TCFD recommendation:
Disclose how the organisation
identifies, assesses, and
manages climate-related risks.
Read more about our risk management
on pages 32-33.
a) Describe the organisation’s
processes for identifying and
assessing climate-related risks;
b) Describe the organisation’s
processes for managing climate-
related risks;
c) Describe how processes
for identifying, assessing,
and managing climate-related
risks are integrated into the
organisation’s overall risk
management.
Nostrum has a robust governance structure
through which climate-related risks are
identified and managed. Specifically, the
ESG and HSE Committees are the conduit
through which climate-related risk
management is enacted. The ESG and
HSE Committees operate under the
principle of 5 pillars:
i. HSE leadership;
ii. rigorous incident investigation;
iii. process safety and asset integrity;
iv. contractor HSE management; and
v. environment and climate change
including a commitment to reduce
GHG emissions.
The fifth pillar is an integral part of our
climate-related risk identification,
assessment, and management process.
Both classifications of climate-related risks
(transition risks and physical risks) are
considered as part of the process.
The ESG and HSE Committees oversee the
design and implementation of systems of
climate-related risk management and
internal controls and manages and reports
on risks.
The Group Head of QHSE supports the
Chief Executive Officer in his oversight and
monitoring role and performs management
and reporting on the risks.
The QHSE department is responsible for
identifying climate-related risks which
include potential effects on operations at
asset level, performance at Group level
and developments at regional level from
transition to lower carbon economy or
extreme weather events.
The processes described above are
embedded into our overall Group Risk
Management framework and form an
integral part of Nostrum’s risk management
and internal controls system. We include
“climate change risks” as a principal risk and
uncertainty on our Company risk register
(see page 37) thus allowing the ESG and
HSE Committees to manage any identified
risks. This risk covers both physical and
transitional climate-related risks and is
reviewed annually by the Nostrum Board
of Directors.
The Company endeavors to constantly
improve its systems of risk management
and internal controls. However, considering
relatively short period of time since the
implementation of the above-mentioned
committees and relevant policies and
procedures in early 2023, the Company
does not report any further material
updates on these matters in this report.
80 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Metrics and Targets
TCFD recommendation:
Disclose the metrics and targets
used to assess and manage
relevant climate-related risks
and opportunities where such
information is material.
Read more about our risk management
on pages 32-33.
a) Disclose the metrics used by
the organisation to assess climate-
related risks and opportunities in
line with its strategy and risk
management process.
Nostrum uses several metrics across the
transition and physical risks spectrum to
assess climate-related risks. For climate
change our key risk metric is focusing on
carbon emissions, air quality and flaring
frequency. All of these are measured,
managed and reported to the Board with a
specific KPI around reduction in GHG (see
(c) below). Beyond KPIs we have identified
certain activities and projects to help
reduce emissions that have included but
are not limited to reducing vehicles at head
office and encouraging the sharing of
vehicles, eliminating taking private vehicles
to the field by making buses mandatory,
promoting work from home and electricity
replacing diesel for heaters, boilers and
other devices.
Management of climate change-related
risks and opportunities is incorporated
into the overall remuneration of the
senior management. Please refer to
the Remuneration Committee Report
for details on climate change KPIs.
Moving forwards, the Company intends
to include carbon pricing into its
economic evaluation of future investment
opportunities both within Chinarevskoye
and outside. Following a benchmarking
analysis of our peers, majors in the sector
and research on regional plans for carbon
pricing, we will incorporate an appropriate
carbon price (cost to the business) in our
investment decisions – implicitly increasing
the hurdle rate for project approvals. For
more information, please see pages 66-72.
b) Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG) emissions,
and the related risks.
c) Describe the targets used by the
organisation to manage climate-
related risks and opportunities and
performance against targets.
In the Environment (GHG Emissions Results)
section of this report, we disclose our
Scope 1 and Scope 2 GHG emissions.
Scope 1 and Scope 2 GHG emissions have
been reported on an annual basis in our
Annual Report and Company website. The
level of reporting has expanded in line with
our commitment to being transparent to
our stakeholders.
Furthermore, GHG emissions reporting is a
State legislative requirement as required by
the Republic of Kazakhstan (the country is
in alignment with the GHG Protocol).
The Company in 2023, expanded its
disclosure on Scope 3 and prepared an
analysis and calculations for Scope 3 GHG
emissions for three categories. In total
Scope 3 emissions amounted to 1,869 tons
of CO2 (‘Waste generated in operations’ –
289 tons of CO2, ‘Capital goods’ – 150 tons
of CO2 and Goods and Services’ – 1,430
tons of CO2). In 2022 Scope 3 emissions
amounted to 352 tons of CO2 for one
category (‘Waste generated in operations’).
Detailed results of Scope 3 calculations will
be covered in CDP submission for 2023.
In 2023 the Company reported total Scope
1 emissions in the amount of 180,136 tCO2e
and total Scope 2 emissions of 21 tCO2e.
For more information, please see
pages 65-72 in the Strategic Report.
With focus on reduction of emissions, it
is our plan to continue to work with our
contractors to identify energy efficient
opportunities in their supply chain and
assist them to implement sustainable
initiatives. Internal focus is also placed on
reducing emissions from business and
commuting travel.
Nostrum is making efforts to not exceed the
quota for greenhouse gas emissions set by
Kazakhstan and sets this target as a KPI in
the annual HSE plan in order to reduce the
actual value of greenhouse gas emissions
by 5% compared to the previous year. While
our approved quota of GHG emissions for
2023 was 206,650 tonnes of CO2, Nostrum
set a goal of 5% year-on-year reduction
of actual CO2 in 2023. The actual CO2
emissions in 2023 were 176,277 tonnes and
our actual GHG emissions in CO2 equivalent
were 180,157 tonnes. The increase in
emissions is explained is due to the re-start
of GTU-3 during 2023 and, as a result, a
higher fuel consumption requirement. For
more information, please see pages 70-72.
In 2023 we significantly improved our ESG
Risk Rating from the international agency
Sustainalytics. Our current ESG Risk Rating is
30.1 which places the Company on the very
low end of the “High Risk” category, and
only 0.1 point separate us from the “Medium
Risk” category on the ESG Risk Rating scale.
Nostrum has scored amongst the top 20
companies within the Oil & Gas Exploration
and Production industry assessed by
Sustainalytics. In 2024 Nostrum plans to
strengthen its ESG strategy around gas and
cleaner energy mix to further improve the
rating. See page 54 for more details.
We accept that the Group is on a journey
towards net zero and will report through
interim targets in forthcoming years.
We intend to be part of the solution for
Kazakhstan’s strategy to transition to
cleaner energy and achieve carbon
neutrality by 2060.
This strategic report is approved by
the Board.
Arfan Khan
Chief Executive Officer
18 April 2024
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 81
STRATEGIC REPORT
Introduction to corporate governance
Introduction to corporate governance
Section 1: Board leadership
and company purpose
A successful company is led by an effective
and entrepreneurial Board, whose role is to
promote the long-term sustainable success
of the company, generating value for
shareholders and contributing to wider
society. See pages 84-85.
The Board establishes the company’s
purpose, values and strategy, and satisfies
itself that these and its culture are aligned.
All directors must act with integrity, lead by
example and promote the desired culture.
See pages 60-63, 18-19.
The Board ensures that the necessary
resources are in place for the company
to meet its objectives and measures
performance against them. The Board also
establishes a framework of prudent and
effective controls, which enable risk to be
assessed and managed. See pages 32-33.
In order for the company to meet its
responsibilities to shareholders and
stakeholders, the Board ensures effective
engagement with, and encourages
participation from, these parties.
See pages 20-21 and 86.
The Board ensures that workforce policies
and practices are consistent with the
company’s values and support its long-term
sustainable success. The workforce is able
to raise any matters of concern with the
Board. See pages 60-63.
Section 2: Division of
responsibilities
The chair leads the Board and is
responsible for its overall effectiveness
in directing the company. The chair
demonstrates objective judgement and
promotes a culture of openness and
debate. In addition, the chair facilitates
constructive Board relations and the
effective contribution of all non- executive
directors, and ensures that directors receive
accurate, timely and clear information.
See pages 90-92.
Section 3: Composition,
succession and evaluation
Appointments to the Board are subject
to a formal, rigorous and transparent
procedure, and an effective succession
plan should be maintained for Board and
senior management. Both appointments
and succession plans should be based on
merit and objective criteria and, within this
context, should promote diversity of
gender, social and ethnic backgrounds,
cognitive and personal strengths.
See pages 91-92.
The Board and its committees have a
combination of skills, experience and
knowledge. Consideration should be given
to the length of service of the Board as a
whole and membership regularly
refreshed. See pages 84-85 and
committee reports.
Annual evaluation of the Board should
consider its composition, diversity and how
effectively members work together to
achieve objectives. Individual evaluation
should demonstrate whether each director
continues to contribute effectively.
See page 86.
The Board includes an appropriate
combination of executive and non-
executive (and, in particular, independent
non-executive) directors, such that no one
individual or small group of individuals
dominates the Board’s decision-making.
There is a clear division of responsibilities
between the leadership of the Board and
the executive leadership of the company’s
business. See pages 90-92.
Non-executive directors should have
sufficient time to meet their Board
responsibilities. They provide constructive
challenge, strategic guidance, offer
specialist advice and hold management
to account. See page 90-92.
The Board, supported by the company
secretary, ensures that the company has the
policies, processes, information, time and
resources it needs in order to function
effectively and efficiently. See pages 90-92.
Compliance with the Code
The UK Corporate Governance Code issued by the Financial Reporting Council in July 2018 (the “Code”) sets out the governance
principles and provisions that applied to the Company until 31 May 2022, when the Company's listing category was transferred
from “Premium Listing (commercial company)” to “Standard Listing (shares)”. A copy of the Code is available from the Financial
Reporting Council’s website at www.frc.org.uk. The aim of the corporate governance report is to demonstrate how the principles
of the Code have been considered and applied by the Company. The UK Financial Reporting Council promotes high-quality
corporate governance and reporting through the Code with which all companies with a premium listing on the London Stock
Exchange are required to either comply in full, or explain why, and to what extent, they do not comply. The Company intends to
continue to comply with the Code or explain any non-compliance as it would if it were still premium listed. This statement should be
read in conjunction with the Corporate Governance section of this report as a whole. The headings on this page and the following
page correspond to the headings in the Code.
82 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Section 4: Audit, risk and
internal control
The Board should establish formal and
transparent policies and procedures
to ensure the independence and
effectiveness of internal and external audit
functions and satisfy itself on the integrity
of financial and narrative statements.
See pages 93-98.
The Board presents a fair, balanced and
understandable assessment of the
company’s position and prospects.
See page 120.
The Board establishes procedures to
manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks the company is
willing to take in order to achieve its
long-term objectives. See pages 32-33.
Section 5: Remuneration
Remuneration policies and practices are
designed to support strategy and promote
long-term sustainable success. Executive
remuneration is aligned to company
purpose and values, and clearly linked to
the successful delivery of the company’s
long-term strategy. See pages 100-115.
A formal and transparent procedure
for developing policy on executive
remuneration and determining director
and senior management remuneration
should be established. No director
is involved in deciding their own
remuneration outcome. See pages 100-115.
Directors exercise independent judgement
and discretion when authorising
remuneration outcomes, taking account of
company and individual performance, and
wider circumstances. See pages 100-115.
Statement of compliance
Nostrum fully complied throughout 2023
with the provisions of the 2018 version of
the UK Corporate Governance Code
except in the following respects:
Provision 12
The Board has not to date appointed one of
the independent non-executive directors to
act as the senior independent director, to
provide a sounding board for the chair and
serve as an intermediary for the other
directors and shareholders. The Board
believes that there are currently effective
arrangements in place for communication
between the chair and other directors and
shareholders without such appointment.
Provision 21
As all members of the Board (with the
exception of the Company’s CEO Arfan
Khan) were appointed in February 2023, no
formal evaluation of the Board or any of its
committees took place in 2023.
Provision 36
The Company’s LTIP has a total holding and
vesting period of no more than three years
and therefore does not comply with the
requirements of Code Provision 36, which
requires share awards to be released for
sale on a phased basis and be subject to a
total vesting and holding period of five
years or more. As explained in the press
release released by the Company on
28 August 2019, a copy of which has also
been published on the Public Register
maintained by the Investment Association,
the Board and the Remuneration
Committee believe that the current
provisions of the LTIP relating to the
performance period and vesting period are
appropriate and aligned with the interests
of shareholders, so that modifying such
provisions of the LTIP at this time would not
be the right course of action. The full text of
the announcement is available to read on
the Company’s website.
The Board members’ visit of Chinarevskoye field and facilities in November 2023.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 83
CORPORATE GOVERNANCE Board of Directors
Board of Directors GRI 2-9
NS
N
A
R
A
RN
Stephen Whyte
Chairman and Non-Executive Director
Chris Cox
Independent Non-Executive Director
Fiona Paulus
Independent Non-Executive Director
Date of appointment: 14 February 2023
Date of appointment: 14 February 2023
Date of appointment: 14 February 2023
Other current appointments:
• Independent Non-Executive Director
Other current appointments:
• Director and the interim CEO of
at Beacon Energy.
Capricorn Energy PLC.
Skills and experience:
• 35 years of total industry experience at
Skills and experience:
• 40 years of experience in the global oil
Shell, BG and Galp.
and gas upstream sector.
• Seasoned FTSE and AIM Chairman and
Non-Executive Director in the global
energy sector with direct experience in
Kazakhstan.
• Chairman at Genel Energy (2017-2019).
• Chairman at Sound Energy.
• Non-Executive Director at Echo Energy.
• Non-Executive Director at JSC National
Company KazMunaiGas.
• Having held various senior roles with BG
Group, Amerada Hess, and Chevron
throughout his career, Chris served most
recently as CEO of Spirit Energy and
Managing Director of Centrica Plc.
• Advisory experience includes serving
as Non-Executive Chairman of Kellas
Midstream from 2015 to 2020.
Other current appointments:
• Senior Adviser in the Metals & Mining
business at Gleacher Shacklock LLP.
• Non-Executive Director at Interpipe
Group and JSW Steel Limited.
Skills and experience:
• 37 years of investment banking
experience.
• She has held senior roles at leading
international investment banks. These
include Head of International Investment
Banking at CIBC, EMEA Head of Private
Equity & Infrastructure Funds at Royal
Bank of Scotland, Global Head of Energy
and Resources at ABN AMRO Bank, and
various senior roles at Societe Generale,
JPMorgan & Citigroup in the UK, Europe,
Australia, and Latin America.
Board committees
A Audit Committee
N Nomination and Governance
Committee
S Strategy Committee
R Remuneration Committee
Chairman/Chairwoman
Former members of the Board of Directors
Atul Gupta
Executive Chairman
Sir Christopher Codrington, Bt.
Independent Non-Executive Director
Committee memberships as stated in the
relevant Committee report
Term of service: from 19 May 2014
to 14 February 2023
Term of service: from 19 May 2014
to 14 February 2023
Skills and experience:
• Chief Executive Officer (2006-2008)
and Chief Operating Officer (1999-
2006) of Burren Energy.
• 40 years’ broad experience in
international upstream oil and gas
businesses: Charterhouse Petroleum,
Petrofina, Monument and Burren
Energy.
Other current appointments: None
Skills and experience:
• More than 30 years’ executive board and
senior management experience in the oil
and gas sector, and the hospitality and
other industries.
• Spent eight years living in Houston, Texas,
developing prospects in various oil and
gas fields for COG, Inc., Texas General
Resources, Inc., TexBrit Corporation, Inc.
and Whitehall Energy Limited.
84 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
R
A
N
N R
S
S
Chris Hopkinson
Independent Non-Executive Director
Martin Gudgeon
Non-Executive Warrant Director
Arfan Khan
Chief Executive Officer
Date of appointment: 14 February 2023
Date of appointment: 14 February 2023
Date of appointment: 26 January 2021
Other current appointments:
• Non-executive Chairman of Enwell Energy.
Other current appointments:
• Partner and Chairman of the EMEA & Asia
• Interim Executive Chairman of
IGas Energy.
• Founder of Astra Resources Management
and Antelopus Energy.
Skills and experience:
• 35 years of experience in the global oil
Restructuring and Special Situations
Group (“RSSG”) at PJT Partners.
• Member of the firm’s RSSG Operating
Committee.
Other current appointments: None
Skills and experience:
• 35 years of total industry experience.
• From January 2020 until joining the
Company, President of Stratum Energy
Group (Romania).
Skills and experience:
• 35 years of industry experience.
• From April 2014 to December 2019, COO
of Amni International Petroleum (Nigeria).
and gas and energy sectors.
• Senior Managing Director at Blackstone
• From April 2012 to March 2014, Petroleum
• Technical and management roles with
for eight years.
Yukos and Lukoil Overseas.
• Chief Executive and Head of Restructuring
• Chief Executive Officer of Imperial
at Close Brothers Corporate Finance.
Energy Group.
• Non-Executive Director at Genel Energy.
• Vice-President Western Siberia for TNK-BP.
• Senior Vice-President North Africa for
BG Group.
• Chief Executive Officer of International
Petroleum Limited.
• Chief Operating Officer for JSC National
Company KazMunaiGas.
Engineering Director at Maersk Oil
(Angola).
• From August 2002 to March 2012, Chief
Production Engineer at Shell (Nigeria &
Kazakhstan).
• Pre-2002: 12 years with ExxonMobil
Gulf-of-Mexico Reservoir Development (US).
• Member of the Society of Petroleum
Engineers.
• Holds a Bachelor of Science degree from
Texas A&M University and an MBA from
Tulane University.
Martin Cocker
Independent Non-Executive Director
Kaat Van Hecke
Independent Non-Executive Director
Committee memberships as stated in the
relevant Committee report
Committee memberships as stated in
the relevant Committee report
Term of service: from 16 November 2017
to 14 February 2023
Term of service: from 31 December
2016 to 14 February 2023
Skills and experience:
• Chartered accountant with over 30 years’
Skills and experience:
• 2013-2016 served as Managing
business experience.
• Held several line management, project
leader, CEO-and CFO-level positions and
has also been independent Non-
Executive Director and Chairman of the
Audit Committee at Etalon Group PLC,
Headhunter Group PLC and TCS Group
Holdings PLC.
• Previously held senior positions with
Deloitte & Touche, KPMG, Ernst & Young
and Amerada Hess.
Director and Senior Vice President of
the Austrian Upstream business at
Österreichische Mineralölverwaltung
(OMV).
• 2010-2013 served as E&P Group Head
of Business Support at OMV.
• 2002-2010 held various positions with
Shell in Russia, Nigeria and The
Netherlands.
• 1995-2001 held various positions with
ExxonMobil in Belgium and The
Netherlands.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 85
CORPORATE GOVERNANCE Board of Directors
Board of Directors continued
Board activities and achievements during 2023
During the financial year, the Board held 7 meetings. The Board and Committee agendas were shaped to ensure that discussion was
focused on the Group’s key strategies and monitoring activities, as well as reviews of significant issues arising during the year. The Group’s
ongoing financial and strategic performance is reviewed at every meeting, and the Chief Executive Officer and the Chief Financial Officer
comment on production, share price performance, the market and shareholder feedback.
The table below gives the highlights of how the Board and its committees spent their time during the 2023 financial year but should not
be regarded as an exhaustive list. More information regarding the Group’s strategic objectives and focus during 2023 can be found in the
Strategic Report on pages 1-81 and the more detailed activities of each Board committee are located in their relevant report.
Strategy and
business focus
• Discussions around the strategic options available to the Group to monetise the infrastructure through processing
third-party volumes and acquisition of nearby, stranded assets such as Stepnoy Leopard.
• Approved a targeted well workover and intervention programme.
Risk
• Review of all interim financial results announcements and the 2022 Annual Report and Accounts.
• Consideration of the Group’s going concern assessment, viability statement and risk appetite for the coming year.
• Reviewed the Group’s liquidity forecast at each board meeting.
Governance
• Received reports from Board committees.
• Consideration of the UK Corporate Governance Code and other regulatory requirements for the Annual Report.
• Review of the Notice of AGM and matters proposed for shareholder approval.
• Reviewed and approved new and updated Group policies.
People and culture • Board field trip and engagement with the local workforce.
Board evaluation
No formal Board evaluation took place in 2023 (the last Board evaluation took place in 2021) as all members of Board (with the exception
of the Company’s Chief Executive Officer Arfan Khan) were appointed in February 2023. A board self-evaluation is currently being carried
out for the 2023 calendar year.
Director induction and training
Each individual joining the Board receives a full, formal induction package with materials on the Group’s business and operational,
financial and legal matters. They also meet with members of the Board in order to obtain a good understanding of the challenges and
opportunities faced by the Group. The Directors are given the opportunity to discuss their training and professional development needs
at every Board meeting and on an ad-hoc basis as required, and to make recommendations to the Chairman regarding topics on which
they would like to receive training. In addition to training organised by the Company, the Directors regularly attend training events
organised by third parties and the Company actively encourages Directors to attend such events.
86 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Attendance at meetings of the Board and its Committees in 2023
The following table illustrates the attendance of Directors at Board and committee meetings (as relevant) throughout the year.
EXECUTIVE DIRECTORS
Atul Gupta 1
Arfan Khan
NON-EXECUTIVE DIRECTORS
Kaat Van Hecke 2
Martin Cocker3
Sir Christopher Codrington Bt.4
Stephen Whyte
Chris Cox
Chris Hopkinson
Martin Gudgeon
Fiona Paulus
Board
Audit Committee
Remuneration
Committee
Nomination and
Governance
Committee
Strategy
Committee5
A
B
A
B
A
B
A
B
A
B
−
7
−
−
−
7
7
7
7
7
−
7
−
−
−
6
7
6
6
4
−
−
2
2
2
−
6
6
−
6
−
−
2
2
2
−
6
6
−
5
−
−
−
−
−
−
3
3
−
3
−
−
−
−
−
−
3
3
−
3
−
−
−
−
−
−
3
3
−
3
−
−
−
−
−
−
3
3
−
2
−
4
−
−
−
4
−
−
4
−
−
4
−
−
−
4
−
−
4
−
A = Total number of meetings the Director was eligible to attend.
B = Total number of meetings the Director did attend.
1. Mr Gupta was the Executive Chairman of the Board of Directors until 14 February 2023.
2. Ms Van Hecke was Chairwoman of the Health, Safety, Environment and Communities Committee and
Chairwoman of the Remuneration Committee until 14 February 2023.
3. Mr Cocker was the Chairman of the Audit Committee from 13 July 2022 until 14 February 2023.
4. Sir Christopher Codrington Bt. was the Chairman of the Audit Committee until 13 July 2022 and the
Chairman of the Nomination and Governance Committee until 14 February 2023.
5. There were no meetings of the Health, Safety, Environment and Communities Committee in 2023.
It is no longer a Board level committee. The Strategy Committee was formally created on 24 February 2023.
The key responsibilities of the
Strategy Committee during
2023 were to:
• Assess the corporate and strategic
performance of the Company and its
subsidiaries (the “Group”) in its broadest
sense, and forming a wide view on the
adequacy of progress made in achieving
strategic objectives and outcomes, and
of the systems to measure, monitor and
deliver on them;
• Support the Board and Senior
Management in formulating the overall
strategy for the Company, with particular
emphasis on horizon scanning, priorities,
activities and outcomes;
• Consider the strategic development
opportunities for the Group, including
by way of acquisitions, disposals, joint
ventures, commercial co-operations
or otherwise;
• Consider options for shareholder
investment or exit.
The terms of reference of the Committee
were approved at a meeting of the Board
on 26 April 2023.
More details on key responsibilities can be
found in the Committee’s terms of
reference, which are available on the
Group’s website at www.nog.co.uk.
Membership from
24 February 2023
Stephen Whyte
Committee Chair from 24 February 2023,
Member from 24 February 2023
Martin Gudgeon
Member from 24 February 2023
Arfan Khan
Member from 24 February 2023
The Chairman does not have any other
significant commitments to report.
Committee meetings
The Strategy Committee met four times
during 2023 (three times in the presence of
the other directors subsumed within Board
meetings). The attendance of each
Committee member at Committee
meetings held during 2023 is shown on
page 87. As a separate agenda item, the
Committee reports to the Board at each
Board meeting on any activities of the
Committee since the last Board meeting.
The principal agenda items at the formal
meetings were as follows:
• April – Business Development
• June – Investor relations. Consent
solicitation.
• August – Drilling Programme.
Stakeholder Engagement.
• October – Strategy for 2024 Budget.
Only members of the Committee have the
right to attend Committee meetings.
However, other individuals may be invited
to attend all or part of any meeting, as and
when appropriate.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 87
CORPORATE GOVERNANCE Senior management team
Senior management team
Arfan Khan
Chief Executive Officer
Petro Mychalkiw
Chief Financial Officer
(See biography of Arfan Khan on page 85).
Thomas Hartnett
Chief Legal Officer & Company Secretary
and Acting Head of Human Resources
Skills and experience:
Skills and experience:
• Appointed as Chief Financial Officer of the
Nostrum Group on 21 August 2023.
• 30 years of post-qualification experience, with
almost 20 years of senior finance experience
within the natural resources industry, including
both oil and gas businesses and mining/metals
companies.
• Extensive public company experience and
first-hand experience of E&P operations in the
Republic of Kazakhstan.
• Previous roles in O&G and emerging markets
include serving as Group CFO at I-Pulse Inc,
High Power Petroleum LLC, Equus Petroleum
Plc and Orsu Metals Corporation and serving as
Regional Finance Director and Group Head of
Corporate Finance at Oriel Resources Plc.
• Holds a Bachelor of Arts degree in Economics
from the University of Manchester.
• Member of the Institute of Chartered
Accountants in England & Wales.
• Appointed as General Counsel of the Nostrum
Group on 5 September 2008, as Company
Secretary of Nostrum Oil & Gas PLC on
3 October 2013 and as Acting Head of
Human Resources on 13 January 2020.
• More than 30 years of post-qualification
experience, including 16 years with the law firm
White & Case LLP, where he was a Partner and
specialised in cross- border corporate and M&A
transactions based in the firm’s New York,
Istanbul, London, Brussels and Bangkok offices.
• Served as Senior Corporate Counsel in the
EMEA headquarters of Intercontinental Hotels
Group from 1996-1998.
• Holds a Bachelor of Arts degree in Comparative
and Developmental Politics from the University
of Pennsylvania and a Juris Doctor degree from
New York University School of Law.
• Member of the New York Bar and the
Association of International Energy Negotiators.
Robert Tinkhof
Chief Operating Officer
Ulugbek Makhmadiyarov
Group Finance Director
Abi Zivs
Director of Marketing
Skills and experience:
Skills and experience:
Skills and experience:
• Appointed as Chief Operating Officer of the
Group on 12 February 2019.
• 36 years of experience in the oil and gas
industry, mainly Royal Dutch Shell with
assignments in the Netherlands, UK, Syria,
Iran, Egypt, Dubai, Iraq and Russia.
• Before taking the position as Chief Operating
Officer, held several senior management
positions since 2000 as General Manager Wells
in Shell and Managing Director at the Scientific
Research Institute of KMG for Production and
Technology in Kazakhstan.
• Led the finance function from 1 October 2022
till 20 August 2023. Chartered accountant with
over 18 years of experience in business and
professional services.
• Held various roles within Nostrum Finance team
from 2014, including leading accounting &
reporting, internal audit and risk management.
Prior to joining Nostrum developed his career
at Ernst & Young in Uzbekistan and Kazakhstan,
managing audits of large international
companies including listed entities.
• Holds Master’s and Bachelor’s Degrees from
the University of World Economy and
Diplomacy.
• Fellow member of ACCA (since 2014) and
Certified Internal Auditor (since 2015).
• Appointed as Head of Marketing on
4 February 2022.
• 2017-2022 held position of LPG and sulphur
sales manager with Zhaikmunai LLP.
• More than 29 years’ experience in shipping and
selling hydrocarbons in Latvia, Kazakhstan and
Turkey.
• Graduate of Latvian State University, Faculty
of Physics and Mathematics.
88 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Zhomart Darkeyev
General Director of Zhaikmunai LLP
Daulet Tulegenov
Group Head of QHSE
Gulnara Shadeyeva
Head of HR in the RoK
Skills and experience:
Skills and experience:
Skills and experience:
• Appointed as General Director of Zhaikmunai
• Appointed as Group head of QHSE in
• Appointed as Head of HR of Zhaikmunai LLP
LLP on 14 November 2016.
October 2018.
in October 2013.
• At Zhaikmunai LLP, Mr Darkeyev has also
• 2017-2018 HSE Transformation team leader
• 23 years of experience in the oil and gas
held the positions of Administrative Director,
Assistant General Director, Chief Administrative
Manager, Engineer Manager and Deputy
General Manager.
at KazMunaiGas JSC.
• 2010-2016 HSE manager at Lukoil.
• 2009-2010 Senior HSE expert at
KazMunaiTeniz JSC.
• Before Zhaikmunai LLP, Mr Darkeyev worked for
Derkl Oil & Gas drilling as assistant driller and
for Kazakhgas State Holding Company as a
leading reservoir engineer.
• Graduate of Furmanov Secondary School with
further education completed at the Ivano-
Frankivsk Institute of Oil & Gas with a
specialisation in drilling of oil and gas wells.
• 2006-2009 Senior HSE specialist at LUKOIL.
• 2003-2006 Safety specialist at Tengizchevroil.
• Over 20 years’ experience in E&P oil
and gas assets (onshore and offshore).
• Took part in major international projects at
Chevron, Shell, Lukoil, Tengizchevroil and
CNPC companies in Kazakhstan.
• Graduate of the Tyumen State Oil & Gas
University, Russian Federation.
industry in several senior positions in Human
Resources in KIOS, Baker Hughes Services Inc.,
AMEC, Exterran, Bolashak- Atyrau.
• Holds Bachelor’s degrees in Automatics
Engineering from the Gubkin Russian State
University of Oil & Gas (Moscow), in Accounting
from the West Kazakhstan State University and
Master’s degrees in Human Resources
Management from the RANEPA (Moscow) and
in International Human Resource Management
from Kingston University in the UK.
Natalya Dibe
Head of ESG
Askhat Seitkazin
Deputy General Director of Zhaikmunai LLP
Melody Pinet
Head of HR outside the RoK
Skills and experience:
Skills and experience:
Skills and experience:
• Head of Budgeting and Control at
• Appointed as Deputy General Director of
• Appointed as Nostrum’s Head of HR outside
Zhaikmunai LLP.
Zhaikmunai LLP in March 2022.
the RoK in May 2018.
• More than 19 years of post-qualification
• 2013-2015 held position of PR manager at
• 2016-2018 HR Manager at Bee Engineering
experience, including 9 years with one of the
largest banks in CIS – Kazkom (currently Halyk).
• Holds an Executive Master’s degree, and an
MBA degree from the Russian Presidential
Academy; a Bachelor’s degree in Accounting
and Audit, and a Bachelor’s degree in Oriental
Studies from the Eurasian Academy.
• Certified in Project Management; and in ESG
from Global Reporting Academy (GRI),
University of Pennsylvania, and the London
Reporting Academy.
• Participant and semifinalist of the management
competition Leaders of Russia in international
track in 2020-2023.
Zhaikmunai LLP.
in Belgium.
• 2015-2022 Head of PR department
• 2015-2016 HR consultant at Tempo-Team’
Zhaikmunai LLP.
Randstad company in Belgium.
• Graduate of the Institute of International
• 2013-2014 Fieldworker at Terres Rouges in
Law&Economics (Moscow) with a specialisation
in Financial and Enterprise Management.
Senegal.
• Holds two Bachelor’s degrees from the
Université catholique de Louvain (one in
Political Science and Government and one in
Psychology).
• Holds Master’s degree from the Université
catholique de Louvain in International relations
and the management of diplomatic conflicts.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 89
CORPORATE GOVERNANCE
Governance framework
GRI 2-9
Our governance framework
as at 31 December 2023
The Board
The Board is chaired by Stephen Whyte as from 14 February 2023. The Board is collectively responsible to stakeholders for the long-term success of the
Group. This is achieved by reviewing trading performance, budgets and funding, setting and monitoring the Group’s strategic objectives, reviewing
acquisition opportunities and engaging with stakeholders. The Board is supported by a number of committees whose terms of reference (TORs) are
available on our website.
Chairman
Responsible for leadership
of the Board and for ensuring
its effectiveness in all aspects
of its role.
Chief Executive Officer
Responsible for the successful
planning and execution of the
objectives and strategies agreed
by the Board.
Independent
Non-Executive Directors 1
Responsible for bringing an external
perspective, sound judgement and
objectivity to the Board’s decision-
making. Scrutinise management
performance and constructively
challenge strategy.
Non-Executive Warrant Director
Responsible for giving or
withholding approval to certain
matters set out in the warrant
instrument.
Audit Committee
Responsible for oversight
of the Group’s financial
reporting processes.
Scrutinises the work of
the external auditor and
regularly reviews the risk
management framework
and the work of internal
audit.
Nomination and
Governance Committee
Governance Committee
Reviews the structure,
size and composition
of the Board and its
committees and makes
recommendations to the
Board accordingly, and
leads the process for new
Board appointments.
Remuneration Committee
Reviews and recommends
to the Board the executive
Remuneration Policy
and determines the
remuneration packages
of the Directors.
Strategy Committee2,3
Assists the Board to
fulfil its responsibilities
in relation to strategy.
Company Secretary
Responsible for advising the
Board, through the Chairman,
on all governance matters
and for ensuring that Board
procedures are complied
with and there is a good flow
of information between the
Board and its committees.
The appointment of the
Company Secretary is a
matter reserved to the
Board as a whole.
Chairwoman:
Fiona Paulus
See page 93 for
Committee Report.
Chairman:
Chris Cox
See page 99 for
Committee Report.
Chairman:
Chris Hopkinson
See page 100 for
Committee Report.
Chairman:
Stephen Whyte
Company Secretary:
Thomas Hartnett
Senior Management Team
The Senior management team supports the Chief Executive Officer in making important decisions regarding the overall management of the Group
in respect of all Group matters that are not reserved for the Board and in ensuring that operational activities and performance are aligned with the
overarching strategy of the Group. Each member of the team reports directly to the Chief Executive Officer, who then directly reports to the Board.
The functional responsibilities of the senior management team members in their respective areas include but are not limited to implementing Chief
Executive Officer and Board decisions, allocating resources, managing risk, maximising efficiencies, guiding and developing employees, reviewing
performance and supporting cross-functional integration.
Finance
Responsible for supporting the Group and the Board in matters relating
to: (i) corporate finance (ii) investor relations (iii) economic analysis (iv)
public relations (v) external communications (vi) accounting and reporting
(vii) tax (viii) budgeting and control (ix) insurance (x) treasury and cash
management (xi) liaison with internal audit (xii) risk management (xiii) ICT
(xiv) company administration (accounting and tax matters) and (xv) capital
markets analysis.
Operations
Responsible for supporting the Group and the Board in matters relating
to: (i) production engineering and reservoir management (ii) drilling and
workover management production (iii) production (iv) engineering and
construction field operations (v) relations with governmental authorities
(vi) procurement (vii) security and (viii) administration.
Head: Petro Mychalkiw
Head: Robert Tinkhof
Legal
Responsible for supporting the
Group and the Board in matters
relating to: (i) all legal matters
(ii) compliance (iii) corporate
governance (iv) company
administration (legal and
governance matters).
Sales and marketing
Responsible for supporting the
Group and the Board in matters
relating to: (i) sales of oil and gas
products (ii) marketing and
(iii) logistics and transportation.
QHSE
RQHSE
Responsible for supporting the
Group and the Board in matters
relating to: (i) product quality
(ii) personnel and community
health and safety and
(iii) environmental protection.
Human resources
Responsible for supporting the
Group and the Board in matters
relating to: (i) personnel and
workforce matters generally
(ii) training and (iii) remuneration.
Head: Thomas Hartnett
Head: Abi Zivs
Head: Daulet Tulegenov
Acting Head: Thomas Hartnett
1. Since 24 February 2023, no Director has been appointed as Senior Independent Director.
2. The Strategy Committee was formally created on 24 February 2023.
3. The Health, Safety, Environment and Communities Committee was at the Board level in 2022. In early 2023, new Senior Management
level HSE and ESG committees were formed. Both committees are chaired by the Chief Executive Officer.
90 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
GRI 2-23
Board policies and
governance arrangements
Nostrum recognises the important role that
good corporate governance plays in the
success of the Company. As a result, the Board
promotes high standards of corporate
governance as a key component of its
activities. Clearly defined roles and
responsibilities, non-executive independence,
boardroom and workplace diversity, an
open and transparent culture and the work
of our committees in implementing the
Company’s values and policies throughout
the Group are all vital ingredients to get this
right for our stakeholders.
In order to ensure that it is involved in
making important decisions for the
Group and to ensure a clear division of
responsibilities between the Board and
executive management, the Board has
identified certain “reserved matters” that
are subject to its approval. Other matters,
responsibilities and authorities have been
delegated to its committees and the senior
management team, as set out in the
governance framework on pages 90-92.
The schedule of matters reserved for the
Board is reviewed annually and is available
on our website.
Division of responsibilities
On 27 November 2018, the Board resolved
to expand the role of the Company’s
Chairman, Atul Gupta, to give him certain
executive responsibilities, in particular in
relation to business development,
strategic initiatives and investor relations.
Notwithstanding this, in accordance with
the Code, and with the exception of the
period from 30 September 2020 to
25 January 2021, the roles of Chairman and
Chief Executive remained separate, with
each having distinct and clearly defined
responsibilities, as summarised in the
Board structure diagram. Mr Gupta’s role as
Executive Chairman was to guide, advise,
counsel and assist the Chief Executive
Officer in overseeing the Company’s
implementation of its strategy. The Chief
Executive remained responsible for line
management of his direct reports and
implementation of the Company’s strategy.
The Company’s Chairman as from
14 February 2023, Stephen Whyte, is a
non-executive director who also chairs the
Company’s Strategy Committee.
The Chief Executive Officer is also a
member of the Strategy Committee and
his strategic capabilities are strengthened
by the Senior management team.
Independence
Robust oversight is crucial for strong
corporate governance and the Board is
committed to securing this through an
appropriate balance of independent
Non-Executive Directors.
At the date of this Annual Report, the Board
considers all of its Non-Executive Directors
other than the Chairman and Martin
Gudgeon to be independent within the
meaning of this term as defined in the Code.
GRI 405-1
Equality and diversity
The Board has due regard for the
importance of, and benefits from, diversity
in its membership, including gender
diversity, and strives to maintain an
appropriate balance on the Board. The
Board is composed of individuals with
diverse sectoral experience, ages,
geographic and ethnic origin, and gender.
As at 31 December 2023 the Company
has 17% female representation on its
Board. As at 2023 year-end, the Audit
Committee comprises 33% females, the
Nomination and Governance Committee
has 20% female representation and 25%
are females in the Remuneration
Committee. The Nomination and
Governance Committee remains satisfied
that the Board has the right mix of skills and
experience to operate effectively. However,
the skills and experience mix will be
revisited following the successful
restructuring of the Existing Notes. The
Nomination and Governance Committee
remains committed to monitoring diversity
closely as part of future succession
planning.
On 7 December 2017, the Board
approved its Equality and Diversity Policy.
Clarificatory amendments were made to
the Company’s Equality and Diversity
Policy on 14 September 2022, to which
the Company continued to adhere
throughout 2023.
In accordance with the policy, the Group is
committed to eliminating discrimination
and encouraging equality and diversity in
all of our business activities, including the
provision of employment. The policy
applies to all who work for the Group,
including Directors, together with the
managerial, supervisory and administrative
bodies of all entities within the Group.
The policy also applies equally to the
treatment of our supply chain, applicants
and visitors by our staff and the treatment
of our staff by these third parties. The
objective of the policy is to promote
equality of opportunity and to ensure
that no individual suffers unlawful
discrimination, directly or indirectly, on the
grounds of race, colour, ethnicity, religion,
sex, gender identity or expression, gender
reassignment, national origin, age, marital
status, disability or sexual orientation.
The Group aims to ensure the objective
of the policy is met by:
• Ensuring all recruitment advertising and
publicity aims to encourage applications
from any individual who has appropriate
qualifications and/or experience;
• Not offering discriminatory conditions
of employment;
• Ensuring all promotions are made strictly
on the basis of the ability to do the job
and no such decision is made on a
discriminatory basis;
• Considering requests for part-time work
or job-sharing opportunities wherever
appropriate and practicable, and aiming
to ensure that part-time employees
receive fair treatment;
• Ensuring that the demands of religion
(e.g. prayer time and religious holidays),
culture (e.g. traditional dress) and special
dietary needs are accommodated where
possible; and
• Taking reasonable steps to assist
employees with domestic responsibilities
(e.g. young children and dependent
elderly relatives).
Throughout the year, our commitment to
advancing diversity and inclusion within
our organisation has remained a priority.
We have enhanced and implemented
several initiatives, notably the ‘Targeted
Recruitment Program’, focusing on
underrepresented groups such as women,
minorities, and individuals with disabilities.
Concrete measures as collaborating with
external organisations, taking training for
inclusive recruitment, and creating inclusive
job advert have been taken. For more
information on the Diversity Action Plan
of the Group please see pages 61.
As at 31 December 2023, we did not
comply with the following targets in the
Listing Rules on board diversity:
• 40% of individuals on the board to be
women.
• At least one senior position (chair, chief
executive, senior independent director
or chief financial officer) to be held by a
woman.
• At least one individual be from an ethnic
minority background.
Diversity data is collated by our HR function
who request colleagues to self-report
against drafts of this Annual Report.
These targets were not met due to (a) the
appointment processes which concluded
on 14 February 2023 having failed to identify
sufficient female candidates and (b) no
member of the Board self-reporting as
being from an ethnic minority background.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 91
CORPORATE GOVERNANCE
Governance framework
Our governance framework continued
Table for reporting on gender identity or sex as at 31 December 2023
Men
Women
Other categories
Not specified, prefer not to say
Number of
board
members
Percentage of
the board
Number of
senior
positions on
the board
(CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
5
1
83%
17%
2
0
8
3
73%
27%
Table for reporting on ethnic background as at 31 December 2023
Number of
board
members
Percentage of
the board
Number of
senior
positions on
the board
(CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
4
1
1
67%
17%
17%
1
1
5
5
5
45%
45%
9%
GRI 2-23, 2-26,
205-1, 205-3
Bribery, corruption
and whistleblowing
Bribery and corruption are
significant risks in the oil and gas industry
and, as such, the Company operates a
Group-wide Anti- Corruption and Bribery
Policy, which applies to all Group
employees and contractor staff. The policy
requires: annual bribery and corruption risk
assessments; risk-based due diligence on
all parties with whom the Company does
business; appropriate anti-bribery and
corruption clauses in contracts; and the
training of personnel in anti-bribery and
corruption measures. In addition, the
Company’s Code of Conduct requires that
employees or others working on behalf of
the Company do not engage in bribery or
corruption in any form. Corruption-related
risks are evaluated on a Group-wide basis
(not in respect of divisions). No confirmed
corruption cases were identified in 2023.
Training on anti-corruption policies was
undertaken in 2023.
The Company has also adopted a
Whistleblowing Policy that takes account
of the Whistleblowing Arrangements Code
of Practice issued by the British Standards
Institute and Public Concern at Work.
Further information can be found on
page 63.
No whistleblowing disclosures were
reported in 2023.
Clarificatory changes were made to the
Whistleblowing Policy on 17 August 2023.
Anti-facilitation of tax evasion
Further to the new rules under the Criminal
Finances Act 2017 (CFA) in the UK, in 2018
the Board approved a new Anti-Facilitation
of Tax Evasion Policy applicable to the
Group and its associated persons. In
connection with the preparation of this
policy, the Company commissioned an
independent bespoke risk assessment and
incorporated findings from the assessment
into the policy.
No training on the anti-facilitation of tax
evasion policy was undertaken in 2023.
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified, prefer not to say
Conflicts of interest
GRI 2-15
Directors have a duty to avoid a situation
in which they have, or may have, a direct
or indirect interest that conflicts or may
conflict with the interests of the Company.
Formal procedures are in place to ensure
that the Board’s powers of authorisation
of conflicts or potential conflicts of interest
of Directors are operated effectively.
The Board is satisfied that during 2023
these procedures were enforced and
adhered to appropriately.
Appointment and tenure
All Executive Directors have service
agreements with the Company. All
Non-Executive Directors have letters of
appointment with the Company. For all
Executive Directors engaged through
service agreements, there is no term limit
on their services, as the Company proposes
all Executive Directors for annual re-
election at each subsequent Annual
General Meeting of the Company.
Each Non-Executive Director appointment
is for an initial term of three years, subject
to being re-elected at each subsequent
Annual General Meeting.
92 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Audit Committee report
Audit Committee report
Role and responsibilities of the Audit Committee
The key areas of responsibility of the Committee during 2023 were as follows:
• Review the Group’s audited annual report and interim unaudited consolidated financial
statements;
• Review the formal announcement of the financial results, investor presentations and any other
related announcements;
• Review the effectiveness of any investigations or internal audits performed;
• Monitor compliance with applicable regulatory and legal requirements and the Group’s Code
of Conduct;
• Monitor and review the effectiveness of the Group’s internal audit function;
• Maintain the relationship with the Company’s external auditor and oversee its appointment,
remuneration and terms of engagement whilst continually assessing its independence and
objectivity; and
• Review audit findings and assess the standard and effectiveness of the external audit.
The terms of reference of the Committee were approved at a meeting of the Board on 26 April
2023. The key areas of responsibility of the Committee with effect from 26 April 2023 are
unchanged from those applying from 1 January 2023 to 26 April 2023.
More detail on these and other key areas of responsibility can be found in the Committee’s
terms of reference, which are available on the Group’s website www.nog.co.uk.
Membership from 1 January 2023 to 14 February 2023
Sir Christopher
Codrington, Bt.
Member from 19 May 2014 to 14 February 2023; Chairman from 8 May 2017 to
3 June 2019 and from 1 April 2020 to 13 July 2022.
Martin Cocker Member from 16 November 2017 to 14 February 2023. Chairman from 4 June
2019 to 1 April 2020 and from 13 July 2022 to 14 February 2023.
Meetings in 2023
The Committee meets normally a few days
in advance of each board meeting. The
Group’s Chief Financial Officer, the Chief
Legal Officer and the Company Secretary
are invited to all meetings with the external
auditor being invited when appropriate.
The Committee held eight formal meetings
during 2023 and the attendance of each
Committee member at meetings of the
Committee is shown on page 87.
The principal agenda items at the formal
meetings were as follows:
Meetings
Agenda item
9 January
Tax audit. Auditor for 2022.
13 January
Replacement auditors. Tax audit.
24 April
23 May
Audit planning. Terms of reference.
Q1 2023 overview. Annual reports
and accounts. Intercompany
bonds. Cash investments.
Project finance.
Audit results. Going concern
assessment. Viability assessment.
Impairment review. Financial
statements. Annual report. Fair,
balanced and understandable
statement.
2023 YTD results overview. 2023
forecast vs budget update. Q1
2023 interim condensed financial
statements. Opex and G&A
per barrel.
2023 FY forecast vs budget update.
2023 H1 interim report and interim
condensed consolidated financial
statements. Restructuring
accounting treatment.
Kaat Van
Hecke
Chairman from 4 June 2019 to 1 April 2020 and from 13 July 2022 to
14 February 2023.
23 June
All members of the Audit Committee from 1 January 2023 to 14 February 2023 were considered
to be independent Non-Executive Directors.
Membership from 24 February 2023
16 August
Fiona Paulus
Committee Chairwoman from 24 February 2023; Member from
24 February 2023.
Chris Cox
Member from 24 February 2023.
Chris
Hopkinson
Member from 24 February 2023.
All members of the Audit Committee from 24 February 2023 were considered to be
independent Non-Executive Directors.
The qualifications presented in the biographies of the members of the Committee on pages
84-85, and their respective contributions to the activities of the Committee, demonstrate that
the Committee has the necessary levels of competence in oil & gas upstream and downstream
operations and in accounting and auditing, as well as recent and relevant financial experience.
16 October 2023 FY forecast vs budget.
Treasury update. 2023 audit
planning and timetable.
14
November
Q3 2023 interim condensed
financial statements.
Tax liabilities.
Consent solicitation for
amendments to trust deeds on
cash investments and AIX listing.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 93
CORPORATE GOVERNANCE Audit Committee report
Financial Reporting Council (FRC)
disclosure expectations
In October 2023, the Corporate Reporting
Review (‘CRR’) team of the FRC highlighted
a number of key matters for the 2022-2023
financial reporting season. Top ten most
common topics on which CRR team raised
substantive questions with companies in
their 2022/23 monitoring cycle were
aligned to the following key areas of
disclosure expectations for 2023/2024
reporting cycle:
• ensuring disclosures about uncertainty
are sufficient to meet the relevant
requirements and for users to understand
the positions taken in the financial
statements.
• giving a clear description in the strategic
report of risks facing the business, their
impact on strategy, business model,
going concern and viability, cross-
referenced to relevant detail in the
reports and accounts.
• providing transparent disclosure of the
nature and extent of material risks arising
from financial instruments.
• providing a clear statement of
The Committee considered the above-
mentioned expectations when reviewing
the annual report and accounts, and
addressed these while reviewing the annual
report and accounts, as further described
below in the next sections.
Self-assessment
No formal review of the Committee’s
performance and effectiveness was made
in 2023.
The Committee’s review of the quarterly
results and half-yearly financial statements
was done with an emphasis on ensuring the
following:
• Appropriateness of critical judgements
and estimates applied by management
(described in more detail below) and
completeness of related disclosures;
• Consistency of the adopted accounting
policies with those used in prior periods;
Activities during the year
In accordance with its responsibilities
outlined above, the Committee’s activities
fall into the following four main areas, each
of which is explained in more detail in the
following sections 1 to 4:
1. Financial reporting
2. Risk management and internal controls
3. Compliance with laws and regulations
4. External audit
1. Financial reporting
The key areas of the Committee’s activities
related to financial reporting can be
summarised as follows:
• Completeness of disclosures for
compliance with financial reporting
standards and relevant corporate
governance requirements;
• Assessment whether the Annual Report,
taken as a whole, is fair, balanced and
understandable, and provides the
information necessary for the
stakeholders to assess the Group’s
performance, business model and
strategy; and
• Discussions on any significant matters
with management and the external
auditor and providing feedback to
management on ways to improve the
effectiveness and clarity of the Group’s
corporate reporting.
The Committee reviewed this Annual
Report with the same emphasis as noted
above together with the specific areas
noted by the FRC and outlined above.
Significant judgements, estimates and
assumptions
Significant judgements, estimates and
assumptions applied by management when
preparing the financial statements are
closely related to the principal risks and
uncertainties faced by the Group, which
are subject to constant monitoring by the
Board and the Committee.
consistency with TCFD which explains,
unambiguously, whether management
considers they have given sufficient
information to comply with the framework
in the current year.
• Review of and discussions on the
quarterly unaudited and annual audited
financial statements and
recommendation to the Board for
approval;
• performing sufficient critical review of the
annual report and accounts, including:
taking a step back to consider whether
the report as a whole is clear, concise
and understandable, omits immaterial
information and whether additional
information, beyond the requirements
of specific standards, is required to
understand particular transactions,
events or circumstances; and a robust
pre-issuance review to consider issues we
commonly challenge including: internal
consistency; whether accounting policies
address all significant transactions; and
presentational matters, such as cash flow
and current/non-current classification.
• Review of and discussions on the matters
of liquidity and going concern analysis, as
well as impairment considerations;
• Review of annual budgets and quarterly
performance and forecasts, and the
status of key initiatives; and
• Discussion of various ad-hoc matters
related to financial accounting, reporting,
treasury and tax, and other finance
matters.
94 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
The other significant judgements, estimates and assumptions applied by management when preparing the financial statements, and the
Committee’s responses, are noted in the following table:
Significant judgements
Significant estimates
Significant assumptions
Impact on financial
statement accounts
VIABILITY AND GOING CONCERN ASSESSMENTS
One of the key judgements made by the
management when preparing 2023 Annual
Report and Accounts was related to the Group’s
continued viability and going concern. Various
risks and uncertainties may threaten the
Company’s future performance and results.
Committee actions
During 2023, the Committee continued to
challenge management’s assessment that the
Company and Group remain a going concern
over a period of at least 12 months from the date
of release of the financial statements and also
viable over a period longer than 12 months.
GEOPOLITICAL FACTORS
The Group’s operations are exposed to risks
associated with the political and business
environment in Kazakhstan, being the Group’s
primary location of oil & gas operations, as well as
its neighbouring countries. Severe sanctions and
trade restrictions imposed by, among others, the
US, UK and EU on Russia at various stages have
increased the economic and political uncertainty
and may have a material adverse impact on the
Group’s business, results of operations, financial
condition and prospects.
Committee actions
Changes in the significant estimates and key
assumptions may affect the ability of the Group
to continue as a going concern, or the level of
impairment required against the CGU.
Management uses internal
estimates to forecast future
volumes of oil and gas
production, as well as opex,
G&A, and capital expenditure
for future periods, which are
subject to various
uncertainties.
The Committee reviewed the
Management’s analysis of the
Group’s cash flows for the
12-36 months, and monitoring
of the Group’s liquidity
position, sensitivity tests of its
liquidity position for changes
in crude oil price, production
volumes and timing of
completion of various
ongoing projects.
Management uses product
price assumptions for crude oil,
LPG, dry gas and stabilised
condensate in order to estimate
cash inflows from future
product sales.
Conclusions based on the going
concern and viability assessment
affect the basis of preparation of
the financial statements, and
may lead to differing valuation
and presentation of the items on
the statement of financials.
The Committee reviewed the
Management’s analysis of the
Group’s cash flows for the 12-36
months, and monitoring of the
Group’s liquidity position,
sensitivity tests of its liquidity
position for changes in crude oil
price, production volumes and
timing of completion of various
ongoing projects.
After careful consideration, the
Committee is satisfied that the
Group has sufficient resources
to continue in operation for
the going concern period to
30 June 2025, and agrees with
management’s conclusions in
relation to the going concern
(see page 46) and viability of the
Group over a period of longer
than 12 months (see pages
39-40).
Estimations of the future prices
for oil, oil products and dry
gas as well as continued
production from the
Chinarevskoye field impact the
calculation of future cash flows.
In turn, these impact the
assessment of the continued
viability of the Company and
Group as well as the level of
impairment provision to
be made.
In estimating recoverable
amounts of the Group’s
non-current assets the
Management uses assumptions
such future commodity prices,
oil and gas reserves, future
production profiles, operating
expenses and capital
expenditure estimates, fiscal
regimes, and discount rates.
Changes in the significant
estimates and key assumptions
may affect the ability of the
Group to continue as a going
concern, or the level of
impairment required against
the CGU.
As part of the regular Board
meetings, the Committee
reviewed the monthly liquidity
position prepared by
management and agreed the
estimations of product prices,
costs and production profiles
were appropriate.
As part of the regular Board
meetings, members of the
Committee considered and
challenged the assumption that
sanctions were not affecting
marketing of the Group’s
products or operations.
The Committee considered the
impact of sanctions on the
financial statements at the same
time as it scrutinised the
application of the going concern
basis for the preparation of the
quarterly, half -yearly and annual
financial statements.
ACCOUNTING TREATMENT OF THE NOTES RESTRUCTURING
When reflecting the Notes Restructuring
completed in February 2023, the Management
applied judgement in determining whether the
exchange of debt instruments was a substantial
modification in the terms (see Note 13 to the
consolidated financial statements) and whether
the debt-to-equity swap met all criteria for
application of IFRIC 19 Extinguishing Financial
Liabilities with Equity Instruments (see Note 11
to the consolidated financial statements).
Due to the absence of
observable market information
for determining fair value of the
SSNs and SUNs on the date of
recognition, the Management
estimated the discount rates
applicable to these financial
instruments to estimate their
fair values through discounting
future cashflows.
The Management applied
certain assumptions when
estimating the applicable
discount rates for SSNs and
SUNs, and used assumptions
when constructing the future
cashflows for the purpose of
discounting for fair value
estimation.
Committee actions
The Committee reviewed the Management’s
analysis on exchange of debt instruments and
debt-to-equity swap, and concurred with
Management’s views and conclusions upon
further discussions at committee meetings also
taking into account the external auditors’ views.
The Committee reviewed the
Management’s estimates of the
discount rates and fair values of
the bonds and concurred with
the conclusions and results.
The Committee discussed
with the Management the
assumptions applied when
estimating the discount rates
applicable to the bonds, and
future cashflows.
Significant estimates,
assumptions and judgments
affect the accounting treatment
of the debt exchange and
debt-to-equity swap, and hence
the amounts of the Notes on the
statement of financial position,
their fair value adjustment
impact on the income statement
amounts as well as its
amortisation over the remaining
life of the financial instruments.
Taking into account
management’s analysis and
conclusions, the Committee
concurred with the adopted
valuations and accounting
treatment for restructuring of the
bonds, and discussed with the
management appropriateness
and clarity of the disclosures.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 95
CORPORATE GOVERNANCE Audit Committee report
Significant judgements
Significant estimates
Significant assumptions
NON-CURRENT ASSETS’ CARRYING VALUES
For impairment analysis, management used
judgement and determined a single cash
generating unit (CGU) within the Group’s
non-current assets, which includes all assets
related to Chinarevskoye field, gas treatment
facilities and processing of hydrocarbons from
Ural O&G. In addition, the management used
judgement in determining the FVLCD of the CGU
while making assumptions about market-
participant’s view on the value creating
components of the CGU.
Estimations of the recoverable
amount of the CGU were
prepared by management
based on the discounted cash
flow model using significant
assumptions as well as
considering the value of the
enterprise.
Assumptions used in
estimating recoverable
amounts included future
commodity prices, oil and gas
reserves, future production
profiles, operating expenses
and capital expenditure
estimates, fiscal regimes,
and discount rates.
Enterprise valuation
considered the market value
of the Group’s bonds and the
Company’s shares.
Committee actions
The Committee concurred with management’s
position in determining a single CGU for the
majority of the Group’s non-current assets, and
with relevant determinations of the value creating
components of the CGU.
The Committee reviewed the
management’s detailed reports
on impairment testing, and
agreed with using a
combination of a discounted
cash flow model and enterprise
value for impairment testing.
The Committee reviewed the
assumed product prices,
discount rates, production
profiles, and forecast capital
and operating expenditures,
and their consistency with
other areas of future cashflow
forecasts.
OIL AND GAS RESERVES
Management applied significant judgement
when selecting the volume of future production
used in the unit-of-production method of
depletion of assets based on the oil and gas
reserves.
Committee actions
The Committee concurred with the continued
application of the unit-of-production method of
assets depletion, as this method reflects the
expected pattern of consumption of future
economic benefits by the Group.
Management uses internal
estimates to perform an annual
assessment of the oil and
gas reserves. The reserves
estimates are made in
accordance with the
methodology of the Society of
Petroleum Engineers (SPE).
The estimates made as of
31 December 2022 were
audited by Ryder Scott.
Considering the most recent
available information, the
Committee reviewed various
key assumptions used by
management in estimating the
oil and gas reserves and was
satisfied with the
reasonableness of such
assumptions.
The Committee gained comfort
on the outcomes of the oil and
gas reserves’ estimations based
on the key assumptions
consistent with previous year’s
estimations, which were audited
by Ryder Scott.
The Committee reviewed the
assumed product prices,
discount rates, production
profiles, and forecast capital
and operating expenditures,
and their consistency with
other areas of future cashflow
forecasts.
Impact on financial
statement accounts
Changes in the key assumptions
and market valuations may
significantly affect the estimation
of the recoverable amount of
non-current assets, and
consequently may result in
impairment of non-current
assets in the future periods.
After reviewing the management
analysis and particularly
considering the sensitivity
analysis, the Committee
concurred with he
Management’s findings and
conclusions on impairment
testing, and also scrutinised the
relevant disclosures in this
report.
The Committee remained
comfortable with the updated
reserves estimations prepared
by the Management, which are a
central element in the calculation
of depreciation, depletion and
impairment.
After reviewing the management
analysis and particularly
considering the sensitivity
analysis, the Committee
concurred with he
Management’s findings and
conclusions on impairment
testing, and also scrutinised the
relevant disclosures in this
report.
TAXATION
Considering ongoing changes and varying
interpretations of Kazakhstan’s tax legislation and
regulations, the management has to exercise
judgement to evaluate the exposures to the
ultimate amount of any future taxes, penalties
and interest, which may result from tax authorities
disagreement with the positions taken by the
Group.
Committee actions
The Committee was periodically updated by the
management on any uncertainties surrounding
the Group’s tax position, which were accordingly
discussed both at the Committee and Board
meetings.
The Group is subject to routine
tax audits and a resulting
process whereby tax
computations are discussed
with the tax authorities. Whilst
the ultimate outcome of such
tax audits and discussions
cannot be determined with
certainty, management
estimates the amounts of taxes
accruals and disclosures.
Assumptions used in
estimating the amount of
taxation which may become
payable are based on
professional advice and
consideration of the nature of
current discussions with the tax
authorities.
Because of the uncertainties
associated with Kazakhstan’s tax
systems, the ultimate amount of
taxes, penalties and interest, if
any, may be in excess of the
amount expensed to date and
accrued at 31 December 2023.
The Committee reviews the
detail of any significant matter
under discussion with the tax
authorities and considers the
likelihood of taxes being
payable.
Areas of focus were the nature
of current discussions with the
tax authorities, the outcomes
of previous similar discussions
and the views of taxation
specialists.
The Committee also gave
special consideration to the
disclosure of any significant
uncertainty in the estimation
of the tax due.
96 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Other significant judgements and
estimates
The decommissioning of oil and gas assets
at the end of their economic lives, the
provisioning for contingent and other
liabilities, current and deferred income tax,
and fair value of financial instruments are all
areas that require management to use
judgement and estimates. The Committee
examined each of these issues and sought
clarifications, as and when necessary,
including discussions with the Company’s
auditor.
Significant matters communicated by the
external auditor
In addition to the significant judgements,
estimates and assumptions identified
above, the external auditor also highlighted
revenue risk, where there is always an
assumed risk of fraud through management
override of controls. The Committee
believes that the Group’s policies and
internal controls sufficiently minimise the
risks related to management’s ability to
manipulate accounting records or to
misappropriate assets.
2. Risk management and
internal controls
The Committee continuously monitored
the Group’s risk management systems,
further information on which can be found
in the Risk Management section on pages
32-33.
In accordance with requirements of the 2018 Code relating to the viability statement, the
Committee reviewed the impact and sensitivity analysis of such risks on the Group’s
long-term viability. The principal areas of risk management assessed by the Committee
are described in the table below.
Key areas of the Committee’s focus in relation to principal risks:
Geopolitical
Risk
Liquidity and
financial
reporting
Oil and gas
production
rates
The Committee continued to oversee the management’s assessments
and responses to the impact of worldwide sanctions on the operations
the Group. Such responses included continued collating and regular
updates of the lists of all persons/entities sanctioned in order to
ensure Nostrum does not enter into transactions with any of the
persons/entities on these lists.
Throughout the year, and as explained in more detail elsewhere in this
report, the Committee has been focused on reviews of the viability
of the Group and the application of the going concern basis for
preparing the financial statements.
The Committee recognises the oil and gas production volumes are
subject to significant risks and uncertainties, and hence continued
constant monitoring of the forecast production rates against actual
rates. Periodic updates were reported by the management at the
Committee meetings and Board meetings, and any material variances
were discussed in details with the management.
Cyber security
The Committee continued to review the Company’s and Group’s
exposure to cyber-attacks and discussed with management the
effectiveness of proposed actions to address such exposures.
Financial
reporting
The Committee seeks to ensure the accurate maintenance of
accounting records and related transactions, and relevant disclosures,
with particular attention to areas of significant judgements,
estimations and assumptions which are inherently subject to
significant risks and uncertainties. Such areas of focus included
viability and going concern assessments, impairment, oil and gas
reserves and production forecasts, taxation as described in the
previous section.
Internal control system
The Group’s internal control system is
aimed at mitigating risks and improving
efficiency. These include:
• Segregation of authorities and duties at
various levels;
• Policies and procedures covering
Directors’ remuneration, compliance,
accounting and reporting and health,
safety and environment as described in
the relevant sections of the Annual
Report;
• Training and internal communications;
and
• Continuous monitoring of short-term,
medium-term and long-term planning,
forecasting and decision-making
processes.
In Committee’s view, the Group continued
to maintain a robust and defensible
systems of risk management and internal
control, and the Committee made
recommendations to senior management
on further improvements as and when
considered necessary.
Details of the procedures related to
compliance control are set out below
(including compliance liaison equivalent to
a hotline). No instructions for any conflict of
interest settlement or compliance control
forms were in use in 2023. No sanctions or
disciplinary actions were applied in respect
of internal control in 2023.
Internal Audit
The primary role of the internal audit
function is to assist the Board and senior
management to protect the assets,
reputation and sustainability of the
organisation. This is achieved through:
• Building strong and effective risk
awareness within the Group;
• Continuously improving risk
management and control processes
so that they operate effectively and
efficiently, and reflect leading practice;
and
• Sharing best practice regarding risk
management and assurance across the
Group.
The Group does not at this time have a
dedicated internal audit function. Instead,
the Group outsources this work to
specialists in relevant areas or engages
internal resources on a case-by-case basis.
Also, one of the compensating measures is
the Contracts Board comprising the Chief
Executive Officer, the Chief Financial
Officer and the Chief Operating Officer.
The Contracts Board meets weekly and
its purpose is to review and approve
significant expenditure commitments.
Also, in the Committee’s view, the Group
has sufficient internal processes providing
assurance to the management, Audit
Committee and the Board about the
effectiveness of systems of internal control
and risk management: for instance quarterly
reports to the Board on operations, financial
performance, liquidity, and legal issues and
assurance provided by Quality, Health,
Safety and the Environment (“QHSE”)
Department.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 97
CORPORATE GOVERNANCE Audit Committee report
3. Compliance with laws and
regulations
The Chief Legal Officer and Company
Secretary attends the Committee’s
meetings, which allows the Committee
to raise any concerns related to legal,
compliance or whistleblowing matters
and the status of any ongoing litigation.
UK Corporate Governance Code
The Committee was in compliance with
the Code throughout 2023, except that
(in breach of provision 21 of the Code)
no formal review of the Committee’s
performance and effectiveness was
made in 2023.
Whistleblowing arrangements
Nostrum has a Group Whistleblowing
Policy and, to ensure that all Group
employees have access to someone who
can provide them with support and
guidance, the Group has two compliance
liaison officers: one English, Kazakh and
Russian-speaking officer based in Uralsk
and another Dutch- and English-speaking
officer based in Brussels. The Audit
Committee maintained close contact
with the compliance liaison officers. No
whistleblowing disclosures were reported
in 2023.
4. External audit
Appointment of external auditor
On 6 March 2023, the Company announced
that it had appointed MHA as auditors to
the Group and Ernst & Young Kazakhstan
as auditors of Zhaikmunai LLP. The
appointment of MHA was confirmed at the
Company’s 2023 annual general meeting
on 30 June 2023.
Non-audit services
The main principle of the Group’s policy on
the provision of non-audit services by the
external auditor is that non-audit services
may only be provided by the external
auditor where the external auditor
maintains the necessary degree of
independence and objectivity, and that
standard supplier selection procedures are
carried out.
Committee pre-approval is required before
the external auditor is engaged to provide
any permitted non-audit services (as
defined in the policy) in addition to any
other approvals required by the Board
and management pursuant to powers
delegated by the Board or Nostrum’s
internal approvals policies.
The Committee monitors the external
auditor to ensure that it does not provide
non-audit services that are prohibited by
the FRC and limits such services to due
diligence services and other assurance
services. The revised policy is available on
the Group’s website at www.nog.co.uk and
will be reviewed and amended as and
when required.
Audit fees for 2023 totalled US$1,116
thousand (2022: US$1,188 thousand).
A detailed breakdown of audit and
non-audit fees for 2023 can be found in
Note 29 to the consolidated financial
statements of the Group on page 149.
By operating in accordance with the above
policy and other practices established
within the Group, the Committee was
satisfied that adequate safeguards were
in place to ensure the objectivity and
independence of the external auditor.
98 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Nomination and Governance Committee report
GRI 2-10
Nomination and Governance
Committee report
Only members of the Committee have
the right to attend Committee meetings.
However, other individuals may be invited
to attend all or part of any meeting, as and
when appropriate.
Diversity
More information on the Group’s actions
and policies in relation to diversity and
inclusion can be found on pages 60-63.
Appointments, succession
planning and evaluation
Following the successful completion of
restructuring in 2023, there were changes
in the composition of the Board and
appointments at the Board level.
Succession planning was discussed in
relation to the CFO, as set out in the
principal agenda items above. An external
search consultancy, Heidrick & Struggles,
was used in relation to the appointment of
the CFO. It has no other connection with
the Company. No formal Board evaluation
took place in 2023 due to the small amount
of time that has elapsed since the current
Board members were appointed. Both
informal (internal) and formal (involving
independent external support) Board
evaluations are planned for 2024.
The gender balance of senior management
and their direct reports is set out on pages
60-61.
All Directors will stand for re-election at the
2024 Annual General Meeting with the full
support of the Board.
Key responsibilities of the Nomination and Governance Committee
The key responsibilities of the Committee in 2023 were to:
• Lead the process for Board appointments and make recommendations to the Board
regarding candidates for appointment or reappointment as Directors;
• Monitor and make recommendations to the Board on Board governance and corporate
governance issues, to enable the Board to operate effectively and efficiently;
• Regularly review the structure, size and composition (including skills, knowledge and
experience) of the Board;
• Ensure that an annual review of the effectiveness of the Board, and each committee of the
Board, and the contribution of each director is conducted every year, with an independent
external review at least every three years;
• Keep under review the leadership needs of the Company, both executive and non-executive,
with a view to ensuring the continued ability of the Company to compete effectively in the
marketplace;
• Review annually the time required from Non-Executive Directors.
• Review and approve changes to the Board’s governance guidelines, monitor the compliance
with such guidelines and with applicable legal, regulatory and listing requirements and
recommend to the Board such changes or additional action as it deems necessary;
• Require Directors to obtain approval from the Board before undertaking additional
external appointments.
The terms of reference of the Committee were approved at a meeting of the Board on
26 April 2023. The key areas of responsibility of the Committee with effect from 26 April 2023
are unchanged from those applying from 1 January 2023 to 26 April 2023.
More details on key responsibilities can be found in the Committee’s terms of reference, which
are available on the Group’s website at www.nog.co.uk.
Membership from 1 January 2023 to 14 February 2023
Chairman
Sir Christopher
Codrington, Bt.
Kaat Van Hecke
Martin Cocker
Membership from 24 February 2023
Chris Cox
Committee Chair from 24 February 2023,
Member from 24 February 2023
Martin Gudgeon
Member from 24 February 2023
Chris Hopkinson
Member from 24 February 2023
Fiona Paulus
Member from 24 February 2023
Stephen Whyte
Member from 24 February 2023
The Chairman does not have any other significant commitments to report.
Committee meetings
The Nomination and Governance Committee met formally three times during 2023.
The attendance of each Committee member at Committee meetings held during 2023
is shown on page 87. As a separate agenda item, the Committee reports to the Board
at each Board meeting on any activities of the Committee since the last Board meeting.
The principal agenda items at the formal meetings were as follows:
Meetings
Agenda item
April
Recruitment of new CFO. Manual of authorities. Terms of reference.
August
Diversity.
November Board effectiveness. Diversity. Individual KPIs.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 99
CORPORATE GOVERNANCE Remuneration Committee report
Statement from the Remuneration
Committee Chairman GRI 2-19
Our strategic targets all remain commercially
sensitive and, therefore, have not been
disclosed.
Mr Khan is the only person who served as
an Executive Director during 2023 who has
been assessed for a bonus against
achievement of these KPIs. The assessment
was prepared by the Remuneration
Committee as a recommendation to the
Board, and was considered and agreed by
the Board (other than Mr Khan himself) on
27 February 2024. It was determined that
80% of the 2023 KPIs had been achieved
over the year 2023 (GBP 360,000).
Production and cost KPIs were fully satisfied
(40% out of a possible 40%), the strategic
KPIs were entirely met (50% out of a
possible 50%) and HSE KPIs were not met
(0% out of a possible 10%). However, taking
into account the unfortunate fatality case
during 2023, the Committee assessed the
HSE KPIs as minus 10%, giving an overall
achievement of 80% bonus of base
compensation for the Chief Executive
Officer for 2023 (GBP 360,000).
In addition, in light of the Chief Executive
Officer’s achievements in 2023 being
critical to the success of the Company, the
Committee awarded the Chief Executive
Officer a special discretionary bonus in
respect of 2023 equal to of 59.5% of his
base compensation (GBP 267,750).
The 2024 key performance indicators for
the CEO and senior managers were initially
proposed by the CEO and then developed
in consultation with the Remuneration
Committee and were agreed by the Board
(other than Mr Khan himself) on 20 March
2024. Such KPIs are set out on page 108.
Senior management, including the Chief
Executive Officer and (when appointed) the
Chief Financial Officer, are assessed for
bonuses based on these KPIs. Certain KPIs
relating to strategic objectives have been
carried forward from 2023 but are still
considered to be commercially sensitive
and so have not been disclosed. It is our
intention to publish these, together with the
bonus outcome, as required in the first
Directors’ Remuneration Report following
their achievement.
The Committee also exercised its discretion
in deciding not to make any awards under
the LTIP in 2023 to any LTIP participants.
As regarding the Group’s personnel as a
whole, the collective agreement with
employees of the Company’s subsidiary
Zhaikmunai LLP working in the RoK
provides for annual indexation of salaries.
Effective 1 January 2023 an increase of 20%
was granted to employees who are paid in
Kazakh Tenge to cover the increase in the
cost of living there during 2022.
Neither of the Executive Directors (Atul
Gupta and Arfan Khan) received any salary
increase in 2023. Any increase set out in the
single total remuneration table in relation
to Atul Gupta relates to untaken holiday
that was paid in lieu. Any increase set
out in the single total remuneration
table in relation to Arfan Khan relates to
deterioration of USD (in which reporting is
made) relative to GBP (in which Mr Khan
is paid).
Fees payable to the independent non-
executive Directors in 2023 were revised to
$100,000 per annum, plus $10,000 per
annum for chairmanship introduced from
14 February 2023.
UK Corporate Governance Code
The Company complied with the provisions
of the Code relating to remuneration
throughout 2023. Further information on
compliance with the Code can be found
on pages 82-83.
The Committee has addressed the factors
in Provision 40 of the Code as to clarity,
simplicity, risk and predictability by refining
the CEO’s KPIs applying in 2024 relative to
those which applied in 2023 to (a) reduce
ambiguity; and (b) increase the level of
granularity.
Compliance statement
This report has been prepared in
accordance with the UK’s regulations on
remuneration reporting. The Companies
Act 2006 requires the Company’s auditor to
report to shareholders on certain parts of
the Directors’ Remuneration Report and to
state whether, in the auditor’s opinion,
those parts of the report have been
properly prepared in accordance with the
above regulations. This Annual Statement
and the Policy Report are not subject to
audit. The sections of the Directors’
Remuneration Report that are subject to
audit are indicated accordingly.
On behalf of the Committee, I would like to
thank shareholders for their continuing
support.
Chris Hopkinson
Chairman, Remuneration Committee
Independent Non-Executive Director
18 April 2024
Dear shareholder,
I am pleased to introduce the Directors’
Remuneration Report, which has been
approved by both the Remuneration
Committee and the Board for the year
ended 31 December 2023.
Remuneration Policy
The aim of our Remuneration Policy,
amongst other things, is to align the
remuneration of executives and senior
management with the interests of the
Company’s shareholders and to ensure that
rewards are justified by performance.
As noted elsewhere in this Annual Report,
in accordance with the Companies
Act 2006 a resolution to approve the
Remuneration Policy was submitted to
shareholders for a binding vote at the 2023
Annual General Meeting and was approved
by 80.30% of votes cast.
Remuneration for 2023
The 2023 Directors’ Remuneration Report
will also be subject to an advisory vote at
our 2024 Annual General Meeting.
Further details of Executive Director
performance against the 2023 KPIs can be
found on pages 101-108. In setting these
targets, the Committee focused on areas
critical for the Company, which were:
• Minimising annual decline of average
sales volumes;
• Reducing operational and G&A
cash costs;
• Pursuing strategic objectives to monetise
the spare capacity within our world-class
processing facilities;
• Ensuring all of our operations are carried
out as safely as possible; and
• Actively managing our greenhouse gas
emissions.
100 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
2023 annual report
on remuneration GRI 2-19, 2-20
Remuneration Committee
The remuneration of the Chairman, the
Chief Executive Officer, the Chief Financial
Officer, the Company Secretary and all
other senior members of executive
management is determined by the
Committee under delegated powers
from the Board and in accordance with
the Committee’s terms of reference. The
Chairman and the executive members of
the Board determine the remuneration of
all Non-Executive Directors, including
members of the Committees.
In accordance with the terms of reference,
members of the Committee shall
be appointed by the Board on the
recommendation of the Nomination and
Governance Committee in consultation
with the Chair of the Committee. The
Committee shall comprise at least three
members, the majority of whom shall be
INEDs and one of whom shall be the
Warrant Director.
From 1 January 2023 to 14 February 2023
the Committee was comprised solely of
INEDs, and from 24 February 2023 the
Committee was comprised of three INEDs
and the Warrant Director.
The primary responsibilities of the
Committee are set out in its terms of
reference which are reviewed and updated
annually, and which are available to
download from the Company’s website.
Alternatively, copies can be obtained on
request from the Company Secretary.
When making recommendations to the
Board regarding Executive Directors’
remuneration the Committee is able to
consider corporate performance on
environmental, social and governance
issues and ensures that any incentive
structures do not raise any environmental,
social or governance risks by inadvertently
motivating irresponsible behaviour.
The Committee held three meetings
in 2023 and the attendance of each
committee member at such meeting
is shown on page 87.
The principal agenda items at the meetings
were as follows:
Meetings
Agenda item
April
October
Recommendations to the
Board regarding terms of
reference, performance
against 2022 KPIs, setting
of 2023 KPIs
Proposed Management
Incentive Plan
November Proposed Management
Incentive Plan
No other Directors participated in meetings
of the Committee during 2023.
During the year, the Committee received
advice internally from Arfan Khan, Petro
Mychalkiw (from 21 August 2023) and
Thomas Hartnett (Company Secretary).
Mr Khan and Mr Mychalkiw were consulted
on the remuneration of the other senior
members of executive management and on
matters relating to the performance of the
Company. The Company Secretary was
consulted on regulatory requirements.
None of Mr Khan, Mr Mychalkiw and
Mr Hartnett participated in decisions
on his own remuneration.
Members of the Group’s human resources
team may attend relevant portions of
Committee meetings to ensure appropriate
input on matters related to the remuneration
of senior members of the executive
management team below Board level.
Key responsibilities of the
Remuneration Committee
The Committee’s key responsibilities
include ensuring that:
• Remuneration policy and practices of
the Company are designed to support
strategy and promote long-term
sustainable success, reward fairly
and responsibly, with a clear link to
corporate and individual performance,
having regard to statutory and
regulatory requirements; and
• Executive remuneration is aligned to
company purpose and values and linked
to delivery of the Company’s long-term
strategy.
Membership
The members of the Committee from
1 January 2023 to 14 February 2023 were:
Name
Membership
start date
Membership
end date
Sir Christopher
Codrington, Bt.
19 May
2014
Kaat Van Hecke
(Chairwoman
from 8 October
2020)
31
December
2016
8 October
2020
14 February
2023
27 January
2020
14 February
2023
Martin Cocker
27 January
2020
8 October
2020
30 August
2021
14 February
2023
The members of the Committee with
effect from 24 February 2023 are:
Name
Chris
Hopkinson
(Chairman)
Fiona Paulus
Chris Cox
Martin
Gudgeon
Membership
start date
Membership
end date
24 February
2023
24 February
2023
24 February
2023
24 February
2023
Their biographies are given on pages
84-85. The Company Secretary acts
as secretary to the Committee.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 101
CORPORATE GOVERNANCE 2023 annual report on remuneration
Voting on remuneration matters
The resolutions put to shareholders at the 2023 Annual General Meeting relating to Directors’ remuneration were a resolution to approve
the Directors’ annual report on remuneration which, in accordance with the Companies Act 2006, was subject to an advisory vote and a
resolution to approve a new remuneration policy which, in accordance with the Companies Act 2006, was submitted to shareholders for a
binding vote. The votes received are set out in the table below.
Resolution
Votes
FOR
% of
votes cast
Votes
AGAINST
% of
votes cast
Votes
WITHHELD
Approval of Directors’ annual report on remuneration
68,102,538
83.28% 13,668,623
Approval of new remuneration policy
65,661,825
80.30% 16,109,336
16.72%
19.70%
0
0
At the 2024 Annual General Meeting, the Directors’ remuneration report will be put to shareholders for approval by way of an advisory vote.
Single total figure of remuneration
The table below shows the single total figure of remuneration for the year ended 31 December 2023 for each Director that served at any
time during the year. The information contained in the table is as prescribed by the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013 and contains a single total figure of remuneration for each Director.
Directors are remunerated in either GBP, US$ or KZT. All figures in relation to Director remuneration are reported in USD throughout
this report.
Salary and
fees
Taxable
benefits*
Annual
bonus 2
Option
Plan
LTIP 3
Pension 4
Total
(audited)
Total fixed
remuneration
Total variable
remuneration
All amounts in US Dollars
Director 1
Stephen Whyte5
(Chairman,
Non-Executive Director)
Atul Gupta6
(Executive Chairman)
Arfan Khan
Period
2023
2022
2023
2022
2023
259,038
−
−
−
538,748
3,967
518,575
3,888
−
−
−
−
686,555
28,183 780,395
(Chief Executive Officer)
2022
683,814
13,763
716,919
Fiona Paulus5
2023
95,897
(Non-Executive Director) 2022
−
Chris Cox5
2023
95,897
(Non-Executive Director) 2022
−
Chris Hopkinson5
2023
95,897
(Non-Executive Director) 2022
−
Martin Gudgeon5
2023
91,667
(Non-Executive Director) 2022
Martin Cocker7
2023
(Non-Executive Director) 2022
Sir Christopher
Codrington, Bt.7
2023
(Non-Executive Director) 2022
Kaat Van Hecke7
2023
(Non-Executive Director) 2022
−
24,615
120,000
24,615
120,000
24,615
120,000
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
− 259,038
259,038
−
−
−
− 542,715
542,715
− 522,463
522,463
−
−
−
−
40,378 1,535,511
755,116
780,395
39,154 1,453,649
736,731
716,919
−
−
−
−
−
−
−
−
−
95,897
95,897
−
−
95,897
95,897
−
−
95,897
95,897
−
−
91,667
91,667
−
−
24,615
24,615
− 120,000
120,000
−
24,615
24,615
− 120,000
120,000
−
24,615
24,615
− 120,000
120,000
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1. Stephen Whyte was remunerated in GBP and US$, Fiona Paulus, Chris Cox, Chris Hopkinson, Martin Gudgeon, Atul Gupta and Martin Cocker were remunerated in
US$, Arfan Khan was remunerated in GBP and KZT and Kaat van Hecke was remunerated in EUR. For the purposes of this table, the following exchange rates have
been used:
2023: GBP: EUR 1.149; EUR: US$1.082; US$: KZT 456.13
2022: GBP: EUR 1.178; EUR: US$1.061; US$: KZT 457.50
2. Arfan Khan received a bonus for his contribution to the operating, commercial, strategic and environmental objectives of the Group in 2023 and 2022. None of the
bonus awarded to Arfan Khan was in relation to the appreciation or depreciation of the Company’s share price. No other Executive Directors received bonuses in
respect of 2023 or 2022.
3. Awards made under the LTIP in 2017 have vested but no awards have been exercised by the Executive Directors in respect of such awards. No awards made under
the LTIP in 2018 are capable of vesting as the performance conditions were not met in 2018. No awards were made under the LTIP in 2023 or 2022.
4. The Company did not operate a pension scheme for Executive Directors in 2023 or 2022 but may make a pension contribution or a payment in lieu of pension
contributions to Executive Directors under their employment contracts as executives of the Group as opposed to under their service agreements as Directors of the
Company. The total amount paid to Executive Directors in 2023 in lieu of pension contributions was 40,378 USD (2022: USD 39,154). Executive Directors are not
entitled to any additional benefit if they retire early.
5. Stephen Whyte, Fiona Paulus, Chris Cox, Chris Hopkinson and Martin Gudgeon received remuneration from the date of their appointment as Directors of the
Company on 14 February 2023.
6. Atul Gupta received remuneration for his term of service until 14 February 2023 and monthly payments in lieu of 12 months’ notice subsequent to 14 February 2023
and a payment of $3,462 in lieu of all accrued but unused holidays entitlement.
7. Martin Cocker, Sir Christopher Codrington and Kaat van Hecke were paid fees of $120,000 per annum. No additional amounts were payable for being Chair of any of
the Board’s committees nor the Senior Independent Non-Executive Director.
* Taxable benefits include travel, medical, disability insurances and other benefits.
102 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Notes on the single total figure of remuneration table
Base salaries
Executive Directors’ salaries were considered by the Committee at the time of appointment to post in 2020 and 2021.
When reviewing salaries, the Committee considered the provisions of the Remuneration Policy and the situation of the Company.
Annual bonus
In 2023, Mr Khan was the only Executive Director eligible for a bonus.
In accordance with the Remuneration Policy approved in 2023, the maximum annual bonus opportunity for Mr Khan in respect of 2023
was 240% of base compensation.
All bonuses are discretionary and can be reduced from the maximum annual bonus opportunity level for reasons such as poor
performance by the employee or due to disappointing financial performance of the Group as a whole.
The key performance indicators for annual cash bonuses for the Chief Executive Officer were as follows:
2023 bonus performance measures
NFA Operations and Costs
Achieve annual No-Further-Activity PDP volume available for sales from 7,793 boepd (0%) closer to P90 to 8,782 boepd (100 %)
in the P50-10 range. Sliding scale.
New Gas-Lift Compressor: Safe startup without any major HSE incident (LTI & HiPo free). Fully operational: 100% by August-1 to
0% by September 1. Sliding scale
GTU3 Commissioning & Startup: Safe startup without and major HSE incident (LTI & HiPO free)
UOG Tie-Back Startup of Nostrum's Scope (excludes UOG's scope): Safe startup without any major HSE incident (LTI & HiPO free)
NFA Cost Focus (Opex + G&A): 0% if any increases, 30% if flat, and 100% if lower by 1 $mln. Sliding Scale (excludes indexation)
Strategic Objectives
A commercially sensitive strategic target, therefore not disclosed1.
A commercially sensitive strategic target, therefore not disclosed1.
A commercially sensitive strategic target, therefore not disclosed1.
HSE
Achievement of the approved 2023 HSE Plan (provided that there have been no fatalities).
KPIs:
• Reduce GHG emissions with 5% of 2022 actual CO2 equivalent level
• Safety KPIs: LTI < 0.85 ; RTI < 0.75 ; TRIF < 1.9 ; Number of HSE stop cards > 1000 ; >60% participation of ZKM employees in
HSE stop cards
Weight
40%
15%
5%
10%
5%
5%
50%
30%
10%
10%
10%
10%
100%
1. In certain cases information on performance measures or targets has been omitted because it is commercially sensitive and disclosure of such information may not
be in the Company’s interest. Such information may be reported in the subsequent annual report if the performance measure or target has been met and the
Company considers that disclosure of such information at such time would not be contrary to the Company’s interest.
These bonus performance measures apply to the Chief Executive Officer only. No other director is eligible for any bonus payment relating
to 2023 performance based on these performance measures.
The Committee considered the performance of the Chief Executive Officer in the period 1 January to 31 December 2023.
Production and cost KPIs were fully satisfied (40% out of a possible 40%), the strategic KPIs were entirely met (50% out of a possible 50%)
and HSE KPIs were not met (0% out of a possible 10%). However, taking into account the fatality case, the Committee exercised its
discretion and assessed the HSE KPIs as minus 10%, giving an overall achievement of 80% bonus of base compensation for the
Chief Executive Officer for 2023 (GBP 360,000).
In addition in light of the Chief Executive Officer’s achievements in 2023 being critical to the success of the Company, the Committee
awarded the Chief Executive Officer a special discretionary bonus in respect of 2023 equal to of 59.5% of his base compensation
(GBP 267,750).
The Company may provide for clawback or withholding provisions regarding annual bonuses. Clawback and withholding provisions do
apply to LTIP awards for which performance conditions have been satisfied. Except as stated in relation to the Phantom Share Option
Scheme and the LTIP, there are no deferral periods, vesting periods or holding periods. There are no performance targets or measures
relating to more than one financial year.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 103
CORPORATE GOVERNANCE
Mr Richardson resigned as Chief Financial
Officer and as a Director of the Company
on 31 March 2020 and, in accordance with
the terms of the Plan, all outstanding
options lapsed on 30 March 2021.
No awards were made under the Plan in
2023 (2022: nil). It is intended that following
the restructuring, a new management
incentive plan will be introduced which will
replace the Plan going forward. Therefore,
it is not currently envisaged to make any
further awards under the Plan.
The Plan rules do not contain any malus or
clawback mechanisms. However, should
further awards be considered under the
Plan, then management will require any
recommendations by the Company to the
option trustee of an option award to be
made subject to an express right for the
Company to suspend further vesting and to
claw back unvested options previously
awarded where there have been
exceptional circumstances of misstatement
or misconduct, misbehaviour, significant
risk failures or material downturns in the
Group’s financial performance prior to
vesting.
Long-term incentive plan
On 24 August 2017, the Board approved
the making of certain initial grants under
the Company’s new long-term incentive
plan (LTIP). Awards under the LTIP were
made in 2017 and 2018 but no further
awards were made in 2019, 2020, 2021,
2022 or 2023.
In accordance with the LTIP rules, all
outstanding options that had been issued
to two Executive Directors, Mr Kessel and
Mr Richardson, who left the Company on
16 December 2019 and 31 March 2020,
respectively, lapsed as of 16 December
2019 and 30 March 2021, respectively.
All Non-Executive Directors who had been
granted awards under the LTIP (including
Atul Gupta) have formally renounced such
awards and the Company has amended the
terms of its LTIP to make Non-Executive
Directors ineligible to participate in the LTIP.
2023 annual report on remuneration
Long-term incentive awards
In 2017, the Company implemented its new
performance-based long-term incentive
plan (LTIP) and granted additional awards
on 28 November 2018.
The LTIP awards granted are based on
performance over one calendar year,
which is followed by an additional two-year
holding period such that no awards may
vest before the third anniversary of the date
of grant.
The Committee decided not to make any
awards in 2023, and so there is no information
to be provided in relation to performance
conditions for the reporting year.
Pension entitlements
The Company did not operate a pension
scheme for Executive Directors in 2023 but
may make a contribution to a private
pension fund or a payment in lieu of
pension contributions to Executive
Directors, under their employment
contracts as executives of the Group as
opposed to under their service agreements
as Directors of the Company.
Payments to past Directors
Following the end of his term of service on
14 February 2023, Atul Gupta was paid
12 monthly equal instalments in lieu of
12 months’ notice and a payment of
$3,462.00 in lieu of all accrued but unused
holiday entitlement. No other payments
were made to past directors of the
Company during the year ended
31 December 2023.
Payments for loss of office
No payments were made to Directors in
2023 for loss of office.
Non-executive Director fees
From 1 January 2023 to 14 February 2023,
Non-executive Director fees were 10K USD
per month. On 14 February 2023, Non-
executive Director fees were revised
as follows:
Director
Fee
Chris Cox
Martin
Gudgeon
Chris
Hopkinson
Fiona
Paulus
Stephen
Whyte
100K USD per annum, plus
10K USD per annum for
chairmanship of Nomination and
Governance Committee
100K USD per annum
100K USD per annum, plus
10K USD per annum for
chairmanship of Remuneration
Committee
100K USD per annum, plus
10K USD per annum for
chairmanship of Audit Committee
230K GBP per annum, plus
10K USD per annum for
chairmanship of Strategy
Committee
Directors’ shareholdings
The beneficial interests of the Directors in
the share capital of the Company as at
31 December 2022 were as follows:
Director
Atul Gupta
Arfan Khan
Total
(audited)
178,357
−
Sir Christopher Codrington, Bt.
3,312
Kaat Van Hecke
Martin Cocker
−
−
Atul Gupta, Sir Christopher Codrington, Bt.,
Kaat Van Hecke and Martin Cocker
resigned on 14 February 2023.
The beneficial interests of the Directors in
the share capital of the Company as at
14 February 2023 and 31 December 2023
were as follows:
Director
Chris Cox
Martin Gudgeon
Chris Hopkinson
Arfan Khan
Fiona Paulus
Stephen Whyte
Total
(audited)
−
−
−
−
−
−
The Company has not been notified of any
change in Directors’ shareholdings since
31 December 2023.
Please refer to the text in the Remuneration
Policy table on page 111 in relation to
shareholding guidelines applicable to
Directors.
No shares have been granted to Directors
so there was no requirement on any
Director to hold them in accordance
with the guidelines. The Company’s sole
Executive Director Arfan Khan did not hold
any shares in 2023 as encouraged by the
guidelines.
Phantom share option plan
The Company operates one non-
performance-related phantom share option
plan (the Plan). The Executive Directors
eligible to participate in the Plan were
Kai-Uwe Kessel and Tom Richardson. Each
held options over Ordinary Shares of the
Company, generally vesting over a five-year
period, exercisable at either US$4.00 or
US$10.00 per Ordinary Share and expiring
10 years from the date of grant, pursuant to
the Plan.
Mr Kessel left the Company by mutual
consent on 16 December 2019 and, in
accordance with the terms of the Plan, all
outstanding options lapsed as at the
same date.
104 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Remuneration statistics and comparisons
The following performance graph shows the growth in value of a notional £100 invested in the Company since the premium listing of the
Company compared with the growth in the FTSE 350 Oil & Gas Index over the same period. The Committee selected the FTSE 350 Oil &
Gas Index as the most appropriate comparator as it feels that it is a broad-based index which includes many of the Company’s competitors.
TOTAL SHARE RETURN
120
100
80
60
40
20
0
4
1
n
u
J
4
1
g
u
A
4
1
t
c
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4
1
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e
D
5
1
b
e
F
5
1
r
p
A
5
1
n
u
J
5
1
g
u
A
5
1
t
c
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5
1
c
e
D
6
1
b
e
F
6
1
r
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A
6
1
n
u
J
6
1
g
u
A
6
1
t
c
O
6
1
c
e
D
7
1
b
e
F
7
1
r
p
A
7
1
n
u
J
7
1
g
u
A
7
1
t
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7
1
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e
D
8
1
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e
F
8
1
r
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A
8
1
n
u
J
8
1
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A
8
1
t
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8
1
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e
D
9
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9
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9
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9
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9
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t
c
O
9
1
c
e
D
0
2
b
e
F
0
2
r
p
A
0
2
n
u
J
0
2
g
u
A
0
2
t
c
O
0
2
c
e
D
1
2
b
e
F
1
2
r
p
A
1
2
n
u
J
1
2
g
u
A
1
2
t
c
O
1
2
c
e
D
2
2
b
e
F
2
2
r
p
A
2
2
n
u
J
2
2
g
u
A
2
2
t
c
O
2
2
c
e
D
3
2
b
e
F
3
2
r
p
A
3
2
n
u
J
3
2
g
u
A
3
2
t
c
O
3
2
c
e
D
Nostrum O&G (dividends received)
Nostrum O&G (dividends re-invested)
FTSE 350 Oil & Gas
Source: Refinitiv
History of Chief Executive Officer remuneration
The total remuneration figures compared with a respective maximum opportunity for the Chief Executive Officer during each of the last
ten financial years are shown in the table below. Kai-Uwe Kessel was in the position for the period 1 January 2014 to 16 December 2019,
Kaat Van Hecke was the Chief Executive Officer from 16 December 2019 to 31 August 2020 and Atul Gupta from 1 September to
25 January 2021.
The total Chief Executive Officer remuneration figure for 2020 therefore includes all amounts paid to Kaat van Hecke for the period
1 January 2020 to 31 August 2020 and Atul Gupta for the period 1 September 2020 to 31 December 2020 for Chief Executive Officer
services provided to the Group. Mr Gupta remained as Executive Chairman throughout the period 1 September 2020 to 25 January 2021.
Therefore, the amount attributed to his role as Chief Executive Officer is the incremental value in his remuneration only, which was the
pension contribution.
Please refer to the single total figure of remuneration table on page 102 for more information.
Year
2014
2015
2016
2017
2018
20193
20204
20215
2022
2023
Total CEO
remuneration
(USD)
Annual bonus
as % of
maximum
opportunity
2,726,9301
100.00%
1,078,059
1,013,718
1,004,305
732,271
1,577,014
1,284,577
948,525
1,453,649
1,535,511
80.00%2
75.00%
31.25%
0.00%
0.00%
60.33%
12.61%
53.13%
58.14%
1. Total CEO remuneration for 2014 includes remuneration from the exercise of share options.
2. These figures include a bonus amount of EUR 236,262 paid in 2015 in respect of 2014 performance. No bonuses were paid for 2015 performance.
3. The amounts published in 2021 in respect of payments to Kaat Van Hecke in 2019 have been corrected to include the amount of EUR 32,006 paid to her spouse in 2019.
4. The amounts published in 2021 in respect of payments to Kaat Van Hecke in 2020 have been corrected to include amount of EUR 423,031 paid to her spouse in 2020.
5. Kaat Van Hecke was Chief Executive Officer from 16 December 2019 to 31 August 2020. Atul Gupta discharged the role of Chief Executive Officer from 1 September
2020 to 25 January 2021 but received no increment in salary, benefits or annual bonus as a result of assuming this role as well as that of Executive Chairman.
Therefore, the figures for the remuneration of the Chief Executive Officer in 2019, 2020 and 2021 reflect only the amounts paid to Kaat Van Hecke (and her spouse)
and Arfan Khan.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 105
CORPORATE GOVERNANCE
2023 annual report on remuneration
Annual percentage change in Director and average employee remuneration
The table below shows the percentage changes in the salary, benefits and annual bonus of the Directors compared to the percentage
increases of the workforce as a whole for each financial year beginning on or after 10 June 2019.
2023
USD
2023 to 2022
% change
2022
USD
2022 to 2021
% change
2021
USD
2021 to 2020
% change
2020
USD
Executive Directors (USD)
Executive Chairman1
Salaries
Taxable benefits
Annual bonus
Chief Executive Officer2
Salaries
Taxable benefits
Annual bonus
Chief Financial Officer3,4
Salaries
Taxable benefits
Annual bonus
Non-Executive Directors (USD)
Stephen Whyte
Salaries
Taxable benefits
Annual bonus
Chris Cox
Salaries
Taxable benefits
Annual bonus
Chris Hopkinson
Salaries
Taxable benefits
Annual bonus
Martin Gudgeon
Salaries
Taxable benefits
Annual bonus
Fiona Paulus
Salaries
Taxable benefits
Annual bonus
Sir Christopher Codrington Bt
Salaries
Taxable benefits
Annual bonus
Kaat Van Hecke
Salaries
Taxable benefits
Annual bonus
Martin Cocker
Salaries
Taxable benefits
Annual bonus
538,748
3,967
−
3.9%
2.0%
−
686,555
0.4%
28,183
104.8%
780,395
8.9%
518,575
3,888
−
683,814
13,763
716,919
1.2%
(7.6%)
−
512,203
(0.1%)
512,776
4,209
(705.6%
−
−
522
−
0.1%
683,330
(37.9%)
1,100,965
(70.2%)
309.7%
46,124
175,000
255.2%
50.3%
12,985
116,405
−
−
−
−
−
−
259,038
100%
−
−
−
−
95,897
100%
−
−
−
−
95,897
100%
−
−
−
−
91,667
100%
−
−
−
−
95,897
100%
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
120,000
−
−
120,000
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
446,338
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
(47.6%)
(100%)
851,099
3,530
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
120,000
27.5%
94,098
−
−
−
−
−
−
120,000
300.4%
29,968
−
−
−
−
−
−
120,000
200%
40,000
45.5%
27,500
−
−
−
−
−
−
−
−
−
−
106 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Mark Martin
Salaries
Taxable benefits
Annual bonus
Michael Calvey
Salaries
Taxable benefits
Annual bonus
Simon Byrne
Salaries
Taxable benefits
Annual bonus
Employees of the Group
on an FTE basis
Salaries
Taxable benefits
Annual bonus
2023
USD
2023 to 2022
% change
2022
USD
2022 to 2021
% change
2021
USD
2021 to 2020
% change
2020
USD
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
(100%)
51,023
−
−
−
−
(100%)
25,000
−
−
−
−
(100%)
25,000
−
−
−
−
22,412
0.8%
22,242
(2.0%)
22,693
−
−
−
−
−
−
1. Amounts paid to the Executive Chairman in 2023 represent remuneration paid to Atul Gupta until 14 February 2023 and payments in lieu of 12 months’ notice as
monthly equal instalments over 12-month period following the end of his term of service on 14 February 2023.
2. Kaat Van Hecke was Chief Executive Officer from 16 December 2019 to 31 August 2020. Atul Gupta discharged the role of Chief Executive Officer from 1 September
2020 to 25 January 2021 but received no increment in salary, benefits or annual bonus as a result of assuming this role as well as that of Executive Chairman.
Therefore, the figures for the remuneration of the Chief Executive Officer in 2019, 2020 and 2021 reflect only the amounts paid to Kaat Van Hecke (and her spouse)
and Arfan Khan.
3. The CFO was not a Director in 2022 and 2023.
4. The amounts published in 2021 in respect of payments to Mr Richardson in 2020 have been corrected to include amounts paid to his spouse in 2020. The amounts
for 2021 only include Chief Financial Officer’s compensation up until 30 August 2021, at which time the position was removed as an Executive Director.
Relative importance of spend on pay
The table below shows the Group’s actual spend on pay (for all employees) relative to dividends.
Key expenditure areas in thousands of US$
Remuneration paid to all employees1
Dividends to shareholders (total)
Dividends
Share buy-back
2023
26,082
2022
% change
22,412
16.4%
0
0
0
0
0
0
0%
0%
0%
1. Total remuneration reflects overall payroll and related taxes. Refer to the consolidated financial statements for further information.
For further information on dividends and expenditure on remuneration for all employees, please see the notes to the consolidated
financial statements.
Service contracts
Details of the Executive Directors’ service
agreements’ and the Non-Executive
Directors’ letters of appointment can be
found in the Company’s Remuneration
Policy on pages 109-115 of this Annual
Report. All Directors are subject to annual
reappointment and accordingly all
executive and Non-Executive Directors
will stand for election or re-election
(as appropriate) at the Annual General
Meeting.
Statement of 2022 Remuneration
Policy implementation
The Company’s Remuneration Policy was
put to a shareholder vote at the 2023
Annual General Meeting and was approved
by 80.30% of votes cast.
Salaries and bonuses of the Executive
Directors are reviewed and determined
annually to ensure they remain appropriate.
The Company’s bonus year runs from
1 January to 31 December each year, with
bonus amounts being determined between
December and March and becoming
payable between March and April of
each year.
Remuneration in respect of 2024 will be
consistent with the current policy described
on pages 109-115 of the Company’s 2023
annual report.
Salaries and service fees
The Group appointed a new Chief
Executive Officer on 26 January 2021.
As part of that process, the level of
remuneration to be paid was agreed by the
Committee and approved by the Board.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 107
CORPORATE GOVERNANCE 2023 annual report on remuneration
Annual bonus
In accordance with the remuneration policy approved at the 2023 AGM, the maximum Executive Director annual bonus opportunity in
respect of 2023 was up to 40% of base compensation, subject to a maximum opportunity for the Company’s Chief Executive Officer, of an
annual bonus of up to 240% of base compensation and a maximum opportunity of 100% of base compensation for the Company’s Chief
Financial Officer (if a Director).
Annual performance will be assessed against a performance scorecard of which a portion is based on operational and financial measures,
a portion on strategic objectives and a portion on HSE, social and governance objectives.
The Committee has compiled a list of suitable key performance indicators against which the performance of the Executive Directors will
be measured at the end of 2024 to determine the annual bonus amounts payable to Executive Directors in 2025. Details of any non-
commercially sensitive KPIs are set out below. 2024 performance will be measured against these key performance indicators and the
Committee will consider such performance together with the Company’s financial position, in deciding whether and at what level to
award.
2024 bonus performance measures
NFA Operations and Costs
Achieve annual Chinarevskoye field No-Further-Activity PDP volume available for sales from P90 of 6,195 boepd (0%) to P50 of
6,698 boepd (100%). Sliding scale.
Sulphur Recovery Unit: Mechanical completion of the Sulphur Recovery unit upgrade without any major HSE incident (LTI).
100% by May 1st and 100% to 0% by July 1st, sliding scale.
NFA Cost Focus (Opex + G&A). Target spend: Opex ($38.0mln) & G&A ($11.3mln). 0% if any increases, 30% if flat, and 100% if
lower by 1 $mln. Sliding Scale
Drill, Complete and Deliver wells Ch-301 and Ch-41_1_1 to planned mechanical objectives and within the approved budget
(100%) sliding scale to 0% in case of 10% over budget. To be split 7.5% on budget achievement and 7.5% on well success.
Strategic Objectives
A commercially sensitive strategic target, therefore not disclosed1.
A commercially sensitive strategic target, therefore not disclosed1.
A commercially sensitive strategic target, therefore not disclosed1.
HSE
Achievement of the approved 2024 HSE Plan (provided that there have been no fatalities. In the case of a fatality 10% additional
will be deducted from the overall weighting.).
KPIs:
• GHG emissions not to exceed target set by the National GHG Allocation of 203,562 CO2. or equivalent level;
• Safety KPIs: LTI < 1.05 ; RTI < 0.75 ; TRIF < 1.9
Weight
50%
20%
5%
10%
15%
40%
10%
10%
20%
10%
10%
100%
1. In certain cases information on performance measures or targets has been omitted because it is commercially sensitive and disclosure of such information may not
be in the Company’s interest. Such information may be reported in the subsequent annual report if the performance measure or target has been met and the
Company considers that disclosure of such information at such time would not be contrary to the Company’s interest.
The percentage result (from the above
table out of 100%) will be applied to 100%
of the Chief Executive Officer’s base
compensation and may also be applied
to a percentage up to the Chief Financial
Officer’s maximum opportunity of 100%
(if he is appointed as a Director). Currently,
no other director is eligible for any bonus
payment relating to 2024 performance
based on these performance measures.
The CEO’s maximum possible total bonus
opportunity for 2024 is 240% of base
compensation and his bonus opportunity
based on the performance measures in the
table above is 100% of base compensation.
If appointed to the Board, the CFO’s
maximum possible total bonus opportunity
for 2024 will be 100% of base compensation.
Phantom share option plan
The Committee does not envisage the
award of any additional phantom share
options to Executive Directors in 2024.
Long-term incentive plan
The Committee does not envisage any
awards under the Company’s existing
long-term incentive plan in 2024. Therefore,
no performance conditions have been set
for 2024.
Non-Executive Directors
From 1 January 2023 to 14 February 2023,
Non-executive Director fees were 10K USD
per month.
Non-Executive Director fees were reviewed
following the restructuring and were
amended as follows:
Director
Fee
Chris Cox
Martin
Gudgeon
Chris
Hopkinson
100K USD per annum, plus
10K USD per annum for
chairmanship of Nomination
and Governance Committee
100K USD per annum
100K USD per annum, plus
10K USD per annum for
chairmanship of
Remuneration Committee
Fiona Paulus 100K USD per annum, plus
Stephen
Whyte
10K USD per annum for
chairmanship of Audit
Committee
230K GBP per annum, plus
10K USD per annum for
chairmanship of Strategy
Committee
108 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Remuneration Policy
This part of the Directors’ remuneration
report sets out the Remuneration Policy for
the Company and has been prepared in
accordance with the Companies Act 2006,
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment) Regulations 2013, the UK
Corporate Governance Code and the
Listing Rules of the UK Listing Authority.
• Align the remuneration of executives with
the interests of the Company’s
shareholders, and ensure that rewards
are justified by performance;
• Ensure that the pay of the Executive
Directors takes into account: (i) pay and
conditions throughout the Company; and
(ii) corporate governance best practice,
including health and safety, environmental,
social and governance risks;
The Company’s current remuneration
policy was approved by shareholders at
the Company’s 2023 AGM.
Policy coverage
This Policy applies to all payments to
Directors of the Company from the date
of the Company’s 2023 AGM and until the
approval of a revised Remuneration Policy.
Policy objectives
This policy is designed to:
• Provide that the Company may not make
any LTIP awards to its Non-Executive
Directors or Chairman;
• Provide a structure and level of pay that
attracts and retains high-calibre directors
capable of delivering the Company’s
strategic objectives;
• Provide clear and transparent
performance incentives in a manner that
is consistent with best practice and
aligned with the interests of the
Company’s shareholders;
• Allow for future bonuses to be paid in
whole or part in deferred shares; and
• Allow for pension contributions to
Executive Directors for their services
under service contracts up to a 10%
maximum opportunity, or higher if
required by applicable law.
Peer group
For the purposes of benchmarking
appropriate compensation, the Committee
currently regards the following companies
as the most relevant peer group for
Nostrum:
• FTSE 350 companies of a similar size to
Nostrum;
• Oil and gas E&P companies globally
which compete for scarce skills within the
industry; and
• Companies operating predominantly in
the FSU which compete for expatriate
and local staff.
Risk management
The Committee will review incentive
arrangements regularly to ensure that they
comply with the Group’s risk management
systems, and that controls are operating
effectively. The Committee also ensures
that inappropriate operational or financial
risk-taking is neither encouraged nor
rewarded through the Company’s
remuneration policies. Instead, a sensible
balance will be struck between fixed and
variable pay, short- and long-term
incentives and cash and equity.
The Committee has access to the Audit
Committee and senior executive
management as and when required to
discuss any matters of risk assessment.
Nostrum operates in an industry that is
inherently subject to operational risks.
Particular emphasis is therefore placed
on ensuring that health and safety best
practice is reinforced by this Policy.
The Committee consults regularly to
ensure that this is the case.
Ongoing review of Policy
The Committee will periodically review
whether this Policy is operating appropriately.
Any actions arising from this review will be
assigned to an appropriate person with a
deadline to report back to the Committee.
The level and structure of the compensation
system will also be reviewed annually by the
Committee.
Remuneration Policy table
The table on the following pages sets out the key components of the reward package for Executive Directors
Executive Directors’ Remuneration Policy table
Element of pay
BASE PAY
Purpose and link
to strategy
To provide
market-
competitive
base salaries.
BENEFITS
To reflect
market practice
and provided
in line with
peer
companies.
Maximum opportunity
Operation
Performance criteria
There is no
prescribed
maximum annual
increase. The
Committee takes
into account
remuneration levels
at peer group
companies together
with the
performance of the
Company and each
individual’s personal
contribution.
The aggregate value
of such benefits
should not
constitute a
significant
proportion of any
employee’s
compensation.
Base salary is reviewed annually and fixed for
12 months.
None
Benefits include:
• Medical insurance;
• Life insurance;
None
• Permanent health insurance (long-term disability
or income protection insurance); and
• A Company car may be provided for the Chief
Executive Officer.
• The Company may make payments to Directors
in lieu of benefits and may also make separate
benefit arrangements for Executive Directors
in connection with their service as Executives
of Group.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 109
CORPORATE GOVERNANCE 2023 annual report on remuneration
Element of pay
ANNUAL
BONUS
Purpose and link
to strategy
Executive
Directors may
be eligible for
an annual
bonus in cash
and/or
deferred
shares for
good
performance
(as determined
at the Board’s
discretion).
Maximum opportunity
Operation
Maximum
opportunity
of 240% of base
compensation for
the Chief Executive
Officer, Arfan Khan.
Maximum
opportunity of
100% of base
compensation for
the Company’s Chief
Financial Officer (if a
Director). In all other
cases, maximum
opportunity of 40%
of base salary.
The annual bonus is generally determined by
reference to performance in the prior calendar
year.
Annual bonuses are generally paid sometime
between April and August of each year.
Malus and clawback provisions apply to the award
of annual bonuses such that Executive Directors
may be liable to repay some or all of their annual
bonus if there is a material misstatement of results,
or error in calculation of any KPI, or serious
misconduct. The discovery period is one year
commencing on the date on which the bonus is
determined.
NOSTRUM OIL
& GAS PLC 2017
LONG-TERM
INCENTIVE
PLAN (LTIP)
To incentivise
Executive
Directors and
employees
over a longer
timeframe, and
to increase
their interest in
the Company’s
long-term
business
goals and
performance
through share
ownership.
To help retain
executives and
other key
employees,
and align their
interests with
shareholders
through
building a
shareholding in
the Company.
200% of base salary
in any financial year.
Awards of nominal-cost options are made at the
sole discretion of the Committee.
It was anticipated that awards would be granted
annually in the period 2017 to 2019 subject to
annual performance conditions. Generally, awards
have a one-year performance period attached to
them and will not vest for an additional two years
following the date on which the Committee
determines whether or not a performance
condition has been wholly or partly satisfied,
such that no award may vest before the third
anniversary of the date of grant.
The Committee has the discretion to decide, on
or before the grant of an award, that a participant
shall be entitled to receive dividend equivalents
arising over the period between the grant date
and the vesting date, with such amounts being
payable in cash or shares in respect of shares
which vest.
Malus and clawback provisions apply to the LTIP
such that participants are liable to repay/forfeit
some or all of their shares if there is a material
misstatement of results, or error in calculation, or if
there is serious misconduct. The discovery period
is three years commencing on the date on which
the award vests, which can be extended by the
Committee for an additional two years if an event
occurs which the Committee determines could
result in the operation of recovery or withholding
provisions.
110 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Performance criteria
Key performance
indicators against which
the performance of the
Executive Directors will be
measured in the following
year are determined at the
end of each year and
all non-commercially-
sensitive key performance
indicators are disclosed
in the Directors’
Remuneration Report.
Any commercially
sensitive performance
measures will be
disclosed retrospectively
following completion of
the relevant financial year.
Performance against key
performance indicators
for the previous year is
also disclosed in the
Directors’ Remuneration
Report to show how the
Board has determined
Executive Director
performance against the
relevant key performance
indicators for that year,
and consequently the
levels of annual bonus
payable to the Executive
Directors.
Performance measures
are generally measured
over one year though the
Committee has the
discretion to apply a
longer performance
period to awards.
The Committee has the
discretion to set any
performance condition
attaching to awards
granted under the LTIP.
Vesting of awards would
ordinarily be based:
• In part on average
accrued sales volumes
measured in barrels of
oil equivalent per
day; and
• In part on reserves
measurement on the
basis of 2P barrels of oil
per share.
Element of pay
PHANTOM
SHARE OPTION
PLAN (THE
PLAN)
PENSIONS
Purpose and link
to strategy
The Board
places great
importance on
minimising
dilution of
existing
shareholders’
equity. Share
awards will
therefore only
be made
to senior
management
who are able
to make a
material
contribution to
shareholder
value that
substantially
exceeds the
value of any
share awards
made.
The Plan has
effectively
been replaced
by the LTIP and
no awards were
made under
the Plan in
2019, 2020,
2021 and 2022.
To remain
competitive
in the
marketplace
and provide
income in
retirement.
Performance criteria
None
Maximum opportunity
Operation
Share awards will
only be made on the
basis of achieving
concrete long-term
objectives defined in
advance by the
Committee. Share
awards will vest over
several years.
In accordance with
the Plan rules, the
total number of
shares that may be
granted pursuant to
the Plan is five
million.
Intertrust Employee Benefit Trustee Limited
administers the Plan and is responsible for
granting rights under the Plan.
Each right entitles holders to receive, on exercise,
a cash amount equal to the excess of the market
value on the exercise date of the Ordinary Shares
of the Company to which it relates over a base
value set at the date of grant.
All Executive Directors of the Company are eligible
to participate in the Plan at the discretion of
the Board.
Awards vest on the basis described in the notes on
the following page.
Long-term objectives are to be reviewed at every
Committee meeting to ensure that they are
appropriate, relevant and rigorous.
Share awards made in future may be reduced at
any time prior to vesting, at the discretion of the
Committee, following events such as (but not
restricted to) a material misstatement of results,
failure of risk management, breach of health and
safety regulations or serious reputational damage
to the Company.
10% or, if higher, any
minimum pension
contribution which
may be required
under applicable
law.
There are ordinarily no pension contributions or
provisions for Directors, although there may be
pension arrangements made for Executive
Directors in connection with their service as
executives of Group companies.
None
SHAREHOLDING
GUIDELINE
Aligns interests
of executive
directors with
those of
shareholders.
Executive Directors
are encouraged to
maintain a holding in
the Company to
align their interests
with shareholders.
If the Company grants shares to Directors outside
the LTIP by way of bonus or otherwise, they will be
required to hold 50% of such shares for a three-
year period.
None
The Committee monitors the holdings of
all Directors.
Non-Executive Directors’ Remuneration Policy table
FEES FOR
NON-
EXECUTIVE
DIRECTORS
AND
CHAIRMAN
Attract and
retain
high-
performing
individuals.
No prescribed
maximum annual
increase in fees.
Any fee increases are usually considered at the end
of each year and the Board and, where applicable,
the Committee considers pay data at comparable
companies of a similar scale.
None
The chairs of the Committees receive additional
fees.
No eligibility for participation in bonuses but
limited benefits may be delivered (e.g. provision of
iPad and travel-related expenses). Non-Executive
Directors and the Chairman are not eligible to
participate in the LTIP.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 111
CORPORATE GOVERNANCE 2023 annual report on remuneration
Phantom share option plan
The Company operates the Plan in
accordance with the Plan rules, the Listing
Rules, the Disclosure and Transparency
rules and other applicable rules. In order
to retain talent, options are generally
granted in tranches exercisable at the
following times:
• As to 20% of the Ordinary Shares in
respect of which an option is granted,
from the first anniversary of the date
of grant;
• As to a further 20% of the Ordinary
Shares in respect of which an option is
granted, from the second anniversary
of the date of grant;
• As to a further 20% of the Ordinary
Shares in respect of which an option is
granted, from the third anniversary of
the date of grant;
• As to a further 20% of the Ordinary
Shares in respect of which an option is
granted, from the fourth anniversary of
the date of grant; and
• As to the remaining 20% of the Ordinary
Shares in respect of which an option is
granted, from the fifth anniversary of the
date of grant.
The Board retains discretion over a number
of areas relating to the operation and
administration of the Plan, which include,
but are not limited to: (i) who participates;
(ii) the timing of the grant of an award; and
(iii) the size of the award.
Dividend waiver
The trustee has agreed to waive any
dividends on shares held under the Plan
and the LTIP.
Treatment of existing
arrangements
For the avoidance of doubt, authority is
given to the Company to honour any
commitments entered into with current or
former Directors notwithstanding the
approval of the Policy. This will last until the
existing incentives vest (or lapse) or the
benefits of any contractual arrangements
no longer apply.
Remuneration scenarios for
Executive Directors
The bar charts below provide estimates of
the potential remuneration of the executive
directors for 2024.
Three scenarios are presented for each
executive director which are based on the
following assumptions:
The “minimum” columns are intended to
show the fixed level of remuneration to
which executive directors are entitled in
2024 irrespective of performance levels,
namely base salary, benefits using the
details set out in the single-figure table
provided on page 102 (which includes any
payments made in lieu of benefits made
under the executive directors employment
contracts for their roles as executives of the
Group and not under their service contracts
as executive directors) and any payments
made in lieu of the provision of a pension
scheme (which are paid under the executive
directors employment contracts for their
roles as executives of the Group and not
under their service contracts as executive
directors). No bonus payments are
assumed for minimum performance.
The “on target” scenario seeks to illustrate
the remuneration the executive directors
would receive if performance was in line
with expectation.
The “maximum” columns illustrate total
remuneration levels in circumstances where
the variable elements pay out in full, namely
an annual bonus payment of 240% for
Arfan Khan, the Company’s Chief
Executive Officer.
As stated above, no Executive Director
participated in the LTIP or the Phantom
Share Option Scheme in 2023 and the
Board will not award any shares under the
Phantom Share Option Scheme in 2024.
The Committee does not envisage any
awards under the Company’s existing
long-term incentive plan in 2024. Therefore,
no performance conditions have been set
for 2024.
ARFAN KHAN – CHIEF EXECUTIVE OFFICER (Amounts in USD thousand)
Minimum
On target
Maximum
100%
755
57%
36%
43%
1,318
64%
2,105
Fixed salary
Bonus
112 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
The Company may lawfully terminate any
Executive Director’s employment in the
following ways:
• At any time upon 6 months’ written
notice; and
• Without notice in circumstances where
the Company is entitled to terminate
for cause.
The lawful termination mechanisms
described above are without prejudice
to the employer’s ability in appropriate
circumstances to terminate in breach of
the notice period referred to above, and
thereby to be liable for damages to the
Executive Director.
The Executive Directors are not permitted
to take up any office or employment with,
or have any direct or indirect interest in,
any firm or company which is in direct or
indirect competition with the Company
or any other member of the Group, or
any company in which any member of the
Group has an interest, without the consent
of the Board.
In addition, the Chief Executive Officer is
subject to non-solicitation covenants in
relation to Group companies for 12 months
from the date of termination of his service
contract.
Copies of the Executive Directors’ service
agreements and the Non-Executive
Directors’ letters of appointment are
available for inspection at the Company’s
registered office during normal business
hours and at the Annual General Meeting.
Recruitment
The Committee expects any new Executive
Directors to be engaged on terms that are
consistent with this Policy, but the
Committee acknowledges that it cannot
always predict the circumstances under
which any new Executive Director may be
recruited and so, accordingly, in each case,
the Committee will consider:
• The objective of attracting, motivating
and retaining the highest calibre
directors in a manner that is consistent
with best practice and aligned with the
interests of the Company’s shareholders;
• Salary, benefits, annual bonus and
long-term incentives will be determined
within the framework of the Remuneration
Policy table on pages 109-111;
• Where an individual would be forfeiting
valuable remuneration in order to join the
Company, the need to retain flexibility
should be considered in order for the
Committee to be able to set base salaries
at a level necessary to facilitate the hiring of
the highest calibre candidates, including
awards or payments to compensate for
remuneration arrangements forfeited
on leaving a previous employer. The
Committee would require reasonable
evidence of the nature and value of any
forfeited compensation and would, to
the extent practicable, ensure any
compensation awarded was no more
valuable than the forfeited award;
• Judgement will be exercised to
determine the appropriate measure of
compensation for any forfeited award by
taking account of relevant factors such as
the value of any lost award, performance
conditions and the time over which they
would have vested or been paid;
• Where an existing employee of the
Company is promoted to the Board, the
Company will honour any commitment to
remuneration made in respect of a prior
role, including any outstanding awards of
options under the Plan;
• The need, in order to recruit the best
candidates, for the Company to offer
sign-on remuneration, the necessity and
level of which will depend on
circumstances; and
• Where an individual is relocating in order
to take up a role, the Company may
provide certain one-off benefits
including, but not limited to, reasonable
relocation expenses, accommodation,
housing allowance and assistance with
visa applications.
In making any decisions on remuneration
for new joiners (including NEDs), the
Committee will endeavour to balance the
expectations of shareholders with current
market and corporate governance best
practice and the requirements of any new
joiner, and would strive to pay no more than
is necessary to attract the right talent to
the role.
Service agreements
As at 31 December 2023, summary details
of each Director’s service agreement were
as follows:
Director’s service
agreement date
As most
recently
amended
(USD)
Arfan
Khan
26 January 2021
562,289
1. The remuneration of Arfan Khan is denominated
in GBP. 2023: GBP/USD: 1,243.
2. Annual salary and fees represents the total salary
and fees (excluding benefits/pension, and
discretionary remuneration) from the Group
for both the Director’s executive and director
service roles.
The appointment of each Executive
Director continues until the Company’s
Annual General Meeting and their ongoing
appointment is subject to being re-elected
as a director at each subsequent Annual
General Meeting. Any Executive Director
may be required to resign at any time in
accordance with the Company’s Articles or
for any regulatory reason such as the
revocation of any approvals required from
the Financial Conduct Authority (FCA).
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 113
CORPORATE GOVERNANCE 2023 annual report on remuneration
Payments for departing Executive Directors
Provision
Policy
Notice period and
compensation for
loss of office in
service contracts
6 months’ notice from the Company to Arfan Khan.
Base salary is paid in line with the notice period. Notice period payments will either be made as normal
(if the Executive Director continues to work during the notice period or is on gardening leave) or they will
be made as monthly payments in lieu of notice (subject to mitigation if alternative employment is found).
Treatment of annual
bonus on termination
No entitlement.
Treatment of
unvested share
option awards
under the Plan
Treatment of
unvested awards
under the LTIP
An Executive Director’s awards will generally lapse to the extent they have not vested on the date of voluntary
cessation of employment and any portion that remains outstanding but unexercised after 12 months following
such cessation will lapse. Mr Khan did not participate in the Plan in 2023.
For a Director considered to be a “good leaver” before the original vesting date (including leaving the Company
on retirement, redundancy, ill health, as a result of death in service or in other circumstances determined by the
Committee), outstanding awards will be pro-rated for time and vest subject to performance on the original vesting
date. For a director who is considered a “good leaver” after the original vesting date, any awards will remain
exercisable for a period of 12 months commencing on the date of cessation. For a Director whose employment is
terminated for any other reason, the award will lapse in full. Mr Khan did not participate in the LTIP in 2023.
In particular circumstances, an arrangement may be agreed to facilitate the exit of a particular individual. Any such arrangement would be
made bearing in mind the desire to minimise costs for the Group and only in circumstances where it is considered in the best interests of
shareholders.
Change of control
In accordance with the LTIP rules and the terms of the awards granted in 2017 and 2018 under the LTIP, if there is a sale of all or
substantially all of the Company or the Company’s business in circumstances where such sale has been approved by a majority of
shareholders and is at a price of $10 per share or more, then all awards granted will vest in full regardless of the achievement or otherwise
of applicable performance conditions on the date of such event if they have not already vested, and all awards will remain exercisable for
one month from such date. To the extent that any option is not exercised in such period, it shall lapse at the end of that period.
Non-Executive Directors
The Chairman and Executive Directors set the remuneration package for Non-Executive Directors in line with the Non-Executive Directors’
Remuneration Policy table and subject to the Company’s Articles of Association (the Articles).
Remuneration Policy for Non-Directors
Employees who are not directors are generally eligible for annual performance-based bonuses and may also be eligible for other bonuses
at varying percentages of their base compensation. Some employees are also participants in the LTIP and Plan.
Non-Executive Director appointment letters
The following table provides details of Non-Executive Director appointment letters as at 31 December 2023:
Name
Chris Cox
Position
Date of letter
of appointment
Expiry of then
current term
Independent Non-Executive Director
14 February 2023
14 February 2026
Martin Gudgeon
Non-Executive Director
14 February 2023
14 February 2026
Chris Hopkinson
Independent Non-Executive Director
14 February 2023
14 February 2026
Fiona Paulus
Independent Non-Executive Director
14 February 2023
14 February 2026
Stephen Whyte
Chairman, Non-Executive Director
14 February 2023
14 February 2026
Notice period
3 months
3 months
3 months
3 months
9 months
Each appointment is for an initial term of three years, subject to being re-elected at each Annual General Meeting, save that a Non-
Executive Director or the Company may terminate the appointment at any time upon one month’s written notice, or that a Non-Executive
Director may be required to resign at any time in accordance with the Articles of the Company, the UK Corporate Governance Code or for
any regulatory reason such as the revocation of approvals required from the FCA.
Each of the Non-Executive Directors is entitled to an annual fee paid in twelve equal instalments and to reimbursement of reasonable
expenses. There is no entitlement for Non-Executive Directors to participate in the Plan or the LTIP.
114 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
The Non-Executive Directors are not
permitted to take up any office or
employment with, or have any direct or
indirect interest in, any firm or company
that was in direct or indirect competition
with the Company without the consent of
the Board.
Upon termination of the appointment and
where such termination is for any reason
other than due to the Non-Executive
Director’s gross misconduct, material breach
of the terms of the appointment, act of fraud
or dishonesty or wilful neglect of the
Non-Executive Director’s duties, the Non-
Executive Director is entitled to be paid a
pro-rated amount of their fees in respect of
the period between the beginning of the
quarter in which termination took place and
the termination date.
Otherwise, none of the Non-Executive
Directors is entitled to any damages for loss
of office and no fee is payable in respect of
any unexpired portion of the term of the
appointment.
The Company intends to comply with
Provision 18 of the UK Corporate
Governance Code and accordingly all
Directors will stand for re-election by
shareholders at future Annual General
Meetings until the Board determines
otherwise.
Statement of consideration of
employment conditions elsewhere
in the Company
We have not consulted with employees on
the executive Remuneration Policy.
However, when determining the Policy for
Executive Directors we have been mindful
of the pay and employment conditions of
employees across the Group as a whole.
Statement of consideration of
shareholder views
Senior executive management of the
Company regularly meet with shareholders
and solicit their views on the Company’s
policies in relation to Director and
Executive remuneration, and take such
views into account when formulating
remuneration policies and remuneration
levels in specific cases.
Approval of the Directors’
remuneration report
The Directors’ remuneration report was
approved by the Board on 18 April 2024.
On behalf of the Board
Arfan Khan
Chief Executive Officer
18 April 2024
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 115
CORPORATE GOVERNANCE Directors’ report
Directors’ report
The Directors submit their report and the
consolidated audited financial statements
of the Group and the audited parent
financial statements of the Company for
the year ended 31 December 2023.
This report has been prepared in
accordance with the Large and Medium-
sized Companies and Groups (Accounts
and Reports) Regulations 2008.
The following are incorporated by
reference and shall be deemed to form
part of this Directors’ Report:
• The Strategic Report on pages 1-81;
• The Board and Governance report (which
includes the Board, the Corporate
Governance Report and the Directors’
Remuneration Report) on pages 82-115;
and
• The energy and global greenhouse gas
emissions disclosure on pages 70-72.
In addition, the following information is also
incorporated into this Directors’ Report by
reference:
Subject matter
Likely future developments
within the Group
Related party transactions
Going concern statement
Financial position and
performance of the Group
Greenhouse gas emissions
Directors’ share interests
Corporate governance
statement
Diversity
Page
39-40
105
46
41-47
70-72
104
82-83
60-63
Directors
Full biographical details of all Directors
(Atul Gupta, Sir Christopher Codrington, Bt,
Martin Cocker, Kaat Van Hecke, Arfan Khan)
of the Company who held office at some
point during the year ended 31 December
2023 and the Board Committees of which
they were members are set out on pages
84-85 of this Annual Report.
Full biographical details of all current
Directors of the Company and the Board
Committees of which they are members
are set out on pages 84-85 of this
Annual Report.
Dividends
No dividends were paid during the year
ended 31 December 2023.
No dividend is proposed to be paid in
2024 in respect of the year ended
31 December 2023.
Auditor
In accordance with section 418(2) of the
Companies Act 2006, each Director in
office at the date of this Directors’ Report
confirms that (a) so far as the Director is
aware, there is no relevant audit information
of which the Company’s auditor is unaware
and (b) the Director has taken all the steps
that he/she ought to have taken as a
Director to make him/herself aware of any
relevant audit information and to establish
that the Company’s auditor is aware of that
information.
On 6 March 2023, the Company announced
that it had appointed MHA as auditors to
the Group and Ernst & Young Kazakhstan
as auditors of Zhaikmunai LLP.
The appointment of MHA as auditors to the
Group was approved by shareholders at the
Company’s 2023 AGM.
The appointment of MHA as auditors to the
Group will be put to shareholders for
approval at the 2024 AGM.
Directors’ liabilities and
indemnities
The Company maintains liability insurance
for its Directors. All Directors are also in
receipt of an indemnity from the Company
under the Company’s Articles of
Association (the Articles) in respect of
(a) liability incurred by any Director due
to negligence, default, breach of duty or
breach of trust in relation to the affairs
of the Company, or any subsidiary
undertaking or (b) any liability incurred
by any Director in connection with the
activities of the Company, or any subsidiary
undertaking, in its capacity as a trustee of
an occupational pension scheme; in both
instances to the extent permitted under the
Companies Act 2006. Copies of the
Company’s Articles are available on the
Company’s website or at the Company’s
registered office during normal business
hours and will be available for inspection
at the Annual General Meeting.
In May 2015, the Board approved a policy
for the indemnification of Directors, officers
and other designated beneficiaries and the
entry by the Company into an accompanying
deed of indemnity.
The policy clarifies that the Company
will seek to provide the maximum
indemnification and protection to Group
Directors and officers permissible under
applicable law, except in cases of fraud or
wilful default, including but not limited to:
i. providing compensation for losses
suffered in the course of acting as a
Director or officer in the interests of
the Group,
ii. providing Directors and officers with
quality external legal representation
and external professional advisers,
iii. assisting Directors or officers with
repatriation following a third-party claim,
iv. continuing to make payment of a
Director’s or officer’s remuneration and
benefits while such Director or officer is
under suspension, investigation or
detention by order of a third party,
v. taking reasonable steps to place any such
Director or officer in a similar position
working in another location or elsewhere
in the Group which would allow his/her
employment to continue and to
compensate for any adverse financial
consequences they incur as a result of
their loss of office, or (vi) maintaining
customary Directors’ and officers’ liability
insurance policies.
The deed of indemnity is intended to cover
any insufficiency in the protection granted
to Directors and officers under the Articles
which could expose such persons to
substantial liability to third parties,
including governmental authorities, in
particular in jurisdictions where significant
uncertainty exists in relation to the
interpretation and application of the law.
The deed of indemnity allows Directors,
officers and other designated beneficiaries
to enforce the protection provided for
under the Articles without any further
action by the Company being required.
116 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
The Company did not acquire any of its
own shares during 2023 either itself or
through a person acting in his own name
but on the Company’s behalf.
None of the circumstances referred to in
paragraphs 8 and 9 of Schedule 7 of the
Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations
2008 applies.
Paragraph 10 Schedule 7 of the Large
and Medium-sized Companies and
Groups (Accounts and Reports)
Regulations 2008 The Company’s
policy is to:
• Give full and fair consideration to
applications for employment made by
disabled persons.
• Continue the employment of, and
arrange training for, employees who
have become disabled when they were
employed by the Company.
• Eliminate bias in relation to the training,
career development and promotion of
disabled persons employed by the
Company.
Paragraph 11 and 11A Schedule 7
of the Large and Medium-sized
Companies and Groups (Accounts
and Reports) Regulations 2008 Action
taken to introduce, maintain or
develop arrangements aimed at the
following is described on pages 62-63:
• Providing employees with information on
matters of concern to them as employees.
• Consulting employees or their
representatives on a regular basis so that
the employees’ views can be taken into
account in making decisions which are
likely to affect their interests.
• Encouraging employee involvement
in the Company’s performance by
an employees’ share scheme or
other means.
• Achieving common employee awareness
of the financial and economic factors
affecting the Company’s performance.
Political donations
The Group made no political donations
during the year 2023.
Contributions to non-UK
political parties
No contributions to non-UK political parties
were made during the year 2023.
Research and development
The Group is not involved in any activities in
the field of research and development.
Branches
The Company is registered in England and
Wales and during 2018 moved its place of
effective management and tax residence
from the Netherlands to the United
Kingdom. As the Group is a global
business, our interests and activities are
held or operated through subsidiaries and
branches and subject to the laws and
regulations of many different jurisdictions.
Share capital
As at 31 December 2023, the Company’s
issued share capital was £16,938,159.646
divided into 169,381,561 Ordinary Shares
each having a nominal value of £0.01 and
15,244,344,036 deferred shares each
having a nominal value of £0.001 (the
“Deferred Shares”). All of the Company’s
issued Ordinary Shares were fully paid up
and rank equally in all respects and the
Deferred Shares have no voting rights in
the capital of the Company. The Company
intends to cancel the Deferred Shares in
due course. The rights attached to the
Ordinary Shares and Deferred Shares, in
addition to those conferred on their holders
by law, are set out in the Articles. The
existing ordinary shareholders were diluted
to 11.1% subject to further dilution to 10% if
the warrants held by noteholders are
exercised.
Intertrust Employee Benefit Trustee Limited
(the Trust) holds shares in the Company in
trust for the purposes of the Company’s
phantom share option plan, and the rights
attaching to these shares are exercised by
independent trustees. As at 31 December
2023, the Trust held 294,887 Ordinary
Shares in the Company.
Share rights
Without prejudice to any rights attached to
any existing shares, the Company may issue
shares with rights or restrictions as
determined by either the shareholders by
ordinary resolution or, subject to and in
default of such determination, the Board.
Voting rights
There are no restrictions on voting rights of
shares in the Articles and at a general
meeting every shareholder present in
person or by proxy has one vote for every
share held by him or her. No shareholder
shall be entitled to vote either personally or
by proxy or to exercise any other right in
relation to general meetings if any sum due
from him or her to the Company in respect
of that share remains unpaid.
Transfer of shares and warrants
The Articles provide that transfers of
certificated shares must be effected in
writing duly signed by or on behalf of the
transferor and, except in the case of fully
paid shares, by or on behalf of the
transferee. The transferor shall remain the
holder of the shares concerned until the
name of the transferee is entered on the
Register of Members in respect of those
shares. Transfers of uncertificated shares
may be effected by means of the relevant
electronic system unless the Uncertificated
Securities Regulations 2001 provide
otherwise.
The Directors may refuse to register a
transfer of shares in favour of more than
four persons jointly.
The warrants issued on 9 February 2023
are not transferable. There are no other
agreements between holders of securities
that are known to the Company and may
restrict transfer of securities or voting rights.
Directors, Articles and purchase
of shares
The Articles were adopted on 29 April 2022
and may only be amended by special
resolution at a general meeting of the
shareholders (and where required, with
the consent of the Warrant Trustee).
The Directors’ powers are conferred on
them by UK legislation and by the Articles.
In accordance with the Articles, the Board
has the power at any time to elect any
person to be a Director. Any person so
appointed by the Directors will retire at the
next Annual General Meeting in
accordance with the Articles; retiring
Directors may be eligible for annual
re-election.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 117
CORPORATE GOVERNANCE Directors’ report
Paragraph 11B and 11C Schedule 7
A summary of the following is described on pages 20-21.
• How Directors have had regard to the need to foster the Company’s business relationships with suppliers, customers and others.
• The effect of that regard on the principal decisions taken by the Company during the financial year.
Shareholders holding 3% or more of the Company’s issued share capital
As of 31 December 2023, the following significant shareholdings of voting rights in the share capital of the Company had been disclosed
to the Company under Disclosure Guidance and Transparency Rule (DTR) 5.
Name
ICU Trading Ltd. and Westal Holdings Ltd.
EMOV Caspian Holdings Limited
Amundi (UK) Limited and Amundi Asset Management
Number of
Ordinary
Shares
% of issued
Ordinary
Shares
42,144,784
31,975,192
16,489,360
24.88
18.88
9.74
Nature of
Holding
Direct
Direct
Direct
Details of all information provided to the Company pursuant to Financial Conduct Authority’s (FCA) DTRs is publicly available to view via
the regulatory information service on the Company’s website.
Since 31 December 2023, disclosures have been made to the Company under DTRs such that as at 18 April 2024, the following significant
shareholdings of voting rights in the share capital of the Company had been disclosed to the Company under Disclosure Guidance and
Transparency Rule (DTR) 5.
Name
ICU Trading Ltd. and Westal Holdings Ltd.
RD Energy LLC
Amundi (UK) Limited and Amundi Asset Management
Number of
Ordinary
Shares
% of issued
Ordinary
Shares
42,144,784
31,975,192
16,489,360
24.88
18.88
9.74
Nature of
Holding
Direct
Direct
Direct
Financial risk management
The Company’s financial risk management objectives and policies, including its use of financial instruments, can be found in Note 31 on
pages 151-152 to the financial statements.
Change of control
The following are significant agreements the Company has entered into which would be affected on a change of control of the Company
following a takeover:
• In the event of a takeover of the Company, all options under the Company’s phantom share option plan shall be deemed to have vested
and the Board shall direct Intertrust Employee Benefit Trustee Limited to allow each option-holder to exercise his or her options at any
time from the date of the change of control up to the 10th anniversary of the date of grant (the Period). Any options that have not been
exercised will lapse at the end of the Period; and
• In the event of a takeover of the Company, all options under the Company’s employee long-term incentive plan shall be deemed to have
vested and the Board shall direct Intertrust Employee Benefit Trustee Limited to allow each option-holder to exercise his or her options
during the one-month period following the change of control event. Any options that have not been exercised will lapse at the end of
this period.
As at 31 December 2023, the 2012 Bonds, 2014 Bonds, SUNs and SSNs contained change of control provisions. If a change of control
occurs, the Company was required to offer to repurchase the 2012 Bonds, 2014 Bonds, SSNs and SUNs at 101% of their principal amount,
plus accrued and unpaid interest to the date of the purchase.
There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or
employment or otherwise that occurs specifically because of a takeover.
Corporate governance statement
Pursuant to Disclosure Guidance and Transparency Rule 7, certain parts of the Corporate Governance statement are required to be
outlined in the Directors’ Report. This information is laid out in the corporate governance section of this Annual Report. Information
regarding the main features of the Company’s internal control and risk management arrangements in relation to the financial reporting
process can be found in the Strategic Report and the report of the Audit Committee.
118 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Requirements of the Listing Rules
The following table provides references to where the information required by Listing Rule 9.8.4R is disclosed.
Information required
Capitalised interest
Publication of unaudited financial information
Details of any long-term incentive schemes
established to specifically recruit or retain a director
Waiver of emoluments by a director
Allotment of equity securities for cash
Participation in a placing of equity securities
Contracts of significance
Contracts for the provisions of services by a
controlling shareholder
Dividend waiver
Agreements with controlling shareholder
Sub-section of
Listing Rule 9.8.4R
Reference
(1)
(2)
(4)
(5) (6)
(7) (8)
(9)
(10)
(11)
(12) (13)
(14)
Please refer to Note 5 to the financial statements, page 142
Not applicable
Not applicable
No such waivers
No such share allotments
Not applicable
No such contracts
Not applicable
Page 111
Not applicable as the Company does not have a “controlling
shareholder” within the definition under Listing Rule 6.1.2A R
Important events since the end of the financial year
Major events after 31 December 2023 are disclosed in Note 32 to the consolidated audited financial statements.
This report was approved by the Board on 18 April 2024.
On behalf of the Board
Arfan Khan
Chief Executive Officer
18 April 2024
Nostrum Oil & Gas PLC, registered number 8717287
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 119
CORPORATE GOVERNANCE Directors’ report
Responsibility statement
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors to
prepare such financial statements for each
financial year that give a true and fair view
of the state of affairs of the Group and the
Company as at the end of the financial year,
and of the profit or loss of the Group for the
financial year. Under that law the Directors
have elected to prepare the Group
and Company financial statements in
accordance with UK adopted International
Accounting Standards. Under company law,
the Directors must not approve the financial
statements unless they are satisfied that
they give a true and fair view of thestate
of affairs of the Group and the Parent
Company and of their profit or loss for
that period.
In preparing these financial statements,
the Directors are required to:
• Select suitable accounting policies in
accordance with IAS 8 Accounting
Policies, Changes and Accounting
Estimates and Errors and then apply
them consistently;
• Make judgements and accounting
estimates that are reasonable and
prudent;
• Present information, including accounting
policies, in a manner that provides
relevant, reliable, comparable and
understandable information;
• State that the Group and the Company
have complied with the UK adopted
International Accounting Standards,
subject to any material departures
disclosed and explained in the financial
statements;
• Provide additional disclosures when
compliance with specific requirements of
IFRS is insufficient to enable users to
understand the impact of particular
transactions, other events and conditions
on the Group’s and Company’s financial
position and performance; and
• Prepare the Group’s and Company’s
financial statements on a going concern
basis, unless it is inappropriate to do so.
Having taken all the matters considered by
the Board and brought to the attention of
the Board during the year into account,
and having reviewed the Annual Report
(including the Strategic Report), the
Directors consider the Annual Report and
Accounts, taken as a whole, to be fair,
balanced and understandable, providing
the information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
The Directors have responsibility for:
• Ensuring that the Company and the
Group keep accounting records which
disclose with reasonable accuracy the
financial position of the Company and the
Group and which enable them to ensure
that its financial statements and Directors’
Remuneration Report comply with the
Companies Act 2006;
• Taking such steps as are reasonably open
to them to safeguard the assets of the
Group and to prevent and detect fraud
and other irregularities; and
• The maintenance and integrity of the
corporate and financial information on
the Company’s website.
Each of the Directors whose names and
functions are listed on pages 84-85
confirms, that to the best of their
knowledge:
• The Company and Group financial
statements, which have been prepared
in accordance with the UK adopted
International Accounting Standards,
give a true and fair view of the assets,
liabilities, financial position and profit
or loss of the Company and the
undertakings included in the
consolidation taken as a whole;
• The Strategic Report contained in the
Annual Report includes a fair review of
the development and performance of
the business and the position of the
Company and the undertakings included
in the consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face; and
• The Annual Report and financial
statements, taken as a whole, are fair,
balanced and understandable and
provide the information necessary for
shareholders to assess the Company’s
position and performance, business
model and strategy.
By order of the Board
Arfan Khan
Chief Executive Officer
18 April 2024
120 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Independent auditors report
Independent auditor’s report to the
members of Nostrum Oil & Gas plc
For the purpose of this report, the terms
“we” and “our” denote MHA in relation to
UK legal, professional and regulatory
responsibilities and reporting obligations
to the members of Nostrum Oil & Gas plc.
For the purposes of the table on pages xx
to xx that sets out the key audit matters and
how our audit addressed the key audit
matters, the terms “we” and “our” refer to
MHA. The Group financial statements, as
defined below, consolidate the accounts of
Nostrum Oil & Gas plc and its subsidiaries
(the “Group”). The “Parent Company” is
defined as Nostrum Oil & Gas plc, as an
individual entity. The relevant legislation
governing the Company is the United
Kingdom Companies Act 2006
(“Companies Act 2006”).
Opinion
We have audited the financial statements of
Nostrum Oil & Gas plc for the year ended
31 December 2023.
The financial statements that we have
audited comprise:
• the Consolidated Statement of Financial
Position;
• the Consolidated Statement of
Comprehensive Income;
• the Consolidated Statement of Cash
Flows;
• the Consolidated Statement of Changes
in Equity;
• Notes 1 to 32 of the consolidated
financial statements, including significant
accounting policies;
• The Parent Company Statement of
Financial Position;
• the Parent Company Statement of Cash
Flows;
• the Parent Company Statement of
Changes in Equity; and
• Notes 1 to 16 of the company financial
statements, including significant
accounting policies.
The financial reporting framework that has
been applied in the preparation of the
Group and Parent Company’s financial
statements is applicable law and
International Financial Reporting Standards
for use in the United Kingdom (“UK
adopted IFRS”).
In our opinion the financial statements:
• Auditing the key factors and assumptions
• give a true and fair view of the state of the
Group’s and of the Parent Company’s
affairs as at 31 December 2023 and of the
Group’s profit for the year then ended;
• have been properly prepared in
accordance with UK adopted IFRS; and
• have been prepared in accordance with
the requirements of the Companies
Act 2006.
Our opinion is consistent with our reporting
to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK)
(ISAs (UK)) and applicable law. Our
responsibilities under those standards
are further described in the Auditor
Responsibilities for the Audit of the
Financial Statements section of our report.
We are independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, including the FRC’s
Ethical Standard as applied to listed public
interest entities, and we have fulfilled our
ethical responsibilities in accordance with
those requirements. We believe that the
audit evidence we have obtained is
sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating
to going concern
In auditing the financial statements, we
have concluded that the Directors' use
of the going basis of accounting in the
preparation of the financial statements is
appropriate.
Our evaluation of the Directors’ assessment
of the Group’s and the Parent Company’s
ability to continue to adopt the going
concern basis of accounting included:
• Determining if the directors’ process was
sufficiently rigorous to support the going
concern assessment;
• Obtaining the directors’ going concern
assessment, including the cash flow
forecast for the period covered by the
going concern assessment to 30 June
2025. The directors have modelled a
number of adverse scenarios in order
to incorporate unexpected changes to
the forecast liquidity of the Group.
We evaluated the sufficiency of the
sensitivities performed, in particular
whether the adverse scenarios met the
severe but plausible test;
adopted in the assessment of going
concern and the cash flow model,
including considering whether
management had exercised any bias
in selecting their assumptions, by
comparing against past performance
and available market data;
• Assessing the appropriateness of the
method used to calculate the cash flow
forecast. We tested the methodology
and calculations;
• Checking the consistency of the factors
and assumptions adopted in the going
concern assessment with other areas of
our audit, including the oil and gas asset
impairment test;
• Considering the results of the reverse
stress test in order to identify what factors
would lead to the Group utilising all
liquidity during the going concern
period. We assessed the likelihood of
these factors in the context of the outlook
for commodity prices and against historic
market lows as well as our own industry
experience;
• Challenging the impact of the Russia/
Ukraine war on the going concern
conclusion, including whether this
threatened the Group’s ability to achieve
forecast production and cash flows,
whether there had been a loss of
suppliers or customers, or whether
sanctions inhibited the Group’s ability
to execute the restructuring; and;
• Considering whether management’s
disclosures in the Annual Report and
Accounts were appropriate.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the Group’s
and Parent Company’s ability to continue
as a going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
In relation to the Group’s reporting
on how it has applied the UK Corporate
Governance Code, we have nothing
material to add or draw attention to in
relation to the Directors’ statement in the
company’s financial statements about
whether the directors considered it
appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities
of the directors with respect to going
concern are described in the relevant
sections of this report.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 121
FINANCIALS Independent auditors report
Overview of our audit approach
Scope
Our audit was scoped by obtaining an understanding of the Group, including the Parent Company, and its environment,
including the Group’s system of internal control, and assessing the risks of material misstatement in the financial
statements. We also addressed the risk of management override of internal controls, including assessing whether
there was evidence of bias by the directors that may have represented a risk of material misstatement.
We, and our component auditors acting on specific group instructions issued by us, undertook full scope audits on the
complete financial information of 2 components; Zhaikmunai LLP and Nostrum Oil & Gas plc (Parent company), specified
audit procedures on particular aspects and balances on another 5 components in Kazakhstan, the Netherlands and Belgium.
Materiality
Group
Parent
2023
2022
US$949k
US$2.3m
2.25% of adjusted EBITDA (2022: 2% of adjusted EBITDA)
US$1.9m
US$8.9m
1% of Parent Company’s Equity (2022: 1% of Parent Company's Equity). Component
materiality for group purposes set at US$500k (2022: US$310k)
Key audit matters
Recurring • Estimation of oil and gas reserves and its impact on impairment testing, depreciation, depletion and amortisation (DD&A)
and the decommissioning provision;
• Impairment of oil & gas development and production fixed assets;
• Valuation of new Notes (SSNs and SUNs) and the accounting treatment of the debt to equity swap
Event
driven
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those matters which had the greatest effect on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Estimation of oil and gas reserves and its impact on impairment testing, depreciation,
depletion and amortisation (DD&A) and the decommissioning provision
Key observations
communicated to
the Group’s Audit
Committee
No material
issues have been
identified from
the audit
procedures
performed.
Key audit matter description
How the scope of our audit responded to the key audit matter
Oil and gas reserves are a material factor in
computing depreciation, depletion and
amortisation (the “DD&A”) and the
decommissioning provision.
We have performed, in conjunction with the component auditor, the following
procedures in respect of the oil and gas reserve estimation:
• Carried out walkthrough procedures and updated understanding the Group’s
internal process and key controls associated with oil and gas reserves estimation.
Significant judgement and estimations are made
by the management, which are potentially
susceptible to management bias, and hence
causing an impact on the financial statements
due to the technical uncertainty in assessing
reserves quantities.
There is also a risk that management may influence
the significant judgements and estimates in
respect of commercial assumptions in order
to portray favourable reserves disclosure to
the market.
• Assessed the competence of internal management’s specialists, to satisfy
ourselves that they are appropriately qualified to carry out the volume’s
estimation.
• Checked the source, completeness and accuracy of the data used to estimate.
• Corroborated management’s commercial assumptions by checking that they lie
within an acceptable range compared to publicly available benchmarks where
available.
• Compared management’s internal assumptions to the latest plans and budgets
for consistency and challenged management’s capabilities to execute on such
plans by comparison to prior performance.
• Validated that the updated reserves estimates were appropriately included in
the Group’s consideration of oil and gas asset impairment testing, in accounting
for DD&A and the determination of decommissioning dates.
• Reviewed the accuracy of the reserves and resource estimates disclosure in the
Annual Report
• Obtained and recalculated management’s decommissioning provision
assessment.
• Critically assessed key inputs and challenge management’s assumptions and
judgements for reasonableness and indictors of bias.
122 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Key observations
communicated to the
Group’s Audit
Committee
No material issues
have been identified
from the audit
procedures
performed.
Impairment of oil & gas development and production fixed assets
Key audit matter description
How the scope of our audit responded to the key audit matter
There is a risk in management’s judgement made
on the impairment or impairment reversal of oil
and gas assets since the recoverable amount of
the oil and gas assets is sensitive to the changes in
key inputs and assumptions, which may include
the estimation of future prices of oil, natural gas
and related products, the discount rate applied to
future cash flow forecasts and the assumptions
relevant to production volumes.
There is also a risk that management may influence
the significant judgements and estimates in
respect of its key assumptions in order to
understate the impairment charge to achieve
a targeted result.
We have performed, in conjunction with the component auditor, the following
procedures in respect of the impairment and production fixed assets:
• Obtained and evaluated management’s assessment of indicators of
impairment or impairment reversal.
• Walked through the controls designed by the Group relating to the
assessment of the recoverable amount of oil & gas assets for impairment.
• Assessed whether the value in use (VIU) or the fair value less costs of
disposal (FVLCD) represents the higher recoverable amount.
• Verified the integrity of supporting discounted cash flow models with the
assistance of experts.
• Evaluated the oil & gas prices and discount rate assumptions by comparing
forecast price assumptions to the latest market evidence available,
including forward curves, brokers’ estimates and other long-term price
forecasts; and benchmarking the discount rate to the risks faced by
the Group.
• Assessed the appropriateness of the oil and gas reserves and resources
estimates and evaluated the risking factors applied in estimating the value
associated with the contingent resources.
• Challenged the valuation methodology for estimating the recoverable
amount; specifically the value attributed to the contingent resources and
the opportunity for utilising the spare GTU processing capacity, including
the related judgements around risking.
• Tested forecast cash flows by comparing the assumptions used within the
impairment models to the approved budgets, business plans and other
evidence of future intentions.
• Compared the exchange rate assumptions to external market data.
• Evaluated management’s sensitivity analysis in order to assess the potential
impact of a range of reasonably possible outcomes. These sensitivities
include adjustments to the discount rate, oil & gas prices, future production
volumes, opex and capex assumptions.
Valuation of new Notes (SSNs and SUNs) and the accounting treatment of the debt to equity swap
In February 2023 the Group restructured its debt
pursuant to the terms of the Scheme sanctioned
by the Court on 26 August 2022.
We have performed the following procedures in respect of the new Notes:
• Obtained and reviewed management’s paper on the restructuring
(project ‘Newport’).
As a result of implementation of the restructuring, a
portion of the Group's Notes were exchanged for
$250 million of Senior Secured Notes (SSNs) and
$345 million of Senior Unsecured Notes (SSNs),
while the remainder of the Existing Notes together
with accrued but unpaid interest were converted
into fully paid ordinary shares which were then
subject, together with the existing ordinary shares
to a share consolidation and sub division exercise..
The new Notes mature in June 2026.
Management judgement is required to determine
if the new Notes are substantially different from the
old Notes in line with IFRS 9 and therefore if these
are recognised as a new liability.
• Considered whether the derecognition criteria of IFRS 9 have been met, on
the basis that the new loans include substantially different terms.
• Considered the accounting treatment regarding the share capital issued in
exchanged for debt and challenged the associated profit recognition and
movement in reserves in accordance with IFRIC 19.
• Considered the fair value of the share capital exchanged and challenged
the accounting treatment of the share premium and share consolidation
and sub division.
• Assessed management’s fair value calculation of the new notes under
IFRS 9, including reliance on management experts.
• Assessed and interrogated supporting valuation models, including
assessment of key inputs and management judgements.
• Engaged an auditor’s expert to assist with the reviews of the valuation
methodology and model.
• Evaluated the appropriateness of financial statement disclosures.
No material issues
have been identified
from the audit
procedures
performed.
Our application of materiality
Our definition of materiality considers the
value of error or omission on the financial
statements that, individually or in
aggregate, would change or influence
the economic decision of a reasonably
knowledgeable user of those financial
statements. Misstatements below these
levels will not necessarily be evaluated as
immaterial as we also take account of the
nature of identified misstatements,
and the particular circumstances of their
occurrence, when evaluating their effect
on the financial statements as a whole.
Materiality is used in planning the scope
of our work, executing that work and
evaluating the results.
Materiality in respect of the Group was set
at US$949,000 (2022: US$2,300,000) which
was determined based on 2.25% (2022: 2%)
of the Group’s adjusted EBITDA (as defined
on page 47). Adjusted EBITDA was deemed
to be the appropriate benchmark for the
calculation of Group materiality as this is a
KPI for the Group in the assessment of the
performance of management, and market
and analyst commentary also uses EBITDA
to comment on the performance of the
Group. In our opinion this is therefore the
benchmark with which the users of the
financial statements are principally
concerned.
Materiality in respect of the Parent
Company was set at US$1,920,000
(2022: US$8,900,000) determined on the
basis of 1% (2022: 1%) of the Parent
Company’s Equity. Component materiality
for group purposes was set at US$500,000
(2022: US$310,000)
Given the non-trading status of the parent,
having a materiality based on 1% of Parent
Company’s Equity is considered an
appropriate approach to benchmarking
materiality as this is primarily what the users
of the financial statements are concerned
with given the loan notes and conversion
during the year.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 123
FINANCIALS Independent auditors report
Component materiality was used by the
auditors to cover the audit risk for the areas
covering significant risk for misstatement.
Performance materiality is the application
of materiality at the individual account or
balance level, set at an amount to reduce,
to an appropriately low level, the
probability that the aggregate of
uncorrected and undetected
misstatements exceeds materiality for the
financial statements as a whole.
Performance materiality for the Group was
set at US$570,000 (2022: US$1,380,000)
and at US$1,152,000 (2022: US$5,340,000)
for the Parent Company which represents
60% (2022: 60%) of the above
materiality levels.
The determination of performance
materiality reflects our assessment of the
risk of undetected errors existing, the
nature of the systems and controls and the
level of misstatements arising in
previous audits.
We agreed to report any corrected or
uncorrected adjustments exceeding
US$47,450 in to the Audit Committee as
well as differences below this threshold that
in our view warranted reporting on
qualitative grounds.
Overview of the scope of the
Group and Parent Company audits
Our assessment of audit risk, evaluation of
materiality and our determination of
performance materiality sets our audit
scope for each company within the Group.
Taken together, this enables us to form an
opinion on the consolidated financial
statements. This assessment takes into
account the size, risk profile, organisation /
distribution and effectiveness of group-
wide controls, changes in the business
environment and other factors such as
recent internal audit results when assessing
the level of work to be performed at each
component.
In assessing the risk of material
misstatement to the consolidated financial
statements, and to ensure we had adequate
quantitative and qualitative coverage of
significant accounts in the consolidated
financial statements, of the 14 reporting
components of the group, we identified
2 components in Kazakhstan and the UK
which represent the principal business units
within the Group.
Full scope audits – Of the 14 components
selected, full scope audits of the complete
financial information of 2 components;
Zhaikmunai LLP Chinarevkoye field and
Nostrum Oil & Gas plc were undertaken,
these entities were selected based upon
their size or risk characteristics.
Limited scope audits – Specific procedures were undertaken on 5 components; Nostrum
Oil & Gas Coöperatief UA, Nostrum Oil & Gas Finance B.V., Nostrum Services N.V.,
Nostrum Services N.V. – KZ Branch and Postiv Invest. Our audit work was executed
at group materiality.
Our audit scoping coverage for the key balances is summarised in the charts below.
The coverage achieved by our audit procedures was:
Name
Revenue
PBT
Gross assets
Full scope
Specified audit
procedures
Analytical
review
100%
55%
62%
0%
45%
38%
0%
0%
0%
Total
100%
100%
100%
The group audit team led and directed the
audit work performed by the component
auditors in Kazakhstan and Belgium
through a combination of group planning
meetings and calls, provision of group
instructions (including detailed
supplemental procedures), review and
challenge of related component interoffice
reporting and of findings from their
working papers, review of component
auditors working papers, and interaction
on audit and accounting matters which
arose, which included assessing the
appropriateness of conclusions and
consistency between reported findings and
work performed.
The control environment
We evaluated the design and
implementation of those internal controls of
the Group, including the Parent Company,
which are relevant to our audit, such
as those relating to the financial
reporting cycle.
Component IT audit specialists were
engaged to get an understanding of the
general IT environment and general IT
controls for the businesses critical
applications principally based in
Kazakhstan.
Climate-related risks
In planning our audit and gaining an
understanding of the Group and Parent
Company, we considered the potential
impact of climate-related risks on the
business and its financial statement. We
obtained management’s climate-related
risk information, along with relevant
documentation relating to management’s
assessment and held discussions with
management to understand their
processes for identifying climate-related
matters.
We engaged specialists to assess, amongst
other factors, the benchmarks used by
management, the nature of the group’s
business activities, its processes and the
geographic distribution of its activities.
We designed audit procedures to
specifically consider those assets and
liabilities where we anticipated, based
on the work performed, that the highest
impact arising from climate change might
fall. We have reviewed the information
received by management and have not
identified any additional climate related
risks to be disclosed within the financial
statements.
Reporting on other information
The other information comprises the
information included in the annual report
other than the financial statements and our
auditor’s report thereon. The directors are
responsible for the other information
contained within the annual report. Our
opinion on the financial statements does
not cover the other information and, except
to the extent otherwise explicitly stated in
our report, we do not express any form
of assurance conclusion thereon. Our
responsibility is to read the other
information and, in doing so, consider
whether the other information is materially
inconsistent with the financial statements or
our knowledge obtained in the course of
the audit, or otherwise appears to be
materially misstated. If we identify such
material inconsistencies or apparent
material misstatements, we are required to
determine whether this gives rise to a
material misstatement in the financial
statements themselves. If, based on the
work we have performed, we conclude that
there is a material misstatement of this
other information, we are required to report
that fact.
We have nothing to report in this regard.
Strategic report and
directors report
In our opinion, based on the work
undertaken in the course of the audit:
• the information given in the strategic
report and the directors’ report for the
financial year for which the financial
statements are prepared is consistent
with the financial statements; and
• the strategic report and the directors’
report have been prepared in accordance
with applicable legal requirements.
124 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
In the light of the knowledge and
understanding of the Group and the Parent
Company and their environment obtained
in the course of the audit, we have not
identified material misstatements in the
strategic report or the directors’ report.
Directors’ remuneration report
Those aspects of the director’s
remuneration report which are required
to be audited have been prepared in
accordance with applicable legal
requirements.
Corporate governance statement
We have reviewed the directors’ statement
in relation to going concern, longer-term
viability and that part of the Corporate
Governance Statement relating to the
entity’s voluntary compliance with the
provisions of the UK Corporate
Governance Code.
Based on the work undertaken as part of
our audit, we have concluded that each of
the following elements of the Corporate
Governance Statement is materially
consistent with the financial statements and
our knowledge obtained during the audit:
• Directors' statement with regards the
appropriateness of adopting the going
concern basis of accounting and any
material uncertainties identified set out
on page 46;
• Directors’ explanation as to its
assessment of the group’s prospects, the
period this assessment covers and why
the period is appropriate set out on
page 46;
• Director’s statement on whether it has a
reasonable expectation that the group
will be able to continue in operation and
meets its liabilities set out on page 46;
• Directors' statement on fair, balanced
and understandable set out on page 120;
• Board’s confirmation that it has carried
out a robust assessment of the emerging
and principal risks set out on page 32-33;
• Section of the annual report that
describes the review of effectiveness of
risk management and internal control
systems set out on page 97;; and
• Section describing the work of the audit
committee set out on pages 93-98.
Matters on which we are required
to report by exception
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not
been kept by the parent company, or
returns adequate for our audit have not
been received by branches not visited by
us; or
• the parent company financial statements
are not in agreement with the accounting
records and returns; or
• certain disclosures of directors’
remuneration specified by law are not
made; or
• the part of the directors’ remuneration
report to be audited is not in agreement
with the accounting records and returns;
or
• we have not received all the information
and explanations we require for our audit;
or
• a corporate governance statement has
not been prepared by the Parent
Company.
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement, the directors are
responsible for the preparation of the
financial statements and for being satisfied
that they give a true and fair view, and for
such internal control as the directors
determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
Group’s and the Parent Company’s ability
to continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern basis
of accounting unless the directors either
intend to liquidate the Group or Parent
Company or to cease operations, or have
no realistic alternative but to do so.
Auditor responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance but is not a guarantee that an
audit conducted in accordance with ISAs
(UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error
and are considered material if, individually
or in aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities
for the financial statements is located on
the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities . This description
forms part of our auditor’s report.
Extent to which the audit was
considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances
of non-compliance with laws and
regulations. We design procedures in line
with our responsibilities, outlined above, to
detect material misstatements in respect of
irregularities, including fraud.
These audit procedures were designed to
provide reasonable assurance that the
financial statements were free from fraud or
error. The risk of not detecting a material
misstatement due to fraud is higher than
the risk of not detecting one resulting from
error and detecting irregularities that result
from fraud is inherently more difficult than
detecting those that result from error, as
fraud may involve collusion, deliberate
concealment, forgery or intentional
misrepresentations. Also, the further
removed non-compliance with laws and
regulations is from events and transactions
reflected in the financial statements, the
less likely we would become aware of it.
Identifying and assessing
potential risks arising from
irregularities, including fraud
The extent of the procedures undertaken to
identify and assess the risks of material
misstatement in respect of irregularities,
including fraud, included the following:
• We considered the nature of the industry
and sector the control environment,
business performance including
remuneration policies and the Group’s,
including the Parent Company’s, own risk
assessment that irregularities might occur
as a result of fraud or error. From our
sector experience and through
discussion with the directors, we
obtained an understanding of the legal
and regulatory frameworks applicable
to the Group focusing on laws and
regulations that could reasonably be
expected to have a direct material effect
on the financial statements.
• We enquired of the directors and
management and the Audit Committee
concerning the Group’s and the Parent
Company’s policies and procedures
relating to:
• identifying, evaluating and complying
with the laws and regulations and
whether they were aware of any
instances of non-compliance;
• detecting and responding to the risks
of fraud and whether they had any
knowledge of actual or suspected
fraud; and
• the internal controls established to
mitigate risks related to fraud or
non-compliance with laws and
regulations.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 125
FINANCIALS Independent auditors report
• We assessed the susceptibility of the
financial statements to material
misstatement, including how fraud might
occur by evaluating management’s
incentives and opportunities for
manipulation of the financial statements.
This included utilising the spectrum of
inherent risk and an evaluation of the risk
of management override of controls.
• As a result of these procedures we
determined that the principal risks were
management bias in accounting
estimates, particularly in determining
impairment of oil and gas reserves, and
the potential for a breach of sanctions
and/or counter sanctions related to the
Russia and Ukraine conflict. The group
engagement team shared this risk
assessment with the Component
Auditors of Significant Subsidiaries so
that they could include appropriate audit
procedures in response to such risks in
their work.
Audit response to risks identified
In respect of the above procedures:
• we corroborated the results of our
enquiries through our review of the
minutes of the Group’s and the Parent
Company’s board meetings;
• we and the component auditors visited
the operations in Kazakhstan observing
operations and carrying out a physical
verification of inventory and observed
operations;
• audit procedures performed by the
engagement team in connection with
the risks identified included:
• reviewing financial statement
disclosures and testing to supporting
documentation to assess compliance
with applicable laws and regulations
expected to have a direct impact on
the financial statements;
• testing journal entries, including those
processed late for financial statements
preparation, those posted by
infrequent or unexpected users, those
posted to unusual account
combinations;
• evaluating the business rationale of
significant transactions outside the
normal course of business, and
reviewing accounting estimates for
bias;
• enquiry of management around actual
and potential litigation and claims;
• challenging the assumptions and
judgements made by management in
its significant accounting estimates;
and
• obtaining confirmations from third
parties to confirm existence of a sample
of year end balances.
• we communicated relevant laws and
regulations and potential fraud risks to all
engagement team members, including
experts, and the component auditors and
remained alert to any indications of fraud
or non-compliance with laws and
regulations throughout the audit.
Other requirements
We were appointed on 6 March 2023. The
period of total uninterrupted engagement
including previous renewals and
reappointments of the firm is 2 years.
We did not provide any non-audit services
which are prohibited by the FRC’s Ethical
Standard to the Group or the Parent
Company, and we remain independent of
the Group and the Parent Company in
conducting our audit.
Use of our report
This report is made solely to the Parent
Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has
been undertaken so that we might state
to the Parent Company’s members those
matters we are required to state to them
in an auditor’s report and for no other
purpose. To the fullest extent permitted
by law, we do not accept or assume
responsibility to anyone other than the
Parent Company and the Parent Company’s
members as a body, for our audit work, for
this report, or for the opinions we have
formed.
As required by the Financial Conduct
Authority (FCA) Disclosure Guidance and
Transparency Rule (DTR) 4.1.14R, these
financial statements form part of the
European Single Electronic Format (ESEF)
prepared Annual Financial Report filed on
the National Storage Mechanism of the UK
FCA in accordance with the ESEF
Regulatory Technical Standard ((‘ESEF
RTS’). This auditor’s report provides no
assurance over whether the annual financial
report has been prepared using the single
electronic format specified in the ESEF RTS.
Rakesh Shaunak FCA
(Senior Statutory Auditor)
For and on behalf of MHA, Statutory Auditor
London, United Kingdom
19 April 2024
MHA is the trading name of MacIntyre
Hudson LLP, a limited liability partnership
in England and Wales (registered number
OC312313)
126 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Consolidated financial statements
Contents
1 General
2 Basis of preparation and consolidation
3 Changes in accounting policies and disclosures
Summary of material accounting policies
Property, plant and equipment
Exploration and evaluation assets
Advances for non-current assets
Inventories
Prepayments and other current assets
128 Consolidated statement of financial position
129 Consolidated statement of comprehensive income
130 Consolidated statement of cash flows
131 Consolidated statement of changes in equity
132 Notes to the consolidated financial statements
132
133
133
134 4
142 5
143 6
143 7
143 8
143 9
143 10 Trade receivables
143 11 Cash and cash equivalents
143 12 Share capital and reserves
144 13 Earnings per share
144 14 Notes payable and accumulated interest
146 15 Abandonment and site restoration provision
146 16 Due to Government of Kazakhstan
146 17 Trade payables
146 18 Other current liabilities
147 19 Revenue
147 20 Cost of sales
147 21 General and administrative expenses
147 22 Selling and transportation expenses
147 23 Taxes other than income tax
147 24 Finance costs
148 25 Employees’ remuneration
148 26 Other income and other expenses
149 27 Income tax
149 28 Related party transactions
149 29 Audit and non-audit fees
150 30 Contingent liabilities and commitments
151 31 Financial risk management objectives and policies
152 32 Events after the reporting Consent
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 127
FINANCIALS Consolidated financial statements
For the year ended 31 December 2023
Consolidated financial statements
Consolidated statement of financial position
Consolidated statement of financial position
In thousands of US Dollars
Assets
Non-current assets
Property, plant and equipment
Exploration and evaluation assets
Advances for non-current assets
Restricted cash
Current assets
Inventories
Prepayments and other current assets
Income tax prepayment
Trade receivables
Cash and cash equivalents
TOTAL ASSETS
Equity and liabilities
Share capital and reserves
Share capital
Treasury capital
Deferred shares
Share premium
Retained deficit and reserves
Attributable to owners of Nostrum Oil & Gas PLC
Non-controlling interest
Non-current liabilities
Notes payable and accumulated interest
Principal
Arrangement fees and fair value adjustments
Abandonment and site restoration provision
Due to Government of Kazakhstan
Deferred tax liability
Current liabilities
Notes payable and accumulated interest
Trade payables
Advances received
Current tax payable
Current portion of due to Government of Kazakhstan
Other current liabilities
TOTAL EQUITY AND LIABILITIES
Notes
31 December
2023
31 December
2022
5
6
7
11
8
9
10
11
12
14
15
16
27
14
17
18
252,621
23,935
1,118
25,215
302,889
29,852
9,417
–
15,472
161,711
216,452
519,341
2,152
(166)
18,551
792,744
(879,456)
(66,175)
502
(65,673)
471,572
636,222
(164,650)
22,147
3,625
44,523
541,867
175
10,632
254
545
1,031
30,510
–
43,147
519,341
276,023
–
2,114
31,022
309,159
30,196
4,688
95
12,395
233,584
280,958
590,117
3,203
(1,660)
–
–
(941,769)
(940,226)
–
(940,226)
–
–
–
20,073
4,002
49,899
73,974
1,396,517
9,929
52
–
1,031
48,840
–
1,456,369
590,117
The consolidated financial statements of Nostrum Oil & Gas PLC, registered number 8717287, were authorised for issue by the Board of Directors on 18 April 2024.
Signed on behalf of the Board:
Consolidated financial statements
For the year ended 31 December 2023
Arfan Khan
Chief Executive Officer
18 April 2024
The accounting policies and explanatory notes on pages 133 through 154 are an integral part of these consolidated financial statements.
The accounting policies and explanatory notes on pages 132 through 152 are an integral part of these consolidated financial statements
112288 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
128 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
The accounting policies and explanatory notes on pages 133 through 154 are an integral part of these consolidated financial statements.
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 112299
Consolidated financial statements
For the year ended 31 December 2023
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
In thousands of US Dollars
Revenue
Revenue from export sales
Revenue from domes_c sales
Cost of sales
Gross profit
General and administra_ve expenses
Selling and transporta_on expenses
Taxes other than income tax
Employee share op_ons reversals
Finance costs
Gain on debt-to-equity exchange
Fair value adjustment on recogni_on of debt instruments
Foreign exchange (loss)/gain, net
Interest income
Other income
Other expenses
Income/(loss) before income tax
Current income tax expense
Deferred income tax benefit/(expense)
Income tax expense
Profit/(loss) for the year
Other comprehensive income that could be reclassified to the income statement in
subsequent periods
Currency transla_on difference
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
For the year ended 31
December
Notes
2023
2022
19
20
21
22
23
25
24
12
14
26
26
27
105,170
14,459
119,629
(77,628)
42,001
(13,807)
(12,403)
(14,187)
25
(102,826)
769,611
174,426
(954)
2,691
6,430
(14,675)
836,332
(10,050)
5,376
(4,674)
177,173
22,544
199,717
(84,053)
115,664
(12,076)
(19,950)
(19,830)
38
(123,138)
–
–
254
272
6,806
(29,821)
(81,781)
(18,837)
(15,827)
(34,664)
831,658
(116,445)
62
62
(490)
(490)
831,720
(116,935)
Income/(loss) for the year acributable to the shareholders (in thousands of US dollars)
Basic earnings per share (in US dollars)
Diluted earnings per share (in US dollars)
13
13
831,658
4.92
4.42
(116,445)
(0.69)
(0.69)
All items in the above statement are derived from continuing operations.
The accounting policies and explanatory notes on pages 133 through 154 are an integral part of these consolidated financial statements.
113300 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
The accounting policies and explanatory notes on pages 132 through 152 are an integral part of these consolidated financial statements
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 129
FINANCIALS
Consolidated financial statements
Consolidated statement of cash flows
Consolidated statement of cash flows
In thousands of US Dollars
Cash flow from opera^ng ac^vi^es:
Income/(loss) before income tax
Adjustments for:
Deprecia_on, deple_on and amor_sa_on
Finance costs
Interest income
Foreign exchange loss on inves_ng and financing ac_vi_es
Loss on disposal of property, plant and equipment
Fair value adjustment on recogni_on of debt instruments
Gain on debt-to-equity exchange
Employee share op_ons reversals
Opera^ng profit before working capital changes
Changes in working capital:
Change in inventories
Change in trade receivables
Change in prepayments and other current assets
Change in trade payables
Change in advances received
Change in due to Government of Kazakhstan
Change in other current liabili_es
Cash used in opera^ons
Income tax paid
Net cash flows used in opera^ng ac^vi^es
Cash flow from inves^ng ac^vi^es:
Interest received
Purchase of property, plant and equipment
Considera_on paid for 80% interest in Posi_v Invest LLP
Advances for non-current assets
Expenditures on explora_on and evalua_on assets
Transfer from/(to) restricted cash
Net cash used in inves^ng ac^vi^es
Cash flow from financing ac^vi^es:
Finance costs paid
Other finance costs
Net cash used in financing ac^vi^es
Effects of exchange rate changes on cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
For the year ended 31 December
Notes
2023
2022
836,332
(81,781)
20, 21, 22
24
6
11
11
40,509
102,826
(2,691)
199
917
(174,426)
(769,611)
(25)
34,030
62
(3,077)
(3,608)
(754)
202
(1,031)
(3,943)
21,881
(24,102)
(2,221)
2,691
(13,711)
(19,338)
–
(3,552)
5,828
(28,082)
(31,821)
(9,801)
(41,622)
52
(71,873)
233,584
161,711
51,835
123,138
(272)
115
–
–
–
(38)
92,997
1,458
(5,736)
5,047
1,094
43
(1,031)
14,578
108,450
(6,246)
102,204
272
(14,770)
–
(696)
–
(587)
(15,781)
–
(17,481)
(17,481)
(604)
68,338
165,246
233,584
F
I
N
A
N
C
I
A
L
S
“Other finance costs” represent advisor fees of US$5,972 thousand and lock-up fees of US$3,828 thousand (2022: US$ 17,481 thousand of advisor fees) paid by the
Group in relation to the forbearance agreements, lock-up agreements and ongoing process of restructuring of the Group’s outstanding bonds. In 2021 these
included also bondholder consent fees in the amount of US$1,117 thousand. For more details see Note 1.
The accounting policies and explanatory notes on pages 133 through 154 are an integral part of these consolidated financial statements.
The accounting policies and explanatory notes on pages 132 through 152 are an integral part of these consolidated financial statements
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 113311
130 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Consolidated financial statements
For year ended 31 December 2023
Consolidated statement of changes in equity
Consolidated statement of changes in equity
Attributable to owners of Nostrum Oil & Gas PLC
In thousands of US Dollars
Notes
As at 1 January 2022
Share
capital
3,203
Treasury
capital
(1,660)
Deferred
shares
–
Share
premium
–
Other
reserves
(Note 12)
262,385
Retained
deficit
(1,087,181)
Non-
controlling
interest
–
Total
(823,253)
(116,445)
(490)
(116,935)
(38)
(940,226)
831,658
62
831,720
42,356
–
–
–
–
–
–
–
–
–
–
–
Loss for the year
Other comprehensive loss
Total comprehensive loss for the
year
Share based payments under LTIP*
As at 31 December 2022
Income for the year
Other comprehensive income
Total comprehensive income for
the year
Debt-to-equity exchange
Transfer of share premium on debt-
to-equity exchange*
Recognition of non-controlling
interest on purchase of Positiv
Invest LLP
6
–
–
–
–
–
–
–
3,203
–
(1,660)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(490)
(116,445)
–
(490)
(116,445)
(38)
261,857
–
(1,203,626)
–
62
62
831,658
–
831,658
(1,051)
1,494
18,551
23,133
229
–
–
769,611
–
(769,611)
–
–
–
–
–
–
–
–
502
502
–
Share based payments under LTIP**
792,744
As at 31 December 2023
* The gain on debt-to-equity exchange is reclassified as share premium in accordance with the requirements of the Companies Act 2006
** Long-Term Incentive Plan (“LTIP”)
–
18,551
–
2,152
–
(166)
(25)
262,123
–
(1,141,579)
–
502
(25)
(65,673)
The accounting policies and explanatory notes on pages 133 through 154 are an integral part of these consolidated financial statements.
113322 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
The accounting policies and explanatory notes on pages 132 through 152 are an integral part of these consolidated financial statements
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 131
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
GRI 2-2
Notes to the consolidated financial statements
Notes to the consolidated financial statements
1. General
100
RRooyyaallttyy ppaayymmeennttss
OOvveerrvviieeww
Nostrum Oil & Gas PLC (“the Company” or
“the Parent”) is a public limited company
incorporated on 3 October 2013 under the
Companies Act 2006 and registered in England and
Wales with registered number 8717287. The
registered address of Nostrum Oil & Gas PLC is:
20 Eastbourne Terrace, London, W2 6LG, UK.
These consolidated financial statements include
the financial position and the results of the
operations of Nostrum Oil & Gas PLC and its
following wholly owned subsidiaries:
Registered office
43B Karev street,
090000 Uralsk,
Republic of Kazakhstan
Form of
capital
Participator
y interests
Owner-
ship, %
100
Members'
interests
100
Company
Nostrum
Associated
Investments
LLP
Nostrum Oil &
Gas
Coöperatief
U.A.
Nostrum Oil &
Gas B.V.
Nostrum Oil &
Gas Finance
B.V.
Nostrum Oil &
Gas UK Ltd.
Bloemendaalseweg
139, 2061 CH
Bloemendaal,
The Netherlands
Bloemendaalseweg
139, 2061 CH
Bloemendaal,
The Netherlands
Bloemendaalseweg
139, 2061 CH
Bloemendaal,
The Netherlands
20 Eastbourne Terrace,
London, W2 6LA,
United Kingdom
20 Eastbourne Terrace,
London, W2 6LA,
United Kingdom
Aksai 3a, 75/38, 050031
Almaty, Republic of
Kazakhstan
Nostrum Oil &
Gas Holding
Ltd.
Nostrum
Services
Central Asia
LLP
Nostrum
Services N.V.
Positiv Invest
LLP
Zhaikmunai LLP 43/1 Karev street,
Chaussee de Wavre 20,
1360 Perwez, Belgium
Dostyk 310/15, Almaty,
Republic of Kazakhstan
090000 Uralsk,
Republic of Kazakhstan
Ordinary
shares
Ordinary
shares
Ordinary
shares
Ordinary
shares
Participator
y interests
Ordinary
shares
Participator
y interests
Participator
y interests
100
100
100
100
100
80
100
Nostrum Oil & Gas PLC and its wholly owned
subsidiaries are hereinafter referred to as
“the Group”. The Group’s operations comprise of a
single operating segment including all Group’s
assets related to its Chinarevskoye field, as well as
surface facilities, and are primarily conducted
through its oil and gas producing entity
Zhaikmunai LLP located in Kazakhstan.
Zhaikmunai LLP carries out its activities in
accordance with the Contract for Additional
Exploration, Production and Production-Sharing of
Crude Hydrocarbons in the Chinarevskoye oil and
gas condensate field (the “Contract”) dated
31 October 1997 between the State Committee of
Investments of the Republic of Kazakhstan and
Zhaikmunai LLP in accordance with the license MG
No. 253D for the exploration and production of
hydrocarbons in Chinarevskoye oil and gas
condensate field.
The term of the Chinarevskoye subsoil use rights
included a 5-year exploration period followed by a
25-year production period with the Contract being
valid until the end of 2031.
As at 31 December 2023 the Group employed 571
employees (31 December 2022: 566).
On 14 October 2022, a new company Nostrum Oil
& Gas Holding Limited was incorporated with a
registered address of 20 Eastbourne Terrace,
London, W2 6LG, UK. The entity is a wholly owned
subsidiary of the Parent.
On 12 December 2023, Nostrum Oil & Gas UK
Limited was dissolved.
On 17 July 2023, Nostrum Oil & Gas PLC acquired
an 80% interest in Positive Invest LLP for US$20
million. Positiv Invest LLP holds the rights to the
Stepnoy Leopard Fields located in the West
Kazakhstan region. The acquisition enhances
Nostrum's ability to connect additional resources
to their gas treatment facilities. The Stepnoy
Leopard Fields are in proximity to Nostrum's
existing operations and have a contract valid until
December 2044.
Zhaikmunai LLP is required to make monthly
royalty payments throughout the entire
production period, at the rates specified in the
Contract.
Royalty rates depend on hydrocarbons recovery
levels and the phase of production and can vary
from 3% to 7% of produced crude oil and from 4%
to 9% of produced natural gas. Royalty is
accounted on a gross basis.
GGoovveerrnnmmeenntt ““pprrooffiitt sshhaarree””
Zhaikmunai LLP makes payments to the
Government of its “profit share” as determined in
the Contract. The “profit share” depends on
hydrocarbon production levels and varies from
10% to 40% of production after deducting royalties
and reimbursable expenditures. Reimbursable
expenditures include operating expenses, costs of
additional exploration and development costs.
Government “profit share” is expensed as incurred
and paid in cash. Government profit share is
accounted on a gross basis.
GGrroouupp ddeebbtt rreessttrruuccttuurriinngg
On 31 March 2020, the Group announced that it
would seek to engage with its bondholders
regarding a possible restructuring of the Group’s
US$725 million 8.0% Senior Notes due July 2022
(“2022 Notes”) and its US$400 million 7.0% Senior
Notes due February 2025 (“2025 Notes”)
(together, the “Existing Notes”). On 23 December
2021, the Group entered into a lock-up agreement
(the “First LUA”) and agreed terms of a
restructuring with noteholders. The below outlines
the key terms of the restructuring as agreed
between the Group, acceded noteholders and ICU
in the LUAs and also voted in favour of by Nostrum
shareholders:
Partial reinstatement of debt:
• In the form of US$250 million Senior Secured
Notes (SSNs) maturing on 30 June 2026 and
bearing interest at a rate of 5.00% per year
payable in cash. The SSNs are not convertible;
113333 NNoossttrruumm OOiill && GGaass PPLLCC
132 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
• In the form of US$300 million Senior Unsecured
Notes (SUNs) maturing on 30 June 2026 and
bearing interest at a rate of 1.00% per year
payable in cash and 13.00% per year payable in
kind. If not repaid in cash at maturity, the SUNs
are repayable in specie through the issuance of
equity in the Company based on the value of
the SUNs outstanding on the issuance date as a
percentage of the fair market value of the
Company (up to a maximum of 99.99% of the
Company’s fully diluted equity);
Conversion to equity:
• Conversion of the remainder of the
Existing Notes and accrued interest into
equity by way of a UK scheme of
arrangement:
• Existing noteholders own 88.89% of the
expanded ordinary share capital of the
Company on closing of the restructuring.
Existing noteholders also own warrants (to
be held by trustee) allowing them to
subscribe for an additional 1.11% of the
ordinary share capital of the Company
upon exercise – increasing noteholder
ownership of the Company to 90.00%;
• The existing ordinary shareholders will
hold 11.11% upon closing of the
restructuring. The existing ordinary
shareholders will be diluted to 10.00% if
the warrants held by existing noteholders
are exercised;
New corporate governance arrangements:
• in respect of the Group and certain
arrangements regarding future utilization of the
Group's cashflows. This includes a cash sweep
mechanism requiring that cash above US$30
million is swept into a debt service retention
account (to fund the next two cash interest
payments due) and a restricted cash account
which the Company can access with approval of
the majority of Independent Non-Executive
Directors of the Company; and
• Transfer the Company's listing to the Standard
Listing segment of the London Stock Exchange.
Restructuring completion
On 9 February 2023, the Restructuring was
implemented on the key terms as agreed under
Lockup Agreement, and pursuant to the terms of
the Scheme sanctioned by the Court on 26 August
2022. This led to the sub-division and consolidation
of the Company's share capital, which resulted in a
reduction of shares from approximately 1,693.8
million to 169.4 million following a 10:1
consolidation. By 10 February 2023, 150,563,304
new shares were listed on the London Stock
Exchange (ticker symbol NOG.L), and by 13
February, also on the Astana International
Exchange. The new notes and warrants were listed
on The International Stock Exchange from 9
February 2023, while no new securities were listed
on Euronext Dublin. On 14 March 2023, the
Company’s ordinary shares were delisted from the
official list of the Kazakhstan Stock Exchange
(KASE).
Notes to the consolidated financial statements (continued)
Consolidated financial statements
For year ended 31 December 2023
113344 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
2. Basis of preparation and consolidation
BBaassiiss ooff pprreeppaarraattiioonn
These consolidated financial statements for
the year ended 31 December 2023 have been
prepared in accordance with the UK adopted
International Accounting Standards and the
Companies Act 2006. The consolidated
financial statements have been prepared
based on a historical cost basis other than
areas where accounting standards require an
alternate measurement basis (Note 4). The
consolidated financial statements are
presented in US dollars and all values are
rounded to the nearest thousand, except
when otherwise indicated. The preparation of
consolidated financial statements in
conformity with IFRS requires the use of
certain critical accounting estimates. It also
requires from management to exercise its
judgment in the process of applying the
Group's accounting policies. The areas
involving a higher degree of judgment or
complexity, or areas where assumptions and
estimates are significant to the consolidated
financial statements are disclosed in Note 4.
The Group recognises that there may be
potential financial implications in the future
from changes in legislation and regulation
implemented to address climate change risk.
Over time these changes may have an impact
across a number of areas of accounting
including asset impairment, increased costs,
provisions, onerous contracts and contingent
liabilities. However, as at the reporting sheet
date, the Group believes there is no material
impact on the balance sheet carrying values of
assets or liabilities. This is not considered a
significant estimate.
BBaassiiss ooff ccoonnssoolliiddaattiioonn
The consolidated financial statements
comprise the financial statements of the
Parent and its subsidiaries as at 31 December
2023. Control is achieved when the Group is
exposed, or has rights, to variable returns
from its involvement with the investee and
has the ability to affect those returns through
its power over the investee. Specifically, the
Group controls an investee if, and only if, the
Group has:
• power over the investee (i.e., existing rights
that give it the current ability to direct the
relevant activities of the investee);
• exposure, or rights, to variable returns from
its involvement with the investee;
• the ability to use its power over the
investee to affect its returns.
Generally, there is a presumption that a
majority of voting rights results in control. To
support this presumption and when the
Group has less than a majority of the voting or
similar rights of an investee, the Group
considers all relevant facts and circumstances
in assessing whether it has power over an
investee, including:
• the contractual arrangement with the
other vote holders of the investee;
• rights arising from other contractual
arrangements;
• the Group’s voting rights and potential
voting rights.
The Group re-assesses whether or not it
controls an investee if facts and circumstances
indicate that there are changes to one or
more of the three elements of control.
Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and
ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and
expenses of a subsidiary acquired or disposed
of during the year are included in the
consolidated financial statements from the
date the Group gains control until the date the
Group ceases to control the subsidiary.
GGooiinngg ccoonncceerrnn
These consolidated financial statements have
been prepared on a going concern basis. For
more information on the going concern
assessment of the Group please see page 46
of the Annual Report.
The directors are satisfied that the Group has
sufficient resources to continue in operation
for the foreseeable future, a period of not less
than 12 months from the date of this report.
Accordingly, they continue to adopt the going
concern basis in preparing the consolidated
financial statements.
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3. Changes in accounting policies and disclosures
NNeeww ssttaannddaarrddss,, iinntteerrpprreettaattiioonnss aanndd
aammeennddmmeennttss aaddoopptteedd bbyy tthhee GGrroouupp
The accounting policies adopted in the preparation
of the financial statements are consistent with
those followed in the preparation of the Group’s
annual financial statements for the year ended 31
December 2022, except for the adoption of new
standards effective as of 1 January 2023. The
Group has not early adopted any standard,
interpretation or amendment that has been issued
but is not yet effective.
Several amendments apply for the first time in
2023, but do not have an impact on the
consolidated financial statements of the Group.
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts is a comprehensive
new accounting standard for insurance contracts
covering recognition and measurement,
presentation and disclosure. IFRS 17 replaces IFRS
4 Insurance Contracts. IFRS 17 applies to all types
of insurance contracts (i.e., life, non-life, direct
insurance and re-insurance), regardless of the type
of entities that issue them as well as to certain
guarantees and financial instruments with
discretionary participation features; a few scope
exceptions will apply. The overall objective of IFRS
17 is to provide a comprehensive accounting
model for insurance contracts that is more useful
and consistent for insurers, covering all relevant
accounting aspects. IFRS 17 is based on a general
model, supplemented by:
• A specific adaptation for contracts with direct
participation features (the variable fee approach)
• A simplified approach (the premium allocation
approach) mainly for short-duration contracts
The new standard had no impact on the
Group’s consolidated financial statements.
Definition of Accounting Estimates -
Amendments to IAS 8
The amendments to IAS 8 clarify the distinction
between changes in accounting estimates,
changes in accounting policies and the
correction of errors. They also clarify how
entities use measurement techniques and
inputs to develop accounting estimates.
The amendments had no impact on the Group’s
consolidated financial statements.
Disclosure of Accounting Policies -
Amendments to IAS 1 and IFRS Practice
Statement 2
The amendments to IAS 1 and IFRS Practice
Statement 2 Making Materiality Judgements
provide guidance and examples to help entities
apply materiality judgements to accounting
policy disclosures. The amendments aim to help
entities provide accounting policy disclosures
that are more useful by replacing the
requirement for entities to disclose their
‘significant’ accounting policies with a
requirement to disclose their ‘material’
accounting policies and adding guidance on
how entities apply the concept of materiality in
making decisions about accounting policy
disclosures.
The amendments have had no impact on the
Group’s disclosures of accounting policies, the
measurement, recognition or presentation of
any items in the Group’s financial statements.
Deferred Tax related to Assets and Liabilities
arising from a Single Transaction –
Amendments to IAS 12
The amendments to IAS 12 Income Tax narrow
the scope of the initial recognition exception, so
that it no longer applies to transactions that
give rise to equal taxable and deductible
temporary differences such as leases and
decommissioning liabilities.
The amendments had no impact on the Group’s
consolidated financial statements.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 133
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 113355
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
Standards issued but not yet effective
The new and amended standards and
interpretations that are issued, but not yet
effective, up to the date of issuance of the
Group’s consolidated financial statements are
disclosed below. The Group intends to adopt
these new and amended standards and
interpretations, if applicable, when they
become effective.
Amendments to IFRS 16: Lease Liability in a Sale
and Leaseback
In September 2022, the IASB issued
amendments to IFRS 16 to specify the
requirements that a seller-lessee uses in
measuring the lease liability arising in a sale and
leaseback transaction, to ensure the seller-
lessee does not recognise any amount of the
gain or loss that relates to the right of use it
retains.
The amendments are effective for annual
reporting periods beginning on or after 1
January 2024 and must applied retrospectively
to sale and leaseback transactions entered into
after the date of initial application of IFRS 16.
Earlier application is permitted and that fact
must be disclosed.
The amendments are not expected to have a
material impact on the Group’s financial
statements.
Amendments to IAS 1: Classification of Liabilities
as Current or Non-current
In January 2020 and October 2022, the IASB
issued amendments to paragraphs 69 to 76 of
IAS 1 to specify the requirements for classifying
liabilities as current or non-current. The
amendments clarify:
• What is meant by a right to defer settlement
• That a right to defer must exist at the end of
the reporting period
• That classification is unaffected by the
likelihood that an entity will exercise its deferral
right
• That only if an embedded derivative in a
convertible liability is itself an equity instrument
would the terms of a liability not impact its
classification.
In addition, a requirement has been introduced
to require disclosure when a liability arising
from a loan agreement is classified as non-
current and the entity’s right to defer
settlement is contingent on compliance with
future covenants within twelve months.
The amendments are effective for annual
reporting periods beginning on or after 1
January 2024 and must be applied
retrospectively. The Group is currently
assessing the impact the amendments will have
on current practice and whether existing loan
agreements may require renegotiation.
Supplier Finance Arrangements - Amendments to
IAS 7 and IFRS 7
In May 2023, the IASB issued amendments to
IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures to clarify the
characteristics of supplier finance arrangements
and require additional disclosure of such
arrangements. The disclosure requirements in
the amendments are intended to assist users of
financial statements in understanding the
effects of supplier finance arrangements on an
entity’s liabilities, cash flows and exposure to
liquidity risk.
The amendments will be effective for annual
reporting periods beginning on or after 1
January 2024. Early adoption is permitted, but
will need to be disclosed.
The amendments are not expected to have a
material impact on the Group’s financial
statements.
management concluded that transactions
represents an asset purchase rather than a
business combination.
The difference between the purchase price of
$19.3 million and the net book value of the assets
and liabilities acquired was considered as the price
paid for the subsoil use license for development
and production at the Stepnoy Leopard Fields. This
distinction ensures proper allocation of the
purchase price and reflects the underlying value
attributed to exploration and valuation assets
within the transaction.
In addition, the fair value of the minority interest
representing 20% ownership retained by the
previous partners of Positiv Invest LLP was
recognized at the proportion of the net assets of
Positiv Invest at the transaction date. Management
believes that this recognition aligns with the
principle of reflecting the true economic value of
the minority interest within the financial
statements.
For more detailed information regarding
exploration and evaluation assets, please see
Note 6 in the financial statements.
4. Summary of material accounting policies
EExxpplloorraattiioonn eexxppeennddiittuurree
Costs directly associated with the purchase of
Positiv Invest LLP and the appraisal of the wells are
capitalised within exploration and evaluation
assets until the reserve appraisal phase is
complete and the commercial viability of field
development have been proved.
These costs include employee remuneration,
materials, fuel used, rig costs, payments made to
contractors, and asset retirement obligation fees.
If hydrocarbons are found and, subject to further
appraisal activity (e.g., the drilling of additional
wells), it is probable that they can be commercially
developed, the costs continue to be carried as an
asset while sufficient/continued progress is made
in assessing the commerciality of the
hydrocarbons.
All such carried costs are subject to technical,
commercial and management review at least once
a year to confirm the continued intent to develop
or otherwise extract value from the discovery,
which is subject to estimation uncertainties. When
this is no longer the case, the costs are written off.
Subsoil use rights acquisition costs are initially
capitalised in exploration and evaluation assets.
Subsoil use rights acquisition costs are reviewed at
each reporting date to confirm that there is no
indication that the carrying amount exceeds the
recoverable amount. This review includes
confirming that exploration drilling is still under
way or firmly planned, or that it has been
determined, or work is under way to determine
that the discovery is economically viable based on
a range of technical and commercial
considerations and sufficient progress is being
made on establishing development plans and
timing. If no future activity is planned or the
subsoil use rights have been relinquished or have
expired, the carrying value of the subsoil use rights
acquisition costs is written off through profit or
loss.
The Group holds the rights to the Stepnoy Leopard
Fields located in the West Kazakhstan region
where the exploration periods will expire
respectively in 2044. The Group remains
committed to developing its exploration assets
and, therefore, continues to carry the capitalised
costs on its balance sheet. For more detailed
information in relation to the subsoil use rights
terms, please see Note 1.
MMaatteerriiaall aaccccoouunnttiinngg jjuuddggmmeenntt:: ooiill aanndd ggaass
rreesseerrvveess
Management used judgment when considering
the purchase of Positiv Invest LLP as an asset
acquisition rather than a business acquisition.
Management applied the concentration test,
introduced within IFRS 3, which offers a simplifying
procedure to ascertain if an acquisition is of a
business or merely assets. If a substantial majority
of the fair value of the gross assets acquired is
concentrated in a single identifiable asset or group
of similar assets, then the set isn't deemed a
business. Taking into account that the most
significant assets of the Positiv Invest LLP are the
licenses to the Stepnoy Leopard’s fields, which are
geographically co-located, and most of the balance
sheet items are attributable to these fields, the
134 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
113366 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt
Oil and gas properties
Expenditure on the construction, installation or
completion of infrastructure facilities such as
treatment facilities, pipelines and the drilling of
development wells, is capitalised within property,
plant and equipment as oil and gas properties. The
initial cost of an asset comprises of its purchase
price or construction cost, any costs directly
attributable to bringing the asset into operation
and the initial estimate of decommissioning
obligations, if any.
The purchase price or construction cost is the
aggregate amount paid and the fair value of any
other consideration given to acquire the asset.
When a development project moves into the
production stage, the capitalisation of certain
construction/development costs ceases, and costs
are either regarded as part of the cost of inventory
or expensed, except for costs which qualify for
capitalisation relating to oil and gas property asset
additions, improvements or new developments.
All capitalised costs of oil and gas properties are
depleted using the unit-of-production method
based on estimated proved developed reserves of
the field, except the Group depreciates its oil
pipeline and oil loading terminal on a straight-line
basis over the life of the relevant subsoil use rights.
In the case of assets that have a useful life shorter
than the lifetime of the field the straight-line
method is applied.
Other properties
All other property, plant and equipment are stated
at historical cost less accumulated depreciation
and impairment. Historical cost includes
expenditures that are directly attributable to the
acquisition of the items. Subsequent costs are
included in the asset's carrying amount or
recognised as a separate asset, as appropriate,
only when it is probable that future economic
benefits associated with the item will flow to the
Group and the cost of the item can be measured
reliably. All other repairs and maintenance are
charged to the profit or loss during the year in
which they are incurred.
Depreciation is calculated on a straight-line basis
over the estimated useful lives of the assets as
follows:
Buildings and constructions
Vehicles
Machinery and equipment
Other
Years
7-15
8
3-13
3-10
Land is a non-depreciable asset and therefore is
not subject to depreciation. It is the company’s
policy to maintain the original cost of land on the
balance sheet. However, the land’s value may be
reviewed periodically to determine if there is any
impairment in value.
For more detailed information in relation to
property plant and equipment, please refer to
Note 5.
SSiiggnniiffiiccaanntt aaccccoouunnttiinngg jjuuddggmmeenntt:: ooiill aanndd
ggaass rreesseerrvveess
Oil and gas reserves are a material factor in the
Group’s computation of depreciation, depletion
and amortisation (the “DD&A”). Management
used significant accounting judgement in selecting
proved developed hydrocarbon reserves for
calculating the unit-of-production depletion rate,
as it reflects the expected pattern of consumption
of future economic benefits by the Group.
SSiiggnniiffiiccaanntt eessttiimmaatteess aanndd aassssuummppttiioonnss:: ooiill
aanndd ggaass rreesseerrvveess
The Group uses internal estimates to assess the oil
and gas reserves of its fields. The reserves
estimates are made in accordance with the
methodology of the Society of Petroleum
Engineers (the “SPE”) and are confirmed or
audited by independent reserve engineers. All
reserve estimates involve some degree of
uncertainty, which depends mainly on the amount
of reliable geological and engineering data
available at the time of the estimate and the
interpretation of this data, as well as long-term
hydrocarbon pricing, which may affect
classification of reserves.
The relative degree of uncertainty can be
conveyed by placing reserves into one of two
principal classifications, either proved or unproved.
Proved reserves are more certain to be recovered
than unproved reserves and may be further sub
classified as developed and undeveloped to
denote progressively increasing uncertainty in their
recoverability.
Reserves estimates are reviewed and revised
annually. Revisions occur due to the evaluation or
re-evaluation of already available geological,
reservoir or production data; availability of new
data; or changes to underlying price assumptions.
Reserve estimates may also be revised due to
improved recovery projects, changes in production
capacity or changes in development strategy.
Management’s estimates of the Chinarevskoye 2P
(Proved plus Probable) volume as at 31 December
2023 was 23.2 mmboe requiring 16 capital
interventions (2022: 28.3 mmboe requiring 17
interventions). The reduction was primarily due to
2022 production of 3.7 mmboe and downwards
revision of probable undeveloped reserves by 1.2
mmboe mainly due to reduced expectations for
Biyski gas-condensate resulting from increased
water ingress.
Downward revision of the proved developed
reserves estimates by 5% would lead to additional
DD&A expense of $2,022 thousand in 2023.
Estimates of economically recoverable oil and gas
reserves and related future net cash flows also
impact the impairment assessment of the Group
(see Impairment related significant judgements,
estimates and assumptions for further details).
Details on carrying values of oil and gas properties
and related depreciation, depletion and
amortization are shown in Note 5.
In addition, provisions for decommissioning may
require revision — where changes to reserves
estimates affect expectations about when such
activities will occur and the associated cost of
these activities (see Decommissioning related
significant judgements, estimates and assumptions
for further details).
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NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 135
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 113377
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
IImmppaaiirrmmeenntt ooff pprrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt,, eexxpplloorraattiioonn aanndd eevvaalluuaattiioonn aasssseettss
At the end of each reporting period the Group
assesses whether events or changes in
circumstances indicate that the carrying amount of
an asset or CGU may not be recoverable; for
example, changes in the Group’s business plans,
significant decreases in the market commodity
prices, low plant utilisation, evidence of physical
damage or, for oil and gas assets, significant
downward revisions of estimated reserves or
increases in estimated future development
expenditure or decommissioning costs. If any such
indication of impairment exists, the Group makes
an estimate of the asset’s recoverable amount.
Individual assets are grouped into a CGU for
impairment assessment purposes at the lowest
level at which there are identifiable cash flows that
are largely independent of the cash flows of other
groups of assets. A CGU’s recoverable amount is
the higher of its fair value less costs of disposal and
its value in use. Where the carrying amount of a
CGU exceeds its recoverable amount, the CGU is
considered impaired, and an impairment loss is
recognised for the excess of carrying amount over
recoverable amount.
The business cash flow internal model, which is
approved on an annual basis by senior
management, is the primary source of information
for the determination of the recoverable amount.
It contains forecasts for oil and gas production,
sales volumes for various types of products,
revenues, costs and capital expenditure. As an
initial step in the preparation of this model, various
assumptions are set by senior management. These
assumptions take account of commodity prices,
global supply-demand equilibrium for oil and
natural gas, other macroeconomic factors and
historical trends and variability. In assessing the
recoverable amount, the estimated future cash
flows are adjusted for the risks specific to the asset
group and are discounted to their present value
using a discount rate.
SSiiggnniiffiiccaanntt aaccccoouunnttiinngg jjuuddggmmeenntt:: iiddeennttiiffiiccaattiioonn ooff ccaasshh--ggeenneerraattiinngg
uunniitt
Judgement is required to identify cash-generating units for the purpose of
testing the assets for impairment. Management has determined a single cash-
generating unit within the Group’s non-current assets consisting of all Group’s
assets related to its Chinarevskoye field and facilities. This is mainly based on
the fact that hydrocarbons extracted from the Chinarevskoye field are
processed and passed through a combination of various facilities.
SSiiggnniiffiiccaanntt eessttiimmaatteess aanndd aassssuummppttiioonnss:: iimmppaaiirrmmeenntt ooff pprrooppeerrttyy,,
ppllaanntt aanndd eeqquuiippmmeenntt,, eexxpplloorraattiioonn aanndd eevvaalluuaattiioonn aasssseettss
Determination as to whether, and by how much, the CGU is impaired involves
management’s best estimates on highly uncertain matters such as future
commodity prices, operating expenses and capital expenditures estimates,
discount rate, fiscal regimes, proved and probable reserves, contingent
resources and respective future production profiles.
Based on the management assessment the recoverable amount was
determined by the fair value less costs of disposal (FVLCD) of the CGU, which
was higher than its value-in-use. FVLCD was based on the discounted cash flow
model as no recent third-party transactions existed on which a reliable market-
based fair value could be established.
The discounted cash flow model takes into consideration cash flows, which are
expected to arise until 2032, i.e. during the licence term of the Chinarevskoye
field, and is considered a level 3 valuation under the fair value hierarchy,
because the valuation methods is represented by discounted cashflow model
using mix of observable and unobservable inputs. The period exceeding five
years is believed to be appropriate based on the proved and probable reserves
audited by independent engineers. The model also takes into account risked-
value cash flows from contingent resources on the basis a market participant
would place value on these resources.
The key assumptions used in the Group’s discounted cash flow model reflecting
past experience and taking into account external factors are subject to periodic
review. These assumptions are:
• Oil prices (in real terms): US$75/bbl for 2024 and US$70/bbl throughout
2025-2032 (2022: US$75/bbl for 2023, US$73/bbl for 2024 and US$65/bbl
throughout 2025-2032);
• Proved and probable hydrocarbon reserves based on management
estimates, updated from reserves confirmed by independent reserve
engineers at 31 December 2022;
• Production profiles based on Group’s internal estimates prepared by
management;
• All cash flows are projected on the basis of stable prices, i.e. inflation/growth
rates are ignored;
• Cost profiles for the development of the fields and subsequent operating
costs consistent with reserves estimates and production profiles; and
• Gas treatment unit (GTU) spare capacity utilization – risk-weighted option
value from processing under the contract with Ural Oil & Gas LLP;
• Post-tax discount rate of 10,3%, estimated to be equivalent to pre-tax
discount rate of 14.0% (2022: 11.6% and 16.5%, respectively).
The impairment testing carried out by the Group as of 31 December 2023 and
2022 has resulted in the recoverable amount approximating the carrying
amount of the Group’s property, plant and equipment as of 31 December 2023
and 2022, respectively. Hence no impairment charge or reversal was recognised
during these years.
More detailed information on carrying values of oil and gas properties and
related depreciation, depletion, amortisation and impairment are shown in
Note 5.
The following table summarizes sensitivity of the recoverable amount and
respective potential impairment charges that would result from changes in the
key assumptions:
Key assumption
Oil price decrease by
Reserves downgrade by
Post-tax discount rate increase by
Operating costs increase by
Change
$10/bbl
10.0%
4.0%
10.0%
35,370
32,862
35,679
12,237
Sensitivity (US$)
On the other hand, certain positive development like successful mitigation of
reservoir risks in the future and respective changes in the drilling plans and
results, with the relevant increase in 2P reserves, or increase in utilisation of the
Group’s processing facilities, could have the effect of reversing the impairment.
Any reversal would be limited so that the carrying amount of the CGU does not
exceed the lower of its recoverable amount, or the carrying amount that would
have been determined, net of depreciation, had no impairment charge been
recognised for the CGU in prior years.
136 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
113388 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
Leases
The Group applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets.
The Group recognises lease liabilities to make lease
payments and right-of-use assets representing the
right to use the underlying assets.
Right-of-use assets
The Group recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred,
and lease payments made at or before the
commencement date less any lease incentives
received. Unless the Group is reasonably certain to
obtain ownership of the leased asset at the end of
the lease term, the recognised right-of-use assets
are depreciated on a straight-line basis over the
shorter of its estimated useful life and the lease
term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group
recognises lease liabilities measured at the present
value of lease payments to be made over the lease
term. The lease payments include fixed payments
(including in substance fixed payments) less any
lease incentives receivable, variable lease payments
that depend on an index or a rate, and amounts
BBuussiinneessss ccoommbbiinnaattiioonnss aanndd ggooooddwwiillll
expected to be paid under residual value
guarantees. The lease payments also include the
exercise price of a purchase option reasonably
certain to be exercised by the Group and payments
of penalties for terminating a lease, if the lease term
reflects the Group exercising the option to
terminate.
Variable lease payments that do not depend on an
index or a rate are recognised as expense in the
period on which the event or condition that triggers
the payment occurs.
In calculating the present value of lease payments,
the Group uses the incremental borrowing rate at
the lease commencement date if the interest rate
implicit in the lease is not readily determinable.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in
the lease term, a change in the in-substance fixed
lease payments or a change in the assessment to
purchase the underlying asset.
Separation of lease and non-lease
components
When contracts for a lease (such as like lease of
drilling rigs and rail-tank cars) include various
additional services like personnel cost,
maintenance, drilling related activities, and other
items, the Group splits such non-lease components
and recognises them separately. Where the
additional services are not separately priced, the
consideration paid is allocated based on the relative
stand-alone prices of the lease and non-lease
components.
Distinguishing fixed and variable lease
payment elements
Certain lease contracts include fixed rates for when
the asset is in operation, and various alternative
rates (like “cold-stack rates” for leases of drilling
rigs) for periods where the asset is engaged in
specified activities or idle, but still under contract. In
general, variability in lease payments under these
contracts has its basis in different use and activity
levels, and the variable elements have been
determined to relate to non-lease components only.
Consequently, the lease components of these
contractual payments are considered fixed for the
purposes of IFRS 16.
Short-term leases and leases of low-value
assets
The Group applies the short-term lease recognition
exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term
of 12 months or less from the commencement date
and do not contain a purchase option). It also
applies the lease of low-value assets recognition
exemption to leases of office equipment that are
considered of low value (i.e., below US$ 5,000).
Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a
straight-line basis over the lease term.
F
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Business combinations are accounted for using the
acquisition method. The cost of an acquisition is
measured as the aggregate of the consideration
transferred, measured at acquisition date fair value
and the amount of any non-controlling interest
(“NCI”) in the acquiree. For each business
combination, the Group elects whether to measure
NCI in the acquiree at fair value or at the
proportionate share of the acquiree’s identifiable
net assets. Acquisition related costs are expensed as
incurred and included in administrative expenses.
When the Group acquires a business, it assesses the
assets and liabilities assumed for appropriate
classification and designation in accordance with the
contractual terms, economic circumstances and
pertinent conditions as at the acquisition date. This
includes the separation of embedded derivatives in
host contracts by the acquiree. Those acquired
petroleum reserves and resources that can be
reliably measured are recognised separately in the
assessment of fair values on acquisition. Other
potential reserves, resources and rights are included
in goodwill.
Goodwill is initially measured at cost, being the
excess of the aggregate of the consideration
transferred and the amount recognised for NCI over
the fair value of the identifiable net assets acquired
and liabilities assumed. If the fair value of the
identifiable net assets acquired is in excess of the
aggregate consideration transferred (bargain
purchase), before recognising a gain, the Group
reassesses whether it has correctly identified all of
the assets acquired and all of the liabilities assumed
and reviews the procedures used to measure the
amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair
value of net assets acquired over the aggregate
consideration transferred, then the gain is
recognised in the statement of profit or loss and
other comprehensive income.
After initial recognition, goodwill is measured at cost
less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date,
allocated to each of the Group’s CGUs that are
expected to benefit from the combination,
irrespective of whether other assets or liabilities of
the acquiree are assigned to those units.
Where goodwill forms part of a Cash Generating
Unit (“CGU”) and part of the operation in that unit is
disposed of, the goodwill associated with the
disposed operation is included in the carrying
amount of the operation when determining the gain
or loss on disposal. Goodwill disposed of in these
circumstances is measured based on the relative
values of the disposed operation and the portion of
the CGU retained.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 137
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 113399
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
TTaaxxaattiioonn
Uncertainties exist with respect to the
interpretation of complex tax regulations, changes
in tax laws, and the amount and timing of future
taxable income. Given the wide range of
international business relationships and the long-
term nature and complexity of existing contractual
agreements, differences arising between the actual
results and the assumptions made, or future
changes to such assumptions, could necessitate
future adjustments to tax bases of income and
expense already recorded. The Group establishes
provisions, based on reasonable estimates, for
possible consequences of audits by the tax
authorities of the respective counties in which it
operates. The amount of such provisions is based on
various factors, such as experience of previous tax
audits and differing interpretations of tax
regulations by the Group and the responsible tax
authority. Such differences in interpretation may
arise for a wide variety of issues depending on the
conditions prevailing in the respective domicile of
the Group companies.
Current income tax
Current income tax assets and liabilities are
measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are
those that are enacted or substantively enacted at
the reporting date in the countries where the Group
operates and generates taxable income. The tax
rates and tax laws used to compute the amount are
those that apply to the relevant taxable income.
Current income tax relating to items recognised
directly in equity is recognised in equity and not in
the statement of profit or loss. Management
periodically evaluates positions taken in the tax
FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn
returns with respect to situations in which
applicable tax regulations are subject to
interpretation and establishes provisions where
appropriate.
Deferred income tax
Deferred tax assets and liabilities are calculated in
respect of temporary differences using the liability
method. Deferred income taxes are provided for all
temporary differences arising between the tax
bases of assets and liabilities and their carrying
values for financial reporting purposes, except
where the deferred income tax arises from the
initial recognition of goodwill or of an asset or
liability in a transaction that is not a business
combination and, at the time of the transaction,
affects neither the accounting profit nor taxable
profit or loss.
A deferred tax asset is recorded only to the extent
that it is probable that taxable profit will be
available against which the deductible temporary
differences can be utilised. Deferred tax assets and
liabilities are measured at tax rates that are
expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates
that have been enacted or substantively enacted at
the reporting date.
Deferred income tax is provided on temporary
differences arising on investments in subsidiaries,
except where the timing of the reversal of the
temporary difference can be controlled and it is
probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and
the deferred taxes relate to the same taxable entity
and the same taxation authority.
For more detailed information in current and
deferred income tax disclosure as at 31 December
2023 and 2022, please see Notes 27 and 30.
Significant accounting judgment: taxation
Kazakhstan’s tax legislation and regulations are
subject to ongoing changes and varying
interpretations. Instances of inconsistent opinions
between local, regional and national tax authorities
are not unusual. Because of the uncertainties
associated with Kazakhstan’s tax system, the
ultimate amount of taxes, penalties and interest, if
any, may be in excess of the amount expensed to
date and accrued at 31 December 2023.
The Group is subject to routine tax audits and also a
process whereby tax computations are discussed
and agreed with the tax authorities. Whilst the
ultimate outcome of such tax audits and discussions
cannot be determined with certainty, and hence
requires management judgement, the level of
provisions are estimated by management as
required for taxes for which it is considered
probable will be payable, based on professional
advice and consideration of the nature of current
discussions with the tax authority.
As at 31 December 2023 management believes that
its interpretation of the relevant legislation is
appropriate and that it is probable that the Group’s
tax position will be sustained. To the extent that
actual outcomes differ from management’s
estimates, income tax charges or credits, and
changes in current and deferred tax assets or
liabilities, may arise in future periods. For more
information, see Notes 27 and 30.
The functional currency is the currency of the
primary economic environment in which an entity
operates and is normally the currency in which the
entity primarily generates and expends cash.
Transactions in foreign currencies are initially
recorded by the Group’s subsidiaries at their
respective functional currency spot rates at the date
the transaction first qualifies for recognition.
The functional currency of the Company is the
United States dollar (the “US dollar” or “US$”). The
functional currencies of the Group’s subsidiaries are
as follows:
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange at the reporting
date. All differences are taken to the profit or loss.
Functional
currency
Company
Nostrum Associated Investments LLP Tenge
Nostrum Oil & Gas Coöperatief U.A.
Nostrum Oil & Gas BV
Nostrum Oil & Gas Finance BV
Nostrum Oil & Gas Holding Ltd
Nostrum Oil & Gas UK Ltd.
Nostrum Services Central Asia LLP
Nostrum Services N.V.
Zhaikmunai LLP
US dollar
US dollar
US dollar
US dollar
British Pound
Tenge
Euro
US dollar
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates as at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined.
In the consolidated financial statements, the assets
and liabilities of non-US dollar functional currency
subsidiaries are translated into US dollars at the spot
exchange rate on the balance sheet date. The
results and cash flows of non-US dollar functional
currency subsidiaries are translated into US dollars
using average rates of exchange, and resulting
exchange differences are accumulated foreign
currency translation reserve within equity, and are
reclassified to the profit or loss on the disposal of
the subsidiary. In the consolidated financial
statements, exchange adjustments arising when the
opening net assets and the profits for the year
retained by non-US dollar functional currency
subsidiaries are translated into US dollars are
reported in the other comprehensive income.
138 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
114400 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
BBoorrrroowwiinngg ccoossttss
AAddvvaanncceess ffoorr nnoonn--ccuurrrreenntt aasssseettss
The Group capitalises borrowing costs on qualifying
assets. Assets qualifying for borrowing costs
capitalisation include all assets under construction
that are not being depreciated, depleted, or
amortised, provided that work is in progress at that
time. Qualifying assets mostly include wells and
other operations field infrastructure under
construction. Capitalised borrowing costs are
calculated by applying the capitalisation rate to the
expenditures on qualifying assets. The capitalisation
rate is the weighted average of the borrowing costs
applicable to the Group’s borrowings that are
outstanding during the period. All other borrowing
costs are recognised in the profit or loss in the
period in which they are incurred.
For more detailed information in relation to
capitalisation of borrowing costs, please refer to
Note 5.
Advances paid for capital investments/acquisition of
non-current assets are qualified as advances for
non-current assets regardless of the period of
supplies of relevant assets or the supply of work or
services to close advances. Advances paid for the
purchase of non-current assets are recognised by
the Group as non-current assets and are not
discounted.
For more detailed information in relation to
advances for non-current assets, please refer to
Note 7.
IInnvveennttoorriieess
Inventories are stated at the lower of cost or net
realisable value (“NRV”). Cost of oil, gas condensate
and liquefied petroleum gas (“LPG”) is determined
on the weighted-average method based on the
production cost including the relevant expenses on
depreciation, depletion and impairment and
overhead costs based on production volume. Net
realisable value is the estimated selling price in the
ordinary course of business, less selling expenses.
For more information in relation to the breakdown
of inventories as at 31 December 2023 and 2022,
please see Note 8.
OOtthheerr ccuurrrreenntt lliiaabbiilliittiieess
The Group makes accruals for liabilities related to
the underperformance and/or adjustments of work
programs under subsoil use agreements (SUA) on a
regular basis. When evaluating the adequacy of an
accrual, management bases its estimates on the
latest work program included in the SUA, and
relevant signed supplements and potential future
changes in payment terms (including the currency in
which these liabilities are to be settled).
Future changes in the work programs may require
adjustments to the accrual recorded in the
consolidated financial statements.
PPrroovviissiioonnss aanndd ccoonnttiinnggeenncciieess
Provisions are recognised when the Group has a
present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of
resources embodying economic benefits will be
required to settle the obligation and a reliable
estimate of the amount of the obligation can be
made. Provisions are reviewed by the Group at each
reporting date and adjusted to reflect the current
best estimate. If it is no longer probable that an
outflow of resources embodying economic benefits
will be required to settle the obligation, the
provision is reversed.
The Group classifies as contingent liabilities those
possible obligations that arise from past events and
whose existence will be confirmed only by the
occurrence or non-occurrence of one or more
uncertain future events not wholly within the
control of the enterprise and the present obligations
that arise from past events but are not recognised
because it is not probable that an outflow of
resources embodying economic benefits will be
required to settle the obligation or the amount of
the obligation cannot be measured with sufficient
reliability.
The Group does not recognise contingent liabilities
but discloses contingent liabilities in Note 30, unless
the possibility of an outflow of resources embodying
economic benefits is remote.
Significant accounting judgment: provisions and
contingencies
Provisions and liabilities are recognized in the period
when it becomes probable that there will be a
future outflow of funds resulting from past
operations or events and the amount of cash
outflow can be reliably estimated. The timing of
recognition and quantification of the liability require
the application of judgment to existing facts and
circumstances, which can be subject to change. The
carrying amounts of provisions and liabilities are
reviewed regularly and adjusted to take account of
changing facts and circumstances.
Significant management judgment is required to
evaluate any claims and actions to determine
whether a provision relating to a specific litigation
should be recognized or revised, or a contingent
liability is required to be disclosed, since the
outcome of litigation is difficult to predict.
For more detail on provisions and contingencies,
please refer to Note 30.
F
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DDeeccoommmmiissssiioonniinngg
Provision for decommissioning is recognised in full,
when the Group has an obligation to dismantle and
remove a facility or an item of plant and to restore
the site on which it is located, and when a
reasonable estimate of that provision can be made.
The Group estimates future dismantlement and site
restoration costs for oil and gas properties with
reference to the estimates provided from either
internal or external engineers after taking into
consideration the anticipated method of
dismantlement and the extent of site restoration
required in accordance with current legislation and
industry practice. The amount of the provision is the
present value of the estimated expenditures
expected to be required to settle the obligation at
current year prices discounted at pre-tax rate that
reflects current market assessment of the time
value of money and the risks specific to liability.
The unwinding of the discount related to the
obligation is recorded in finance costs. A
corresponding amount equivalent to the provision is
also recognised as part of the cost of the related oil
and gas properties. This asset is subsequently
depreciated as part of the capital costs of the oil and
gas properties on a unit-of-production basis.
The Group reviews site restoration provisions at
each financial reporting date and adjusts them to
reflect current best estimates in accordance with
IFRIC 1 Changes in Existing Decommissioning,
Restoration and Similar Liabilities.
Changes in the measurement of an existing
decommissioning liability that result from changes
in the estimated timing or amount of the outflow of
resources embodying economic benefits required to
settle the obligation, or changes to the discount
rate:
• are added to, or deducted from, the cost of the
related asset in the current period. If deducted
from the cost of the asset the amount deducted
shall not exceed its carrying amount. If a
decrease in the provision exceeds the carrying
amount of the asset, the excess is recognised
immediately in the profit or loss; and
• if the adjustment results in an addition to the
cost of an asset, the Group considers whether
this is an indication that the new carrying amount
of the asset may not be fully recoverable. If it is
such an indication, the Group tests the asset for
impairment by estimating its recoverable
amount, and accounts for any impairment loss in
accordance with IAS 36.
Movements in the abandonment and site
restoration provision are disclosed in Note 15.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 139
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 114411
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
Significant estimates and assumptions: provisions
and contingencies
The Group holds provision for the future
decommissioning of oil and gas properties and site
restoration. The estimation of the future
dismantlement and site restoration costs involves
use of significant estimates and assumptions by
management, specifically for determining the timing
of the future cash outflows and discount rate.
Management made its estimates based on the
assumption that cash flow will take place at the
expected end of the subsoil use rights. Therefore,
most decommissioning events are many years in the
future and the precise date of wells abandonment
and site restoration may change with the relative
impact on the cash outflows.
Management of the Group believes that the long-
term US Treasury real yield curve rates adjusted for
country risk premium of Kazakhstan provides the
best estimates of applicable real discount rate.
Any changes in the expected future costs are
reflected in both the provision and the asset.
Moreover, actual decommissioning costs can differ
from estimates because of constantly changing
decommissioning technologies as well as changes in
environmental laws and regulations and public
expectations.
As a result, there could be significant adjustments to
the provisions established which would affect future
financial results. For example, 10% increase in the
cost of decommissioning may lead to additional
US$2,002 liability.
For more details on abandonment and site
restoration provision please refer to Note 15.
FFiinnaanncciiaall aasssseettss
Initial recognition and measurement
Financial assets are classified, at initial recognition,
as subsequently measured at amortised cost and
fair value through profit or loss. The Group
determines the classification of its financial assets at
initial recognition.
The classification of financial assets at initial
recognition depends on the financial asset’s
contractual cash flow characteristics and the
Group’s business model for managing them. With
the exception of trade receivables that do not
contain a significant financing component or for
which the Group has applied the practical
expedient, the Group initially measures a financial
asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss,
transaction costs. Trade receivables that do not
contain a significant financing component or for
which the Group has applied the practical expedient
are measured at the transaction price determined
under IFRS 15.
In order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are
‘solely payments of principal and interest (SPPI)’ on
the principal amount outstanding. This assessment
is referred to as the SPPI test and is performed at an
instrument level.
The Group’s business model for managing financial
assets refers to how it manages its financial assets in
order to generate cash flows. The business model
determines whether cash flows will result from
collecting contractual cash flows, selling the financial
assets, or both.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the market place
(regular way trades) are recognised on the trade
date, i.e., the date that the Group commits to
purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial
assets are classified in four categories:
• Financial assets at amortised cost (debt
instruments);
• Financial assets at fair value through OCI with
recycling of cumulative gains and losses (debt
instruments);
• Financial assets designated at fair value through
OCI with no recycling of cumulative gains and
losses upon derecognition;
• Financial assets at fair value through profit or
loss.
Financial assets at amortised cost (debt
instruments)
This category is the most relevant to the Group. The
Group measures financial assets at amortised cost if
both of the following conditions are met:
• The financial asset is held within a business
model with the objective to hold financial assets
in order to collect contractual cash flows, and
• The contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
Financial assets at amortised cost are subsequently
measured using the effective interest (EIR) method
and are subject to impairment. Gains and losses are
recognised in profit or loss when the asset is
derecognised, modified or impaired.
The Group’s financial assets at amortised cost
include cash, long-term and short-term deposits,
trade and other receivables.
Derecognition
• The rights to receive cash flows from the asset
have expired; or
• The Group has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a
‘pass-through’ arrangement; and either (a) the
Group has transferred substantially all the risks
and rewards of the asset, or (b) the Group has
neither transferred nor retained substantially all
the risks and rewards of the asset, but has
transferred control of the asset.
When the Group has transferred its rights to receive
cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if, and to what
extent, it has retained the risks and rewards of
ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the
Group continues to recognise the transferred asset
to the extent of its continuing involvement. In that
case, the Group also recognises an associated
liability. The transferred asset and the associated
liability are measured on a basis that reflects the
rights and obligations that the Group has retained.
Impairment of financial assets
The Group recognises an allowance for expected
credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on
the difference between the contractual cash flows
due in accordance with the contract and all the cash
flows that the Group expects to receive, discounted
at an approximation of the original effective interest
rate. The expected cash flows will include cash flows
from the sale of collateral held or other credit
enhancements that are integral to the contractual
terms.
A financial asset (or, where applicable, a part of a
financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from
the Group’s consolidated statement of financial
position) when:
For trade receivables and contract assets, the Group
applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in
credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date.
140 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
114422 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
FFiinnaanncciiaall lliiaabbiilliittiieess
Initial recognition, measurement and
derecognition
• Financial liabilities at amortised cost (loans and
borrowings)
Derecognition
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, long-term borrowings,
payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of long-term borrowings and
payables, net of directly attributable transaction
costs.
The Group’s financial liabilities include trade and
other payables, long-term borrowings, and
derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial
liabilities are classified in two categories:
• Financial liabilities at fair value through profit or
loss
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
Cash and cash equivalents in the statement of
financial position comprise cash at banks and at
hand and short-term deposits with an original
maturity of three months or less at inception.
Restricted cash and cash equivalent balances are
those which meet the definition of cash and cash
equivalents but are not available for use by the
Group and therefore is not considered highly liquid
– for example, cash set aside to cover
decommissioning obligations or as required by the
forbearance agreement.
For the purpose of the consolidated statement of
cash flows, cash and cash equivalents consist of
cash and cash equivalents, as defined above, net of
outstanding bank overdrafts.
For more detailed information in relation to cash
and cash equivalents as at 31 December 2023 and
2022, please see Note 11.
RReevveennuuee rreeccooggnniittiioonn
The Group sells crude oil, gas condensate and LPG
under agreements priced by reference to Platt’s
and/or Argus’ index quotations and adjusted for
freight, insurance and quality differentials where
applicable. The Group sells gas under agreements
at fixed prices.
FFiinnaanncciiaall lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt ((llooaannss
aanndd bboorrrroowwiinnggss))
This is the category most relevant to the Group.
After initial recognition, interest-bearing borrowings
are subsequently measured at amortised cost using
the EIR method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised as
well as through the EIR amortisation process.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the
statement of profit or loss.
This category generally applies to interest-bearing
borrowings. For more information, refer to Note 14.
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same lender
on substantially different terms, or the terms of an
existing liability are substantially modified, such an
exchange or modification is treated as the
derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and
the net amount reported in the statement of
financial position if, and only if, there is a currently
enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net
basis, or to realise the assets and settle the liabilities
simultaneously.
SShhaarree--bbaasseedd ppaayymmeennttss
The cost of equity-settled transactions is measured
at fair value at the grant date. This fair value is
expensed over the period until vesting with the
recognition of a corresponding equity element,
which is not remeasured subsequently until the
settlement date.
F
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S
Estimating fair value for share-based payment
transactions requires determination of the most
appropriate valuation model, which is dependent
on the terms and conditions of the grant. This
estimate also requires determination of the most
appropriate inputs to the valuation model
including the expected life of the share option,
volatility and distribution yield and making
assumptions about them.
Revenue from contracts with customers is
recognised when control of the goods is
transferred to the customer. For sales of crude oil,
gas condensate and LPG, this generally occurs
when the product is physically transferred into a
vessel, pipe, railcar, trucks or other delivery
mechanism; for sales of gas, it is when the product
is physically transferred into a pipe. The Group’s
LPG are sales are mostly on advance payment
basis, while payment terms for gas, oil and
condensate are normally 15-45 days after delivery.
The Group has generally concluded that it is the
principal in its revenue arrangements, because it
typically controls the goods before transferring
them to the customer.
TTrreeaassuurryy sshhaarreess
Own equity instruments that are reacquired
(treasury shares) are recognised at cost and
deducted from equity. No gain or loss is recognised
in profit or loss on the purchase, sale, issue or
cancellation of the Group’s own equity
instruments. Any difference between the carrying
amount and the consideration, if reissued, is
recognised in the share premium. Voting rights
related to treasury shares are nullified for the
Group and no distributions are accepted in relation
to them. Share options exercised during the
reporting period can be satisfied with treasury
shares.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 141
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 114433
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
5. Property, plant and equipment
Depletion has been calculated using the unit of production method based on
these reserves estimates.
As at 31 December 2023 and 31 December 2022 property, plant and
equipment comprised the following:
In thousands of US Dollars
Oil and gas proper_es
Other property, plant and equipment
31 December
2023
31 December
2022
245,346
7,275
252,621
268,990
7,033
276,023
OOiill aanndd ggaass pprrooppeerrttiieess
The category “Oil and gas properties” represents mainly wells, oil and gas
treatment facilities, oil transportation and other related assets. The movement
of oil and gas properties for the years ended 31 December 2023 and 2022 was
as follows:
The change in the discount rate used to determine the abandonment and site
restoration provision (Note 15) in the year ended 31 December 2023 resulted
in the decrease of the oil and gas properties by US$ 630 thousand
(31 December 2022: an increase of US$9,206 thousand).
The Group incurred borrowing costs including amortisation of arrangement
fees. Capitalisation rate and capitalised borrowing costs were as follows as at
31 December 2023 and 31 December 2022:
In thousands of US Dollars
Borrowing costs including amor_sa_on of
arrangement fee
31 December
2023
31 December
2022
97,288
106,915
Capitalisa_on rate
Capitalised borrowing costs
8.31%
2,062
8.44%
1,504
OOtthheerr pprrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt
In thousands of US Dollars
Balance at 1 January 2022
Addi_ons
Transfers
Disposals
Disposals deprecia_on
Deprecia_on
Impairment transfer
Machi-
nery &
equip-
ment
Buildings
2,658
2,091
–
265
(25)
26
(257)
(738)
313
436
(188)
188
(129)
(105)
Balance at 31 December 2022
1,929
2,606
Addi_ons
Transfers
Disposals
Disposals deprecia_on
Deprecia_on
–
(5)
–
–
(213)
47
83
(551)
548
(263)
Balance at 31 December 2023
1,711
2,470
Vehicles
Others
Total
37
–
–
(86)
85
(3)
–
33
–
–
–
–
(3)
30
2,330
7,116
773
1,086
(403)
(152)
132
(233)
18
298
(451)
431
(622)
(825)
2,465
7,033
1,153
(111)
(189)
169
(424)
3,063
1,200
(33)
(740)
717
(903)
7,275
As at 31 December 2021
Cost
49,258
21,756
1,591
17,792
90,397
Accumulated deprecia_on**
(46,763)
(19,611)
(1,544)
(15,363)
(83,281)
Balance*
2,495
2,145
47
2,429
7,116
Accumulated deprecia_on**
49,498
(47,569)
22,317
(19,711)
1,505
(1,472)
18,010
(15,545)
91,330
(84,297)
Balance*
1,929
2,606
33
2,465
7,033
As at 31 December 2023
Cost
49,493
21,896
1,505
18,864
91,758
Accumulated deprecia_on**
(47,782)
(19,426)
(1,475)
(15,800)
(84,483)
Balance*
1,711
2,470
30
3,064
7,275
* Balances, net of accumulated depreciation, amortisation and impairment
** Accumulated depreciation, amortisation and impairment
In thousands of US Dollars
Balance at 1 January 2022, net*
AddiTons
Transfers
Disposals
Disposals depreciaTon
Working
assets
272,044
Construc8on
in progress
40,965
8
28,217
(9,220)
16
16,544
(28,515)
(742)
–
–
DepreciaTon and depleTon charge
(51,213)
Impairment transfer
(24,308)
25,194
Balance at 31 December 2022, net*
AddiTons
215,544
727
Transfers
Disposals
Disposals depreciaTon
18,466
(5,555)
4,464
53,446
17,217
(18,433)
(917)
–
DepreciaTon and depleTon charge
(39,606)
Impairment transfer
(2,801)
2,794
Total
313,009
16,552
(298)
(9,962)
16
(51,213)
886
–
268,990
17,944
33
(6,472)
4,464
(39,606)
(7)
Balance at 31 December 2023, net*
191,239
54,107
245,346
As at 31 December 2021
Cost
Accumulated depreciaTon**
Balance*
As at 31 December 2022
2,951,778
112,732
3,064,510
(2,679,734)
(71,767)
(2,751,501)
272,044
40,965
313,009
Cost
2,970,783
100,019
3,070,802
Accumulated depreciaTon
(2,755,239)
(46,573)
(2,801,812)
Balance
As at 31 December 2023
Cost
Accumulated depreciaTon**
Balance*
215,544
53,446
268,990
2,984,421
97,886
3,082,307
Cost
As at 31 December 2022
(2,793,182)
(43,779)
(2,836,961)
191,239
54,107
245,346
* Balances, net of accumulated depreciation, depletion and impairment
** Accumulated depreciation, depletion and impairment
The category “Construction in progress” is represented by employee
remuneration, materials and fuel used, rig costs, payments made to
contractors, and asset retirement obligation fees directly associated with
development of wells until the drilling of the well is complete and results have
been evaluated.
The depletion rate for oil and gas working assets was 21.52% and 21.73% in
2023 and 2022, respectively. In 2023, the Group applied consistent approach in
the estimation of oil & gas reserves adopting the same methodology with
previous periods, however, the Group decided not to engage independent
reserve auditors taking into account immaterial changes in the reserves
estimates, which were in line with expectations.
142 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
114444 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
6. Exploration and evaluation assets
On 17 July 2023, Nostrum Oil & Gas PLC completed the acquisition of an
80% interest in Positiv Invest LLP. Positiv Invest LLP holds the rights to the
Stepnoy Leopard Fields situated in the West Kazakhstan region, which has
been classified as being in the evaluation and appraisal phase.
As at 31 December 2023 exploration and evaluation assets comprised the
following:
Balance at 1 January 2023
Exploration and evaluation assets related purchase
–
17,330
considera_on, net
Exploration and evaluation assets on the date of
1,560
acquisition
Expenditures on Exploration and evaluation assets
5,045
subsequent to acquisition
Balance at 31 December 2023
There were no other movements in the provision for impairment of advances
paid during the year ended 31 December 2023 and the year ended
31 December 2022.
10. Trade receivables
As at 31 December 2023 and 31 December 2022 trade receivables were not
interest-bearing and were mainly denominated in US dollars and Tenge. Their
average collection period is not more than 45 days.
As at 31 December 2023 there were no past due but not impaired trade
receivables (31 December 2022: there were past due but not impaired trade
receivables). Based on the assessments made, the Group concluded that no
provision for expected credit losses should be recognized as at 31 December
2023 and 31 December 2022.
11. Cash and cash equivalents
23,935
As at 31 December 2023 and 31 December 2022 cash and cash equivalents
comprised the following:
At the date of acquisition the exploration and evaluation assets amounted to
US$1,560 thousand. During the period after the acquisition until 31 December
2023 the Group incurred further exploration and evaluation of US$5,045
thousand primarily related to the two-well appraisal programme.
7. Advances for non-current assets
As at 31 December 2023 and 31 December 2022 advances for non-current
assets comprised the following:
In thousands of US Dollars
Current accounts in US Dollars
Current accounts in Tenge
Current accounts in Euro
Current accounts in other currencies
Pecy cash
31 December
2023
31 December
2022
160,646
395
66
601
3
161,711
217,026
13,827
1,824
901
6
233,584
In thousands of US Dollars
Advances for construc_on services
Advances for construc_on materials
Advances for other non-current assets
31 December
2023
31 December
2022
790
6
322
1,118
582
1,090
442
2,114
In addition to the cash and cash equivalents in the table above, as at
31 December 2023 the Group had restricted cash accounts as a liquidation
fund deposit of US$8,662 thousand with Halyk bank, and US$20 thousand with
Jusan bank (31 December 2022: US$8,220 thousand with Halyk bank), which
are kept as required by the subsoil use rights for abandonment and site
restoration liabilities of the Group.
F
I
N
A
N
C
I
A
L
S
8. Inventories
As at 31 December 2023 and 31 December 2022 inventories comprised the
following:
The Group set up a debt service retention account (DSRA) to ensure funding
for the forthcoming two interest instalments on SUNs and SSNs. As of 31
December 2023, the DSRA contained US$16,533 thousand, (31 December
2022: US$22,802 thousand on in the escrow account established per the FBA
terms).
31 December
2023
31 December
2022
12. Share capital and reserves
In thousands of US Dollars
Spare parts and other inventories
Gas condensate
Crude oil
LPG
Dry gas
Sulphur
27,067
1,072
1,217
462
30
4
29,852
26,720
1,905
1,182
335
46
8
30,196
As at 31 December 2023 and 31 December 2022 inventories are carried at
cost.
9. Prepayments and other current assets
As at 31 December 2023 and 31 December 2022 prepayments and other
current assets comprised the following:
In thousands of US Dollars
Advances paid
Other taxes receivable
VAT receivable
Other
31 December
2023
31 December
2022
2,123
1,142
5,872
280
9,417
2,959
761
744
224
4,688
Advances paid consist primarily of prepayments made to service providers. As
at 31 December 2023 the impaired VAT receivable amounted to US$567
thousand (31 December 2022: the impaired VAT receivable: US$5,596).
As at 31 December 2023 the ordinary share capital of the Parent consists of
169,381,561 issued and fully paid ordinary shares, which are listed on the
London Stock Exchange. The ordinary shares have a nominal value of GB£ 0.01.
The table below represents movements in the number of ordinary shares
during the year ended 31 December 2023. The movements in the number of
shares during the year ended 31 December 2023 and 31 December 2022 was
as follows:
Number of shares
As at 31 December 2022
Shares issued
Share consolidaTon
In
circula8on
185,234,079
Treasury
capital
2,948,879
TOTAL
188,182,958
1,505,633,046
(1,521,780,413)
–
1,505,633,046
(2,653,991) (1,524,434,404)
As at 31 December 2023
169,086,712
294,888
169,381,600
As part of the Restructuring, on 9 February 2023 the Company issued
1,505,633,046 new shares in connection with the repayment of the remaining
face value of the Existing Notes following the issue of the New Notes (see Note
14 below), together with accrued but unpaid interest (the “Debt for Equity
Swap”). Given the number of new shares issued, at the close of business on 9
February 2023 the Company also performed a share consolidation, so as to
achieve an appropriate share price following closing of the Restructuring (Note
1). As a result, the number of ordinary shares in issue was reduced from
1,693,816,004 (following the issue of the new shares) to 169,381,600 ordinary
shares, on the basis of a 10:1 consolidation (the “Share Consolidation”). In
order to give effect to the Share Consolidation, the Company initially reduced
the nominal value of the ordinary shares (the “Sub-Division”) after the issue of
the new shares, through sub-division of each ordinary share at a ratio of 1:10
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 143
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 114455
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
into one ordinary share of nominal value of £0.001 each together with nine
deferred shares of nominal value £0.001 each (the “Deferred Shares”). The
resulting 15,244,344,036 Deferred Shares (in practice), which are not included
in the table above, have no economic or voting rights in the capital of the
Company and it is expected that they will be cancelled following the
implementation of the Restructuring. The nominal value of the ordinary shares
following the Share Consolidation was £0.01 each. Fractions of new ordinary
shares were not issued in connection with the Share Consolidation and any
fractional entitlements were rounded down to the nearest whole ordinary
share.
WWaarrrraannttss
As part of the Restructuring 18,801,358 warrants were issued to the warrant
trustee, which upon exercise in full, would result in the issue of new Ordinary
Shares (the “Warrant Shares”) at their nominal value to the holders of the
Existing Notes to Ordinary Shares from 88.89% to 90%, based upon the pro
forma capitalisation of Nostrum immediately following closing of the
Restructuring (but excluding entitlements under any new management
incentive plan, long-term incentive plan or similar share scheme).
The Warrants will be exercisable in full upon:
• a breach of the Company’s covenants or undertakings in relation to the
SUNs or the Warrants;
• a change in, or breach of, certain agreed governance principles without
approval from the Warrant Director (“Warrant Approval”);
• a change to the agreed composition of the Board that has not obtained
Warrant Approval; or
• an exit event (as specifically defined in the instrument pursuant to which the
Warrants will be constituted) but including, in principle, any delisting of
Nostrum from the London Stock Exchange, a change of control, sale of all or
substantially all assets, the commencement of any winding-up or similar
process in relation to Nostrum, or merger of Nostrum (an “Exit”).
DDeebbtt ffoorr EEqquuiittyy sswwaapp
Debt for Equity swap was recorded by the Company in accordance with the
requirements of IFRS 9 Financial Instruments and IFRIC 19 Extinguishing
Financial Liabilities with Equity Instruments, i.e.:
• Derecognition of the outstanding amount of Existing Notes (after issue of
the New Notes) as shown in the table below:
In thousands of US Dollars
Amount
2022 Notes principal amount
2025 Notes principal amount
2025 Notes accrued but unpaid interest of
2025 Notes accrued but unpaid interest of
Unamortised transaction costs
336,976
192,946
195,216
91,056
(2,013)
814,181
• Recognition of the shares issued at their fair value at the time of issue of
US$42,356 thousand, which was estimated at the trading share price of
£0.2375 and converted into US dollars using the prevailing exchange rate of
1.2169 GBP/USD. Relevant adjustments were made in the nominal amount
of the share capital in accordance with the share issue, subdivision and
consolidation described above, which resulted in the following allocations
between various components of equity:
Treasury shares were issued to support the Group’s obligations to employees
under the Employee Share Option Plan (“ESOP”) and the Long-Term Incentive
Plan (“LTIP”) and are held by Intertrust Employee Benefit Trustee Limited as
trustee for the Nostrum Oil & Gas Benefit Trust.
The movements in the Group’s other reserves is presented as follows:
In thousands of US Dollars
Group
reorgani-
sa5on
reserve
Foreign
currency
transla5on
reserves
Share-
op5on
reserves
Total
As at 1 January 2022
255,459
3,102
3,824 262,385
Currency translaTon difference
Share based payments under LTIP
–
–
(490)
–
–
(38)
(490)
(38)
As at 31 December 2022
255,459
2,612
3,786 261,857
Currency translaTon difference
Debt-to-equity exchange
Share based payments under LTIP
–
229
–
62
–
–
–
–
(25)
62
229
(25)
As at 31 December 2023
255,688
2,674
3,761 262,123
Group reorganisation reserve in the amount of US$255,688 thousand as of 31
December 2023 represents the difference between the partnership capital,
treasury capital and additional paid-in capital of Nostrum Oil & Gas LP, the
share capital of Nostrum Oil & Gas PLC, that arose during the reorganisation of
the Group in 2014.
DDiissttrriibbuuttiioonnss
There were no distributions made during the year ended 31 December 2023
and year ended 31 December 2022.
KKaazzaakkhhssttaann ssttoocckk eexxcchhaannggee ddiisscclloossuurree rreeqquuiirreemmeenntt
The Kazakhstan Stock Exchange enacted on 11 October 2010 (as amended on
18 April 2014) a requirement for disclosure of “the book value per share” (total
assets less intangible assets, total liabilities and preferred stock divided by the
number of outstanding shares as at the reporting date). As at 31 December
2023 the book value per share amounted to US$0.64 negative (31 December
2022: US$5.56 negative).
13. Earnings per share
As at 31 December 2023 the ordinary share capital of the Parent consists of
169,381,600 issued and fully paid ordinary shares, which are listed on the
London Stock Exchange. The ordinary shares have a nominal value of GB£0.01.
For the purpose of calculations of earnings per share the number of shares for
the year ended 31 December 2023
Income/(loss) for the period aCributable
to the shareholders (in thousands of
US dollars)
Basic earnings per share (in US dollars)
Diluted earnings per share (in US dollars)
Weighted average number of ordinary
For the year ended 31
December
2023
2022
831,658
(116,445)
4.92
4.42
(0.69)
(0.69)
169,086,713
169,086,713
18,818,296
–
188,182,958
169,086,713
In thousands of US Dollars
Amount
shares for basic EPS
Net reduction in share capital
Reduction in treasury capital
Deferred shares
Share premium
Other reserves (warrants)
(1,051)
1,494
18,551
23,133
229
42,356
• The difference between Existing Notes balance of US$814,181 thousand
and the total equity additions of US$42,356 thousand as described above
after deduction of the relevant proportion of lock-up fees of US$2,213
thousand, amounted to US$769,611 thousand and was recognised as a
separate item in the income statement.
Effects of diluRon from warrants
Weighted average number of ordinary
shares adjusted for the effect of
diluRon
144 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
114466 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
14. Notes payable and accumulated interest
Notes payable and accumulated interest are comprised of the following as at
31 December 2023 and 31 December 2022:
In thousands of US Dollars
Notes issued in 2017 and maturing in 2022
Notes issued in 2018 and maturing in 2025
Senior Secured Notes
Senior Unsecured Notes
Accrued interest
Less amounts due within 12 months
31 December
2023
–
–
207,304
264,443
–
31 December
2022
725,000
396,320
–
–
275,197
471,747
1,396,517
(175)
(1,396,517)
471,572
–
Senior Secured Notes (SSNs)
Following the Restructuring of the 2025 and 2022 Notes, Nostrum Oil & Gas
Finance BV, issued US$250,000,000 senior secured notes due 30 June 2026.
The SSNs bear cash-pay interest at a rate of 5.0% per year, payable semi-
annually. Pursuant to the Lock-up Agreement, the Group has agreed that the
5.0% cash interest will accrue from 1 January 2022 and such accrued amount
was paid in cash after the issue of the SSNs. For more information, please refer
to Note 1.
Senior Unsecured Notes (SUNs)
Following the Restructuring of the 2025 and 2022 Notes, Nostrum Oil & Gas
Finance BV issued US$300,000,000 senior notes due 30 June 2026. The SUNs
bear interest at a rate of 1.0% cash-pay and 13.0% payment-in-kind (PIK) per
year, payable semi-annually. Pursuant to the Lock-up Agreement, the
Company agreed that the 1.0% cash interest and 13.0% PIK interest would
accrue from 1 January 2022. Accordingly, Nostrum Oil & Gas Finance issued a
principal amount of US$45,078,172 additional SUNs representing the PIK
interest which has been agreed to be payable with effect from 1 January 2022
until 9 February 2022 upon the issue of the SUNs. For more information, please
refer to Note 1 for Restructuring terms.
2022 Notes
On 25 July 2017, a newly incorporated entity, Nostrum Oil & Gas Finance B.V.
(the "2022 Issuer") issued US$725,000 thousand notes with maturity on 25 July
2022. The 2022 Notes bore interest at a rate of 8.00% per year, payable on 25
January and 25 July of each year. The 2022 Notes were jointly and severally
guaranteed (the "2022 Guarantees") on a senior basis by Nostrum Oil & Gas
PLC, Nostrum Oil & Gas Coöperatief U.A., Zhaikmunai LLP and Nostrum Oil &
Gas B.V. (the "2022 Guarantors"). The 2022 Notes were the 2022 Issuer's and
the 2022 Guarantors’ senior obligations and ranked equally with all of the 2022
Issuer's and the 2022 Guarantors’ other senior indebtedness. The issue of the
2022 Notes was used primarily to fund the refinancing of part of the Group’s
Notes issued in 2012 and 2014.
2025 Notes
On 16 February 2018, Nostrum Oil & Gas Finance B.V. (the "2025 Issuer")
issued US$400,000 thousand notes with maturity on 16 February 2025. The
2025 Notes bore interest at a rate of 7.00% per year, payable on 16 August and
16 February of each year. The 2025 Notes were jointly and severally
guaranteed (the "2025 Guarantees") on a senior basis by Nostrum Oil & Gas
PLC, Nostrum Oil & Gas Coöperatief U.A., Zhaikmunai LLP and Nostrum Oil &
Gas B.V. (the "2025 Guarantors"). The 2025 Notes were the 2025 Issuer's and
the 2025 Guarantors’ senior obligations and ranked equally with all of the 2025
CChhaannggeess iinn lliiaabbiilliittiieess aarriissiinngg ffrroomm ffiinnaanncciinngg aaccttiivviittiieess
Issuer's and the 2025 Guarantors’ other senior indebtedness. The issue of the
2025 Notes was used primarily to fund the refinancing of the remaining
Group’s Notes issued in 2012 and 2014.
Exchange of debt instruments
Taking into account significant differences in the terms of the Existing Notes
and the terms of SSNs and SUNs issued in exchange, the Group accounted for
the exchange transaction in accordance with the requirements of IFRS 9
Financial Instruments for a substantial modification, i.e. extinguishment of the
Existing Notes and recognition of the New Notes at their fair value.
Such fair values have been determined by discounting future cashflows at the
relevant implied yields of the instruments on issue date (13.25% for SSNs and
31.04% for SUNs). The resulting gains on initial recognition of SSNs and SUNs in
the amount of $40.294 thousand and $134.132 thousand, respectively, were
recorded in the income statements under separate line item. These
adjustments will be amortised over the life of the instruments and reflected as
part of finance costs in the income statement.
Reclassification to current liabilities
The Group has not made coupon payments due under the Existing Notes since
July 2020, which was an event of default under the terms of the indentures
governing 2022 Notes and 2025 Notes. Considering these facts and
circumstances, starting from Q3 2020 the Group reclassified the carrying
amounts of the 2022 Notes and 2025 Notes into current liabilities and since
then and until the restructuring has been presenting them as the current
portion of long-term borrowings in the statement of financial position.
More detailed information for restructuring is disclosed in the Note 1.
Covenants contained in the SSNs and SUNs
The SSNs and SUNs contained consistent covenants that, among other things,
sets following requirements, subject to certain exceptions and qualifications,
the Issuer, the Guarantors, and certain other members of the Group:
• Produce reports to holders, including quarterly and annual financial
statements and certain other reports and documents upon request
from bondholders;
• Limitations on Indebtedness;
• Limitations on restricted payments;
• Limitations on restrictions on distributions from Group entities;
• Limitations on sales of assets and equity interests in Group
subsidiaries;
• Limitations on affiliate transactions;
• Limitation on line of business;
• Listing of the bonds on international stock exchange;
• Change of Control;
• Limitation on Liens;
• Limitation on issuances of guarantees of Indebtedness;
• Payments for Consents;
• Additional Amounts;
• Compliance Certificates; Default Notices;
• Registration with the National Bank of Kazakhstan;
• Merger and Consolidation;
• Cashflow Arrangements.
In addition, the indentures imposed certain requirements as to future
subsidiary guarantors, and certain customary information covenants and
events of default.
In thousands of US Dollars
2023
Notes payable and accumulated interest
2022
Notes payable and accumulated interest
1 January
Cash
ouXlows
Borrowing costs
including
amorTsaTon of
arrangement
fees
Gain on
debt-to-
equity
exchange
Fair value
adjustment on
recogniTon of
debt instruments
Reclassificat
ion from
non-current
to current
31 December
1,396,517
(35,649)
97,288
(811,983)
(174,426)
1,289,603
–
106,914
–
–
–
471,747
1,396,517
F
I
N
A
N
C
I
A
L
S
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 145
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 114477
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
15. Abandonment and site restoration provision
The summary of changes in abandonment and site restoration provision during
years ended 31 December 2023 and 2022 is as follows:
In thousands of US Dollars
Provision as at 1 January
Unwinding of discount
Addi_onal provision
Provision disposed
Change in es_mates
17. Trade payables
Trade payables comprise the following as at 31 December 2023 and
31 December 2022:
2023
2022
20,073
29,008
In thousands of US Dollars
973
472
–
629
271
–
–
(9,206)
20,073
Tenge denominated trade payables
US Dollar denominated trade payables
Euro denominated trade payables
Russian Rouble denominated trade
payables
Trade payables denominated in other
currencies
31 December
2023
31 December
2022
8,246
1,684
466
44
6,942
1,543
1,160
141
192
143
10,632
9,929
18. Other current liabilities
Other current liabilities comprise the following as at 31 December 2023 and
31 December 2022:
In thousands of US Dollars
Other accruals
Training obliga_ons accrual
Due to employees
Taxes payable, including corporate
income tax
Other current liabili_es
31 December
2023
31 December
2022
16,867
6,317
4,019
2,600
707
30,510
23,481
6,441
2,724
15,437
757
48,840
Other accruals include various amounts accrued according to management
best estimates and assessment of probabilities of cash outflows, such as
penalties related to tax audit payments, environmental provision and other
similar items.
Provision as at 31 December
22,147
Management's estimation is predicated on the expectation that cash flow will
occur at the termination of the subsoil use rights, projected for 2032 for the
Chinarevskoye field and 2044 for the Stepnoy Leopard fields. There are
uncertainties in estimation of future costs as Kazakh laws and regulations
concerning site restoration evolve.
The real discount rate used to determine the abandonment and site
restoration provision at 31 December 2023 was 4.52% (31 December 2022:
4.87%). The change in the discount rate during the year ended 31 December
2023 resulted in the increase of the abandonment and site restoration
provision by US$629 thousand (31 December 2022: decrease US$9.206
thousand).
Additional provision is resulted from recognition liability for Stepnoy Leopard
fields of 3 wells.
16. Due to Government of Kazakhstan
The amount due to Government of the Republic of Kazakhstan has been
recorded to reflect the present value of a liability in relation to the
expenditures made by the Government in the time period prior to signing the
Contract that were related to exploration of the Contract territory and the
construction of surface facilities in fields discovered therein and that are
reimbursable by the Group to the Government during the production period.
The total amount of liability due to Government as stipulated by the Contract is
US$ 25,000 thousand.
Repayment of this liability commenced in 2008 with the first payment of
US$1,030 thousand in March 2008 and with further payments by equal
quarterly instalments of US$258 thousand until 26 May 2031. The liability was
discounted at 13%.
The summary of the changes in the amounts due to Government of
Kazakhstan during the years ended 31 December 2023 and 31 December 2022
is as follows:
In thousands of US Dollars
Balance as at 1 January
Unwinding of discount
Paid during the year
Balanсe as at 31 December
Less: current por_on
Non-current por^on
2023
2022
5,033
654
(1,031)
4,656
(1,031)
3,625
5,594
470
(1,031)
5,033
(1,031)
4,002
114488 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
146 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
19. Revenue
22. Selling and transportation expenses
In thousands of US Dollars
2023
2022
For the year ended 31 December
Revenue from oil and gas condensate
sales
Revenue from gas and LPG sales
Revenue from external raw material
processing
Revenue from sulphur sales
101,463
18,009
156
1
158,107
41,578
–
32
119,629
199,717
The pricing for all of the Group’s crude oil, condensate and LPG is, directly or
indirectly, related to the price of Brent crude oil. The average Brent crude oil
price the year ended 31 December 2023 was US$82.16/bbl (year ended 31
December 2022: US$99.0/bbl).
The operations of the Group are located in only one geographic location,
Kazakhstan.
During the year ended 31 December 2023 the revenue from sales to three
major customers amounted to US$52,190 thousand, US$42,979 thousand and
US$8,008 thousand respectively (year ended 31 December 2022: US$151,302
thousand, US$15,707 thousand and US$6,805 thousand respectively). The
Group’s exports were mainly represented by deliveries to Azerbaijan and to
the Baltic ports of Russia.
20. Cost of sales
In thousands of US Dollars
2023
2022
For the year ended 31 December
Transporta_on costs
Loading and storage costs
Payroll and related taxes
Other
4,914
4,091
1,501
1,897
8,473
8,094
1,375
2,008
12,403
19,950
23. Taxes other than income tax
In thousands of US Dollars
2023
2022
For the year ended 31 December
Export customs duty
Royal_es
Government profit share
Other taxes
8,154
4,841
1,169
23
14,187
10,014
8,116
1,692
8
19,830
Export customs duty is comprised of customs duties for export of crude oil and
customs fees for services such as processing of declarations and temporary
warehousing.
In thousands of US Dollars
Deprecia_on, deple_on and
amor_sa_on
Payroll and related taxes
Repair, maintenance and other
services
Well repair and maintenance costs
Materials and supplies
Transporta_on services
Change in stock
Environmental levies
Other
For the year ended 31 December
2023
2022
40,321
51,682
24. Finance costs
16,741
6,558
5,027
4,922
2,505
691
138
725
14,179
6,662
3,122
4,333
2,285
1,191
79
520
In thousands of US Dollars
Interest expense on borrowings
Other finance costs
Unwinding of discount on amounts
due to Government of Kazakhstan
Unwinding of discount on
abandonment and site restoraTon
provision
For the year ended 31 December
2023
2022
95,226
5,973
654
973
105,411
16,986
470
271
102,826
123,138
77,628
84,053
Other finance costs represent advisor fees incurred by the Group in relation to
the FBAs, Lock-up Agreement and process of restructuring of the Group’s
outstanding bonds. For more details on the restructuring see Note 1.
F
I
N
A
N
C
I
A
L
S
21. General and administrative expenses
In thousands of US Dollars
2023
2022
For the year ended 31 December
Payroll and related taxes
Professional services
Business travel
Insurance fees
Deprecia_on and
amor_sa_on
Materials and supplies
Communica_on
Short-term leases
Bank charges
Other
7,622
4,182
568
427
188
166
159
109
29
357
13,807
6,634
3,556
282
577
153
182
180
172
47
293
12,076
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 147
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 114499
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
25. Employees’ remuneration
Employees (including senior executives and executive directors) of members of
the Group may receive an award, which is a "nominal cost option" over a
specified number of ordinary shares in the capital of the Company. The option
has an exercise price of 1p per share (but the Company has the discretion to
waive this prior to exercise). In addition, under the Rules of the LTIP the
Company has discretion to settle awards other than by transfer of shares such
as by way of cash settlement. Generally, the awards are classified as equity-
settled transactions. The share options are treated as equity-settled since there
are no legal limitations expected on issue of shares for these upon vesting, the
Group has a choice of settlement and the intention is to settle them in equity.
However, in certain jurisdictions due to regulatory requirements the Company
may not be able to settle the awards other than by transfer of cash, in which
case the awards are classified as cash-settled transactions, and accounted for
similar to SARs.
26. Other income and other expenses
For the year ended 31 December 2023 and 2022 other income comprise the
following:
In thousands of US Dollars
Insurance compensaTon
Reversals of other accruals
Recovery of bad debt
Currency conversion
Reversals of training accruals
Catering and accommodaTon
Other
For the year ended 31 December
2023
2022
3,588
1,561
688
199
10
75
309
6,430
–
3,561
–
360
2,214
212
459
6,806
For the year ended 31 December 2023 and 2022 other expenses comprise the
following:
For the year ended 31 December
In thousands of US Dollars
2023
2022
Other taxes, penalRes and accruals
Business development costs
Loss on disposal of property, plant
and equipment
Training accruals
Currency conversion
Social program
Sponsorship
Other
9,856
1,554
917
586
322
310
59
1,071
14,675
27,149
–
–
428
581
311
903
449
29,821
Other taxes, penalties and accruals mainly include additional taxes, penalties
and environmental provisions assessed in relation to prior periods considering
new information, which was not available at the time of preparation of
respective financial information, and relevant interpretations by the
management.
The average monthly number of employees (including Executive Directors)
employed was as follows:
In thousands of US Dollars
Management and administrative
Technical and operational
Their aggregate remuneration comprised:
In thousands of US Dollars
Wages and salaries
Social security costs
Share-based payments
For the year ended 31 December
2023
2022
145
412
557
137
417
554
For the year ended 31 December
2023
2022
22,155
3,952
(25)
26,082
19,057
3,393
(38)
22,412
The amount reflected in the income statement was US$22,150 thousand
(2022: US$22,150 thousand).
KKeeyy mmaannaaggeemmeenntt ppeerrssoonnnneell rreemmuunneerraattiioonn
In thousands of US Dollars
Short-term employee benefits
Share-based payments
DDiirreeccttoorrss’’ rreemmuunneerraattiioonn
In thousands of US Dollars
Short-term employee benefits
Share-based payments
For the year ended 31 December
2023
2022
4,203
–
4,203
4,033
–
4,033
For the year ended 31 December
2023
2022
1,138
–
1,138
1,960
–
1,960
As at 31 December 2023 the amount payable to key management personnel
was US$1,369 thousand (31 December 2022: US$611 thousand).
EEmmppllooyyeeee sshhaarree ooppttiioonn ppllaann ((EESSOOPP))
The Group’s Phantom Option Plan was adopted by the board of directors of
the Company on 20 June 2014 to allow for the continuation of the option plan
previously maintained by Nostrum Oil & Gas LP. The rights and obligations in
relation to this option plan were transferred to Nostrum Oil & Gas PLC from
Nostrum Oil & Gas LP following the reorganisation.
Employees (including senior executives and executive directors) of members of
the Group received remuneration in the form of equity-based payment
transactions, whereby employees render services as consideration for share
appreciation rights, which can only be settled in cash (“cash-settled
transactions”).
22001177 LLoonngg--tteerrmm iinncceennttiivvee ppllaann
In 2017 the Group started operating a Long-term incentive plan (“the LTIP”),
that was approved by the shareholders of the Company on 26 June 2017 and
adopted by the board of directors of the Company on 24 August 2017. The LTIP
is a discretionary benefit offered by the Company for the benefit of selected
employees. Its main purpose is to increase the interest of the employees in the
Company's long-term business goals and performance through share
ownership. The LTIP is an incentive for the employees' future performance and
commitment to the goals of the Company. The remuneration committee of
the board of the Company has the right to decide, in its sole discretion,
whether or not further awards will be granted in the future and to which
employees those awards will be granted.
148 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
115500 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
27. Income tax
In thousands of US Dollars
Deferred income tax expense
Withholding tax
Corporate income tax expense
Adjustment in respect of the current
income tax for the prior periods
For the year ended 31 December
2023
2022
(5,376)
614
5,743
3,693
4,674
15,827
560
5,777
12,500
34,664
The Group’s profits are assessed for income taxes mainly in the Republic of
Kazakhstan. A reconciliation between tax expense and the product of
accounting profit multiplied by the Kazakhstani tax rate applicable to the
Chinarevskoye subsoil use rights is as follows:
In thousands of US Dollars
Loss before income tax
Tax rate applicable to the subsoil use rights
Expected tax provision
Non-deducTble interest expense on
borrowings and other financial expenses
Non-deducTble taxes and penalTes
Effect of exchange rate on the tax base
Adjustments in respect of current income
tax of previous years
Net foreign exchange gain
Reversal of training provisions
Fair value adjustment on recogni_on
of debt instruments
Gain on debt-to-equity exchange
Non-deducTble unwinding of discount
Other non-deducTble expenses
Income tax expense
For the year ended 31 December
2023
2022
836,332
30%
250,900
25,490
2,957
(587)
3,693
286
173
(52,328)
(230,883)
488
4,485
4,674
(81,781)
30%
(24,534)
32,488
7,842
4,581
12,500
(76)
(536)
–
–
222
2,177
34,664
Deferred tax liability is primarily attributable to operations in Kazakhstan,
hence calculated by applying the Kazakhstani statutory tax rate applicable to
the Chinarevskoye subsoil use rights to the temporary differences between the
tax amounts and the amounts reported in the consolidated financial
statements and are comprised of the following:
In thousands of US Dollars
Deferred tax asset
Accounts payable and provisions
Deferred tax liability
Property, plant and equipment
Inventories
Long-term borrowings
Net deferred tax liability
31 December
2023
31 December
2022
3,232
2,877
(44,943)
(2,812)
–
(44,523)
(49,763)
(3,131)
118
(49,899)
The movements in the deferred tax liability were as follows:
In thousands of US Dollars
Balance as at 1 January
Current period charge to statement of
comprehensive income
2023
2022
49,899
(5,376)
34,072
15,827
Balance as at 31 December
44,523
49,899
28. Related party transactions
For the purpose of these consolidated financial statements transactions with
related parties mainly comprise transactions between subsidiaries of the
Company and the key management. It should be noted that intercompany
balances and transactions are offset on consolidation.
Remuneration (represented by short-term employee benefits) of key
management personnel amounted to US$4,203 thousand for the year ended
31 December 2023 (year ended 31 December 2022: US$4,033 thousand).
F
I
N
A
N
C
I
A
L
S
1 Jurisdictions which contribute significantly to this item are Republic of
Kazakhstan with an applicable statutory tax rate of 20% (for activities not
related to the Contract), and the Netherlands with an applicable statutory tax
rate of 25%.
Certain revisions to previous period tax assessments were made considering
new information, which was not available at the time of preparation of
respective financial information, and relevant interpretations by the
management. During 2022 the tax authorities in Kazakhstan carried out a
comprehensive tax audit of Zhaikmunai LLP for the financial years 2016-2021,
as a result of which additional corporate income tax in a principal amount
equivalent to US$12,500 thousand has been assessed for the periods covered.
29. Audit and non-audit fees
During the years ended 31 December 2023 and 2022 audit and non-audit fees
comprise the following:
In thousands of US Dollars
Audit services:
Ernst & Young
MHA & Baker Tilly International
Total audit services
For the year ended 31 December
2023
2022
420
696
1,116
561
627
1,188
In management’s view, as at 31 December 2023 there were no significant
uncertain tax positions requiring disclosure in accordance with IFRIC 23 –
Uncertainty over Income Tax Treatments, other than those detailed in Note
30..
Services relating to corporate finance
transactions:
Ernst & Young
Total non-audit services
The Group’s effective tax rate for the year ended 31 December 2023 is
negative 0.5% (2022: 42.4%). The Group’s effective tax rate, excluding effect of
movements in exchange rates, non-deductible interest expense on borrowings
and other one-off items, for the year ended 31 December 2023 is 31.0% (2022:
2.9%).
As at 31 December 2023 the Group has tax losses of US$127,982 thousand
(2022: US$122,111 thousand) that are available to offset against future taxable
profits in the companies in which the losses arose within 9 years after
generation and will expire in the period 2023-2029. On 21 May 2021, a Royal
Decree was issued in the Netherlands, which dictates that the tax losses can
now be carried forward indefinitely from 1 January 2022, subject to annual
limit on carry back loss utilization. Deferred tax assets have not been
recognised in respect of these losses as they may not be used to offset taxable
profits elsewhere in the Group.
–
–
161
161
1,116
1,349
The audit fees for the year ended 31 December 2023 in the table above include
the audit fees of US$10 thousand in relation to the Parent (2022: US$10
thousand).
The audit fees for the year ended 31 December 2023 include fees related to
the audit of the 2022 financial statements in the amount of US$20 thousand,
which represent audit overruns (2022: overruns in the amount of US$ 186
thousand and the fees for the forensic scope of US$ 108 thousand).
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 149
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 115511
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
30. Contingent liabilities and commitments
EEnnvviirroonnmmeennttaall oobblliiggaattiioonnss
TTaaxxaattiioonn
Kazakhstan’s tax legislation and regulations are subject to ongoing changes and
varying interpretations. Instances of inconsistent opinions between local,
regional and national tax authorities are not unusual. The current regime of
penalties and interest related to reported and discovered violations of
Kazakhstan’s tax laws are severe and where the tax authorities disagree with
the positions taken by the Group the financial outcomes could be material.
Administrative fines are generally 80% of the taxes additionally assessed and
interest penalty is assessed at the refinancing rate established by the National
Bank of Kazakhstan multiplied by 1.25. As a result, penalties and interest can
amount to multiples of any assessed taxes. Fiscal periods remain open to
review by tax authorities for five calendar years preceding the year of review.
Under certain circumstances reviews may cover longer periods. Because of the
uncertainties associated with Kazakhstan’s tax system, the ultimate amount of
taxes, penalties and interest, if any, may be in excess of the amount expensed
to date and accrued at 31 December 2023. As at 31 December 2023
management believes that its interpretation of the relevant legislation is
appropriate and that it is probable that the Group’s tax position will be
sustained.
The Group may also be subject to loss contingencies relating to regional
environmental claims that may arise from the past operations of the related
fields in which it operates. Kazakhstan’s environmental legislation and
regulations are subject to ongoing changes and varying interpretations. As
Kazakh laws and regulations evolve concerning environmental assessments
and site restoration, the Group may incur future costs, the amount of which is
currently indeterminable due to such factors as the ultimate determination of
responsible parties associated with these costs and the Government’s
assessment of respective parties’ ability to pay for the costs related to
environmental reclamation.
However, depending on any unfavourable court decisions with respect to any
claims or penalties assessed by the Kazakh regulatory agencies, it is possible
that the Group’s future results of operations or cash flow could be materially
affected in a particular period.
CCaappiittaall ccoommmmiittmmeennttss
As at 31 December 2023, the Group had contractual capital commitments in
the amount of US$ 16,039 thousand (31 December 2022: US$2,845 thousand),
mainly in respect to the Group’s oil field development activities.
PPeennddiinngg ttaaxx ddiissppuutteess
SSoocciiaall aanndd eedduuccaattiioonn ccoommmmiittmmeennttss
As required by the Contract (after its amendment on 2 September 2019), the
Group is obliged to:
• spend US$ 300 thousand per annum to finance social infrastructure;
• make an accrual of one percent per annum of the actual investments for the
Chinarevskoye field for the purposes of educating Kazakh citizens.
DDoommeessttiicc ooiill ssaalleess
In accordance with Supplement # 7 to the Contract, Zhaikmunai LLP is required
to deliver at least 15% of produced oil to the domestic market on a monthly
basis for which prices are materially lower than export prices.
In late 2023 the Kazakhstan tax authorities conducted a withholding tax audit
of Zhaikmunai LLP for the financial year 2018, and in January 2024 issued a
withholding tax assessment equivalent to US$6.8 million and related fines and
penalties equivalent to US$5.1 million. According to Company’s best estimates,
the application of similar arguments to the periods 2019-23 could result in
additional amounts of taxes and penalties in the amount of circa US$3.0
million. This excludes other items included within the assessment which the
Company believes to be a remote risk.
Whilst Zhaikmunai LLP successfully challenged the legality and enforceability of
the 2018 withholding tax assessment in January 2024, the Kazakhstan tax
authorities subsequently filed an appeal in April 2024 which will be heard in
the appellate court. Following the decision of the appellate court, either party
has the right to a final appeal to the Supreme Court of Kazakhstan.
Kazakhstan’s tax legislation and regulations are subject to varying
interpretations and instances of inconsistent opinions between local, regional,
and national tax authorities and courts are not unusual. Taking this into
account, while management believes that it is likely that the ruling in
Zhaikmunai’s favour will be upheld on appeal, management assesses the risk of
an unfavourable outcome for Zhaikmunai in pending and future legal
proceedings and resulting payment of the above-mentioned claimed amounts
of taxes and penalties as possible.
AAbbaannddoonnmmeenntt aanndd ssiittee rreessttoorraattiioonn ((ddeeccoommmmiissssiioonniinngg))
As Kazakh laws and regulations concerning site restoration and clean-up
evolve, the Group may incur future costs, the amount of which is currently
indeterminable. Such costs, when known, will be provided for as new
information, legislation and estimates evolve.
150 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
115522 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
31. Financial risk management objectives and policies
The Group’s principal financial liabilities comprise borrowings, payables to the
Government of Kazakhstan, trade payables and other current liabilities. The
main purpose of these financial liabilities is to finance the Group’s operations.
The Group's financial assets consist of trade and other receivables and cash
and cash equivalents that derive directly from its operations.
The Group is exposed to commodity price risk, foreign currency risk, liquidity
risk and credit risk. The Group’s senior management oversees the
management of these risks. The Group’s senior management ensures that the
Group’s financial risk activities are governed by appropriate policies and
procedures and that financial risks are identified, measured and managed in
accordance with the Group’s policies and risk objectives. The Board of
Directors reviews and agrees policies for managing each of these risks, which
are summarised below.
CClliimmaattee cchhaannggee
Management has considered how the Group’s identified climate risks and
climate related goals (as discussed in Climate Change and GHG Emissions in the
Group’s 2023 Annual Report) may impact the estimation of the recoverable
value of cash-generating unit tested for impairment. The anticipated extent
and nature of the future impact of climate on the Group’s operations and
future investment depends on the development of new technologies and
production processes employed and the level of emissions, energy efficiency
and use of renewable energy. The sensitivity of the Group’s impairment
assessment to these factors is also impacted by the extent that estimated
recoverable value exceeds the carrying value of an individual cash-generating
unit – where this is lower there is an increased risk of a future impact. The
Group is in the process of identifying a range of actions and initiatives to
progress towards the Group’s goals, including reduction of greenhouse gas
emissions, wastewater discharges and increase of waste utilisation. In certain
cases, the costs of such actions have been quantified and are included in the
Group’s forecasts which are used to estimate recoverable value for the Group’s
cash-generating unit. Other actions and initiatives continue to be explored by
the Group but are not sufficiently certain to be reflected in the Group’s
forecasts of estimated recoverable value.
CCoommmmooddiittyy pprriiccee rriisskk
The Group is exposed to the effect of fluctuations in price of crude oil, which is
quoted in US dollar on the international markets. The Group prepares annual
budgets and periodic forecasts including sensitivity analyses in respect of
various levels of crude oil prices in the future.
IInntteerreesstt rraattee rriisskk
The Group is not exposed to interest rate risk in 2023 and 2022 as the Group
had no financial instruments with floating rates as at years ended 31 December
2023 and 2022.
FFoorreeiiggnn ccuurrrreennccyy rriisskk
As a significant portion of the Group’s operation is Tenge denominated, the
Group’s statement of financial position can be affected by movements in the
US dollar / Tenge exchange rates. The Group mitigates the effect of its
structural currency exposure by borrowing in US dollars and denominating
sales in US dollars.
The following table demonstrates the sensitivity to a reasonably possible
change in the US dollar exchange rate, with all other variables held constant.
2023
2022
Change in Tenge to
US dollar exchange
rate
Effect on profit before tax
(In thousands of US
Dollars)
21%
(21%)
21%
(21%)
6,344
(9,716)
5,455
(8,355)
A devaluation of Tenge against US dollar by 21% would lead to decrease in the
net Tenge liability position by US$8,355 thousand as of 31 December 2023 and
respective reduction of the loss before income tax for the year ended
31 December 2023. The impact on equity is the same as the impact on profit
before tax.
The Group’s foreign currency denominated monetary assets and liabilities
were as follows:
In thousands of US Dollars
As at 31 December 2023
Cash and cash equivalents
Trade receivables
Trade payables
Other current liabiliGes
As at 31 December 2022
Cash and cash equivalents
Trade receivables
Trade payables
Tenge
395
1,530
(8,246)
(30,278)
(36,599)
Russian
Roubles
Euro
Other
Total
–
–
66
–
604
–
1,065
1,530
(44)
(466)
(192)
(8,948)
–
(2,107)
(27)
(32,412)
(44)
(2,507)
385
(38,765)
13,827
1,997
–
–
1,824
–
907
–
16,558
1,997
(6,942)
(141)
(1,160)
(143)
(8,386)
Other current liabiliGes
(40,312)
–
(1,476)
(63)
(41,851)
(31,430)
(141)
(812)
701
(31,682)
LLiiqquuiiddiittyy aanndd ffuunnddiinngg rriisskk
Liquidity risk is the risk that the Group will encounter difficulty in raising funds
to meet commitments associated with its financial liabilities. The Group
monitors its risk to a shortage of funds using a liquidity planning tool. The tool
allows selecting severe stress test scenarios (for more details see Viability
statement on pages 39-40 of the Annual Report). To ensure an adequate level
of liquidity a minimum cash balance has been defined as a cushion of liquid
assets. The Group’s objective is to maintain a balance between continuity and
diversity of funding and flexibility through the use of notes, export financing
and leases.
The successful completion of the 2025 and 2022 Notes restructuring efforts
has enhanced the Group's liquidity position and provided a more sustainable
debt profile. The Directors confirm their expectation that the Group will
continue to operate and meet its obligations as they fall due through the three-
year viability assessment period ending 31 December 2025.
For more information on analysis of the Group’s ability to meet its liabilities on
repayment of the Notes please see “Viability statement” section on the Annual
report on pages 39-40.
The table below summarizes the maturity profile of the Group's financial
liabilities at 31 December 2023 and 31 December 2022 based on contractual
undiscounted payments:
In thousands of US
Dollars
As at 31 December
2023
Borrowings
Trade payables
Other current liabili_es
Due to Government of
Kazakhstan
As at 31 December
2022
Borrowings
Trade payables
Other current liabili_es
Due to Government of
Kazakhstan
On
demand
Less than
3 months
3-12
month
s
1-5
years
More
than
5 years
Total
–
–
16,489
805,097
10,305
12,936
–
–
327
–
–
–
–
–
–
821,586
10,632
12,936
–
258
773
4,124
2,319
7,474
23,241
258 17,589
809,221
2,319
852,628
1,400,197
43,000
43,000
9,525
10,824
–
–
404
–
–
–
–
– 1,486,197
–
–
9,929
10,824
–
258
773
4,124
3,350
8,505
1,420,546
43,258 44,177
4,124
3,350 1,515,455
F
I
N
A
N
C
I
A
L
S
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 151
NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023 115533
FINANCIALS
Consolidated financial statements
Consolidated financial statements
For the year ended 31 December 2023
Notes to the consolidated financial statements continued
Notes to the consolidated financial statements (continued)
CCrreeddiitt rriisskk
CCaappiittaall mmaannaaggeemmeenntt
For the purpose of the Group’s capital management, capital includes issued
capital, additional paid-in capital and all other equity reserves attributable to
the equity holders of the parent. The primary objective of the Group’s capital
management is to maximise the shareholder value.
Since the engagement with the AHG in discussions on potential restructuring of
the Notes and signing of the FBAs in 2020 (see Note 1), the Group’s focus was
on maintaining short-term liquidity and preserving cash. Successful cost
optimisation programme, favourable hydrocarbon pricing and successful
restructuring enabled the Group to grow its unrestricted cash balances to the
level of US$161,711 thousand as at 31 December 2023. After successful
implementation of the restructuring, the Group is in the process of revising its
capital management policy in line with new requirements of SSN and SUN trust
deeds and shareholder expectations.
32. Events after the reporting date
AAIIXX ddeelliissttiinngg
On February 21, 2024 the Parent announced the successful completion of the
delisting process for its ordinary shares from the Official List of the Astana
International Exchange.
UUppddaattee oonn SStteeppnnooyy LLeeooppaarrdd FFiieellddss
In Q1 2024, the well appraisal operations on Stepnoy Leopard Fields were
nearly complete and significant data has been collected that included well flow
rates, fluid contacts, and fluid and reservoir properties across a logged interval
with c. 50-meter of net-pay. The flow-rate and pressure build-up tests
confirmed high well productivity potential. The positive results obtained to
date supported the commercial potential of the fields, hence in March 2024
the Company made a final investment decision (“FID”) for the initial field
development phase of the Stepnoy Leopard Fields with the forecast total
capital budget for this initial field development phase of US$100 million gross.
The Company plans to compile a Competent Person’s Report (CPR) to reclassify
specific resources into reserves.
DDrriilllliinngg pprrooggrraammmmee
Following the approval of two-well drilling programme at the Chinarevskoye
field in 2023, the first well (CHN-301) was spudded in December of 2023 with
drilling in Q1 2024 to total depth of 4,980 meters on time and on budget, and
awaiting completion operations with start-up expected mid-2024. It had
multiple in-fill targets across the Carboniferous and Devonian age reservoirs.
Hydrocarbons (oil, gas-condensate) have been encountered across three key
intervals. The results are in line with our expectations of initial well rates of 400
to 700 boepd. Next, the drilling rig will be moved to well No.41, with expected
spud in April and start-up in Q3 2024. This well is a sidetrack and carries a
higher level of geologic risk as it is a step-out from the existing well control in
the targeted Devonian reservoir. If successful, these wells will enable a cost-
effective means of converting the field’s 2P reserves to PDP whilst also
complying with Zhaikmunai’s PSA obligations.
Credit risk is the risk that a counterparty will not meet its obligations under a
financial instrument or customer contract, leading to a financial loss. The
Group is exposed to credit risk from its operating activities (primarily trade
receivables) and from its financing activities, including deposits with banks and
financial institutions and foreign exchange transactions.
The Group places its cash and deposits primarily with Citibank, N.A., and Halyk
bank JSC with most recent credit ratings from Moody's rating agency of Aa3
(Stable), and Baa2 (Stable), respectively.
The Group sells its products and makes advance payments only to recognised,
creditworthy third parties. In addition, receivable balances are monitored on
an ongoing basis with the result that the Group’s exposure to bad debts and
recoverability of prepayments made is not significant and thus risk of credit
default is low. Also, the Group’s policy is to mitigate the payment risk on its off-
takers by requiring all purchases to be prepaid or secured by a letter of credit
from an international bank.
The Group considers a financial asset in default when contractual payments
are 90 days past due, however certain exceptions can be made depending on
the particular circumstances and discussions with the counterparty. Also, in
certain cases, the Group may also consider a financial asset to be in default
when internal or external information indicates that the Group is unlikely to
receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Group. A financial asset is written off
when there is no reasonable expectation of recovering the contractual cash
flows.
An impairment analysis is performed at each reporting date on an individual
basis for major clients. The maximum exposure to credit risk at the reporting
date is the carrying value of each class of financial assets. The Group does not
hold collateral as security. The Group evaluates the concentration of risk with
respect to trade receivables as low, as its customers are located in several
jurisdictions and industries and operate in largely independent markets. The
Group’s maximum exposure to credit risks is represented by its balances of
cash and cash equivalents and restricted cash (Note 11).
FFaaiirr vvaalluueess ooff ffiinnaanncciiaall iinnssttrruummeennttss
Management assessed that the fair value of cash and cash equivalents, trade
receivables, trade payables and other current liabilities approximate their
carrying amounts at 31 December 2023 and 31 December 2022.
Set out below, is a comparison by class of the carrying amounts and fair value
of the Group’s financial instruments, other than those with carrying amounts
reasonably approximating their fair values:
In thousands of
US Dollars
Interest bearing
borrowings
Total
Carrying amount
Fair value
31
December
2023
471,747
31
December
2022
1,396,517
31
December
2023
270,834
31
December
2022
272,500
471,747
1,396,517
270,834
272,500
The fair value of the financial assets and liabilities represents the amount at
which the instruments could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. Fair value of the
quoted notes is based on price quotations at the reporting date and
respectively categorised as Level 1 within the fair value hierarchy.
During the year ended 31 December 2023 and year ended 31 December 2022
there were no transfers between the levels of fair value hierarchy of the
Group’s financial instruments.
End of Document
152 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
115544 NNOOSSTTRRUUMM OOIILL && GGAASS PPLLCC ANNUAL REPORT & ACCOUNTS 2023
Parent company financial statements
Contents
Investments in subsidiaries
154 Parent company statement of financial position
155 Parent company statement of cash flows
156 Parent company statement of changes in equity
157 Notes to the parent company financial statements
157 1 General
157 2 Basis of preparation
158 3 Changes in accounting policies and disclosures
159 4 Summary of material accounting policies
161 5
161 6 Receivables from related parties
161 7 Cash and Cash Equivalents
161 8 Shareholders’ equity
162 9 Financial guarantees
162 10 Payables to related parties
162 11 Auditors’ remuneration
162 12 Employee’s remuneration
163 13 Long-term incentive plan
163 14 Related party transactions
164 15 Financial risk management objectives and policies
164 16 Events after the reporting
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 153
FINANCIALS Parent company financial statements
Parent company financial statements
Parent company statement of financial position
Parent company statement of financial position
In thousands of US Dollars
Assets
Non-current assets
Property, plant and equipment
Current assets
Prepayments and other current assets
Receivables from related parties
Cash and cash equivalents
TOTAL ASSETS
Equity and liabilities
Share capital and reserves
Share capital
Deferred shares
Share premium
Retained deficit and reserves
Financial guarantees, long-term
Current liabilities
Current portion of financial guarantees
Payables to related parties
Trade payables
Income tax payable
Other current liabilities
TOTAL EQUITY AND LIABILITIES
Notes
31 December
2023
31 December
2022
6
7
8
9
9
10
7
7
252
1,907
160
2,319
2,326
2,152
18,551
792,744
(1,006,281)
(192,834)
193,817
193,817
–
258
1,011
48
26
1,343
2,326
3
3
167
955
901
2,023
2,026
3,203
–
0
(903,094)
(899,891)
–
–
900,684
323
847
–
63
901,917
2,026
As permitted by section 408(3) of the Companies Act 2006, the profit and loss account of the Company is not presented in the Company’s financial statements.
The Company reported a loss of US$103,392 thousand in the statement of comprehensive income or the financial year ended 31 December 2023, which
includes current income tax expense of US$48 thousand (2022: loss US$90,955 thousand including income tax benefit of US$27 thousand). During the reporting
periods there were no transactions impacting the statement of other comprehensive income.
The financial statements of Nostrum Oil & Gas PLC, registered number 8717287, were approved by the Board of Directors. The financial statements were
authorised for issue on 18 April 2024.
Signed on behalf of the Board:
Arfan Khan
Chief Executive Officer
18 April 2024
The accounting policies and explanatory notes on pages 157 through 164 are an integral part of these financial statements
115544 NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023
The accounting policies and explanatory notes on pages 157 through 164 are an integral part of these consolidated financial statements
154 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Parent company statement of cash flows
Parent company statement of cash flows
In thousands of US Dollars
Cash flow from operating activities:
Loss before income tax
Adjustments for:
Depreciation
Impairment charge
Employee share option plan fair value adjustment
Financial guarantee (release 2023) / movement 2022
Operating profit before working capital changes
Changes in working capital:
Change in other current assets
Change in receivables from related parties
Change in trade payables
Change in payables to related parties
Change in other current liabilities
Cash generated from operations
Income tax paid
Net cash flows from operating activities
Cash flow from investing activities:
Purchase of property, plant and equipment
Net cash used in investing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Parent company financial statements
Notes
For the year ended 31 December
2022
2023
(103,344)
(90,982)
3
1,004,290
–
(900,684)
265
(84)
(952)
164
(65)
(62)
(734)
–
(734)
(7)
(7)
(741)
901
160
3
–
(38)
90,872
(145)
322
45
367
(153)
(45)
391
(34)
357
(4)
(4)
353
549
901
9
7
7
The accounting policies and explanatory notes on pages 157 through 164 are an integral part of these financial statements
The accounting policies and explanatory notes on pages 157 through 164 are an integral part of these consolidated financial statements
NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023 115555
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 155
FINANCIALS
Parent company financial statements
Parent company statement of changes in equity
Parent company financial statements
Parent company statement of changes in equity
In thousands of US Dollars
As at 1 January 2022
Notes
Share
capital
3,203
Deferred
shares
–
Share
premium
–
Other
reserves
605
Retained
deficit
(812,706)
Total
(808,898)
Loss for the year
Total comprehensive loss for the year
–
–
Share based payments under LTIP
As at 31 December 2022
13
–
3,203
Loss for the year
Total comprehensive loss for the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(90,955)
(90,955)
(90,955)
(90,955)
(38)
567
–
(903,661)
(38)
(899,891)
–
–
(103,392)
(103,392)
(103,392)
(103,392)
Debt-to-equity exchange
Share based payments under LTIP
As at 31 December 2023
(1,051)
–
2,152
18,551
–
18,551
792,744
–
792,744
229
(24)
772
–
–
(1,007,053)
810,473
(24)
(192,834)
The accounting policies and explanatory notes on pages 157 through 164 are an integral part of these financial statements
115566 NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023
The accounting policies and explanatory notes on pages 157 through 164 are an integral part of these consolidated financial statements
156 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Parent company financial statements
Notes to the parent company financial statements
Notes to the parent company financial statements
1. General
OOvveerrvviieeww
Nostrum Oil & Gas PLC (“the Company”) is a public
limited company incorporated on 3 October 2013
under the Companies Act 2006 and registered in
England and Wales with registered number
8717287. The registered address of Nostrum Oil &
Gas PLC is: 20 Eastbourne Terrace, London
W2 6LA, United Kingdom.
The subsidiary undertakings of the Company as at
31 December 2023 and the percentage holding of
their capital are set out below:
Registered office
43B Karev street,
090000 Uralsk,
Republic of Kazakhstan
Form of
capital
Participator
y interests
Owner-
ship, %
100
Company
Nostrum
Associated
Investments
LLP
Nostrum Oil &
Gas
Coöperatief
U.A.
Nostrum Oil &
Gas B.V.
Nostrum Oil &
Gas Finance
B.V.
Nostrum Oil &
Gas UK Ltd.
Bloemendaalseweg
139, 2061 CH
Bloemendaal,
The Netherlands
Bloemendaalseweg
139, 2061 CH
Bloemendaal,
The Netherlands
Bloemendaalseweg
139, 2061 CH
Bloemendaal,
The Netherlands
20 Eastbourne Terrace,
London, W2 6LA,
United Kingdom
20 Eastbourne Terrace,
London, W2 6LA,
United Kingdom
Aksai 3a, 75/38, 050031
Almaty, Republic of
Kazakhstan
Nostrum Oil &
Gas Holding
Ltd.
Nostrum
Services
Central Asia
LLP
Nostrum
Services N.V.
Positiv Invest
LLP
Zhaikmunai LLP 43/1 Karev street,
Chaussee de Wavre 20,
1360 Perwez, Belgium
Dostyk 310/15, Almaty,
Republic of Kazakhstan
090000 Uralsk,
Republic of Kazakhstan
Members'
interests
Ordinary
shares
Ordinary
shares
Ordinary
shares
Ordinary
shares
Participator
y interests
Ordinary
shares
Participator
y interests
Participator
y interests
100
100
100
100
100
100
100
80
100
The Company and its wholly-owned subsidiaries
are hereinafter referred to as “the Group”.
On 14 October 2022, a new company Nostrum Oil
& Gas Holding Limited was incorporated with a
registered address of 20 Eastbourne Terrace,
London, W2 6LG, UK. The entity is a wholly owned
subsidiary of the Parent.
On 12 December 2023, Nostrum Oil & Gas UK
Limited was dissolved.
2. Basis of preparation
BBaassiiss ooff pprreeppaarraattiioonn
The Company financial statements for the year
ended 31 December 2023 have been prepared on
a going concern basis and in accordance with UK
Adopted International Accounting Standards and
the Companies Act 2006 in so far as it is applicable
when reporting under UK adopted IAS.
The Company financial statements have been
prepared based on a historical cost basis. The
Company financial statements are presented in
subscribe for an additional 1.11% of the
ordinary share capital of the Company
upon exercise – increasing noteholder
ownership of the Company to 90.00%;
• The existing ordinary shareholders will
hold 11.11% upon closing of the
restructuring. The existing ordinary
shareholders will be diluted to 10.00% if
the warrants held by existing noteholders
are exercised;
New corporate governance arrangements:
• in respect of the Group and certain
arrangements regarding future utilization
of the Group's cashflows. This includes a
cash sweep mechanism requiring that cash
above US$30 million is swept into a debt
service retention account (to fund the next
two cash interest payments due) and a
restricted cash account which the
Company can access with approval of the
majority of Independent Non-Executive
Directors of the Company; and
• Transfer the Company's listing to the
Standard Listing segment of the London
Stock Exchange.
Restructuring completion
On 9 February 2023, the Restructuring was
implemented on the key terms as agreed under
Lockup Agreement, and pursuant to the terms of
the Scheme sanctioned by the Court on 26 August
2022. This led to the sub-division and consolidation
of the Company's share capital, which resulted in a
reduction of shares from approximately 1,693.8
million to 169.4 million following a 10:1
consolidation. By 10 February 2023, 150,563,304
new shares were listed on the London Stock
Exchange (ticker symbol NOG.L), and by 13
February, also on the Astana International
Exchange. The new notes and warrants were listed
on The International Stock Exchange from 9
February 2023, while no new securities were listed
on Euronext Dublin. On 14 March 2023, the
Company’s ordinary shares were delisted from the
official list of the Kazakhstan Stock Exchange
(KASE).
contingent liabilities. However, as at the reporting
sheet date, the Company believes there is no
material impact on the balance sheet carrying
values of assets or liabilities. This is not considered
a significant estimate.
Group debt restructuring
On 31 March 2020, the Group announced that it
would seek to engage with its bondholders
regarding a possible restructuring of the Group’s
US$725 million 8.0% Senior Notes due July 2022
(“2022 Notes”) and its US$400 million 7.0% Senior
Notes due February 2025 (“2025 Notes”)
(together, the “Existing Notes”).
On 23 December 2021, the Group entered into a
lock-up agreement (the “First LUA”) and agreed
terms of a restructuring with noteholders. The
below outlines the key terms of the restructuring
as agreed between the Group, acceded
noteholders and ICU in the LUAs and also voted in
favour of by Nostrum shareholders:
Partial reinstatement of debt:
• In the form of US$250 million Senior
Secured Notes (SSNs) maturing on 30
June 2026 and bearing interest at a rate of
5.00% per year payable in cash. The SSNs
are not convertible;
• In the form of US$300 million Senior
Unsecured Notes (SUNs) maturing on 30
June 2026 and bearing interest at a rate of
1.00% per year payable in cash and
13.00% per year payable in kind. If not
repaid in cash at maturity, the SUNs are
repayable in specie through the issuance
of equity in the Company based on the
value of the SUNs outstanding on the
issuance date as a percentage of the fair
market value of the Company (up to a
maximum of 99.99% of the Company’s
fully diluted equity);
Conversion to equity:
• Conversion of the remainder of the
Existing Notes and accrued interest into
equity by way of a UK scheme of
arrangement:
• Existing noteholders own 88.89% of the
expanded ordinary share capital of the
Company on closing of the restructuring.
Existing noteholders also own warrants (to
be held by trustee) allowing them to
US dollars and all values are rounded to the
nearest thousands, except when otherwise
indicated.
The Company recognises that there may be
potential financial implications in the future from
changes in legislation and regulation implemented
to address climate change risk. Over time these
changes may have an impact across a number of
areas of accounting including asset impairment,
increased costs, provisions, onerous contracts and
NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2020 115577
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 157
FINANCIALS
Parent company financial statements
Parent company financial statements
Notes to the parent company financial statements continued
Notes to the parent company financial statements (continued)
GGooiinngg ccoonncceerrnn
These financial statements have been prepared on
a going concern basis. The Company is dependent
on liquidity generated by its subsidiaries to
continue in operation and its ability to meet its
liabilities as they become due for the foreseeable
future, a period of not less than 12 months from
the date of these financial statements.
Respectively, the Group level going concern
matters and analysis are considered directly
relevant for the Company (please refer to page 46
of the Annual Report for more details). The
directors are satisfied that the Group will have
sufficient resources to continue in operation for
the foreseeable future, a period of not less than 12
months from the date of these financial
statements. In addition, the Group has controls in
place over allocation of resources among parent
and subsidiaries.
Taking into account the abovementioned
considerations the directors are satisfied that the
Company has sufficient resources to continue in
operation for the foreseeable future, a period of
not less than 12 months from the date of this
report. Accordingly, they continue to adopt the
going concern basis in preparing these parent
company financial statements.
3. Changes in accounting policies and disclosures
NNeeww ssttaannddaarrddss,, iinntteerrpprreettaattiioonnss aanndd
aammeennddmmeennttss aaddoopptteedd bbyy tthhee CCoommppaannyy
The Company applied for the first-time certain
standards and amendments, which are effective
for annual periods beginning on or after 1 January
2023. The Company has not early adopted any
other standard, interpretation or amendment that
has been issued but is not yet effective.
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts is a comprehensive
new accounting standard for insurance contracts
covering recognition and measurement,
presentation and disclosure. IFRS 17 replaces IFRS
4 Insurance Contracts. IFRS 17 applies to all types
of insurance contracts (i.e., life, non-life, direct
insurance and re-insurance), regardless of the type
of entities that issue them as well as to certain
guarantees and financial instruments with
discretionary participation features; a few scope
exceptions will apply. The overall objective of IFRS
17 is to provide a comprehensive accounting
model for insurance contracts that is more useful
and consistent for insurers, covering all relevant
accounting aspects. IFRS 17 is based on a general
model, supplemented by:
• A specific adaptation for contracts with direct
participation features (the variable fee approach)
• A simplified approach (the premium allocation
approach) mainly for short-duration contracts
The new standard had no impact on the
Company’s financial statements.
Definition of Accounting Estimates -
Amendments to IAS 8
The amendments to IAS 8 clarify the distinction
between changes in accounting estimates,
changes in accounting policies and the
correction of errors. They also clarify how
entities use measurement techniques and
inputs to develop accounting estimates.
The amendments had no impact on the
Company’s financial statements.
Disclosure of Accounting Policies -
Amendments to IAS 1 and IFRS Practice
Statement 2
The amendments to IAS 1 and IFRS Practice
Statement 2 Making Materiality Judgements
provide guidance and examples to help entities
apply materiality judgements to accounting
policy disclosures. The amendments aim to help
entities provide accounting policy disclosures
that are more useful by replacing the
requirement for entities to disclose their
‘significant’ accounting policies with a
requirement to disclose their ‘material’
accounting policies and adding guidance on
how entities apply the concept of materiality in
making decisions about accounting policy
disclosures.
The amendments have had no impact on the
Company’s disclosures of accounting policies,
the measurement, recognition or presentation
of any items in the Group’s financial
statements.
Deferred Tax related to Assets and Liabilities
arising from a Single Transaction –
Amendments to IAS 12
The amendments to IAS 12 Income Tax narrow
the scope of the initial recognition exception, so
that it no longer applies to transactions that
give rise to equal taxable and deductible
temporary differences such as leases and
decommissioning liabilities.
The amendments had no impact on the
Company’s financial statements.
SSttaannddaarrddss iissssuueedd bbuutt nnoott yyeett eeffffeeccttiivvee
The new and amended standards and
interpretations that are issued, but not yet
effective, up to the date of issuance of the
Company’s financial statements are disclosed
below. The Company intends to adopt these
new and amended standards and
interpretations, if applicable, when they
become effective.
Amendments to IFRS 16: Lease Liability in a Sale
and Leaseback
In September 2022, the IASB issued
amendments to IFRS 16 to specify the
requirements that a seller-lessee uses in
measuring the lease liability arising in a sale and
leaseback transaction, to ensure the seller-
lessee does not recognise any amount of the
gain or loss that relates to the right of use it
retains.
The amendments are effective for annual
reporting periods beginning on or after 1
January 2024 and must applied retrospectively
to sale and leaseback transactions entered into
after the date of initial application of IFRS 16.
Earlier application is permitted and that fact
must be disclosed.
The amendments are not expected to have a
material impact on the Company’s financial
statements.
158 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
115588 NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023
Amendments to IAS 1: Classification of Liabilities
as Current or Non-current
In January 2020 and October 2022, the IASB
issued amendments to paragraphs 69 to 76 of
IAS 1 to specify the requirements for classifying
liabilities as current or non-current. The
amendments clarify:
• What is meant by a right to defer settlement
• That a right to defer must exist at the end of
the reporting period
• That classification is unaffected by the
likelihood that an entity will exercise its deferral
right
• That only if an embedded derivative in a
convertible liability is itself an equity instrument
would the terms of a liability not impact its
classification.
In addition, a requirement has been introduced
to require disclosure when a liability arising
from a loan agreement is classified as non-
current and the entity’s right to defer
settlement is contingent on compliance with
future covenants within twelve months.
The amendments are effective for annual
reporting periods beginning on or after 1
January 2024 and must be applied
retrospectively. The Company is currently
assessing the impact the amendments will have
on current practice and whether existing loan
agreements may require renegotiation.
Supplier Finance Arrangements - Amendments to
IAS 7 and IFRS 7
In May 2023, the IASB issued amendments to
IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures to clarify the
characteristics of supplier finance arrangements
and require additional disclosure of such
arrangements. The disclosure requirements in
the amendments are intended to assist users of
financial statements in understanding the
effects of supplier finance arrangements on an
entity’s liabilities, cash flows and exposure to
liquidity risk.
The amendments will be effective for annual
reporting periods beginning on or after
1 January 2024. Early adoption is permitted, but
will need to be disclosed.
The amendments are not expected to have a
material impact on the Company’s financial
statements.
Notes to the parent company financial statements (continued)
Parent company financial statements
4. Summary of material accounting policies
FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn
The functional currency is the currency of the
primary economic environment in which an entity
operates and is normally the currency in which the
entity primarily generates and expends cash.
Transactions in foreign currencies are initially
recorded at their respective functional currency
spot rates at the date the transaction first qualifies
for recognition.
The functional currency of the Company is the
United States dollar (the “US dollar” or “US$”).
IInnvveessttmmeennttss
Investments in subsidiaries are recorded at cost.
Subsequently, the Company determines whether it
is necessary to recognise an impairment loss on its
investment in a subsidiary. At each reporting date,
the Company determines whether there is objective
evidence that the investment in the subsidiary is
impaired. If there is such evidence, the Company
calculates the amount of impairment as the
difference between the recoverable amount of the
subsidiary and its carrying value, and then
recognises the impairment loss in the statement of
profit or loss.
FFiinnaanncciiaall aasssseettss
Initial recognition and measurement
Financial assets are classified, at initial recognition,
as subsequently measured at amortised cost, fair
value through other comprehensive income (OCI),
and fair value through profit or loss. The Company
determines the classification of its financial assets at
initial recognition.
The classification of financial assets at initial
recognition depends on the financial asset’s
contractual cash flow characteristics and the
Company’s business model for managing them.
With the exception of trade receivables that do not
contain a significant financing component or for
which the Company has applied the practical
expedient, the Company initially measures a
financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss,
transaction costs.
In order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to cash flows that are
‘solely payments of principal and interest (SPPI)’ on
the principal amount outstanding. This assessment
is referred to as the SPPI test and is performed at an
instrument level.
The Company’s business model for managing
financial assets refers to how it manages its financial
assets in order to generate cash flows. The business
model determines whether cash flows will result
from collecting contractual cash flows, selling the
financial assets, or both.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the market place
(regular way trades) are recognised on the trade
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange at the reporting
date. All differences are taken to the profit or loss.
Significant estimates and assumptions: impairment
of investments in subsidiaries
Determination as to whether, and by how much,
the investment in a subsidiary is impaired involves
management’s best estimates on highly uncertain
matters such as future revenues of the subsidiary,
operating expenses, discount rate, as well as fiscal
regimes.
Since 2019, the Company have been recording
impairment for the full amount of the investments
in Nostrum Oil & Gas Coöperatief U.A. and Nostrum
Oil & Gas B.V. (Note 5), which has been recognised
in view of the decrease in the net assets of these
subsidiaries, and the reduction of the 2P reserves
date, i.e., the date that the Company commits to
purchase or sell the asset.
Financial assets at amortised cost (debt
instruments)
This category is the most relevant to the Company.
The Company measures financial assets at
amortised cost if both of the following conditions
are met:
• The financial asset is held within a business model
with the objective to hold financial assets in order
to collect contractual cash flows, and
• The contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
Financial assets at amortised cost are subsequently
measured using the effective interest (EIR) method
and are subject to impairment. Gains and losses are
recognised in profit or loss when the asset is
derecognised, modified or impaired.
The Company’s financial assets at amortised cost
include cash and receivables from related parties.
Derecognition
A financial asset (or, where applicable, a part of a
financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from
the Company’s statement of financial position)
when:
• The rights to receive cash flows from the asset
have expired; or
• The Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a
‘pass-through’ arrangement; and either (a) the
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates as at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined.
expected to be recovered from the main operating
subsidiary of the Company over the period of 2020-
2032, with the relevant decrease in the expected
future net cash proceeds of Nostrum Oil & Gas
Coöperatief U.A.
As at 31 December 2023, impairment for the full
amount of investments in Nostrum Oil & Gas
Coöperatief U.A. and Nostrum Oil & Gas B.V.
remained appropriate taking into account no
significant changes in the assessments of
recoverability of these investments.
Company has transferred substantially all the risks
and rewards of the asset, or (b) the Company has
neither transferred nor retained substantially all
the risks and rewards of the asset, but has
transferred control of the asset.
When the Company has transferred its rights to
receive cash flows from an asset or has entered into
a pass-through arrangement, it evaluates if, and to
what extent, it has retained the risks and rewards of
ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the
Company continues to recognise the transferred
asset to the extent of its continuing involvement. In
that case, the Company also recognises an
associated liability. The transferred asset and the
associated liability are measured on a basis that
reflects the rights and obligations that the Company
has retained.
Impairment of financial assets
The Company recognises an allowance for expected
credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on
the difference between the contractual cash flows
due in accordance with the contract and all the cash
flows that the Company expects to receive,
discounted at an approximation of the original
effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or
other credit enhancements that are integral to the
contractual terms.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 159
NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023 115599
FINANCIALS
Parent company financial statements
Parent company financial statements
Notes to the parent company financial statements continued
Notes to the parent company financial statements (continued)
ECLs are recognised in two stages. For credit
exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from
default events that are possible within the next 12-
months (a 12-month ECL). For those credit
exposures for which there has been a significant
increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over
the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the
Company applies a simplified approach in
calculating ECLs. Therefore, the Company does not
track changes in credit risk, but instead recognises a
loss allowance based on lifetime ECLs at each
reporting date.
FFiinnaanncciiaall lliiaabbiilliittiieess
Initial recognition, measurement and
derecognition
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, long-term borrowings,
payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of long-term borrowings and
payables, net of directly attributable transaction
costs.
FFiinnaanncciiaall gguuaarraanntteeeess
The Company’s financial liabilities include trade
payables, payables related parties and financial
guarantee liabilities.
Subsequent measurement
For purposes of subsequent measurement, financial
liabilities are classified in two categories:
Financial liabilities at fair value through profit or loss
Financial liabilities at amortised cost (loans and
borrowings)
Financial guarantee is initially recognised in the
financial statements at fair value at the time the
guarantee is issued. The Company estimates the fair
value of the financial guarantee contract as the
difference between the net present value of the
contractual cashflows required under a debt
instrument, and the net present value of the net
contractual cashflows that would have been
required without the guarantee. The present value
is calculated using a risk-free interest rate.
Subsequent to initial recognition, the Company’s
liability under each guarantee is measured at the
higher of the amount initially recognised less
cumulative amortisation recognised in profit and
loss, and the amount of expected credit losses (ECL).
Financial guarantee ECL reflect the cash shortfalls
adjusted by the risks that are specific to the
cashflows. If the ECL exceeds the initially recognised
guarantee amount less cumulative amortisation the
difference is taken to profit and loss.
SShhaarree--bbaasseedd ppaayymmeennttss
The cost of cash-settled equity-based employee
compensation is measured initially at fair value at
the grant date. This fair value is expensed over the
period until vesting with the recognition of a
corresponding liability. The liability is remeasured at
each reporting date up to and including the
settlement date with changes in fair value
recognised in the statement of comprehensive
income.
The cost of equity-settled transactions is measured
at fair value at the grant date. This fair value is
expensed over the period until vesting with the
recognition of a corresponding equity element,
which is not remeasured subsequently until the
settlement date.
Estimating fair value for share-based payment
transactions requires determination of the most
appropriate valuation model, which is dependent
Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires. When an existing financial
liability is replaced by another from the same lender
on substantially different terms, or the terms of an
existing liability are substantially modified, such an
exchange or modification is treated as the
derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
statement of profit or loss.
A financial guarantee liability is derecognised when
the liability underlying the guarantee is discharged
or cancelled or expires, or if the guarantee is
withdrawn or cancelled. The carrying amount of the
financial guarantee is taken to the statement of
profit or loss.
on the terms and conditions of the grant. This
estimate also requires determination of the most
appropriate inputs to the valuation model including
the expected life of the share option, volatility and
distribution yield and making assumptions about
them. The assumptions and models used for
estimating fair value for share-based payment
transactions are disclosed in Note 13.
160 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
116600 NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023
Notes to the parent company financial statements (continued)
Parent company financial statements
5. Investments in subsidiaries
As at 31 December 2023 and 31 December 2022 Investments of the Company
comprised the following:
In thousands of US Dollars
Nostrum Oil & Gas Holding Limited
Nostrum Oil & Gas Coöperaoef U.A.
Nostrum Oil & Gas BV
Impairment of investments
31 December
2023
31 December
2022
1,111,031
–
–
(1,111,031)
–
–
116,399
222
(116,621)
–
In May 2023, the Company performed a corporate reorganisation, namely, in
return for the transfer and assignment by the Company of its membership and
associated rights in Nostrum Oil & Gas Coöperatief U.A. and Nostrum Oil & Gas
B.V., Nostrum Oil & Gas Holding Limited issued 100 new ordinary shares, which
were allotted and issued to the Company. As a result of this reorganising the
Company reallocated the cost of its investments in Nostrum Oil & Gas Coöperatief
U.A. and Nostrum Oil & Gas BV for the total amount of US$106,741 thousand
(excluding initial guarantee value of US$9,881 thousand) to investments to
Nostrum Oil & Gas Holding Limited.
In addition, the investments in Nostrum Oil & Gas Holding Limited include the
US$810,473 thousand recognised as an equivalent of the Old Notes of Nostrum
Oil & Gas Finance B.V., which were exchanged for the shares issued by the
Company during the Restructuring process. Also, the Company acts as a guarantor
under the Group’s SSNs and SUNs, which are issued in favour of the Company’s
indirect subsidiaries, hence related costs in the amount of US$193,817 thousand
at initial recognition are capitalised into the investments in subsidiaries. As a result
of the impairment testing performed at 31 December 2023 the Company
recognised an impairment charge of US$1,004,290 thousand for the full amount
of these investments in the subsidiary.
As at 31 December 2022, Nostrum Oil & Gas Cooperatief U.A. include the
guarantees initial cost in the amount of US$9,881 thousand as described in the
Note 9 as well as US$518 thousand capitalized costs under the “Long-term
Incentive Plan 2017.
As a result of the impairment testing performed at 31 December 2019 the
Company recognised an impairment charge of US$117,361 thousand for the full
amount of its investments in subsidiaries. For more details, please refer to
Note 4.
6. Receivables from related parties
Receivables from related parties are comprised of the following as at 31
December 2023 and 31 December 2022:
In thousands of US Dollars
Receivables from Nostrum Oil & Gas
Benefit Trust
Receivables from Nostrum Oil & Gas
CoöperaCef U.A.
Less: bad debt allowance
31 December
2023
31 December
2022
23,812
23,812
1,853
836
25,665
(23,758)
1,907
24,648
(23,693)
955
Receivables from the Nostrum Oil & Gas Benefit Trust (“the Trust”) represent the
loan provided to support the Company’s obligations to employees under the
Employee Share Option Plan (“ESOP”) and the Long-Term Incentive Plan 2017
(“LTIP”) (Note 13). The loan is interest free and unsecured. The loan is repayable
in the case of an advance used to acquire securities to satisfy the exercise of
options granted pursuant to the rules of ESOP, and unless otherwise agreed in
writing between the parties, the earlier of 1) ten years from the Date of Grant, or
2) 30 days after the exercise date, and in all other cases any other date agreed in
writing between the parties.
Considering the fact that the loan is repayable to the extent of the assets of the
Trust, which are reflected in treasury shares held by the Trust, the Company has
recognised a bad debt allowance as at 31 December 2023 in the amount of
US$65 thousand (2022: US$23,541 thousand), representing the difference
between the book value of the loan and the recoverable value of the treasury
shares as of 31 December 2023.
7. Cash and Cash Equivalents
As at 31 December 2023 and 31 December 2022 cash and cash equivalents
comprised US$160 thousand at the current accounts in Pound Sterling.
8. Shareholders’ equity
As at 31 December 2023 the ordinary share capital of the Company consists of
169,381,561 issued and fully paid ordinary shares, which are listed on the London
Stock Exchange. The ordinary shares have a nominal value of GB£ 0.01. The table
below represents movements in the number of ordinary shares during the year
ended 31 December 2023. The movements in the number of shares during the
year ended 31 December 2023 and 31 December 2022 was as follows:
Number of shares
As at 31 December 2022
Shares issued
Share consolidaCon
In
circula:on
185,234,079
Treasury
capital
2,948,879
TOTAL
188,182,958
1,505,633,046
(1,521,780,413)
–
1,505,633,046
(2,653,991) (1,524,434,404)
As at 31 December 2023
169,086,712
294,888
169,381,600
As part of the Restructuring, on 9 February 2023 the Company issued
1,505,633,046 new shares in connection with the repayment of the remaining
face value of the Existing Notes following the issue of the New Notes (see Note 14
below), together with accrued but unpaid interest (the “Debt for Equity Swap”).
Given the number of new shares issued, at the close of business on 9 February
2023 the Company also performed a share consolidation, so as to achieve an
appropriate share price following closing of the Restructuring (Note 1). As a result,
the number of ordinary shares in issue was reduced from 1,693,816,004
(following the issue of the new shares) to 169,381,600 ordinary shares, on the
basis of a 10:1 consolidation (the “Share Consolidation”). In order to give effect to
the Share Consolidation, the Company initially reduced the nominal value of the
ordinary shares (the “Sub-Division”) after the issue of the new shares, through
sub-division of each ordinary share at a ratio of 1:10 into one ordinary share of
nominal value of £0.001 each together with nine deferred shares of nominal value
£0.001 each (the “Deferred Shares”). The Deferred Shares (in practice) have no
economic or voting rights in the capital of the Company and it is expected that
they will be cancelled following the implementation of the Restructuring. The
nominal value of the ordinary shares following the Share Consolidation was £0.01
each. Fractions of new ordinary shares were not issued in connection with the
Share Consolidation and any fractional entitlements were rounded down to the
nearest whole ordinary share.
TTrreeaassuurryy sshhaarreess
Treasury shares were issued to support the Group’s obligations to employees
under the Employee Share Option Plan (“ESOP”) and the Long-Term Incentive
Plan (“LTIP”) and are held by Intertrust Employee Benefit Trustee Limited as
trustee for the Nostrum Oil & Gas Benefit Trust. In the case of the ESOP, upon
request from employees to exercise options, the trustee would sell shares on the
market and settle respective obligations under the ESOP. In the case of share-
settled LTIP awards, the trustee would transfer shares to the relevant LTIP award
holder (although no LTIP awards are currently exercisable). The Nostrum Oil & Gas
Benefit Trust constitutes a special purpose entity under IFRS and therefore, the
shares held in the trust are recorded as treasury capital of the Company.
Group reorganisation reserve in the amount of US$255,459 thousand represents
the difference between the partnership capital, treasury capital and additional
paid-in capital of Nostrum Oil & Gas LP and the share capital of Nostrum Oil & Gas
PLC, that arose during the reorganisation of the Group in 2014. Share-option
reserves include amounts related to sale of treasury shares under ESOP as well as
share-based payments under LTIP.
Nostrum Oil & Gas PLC became the new holding company for the business of
Nostrum Oil & Gas LP based on the resolution passed by its limited partners on 17
June 2014 followed by the Company reorganisation referred to in that resolution.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 161
NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023 116611
FINANCIALS
Parent company financial statements
Parent company financial statements
Parent company financial statements
Notes to the parent company financial statements (continued)
Notes to the parent company financial statements continued
Notes to the parent company financial statements (continued)
31 December
2023
31 December
54
2023
204
54
258
204
258
10. Payables to related parties
10. Payables to related parties
Payables to related parties are comprised of the following as at 31 December
2023 and 31 December 2022:
Payables to related parties are comprised of the following as at 31 December
2023 and 31 December 2022:
In thousands of US Dollars
31 December
2022
Interest payable Nostrum Oil & Gas Finance B.V.
Payables to Nostrum Oil & Gas CoöperaCef U.A.
In thousands of US Dollars
Interest payable Nostrum Oil & Gas Finance B.V.
Payables to Nostrum Oil & Gas CoöperaCef U.A.
31 December
119
2022
204
119
323
204
323
As at 31 December 2023 amounts payable to Nostrum Oil & Gas Coöperatief U.A.
represent the arrangements in respect of the Nostrum employee benefit trust.
As at 31 December 2023 amounts payable to Nostrum Oil & Gas Coöperatief U.A.
For more details, please refer to Note 6. Based on the service agreement, the
represent the arrangements in respect of the Nostrum employee benefit trust.
amounts payable to Nostrum Oil & Gas Coöperatief U.A. in respect to the
For more details, please refer to Note 6. Based on the service agreement, the
employee benefit trust, are only repayable to the extent of amounts received (or
amounts payable to Nostrum Oil & Gas Coöperatief U.A. in respect to the
recovered) from the Trust. Considering the fact that the loan is repayable to the
employee benefit trust, are only repayable to the extent of amounts received (or
extent of the assets of the Trust, which are reflected in treasury shares held by the
recovered) from the Trust. Considering the fact that the loan is repayable to the
Trust, the Company has remeasured and reduced the loan payable as at 31
extent of the assets of the Trust, which are reflected in treasury shares held by the
December 2023 by US$65 thousand (2022: US$153 thousand), representing the
Trust, the Company has remeasured and reduced the loan payable as at 31
difference between the book value of the loan and the recoverable value of the
December 2023 by US$65 thousand (2022: US$153 thousand), representing the
treasury shares as of 31 December 2023.
difference between the book value of the loan and the recoverable value of the
As at 31 December 2023 and 2022 amounts payable to Nostrum Oil & Gas
treasury shares as of 31 December 2023.
Finance B.V. represent interest accrued in the amount US$204 thousand on the
As at 31 December 2023 and 2022 amounts payable to Nostrum Oil & Gas
loan from Nostrum Oil & Gas Finance B.V. The loan on which the above interest
Finance B.V. represent interest accrued in the amount US$204 thousand on the
amounts were calculated was settled against the receivables due from Nostrum
loan from Nostrum Oil & Gas Finance B.V. The loan on which the above interest
Oil & Gas Coöperatief U.A. in the amount of $3,000 thousand in 2019.
amounts were calculated was settled against the receivables due from Nostrum
Oil & Gas Coöperatief U.A. in the amount of $3,000 thousand in 2019.
11. Auditors’ remuneration
11. Auditors’ remuneration
For the year ended 31 December 2023 the fees for the audit of the Company
amount to US$10 thousand (2022: US$10 thousand).
For the year ended 31 December 2023 the fees for the audit of the Company
amount to US$10 thousand (2022: US$10 thousand).
12. Employee’s remuneration
12. Employee’s remuneration
The average monthly number of employees employed was as follows:
The average monthly number of employees employed was as follows:
In thousands of US Dollars
Executive Directors
In thousands of US Dollars
Administrative personnel
Executive Directors
Administrative personnel
Their aggregate remuneration comprised:
Their aggregate remuneration comprised:
In thousands of US Dollars
Wages and salaries
In thousands of US Dollars
Social security costs
Wages and salaries
Other benefits
Social security costs
Other benefits
For the year ended 31 December
2022
For the year ended 31 December
1
2022
3
1
4
3
4
2023
1
2023
3
1
4
3
4
For the year ended 31
December
For the year ended 31
2022
2023
December
2023
2022
642
172
642
19
172
833
19
833
691
125
691
19
125
835
19
835
The directors of the Company are also directors of the Group. The aggregate
amount of remuneration paid to or receivable by executive directors in respect of
The directors of the Company are also directors of the Group. The aggregate
qualifying services for the financial year ended 31 December 2023 was US$1,138
amount of remuneration paid to or receivable by executive directors in respect of
thousand (2022: US$ US$1,960 thousand) and also includes remuneration paid by
qualifying services for the financial year ended 31 December 2023 was US$1,138
other companies of the Group. In addition, US$939 thousand (2022: US$359
thousand (2022: US$ US$1,960 thousand) and also includes remuneration paid by
thousand) was paid by the Company to the non-executive directors. The directors
other companies of the Group. In addition, US$939 thousand (2022: US$359
do not believe that it is practicable to apportion these amounts between their
thousand) was paid by the Company to the non-executive directors. The directors
services as directors of the Company and their services as directors of the Group.
do not believe that it is practicable to apportion these amounts between their
services as directors of the Company and their services as directors of the Group.
For the year ended 31 December 2023 the Company employed an average of
5 non-executive directors (2022: 2 non-executive directors).
For the year ended 31 December 2023 the Company employed an average of
Full details of individual directors’ remuneration are given in the directors’
5 non-executive directors (2022: 2 non-executive directors).
remuneration report on pages 101-115 of the annual report.
Full details of individual directors’ remuneration are given in the directors’
remuneration report on pages 101-115 of the annual report.
9. Financial guarantees
9. Financial guarantees
Financial guarantees are comprised of the following as at 31 December 2023 and
31 December 2022:
Financial guarantees are comprised of the following as at 31 December 2023 and
In thousands of US Dollars
31 December 2022:
Financial guarantee as at 1 January
In thousands of US Dollars
Financial guarantee (loss)/income
Financial guarantee as at 1 January
Financial guarantee as at 31 December
Financial guarantee (loss)/income
Financial guarantee as at 31 December
2023
900,684
2023
(706,867)
900,684
193,817
(706,867)
193,817
2022
809,812
2022
90,872
809,812
900,684
90,872
900,684
The Company acted as a guarantor under the Group’s SSNs and SUNs (31
December 2023: US$725 million 8.0% Senior Notes and US$400 million 7.0%
The Company acted as a guarantor under the Group’s SSNs and SUNs (31
Senior Notes due February 2025). Since the guarantees are issued in favour of the
December 2023: US$725 million 8.0% Senior Notes and US$400 million 7.0%
Company’s indirect subsidiaries, related costs at initial recognition are capitalised
Senior Notes due February 2025). Since the guarantees are issued in favour of the
into the investments in subsidiaries (Note 5).
Company’s indirect subsidiaries, related costs at initial recognition are capitalised
into the investments in subsidiaries (Note 5).
As at 31 December 2023 the Company performed an assessment of the value of
the guarantees issued under SSNs and SUNs (31 December 2022: the 2022 and
As at 31 December 2023 the Company performed an assessment of the value of
2025 Notes), taking into account the Group’s financial position as at 31 December
the guarantees issued under SSNs and SUNs (31 December 2022: the 2022 and
in both years and the fact that the Company is the parent entity in the Group and
2025 Notes), taking into account the Group’s financial position as at 31 December
so would ultimately assume the guarantee obligations of its subsidiaries in the
in both years and the fact that the Company is the parent entity in the Group and
event of their inability to meet such obligations. As a result, the Company has
so would ultimately assume the guarantee obligations of its subsidiaries in the
recognised the guarantee liabilities for the total amount of US$ 193.817 thousand
event of their inability to meet such obligations. As a result, the Company has
as at 31 December 2023 (2022: US$886,513 thousand), representing the amount
recognised the guarantee liabilities for the total amount of US$ 193.817 thousand
of expected credit losses as of the reporting date. Further details on the Notes are
as at 31 December 2023 (2022: US$886,513 thousand), representing the amount
provided below.
of expected credit losses as of the reporting date. Further details on the Notes are
SSeenniioorr SSeeccuurreedd NNootteess aanndd SSeenniioorr UUnnsseeccuurreedd NNootteess
provided below.
SSeenniioorr SSeeccuurreedd NNootteess aanndd SSeenniioorr UUnnsseeccuurreedd NNootteess
On 8 February 2023, the Group completed restructuring of the Group’s US$725
million 8.0% Senior Notes due July 2022 and its US$400 million 7.0% Senior Notes
On 8 February 2023, the Group completed restructuring of the Group’s US$725
due February 2025. Through the partial reinstatement of debt of US$250 million
million 8.0% Senior Notes due July 2022 and its US$400 million 7.0% Senior Notes
Senior Secured Notes (SSNs) and US$300 million Senior Unsecured Notes (SUNs).
due February 2025. Through the partial reinstatement of debt of US$250 million
Senior Secured Notes (SSNs) and US$300 million Senior Unsecured Notes (SUNs).
The SSNs and SUNs are jointly and severally guaranteed (the “2023 Guarantees”)
on a senior basis by Nostrum Oil & Gas PLC, Nostrum Oil & Gas Coöperatief U.A.,
The SSNs and SUNs are jointly and severally guaranteed (the “2023 Guarantees”)
Zhaikmunai LLP and Nostrum Oil & Gas B.V. (the “2023 Guarantors”). SUNs and
on a senior basis by Nostrum Oil & Gas PLC, Nostrum Oil & Gas Coöperatief U.A.,
SSNs Issuer’s and the 2023 Guarantors’ senior obligations and rank equally with all
Zhaikmunai LLP and Nostrum Oil & Gas B.V. (the “2023 Guarantors”). SUNs and
of the 2023 Issuer’s and the 2023 Guarantors’ other senior indebtedness.
SSNs Issuer’s and the 2023 Guarantors’ senior obligations and rank equally with all
22002222 NNootteess
of the 2023 Issuer’s and the 2023 Guarantors’ other senior indebtedness.
22002222 NNootteess
On 25 July 2017, a newly incorporated entity, Nostrum Oil & Gas Finance B.V. (the
“2022 Issuer”) issued US$ 725,000 thousand notes (the “2022 Notes”). The 2022
On 25 July 2017, a newly incorporated entity, Nostrum Oil & Gas Finance B.V. (the
Notes bear interest at a rate of 8.00% per year, payable on 25 January and 25 July
“2022 Issuer”) issued US$ 725,000 thousand notes (the “2022 Notes”). The 2022
of each year, maturing in 2022.
Notes bear interest at a rate of 8.00% per year, payable on 25 January and 25 July
of each year, maturing in 2022.
The 2022 Notes are jointly and severally guaranteed (the “2022 Guarantees”) on a
senior basis by Nostrum Oil & Gas PLC, Nostrum Oil & Gas Coöperatief U.A.,
The 2022 Notes are jointly and severally guaranteed (the “2022 Guarantees”) on a
Zhaikmunai LLP and Nostrum Oil & Gas B.V. (the “2022 Guarantors”). The 2022
senior basis by Nostrum Oil & Gas PLC, Nostrum Oil & Gas Coöperatief U.A.,
Notes are the 2022 Issuer’s and the 2022 Guarantors’ senior obligations and rank
Zhaikmunai LLP and Nostrum Oil & Gas B.V. (the “2022 Guarantors”). The 2022
equally with all of the 2022 Issuer’s and the 2022 Guarantors’ other senior
Notes are the 2022 Issuer’s and the 2022 Guarantors’ senior obligations and rank
indebtedness.
equally with all of the 2022 Issuer’s and the 2022 Guarantors’ other senior
22002255 NNootteess
indebtedness.
22002255 NNootteess
On 16 February 2018, Nostrum Oil & Gas Finance B.V. (the “2025 Issuer”) issued
US$ 400,000 thousand notes (the “2025 Notes”). The 2025 Notes bear interest at
On 16 February 2018, Nostrum Oil & Gas Finance B.V. (the “2025 Issuer”) issued
a rate of 7.00% per year, payable on 16 February and 16 August of each year,
US$ 400,000 thousand notes (the “2025 Notes”). The 2025 Notes bear interest at
maturing in 2025.
a rate of 7.00% per year, payable on 16 February and 16 August of each year,
maturing in 2025.
The 2025 Notes are jointly and severally guaranteed (the “2025 Guarantees”) on a
senior basis by Nostrum Oil & Gas PLC, Nostrum Oil & Gas Coöperatief U.A.,
The 2025 Notes are jointly and severally guaranteed (the “2025 Guarantees”) on a
Zhaikmunai LLP and Nostrum Oil & Gas B.V. (the “2025 Guarantors”). The 2025
senior basis by Nostrum Oil & Gas PLC, Nostrum Oil & Gas Coöperatief U.A.,
Notes are the 2025 Issuer’s and the 2025 Guarantors’ senior obligations and rank
Zhaikmunai LLP and Nostrum Oil & Gas B.V. (the “2025 Guarantors”). The 2025
equally with all of the 2025 Issuer’s and the 2025 Guarantors’ other senior
Notes are the 2025 Issuer’s and the 2025 Guarantors’ senior obligations and rank
indebtedness.
equally with all of the 2025 Issuer’s and the 2025 Guarantors’ other senior
indebtedness.
162 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
116622 NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023
116622 NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023
Notes to the parent company financial statements (continued)
Parent company financial statements
13. Long-term incentive plan
22001177 LLoonngg--tteerrmm iinncceennttiivvee ppllaann
In 2017 the Company started operating a Long-term incentive plan (“the LTIP”),
that was approved by the shareholders of the Company on 26 June 2017 and
adopted by the board of directors of the Company on 24 August 2017. The LTIP is
a discretionary benefit offered by the Company for the benefit of selected
employees. Its main purpose is to increase the interest of the employees in the
Company's long-term business goals and performance through share ownership.
The LTIP is an incentive for the employees' future performance and commitment
to the goals of the Company. The remuneration committee of the board of the
Company has the right to decide, in its sole discretion, whether or not further
awards will be granted in the future and to which employees those awards will be
granted.
Employees (including senior executives and executive directors) of members of
the Group or their associates may receive an award, which is a "nominal cost
option" over a specified number of ordinary shares in the capital of the Company.
The option has an exercise price of 1p per share (but the Company has the
discretion to waive this prior to exercise). In addition, under the Rules of the LTIP
the Company has discretion to settle awards other than by transfer of shares such
as by way of cash settlement. Generally, the awards are classified as equity-
settled transactions. The share options are treated as equity-settled since there
are no legal limitations expected on issue of shares for these upon vesting, the
Company has a choice of settlement and the intention is to settle them in equity.
However, in certain jurisdictions due to regulatory requirements the Company
may not be able to settle the awards other than by transfer of cash, in which case
the awards are classified as cash-settled transactions, and accounted for similar to
SARs.
The award ordinarily vests and becomes exercisable as from later of the third
anniversary of grant or two years after the date on which the Company
determines whether the performance condition has been satisfied, subject to
employee’s continued service and to the extent to which the performance
condition is satisfied, until the end of the contractual life. The contractual life of
the share options is ten years.
The cost of cash-settled equity-based employee compensation is measured
initially at fair value at the grant date using a trinomial lattice valuation model.
This fair value is expensed over the period until vesting with the recognition of a
corresponding liability. The liability is remeasured at each reporting date up to
and including the settlement date with changes in fair value recognised in the
statement of comprehensive income.
The cost of equity-settled transactions is measured at fair value at the grant date
using a trinomial lattice valuation model. This fair value is expensed over the
period until vesting with the recognition of a corresponding equity element of
“shares to be issued under LTIP”, which is not remeasured subsequently until the
settlement date.
The following table summarises the movement in the number of outstanding
share options capable of vesting during the years ended 31 December 2023 and
31 December 2022:
As at 31 December 2021
Share options forfeited
As at 31 December 2022
Share options forfeited
As at 31 December 2023
Equity-settled
awards
156,039
(8,696)
147,343
(7,503)
139,840
Cash-settled
awards
–
–
–
–
–
TOTAL awards
156,039
(8,696)
147,343
(7,503)
139,840
In 2017 the Company granted 1,208,843 share options, of which 308,850 share
options remained outstanding as at 31 December 2023 (2022: 325,423 share
options). The weighted average remaining contractual life of share options
outstanding as at 31 December 2023 was 4 years (2022: 5 years). On 23 March
2018 the remuneration committee of the board of the Company determined the
level of performance conditions that were met for the performance conditions set
upon issue of the share options granted in 2017. After adjusting for the non-
achievement of performance conditions, 139,840 share options are capable of
vesting as of 31 December 2023 (2022: 147,343 share options) and all of these
share options were vested, in accordance with the management’s best estimate,
and exercisable as of 31 December 2023.
On 28 November 2018 the Company granted a further 1,163,040 share options,
however due to the performance conditions not being met none of these share
options are capable of vesting.
The fair value of the equity-settled share options at the valuation dates of
28 November 2018 and 23 March 2018 amounted to US$1.25 and US$2.76 per
share option, respectively. Based on these estimations, during the year ended 31
December 2023 the Company recognised a reduction in the investments in
subsidiaries in the amounts of US$25 thousand (2022: US$38 thousand).
Share options
The Hull-White trinomial lattice valuation model was used to value the share
options. The following table lists the inputs to the model used for valuation of the
share options at the grant date:
Price at the issue date (US$)
Distribution yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life (years)
Option turnover (%)
Price trigger
10 October 2017
1.25
0%
43.4%
1.38%
10
10%
2.0
11 December 2017
2.76
0%
40.4%
1.45%
10
10%
2.0
The expected life of the options is based on historical data and is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome. Option turnover rate represents the
rate of employees expected to leave the Company during the vesting period,
which is based on historical data and may not necessarily be the actual outcome.
The model considers that when share price reaches the level of exercise price
multiplied by the price trigger the employees are expected to exercise their
options.
14. Related party transactions
Related parties of the Company include its direct and indirect subsidiaries, key
management personnel and other entities that are under the control or
significant influence of the key management personnel.
Accounts receivable from related parties represented by Company’s subsidiaries
as at 31 December 2023 and 31 December 2022 consisted of the following:
In thousands of US Dollars
Receivables from Nostrum Oil & Gas
Benefit Trust
Receivables from Nostrum Oil & Gas
CoöperaCef U.A.
Less: bad debt allowance
31 December
2023
31 December
2022
23,812
23,812
1,853
836
25,665
(23,758)
1,907
24,648
(23,693)
955
Accounts payable to related parties represented by Company’s subsidiaries as at
31 December 2023 and 31 December 2022 consisted of the following:
In thousands of US Dollars
Payables to Nostrum Oil & Gas
CoöperaCef U.A.
Interest payable Nostrum Oil & Gas
Finance B.V.
31 December
2023
31 December
2022
54
204
258
119
204
323
Financial guarantees are comprised of the following as at 31 December 2023 and
31 December 2022:
In thousands of US Dollars
Financial guarantee as at 1 January
Financial guarantee (loss)/income
Financial guarantee as at 31 December
2023
2022
900,684
809,812
(706,867)
90,872
193,817
900,684
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 163
NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023 116633
FINANCIALS
Parent company financial statements
Parent company financial statements
Notes to the parent company financial statements continued
Notes to the parent company financial statements (continued)
During the years ended 31 December 2023 and 2022 the Company had the
following transactions with related parties represented by Company’s
subsidiaries:
In thousands of US Dollars
Income from provision of services
Nostrum Oil & Gas Coöperaoef U.A.
For the year ended 31 December
2023
2022
5,300
5,516
Gain/(loss) from financial guarantee
Nostrum Oil & Gas Finance B.V. (Note 9)
706,867
78,340
15. Financial risk management objectives and policies
The Company’s financial assets consist of receivables from shareholders and cash
and cash equivalents. The Company’s financial liabilities consist of payables to
related parties, trade and other payables and accrued liabilities.
The main risks arising from the Company’s financial instruments are foreign
exchange risk and credit risk. The Company’s management reviews and agrees
policies for managing each of these risks, which are summarized below.
CClliimmaattee cchhaannggee
Management has considered how the Company’s identified climate risks and
climate related goals (as discussed in Climate Change and GHG Emissions in the
Group’s 2022 Annual Report) may impact the estimation of the recoverable value
of cash-generating unit tested for impairment and therefore of the finance
guarantee provision. The anticipated extent and nature of the future impact of
climate on the Group’s operations and future investment depends on the
development of new technologies and production processes employed and the
level of emissions, energy efficiency and use of renewable energy. The sensitivity
of the Group’s impairment assessment to these factors is also impacted by the
extent that estimated recoverable value exceeds the carrying value of an
individual cash-generating unit – where this is lower there is an increased risk of a
future impact. The Group is in the process of identifying a range of actions and
initiatives to progress towards the Group’s goals, including reduction of
greenhouse gas emissions, wastewater discharges and increase of waste
utilisation. In certain cases, the costs of such actions have been quantified and are
included in the Group’s forecasts which are used to estimate recoverable value
for the Group’s cash-generating unit. Other actions and initiatives continue to be
explored by the Group but are not sufficiently certain to be reflected in the
Group’s forecasts of estimated recoverable value.
FFoorreeiiggnn ccuurrrreennccyy rriisskk
Most of the Company’s operation is denominated in USD, therefore the
Company’s statement of financial position is not significantly affected by exchange
rate movements.
IInntteerreesstt rraattee rriisskk
The Company is not exposed to interest rate risk in 2022 and 2021 as the
Company had no financial instruments with floating rates as at years ended 31
December 2023 and 2022.
LLiiqquuiiddiittyy rriisskk
Liquidity risk is the risk that the Company will encounter difficulty in raising funds
to meet commitments associated with its financial liabilities. The Company is part
of the Group’s monitoring process of its risk to a shortage of funds using a liquidity
planning tool. The tool allows selecting severe stress test scenarios. To ensure an
adequate level of liquidity a minimum cash balance has been defined as a cushion
of liquid assets. The Group’s objective is to maintain a balance between continuity
of funding and flexibility through the use of notes, export financing and leases,
and adequately allocating funding among various entities in the Group.
Following successful restructuring of the 2025 Notes and 2022 Notes, the
Directors confirm that they have a reasonable expectation that the Company and
the Group will continue in operation as they fall due through the three-year
viability assessment period ending 30 June 2027. For more information on
analysis of the Group’s ability to meet its liabilities on repayment of the Notes
please see “Viability statement” section on the Annual report on pages 39-40.
End of Document
164 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
116644 NNoossttrruumm OOiill && GGaass PPLLCC Annual Report & Accounts 2023
CCrreeddiitt rriisskk
Financial instruments, which potentially subject the Company to credit risk,
consist primarily of receivables and cash in banks. The maximum exposure to
credit risk is represented by the carrying amount of each financial asset. The
Company considers that its maximum exposure is reflected by the amount of
receivables from shareholders and cash and cash equivalents.
The Company places its US Dollar, British Pound and Euro denominated cash with
Citibank which has a credit rating of Aa3 (stable) from Moody’s rating agency at
31 December 2023.
Receivables are amounts receivable from Group companies, thus risk of credit
default is low, except for the loan receivable from the Trust for which loss
allowance has been recognised.
In addition to the direct credit exposures outlined above, the Company has also
acted as a guarantor under the Group’s SSNs and SUNs. Since the guarantees are
issued in favor of the Company’s indirect subsidiaries, related costs at initial
recognition are capitalised into the investments in subsidiaries. The guarantees
could potentially expose the Company to significant financial strain in the event of
the default of the SSNs and SUNs.
FFaaiirr vvaalluueess ooff ffiinnaanncciiaall iinnssttrruummeennttss
The fair value of the financial assets represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale.
The management assessed that its assets and liabilities approximate their carrying
amounts largely due to their nature or the short-term maturities of these
instruments.
CCaappiittaall mmaannaaggeemmeenntt
For the purpose of the Company’s capital management, capital includes issued
capital and all other equity reserves attributable to the equity holders of the
Company. The primary objective of the Company’s capital management is to
maximise the shareholder value.
16. Events after the reporting
AAIIXX ddeelliissttiinngg
On February 21, 2024 the Company announced the successful completion of the
delisting process for its ordinary shares from the Official List of the Astana
International Exchange.
UUppddaattee oonn SStteeppnnooyy LLeeooppaarrdd FFiieellddss
In Q1 2024, the well appraisal operations on Stepnoy Leopard Fields were nearly
complete and significant data has been collected that included well flow rates,
fluid contacts, and fluid and reservoir properties across a logged interval with c.
50-meter of net-pay. The flow-rate and pressure build-up tests confirmed high
well productivity potential. The positive results obtained to date supported the
commercial potential of the fields, hence in March 2024 the Company made a
final investment decision (“FID”) for the initial field development phase of the
Stepnoy Leopard Fields with the forecast total capital budget for this initial field
development phase of US$100 million gross. The Company plans to compile a
Competent Person’s Report (CPR) to reclassify specific resources into reserves.
DDrriilllliinngg pprrooggrraammmmee
Following the approval of two-well drilling programme at the Chinarevskoye field
in 2023, the first well (CHN-301) was spudded in December of 2023 with drilling in
Q1 2024 to total depth of 4,980 meters on time and on budget, and awaiting
completion operations with start-up expected mid-2024. It had multiple in-fill
targets across the Carboniferous and Devonian age reservoirs. Hydrocarbons (oil,
gas-condensate) have been encountered across three key intervals. The results
are in line with our expectations of initial well rates of 400 to 700 boepd. Next, the
drilling rig will be moved to well No.41, with expected spud in April and start-up in
Q3 2024. This well is a sidetrack and carries a higher level of geologic risk as it is a
step-out from the existing well control in the targeted Devonian reservoir. If
successful, these wells will enable a cost-effective means of converting the field’s
2P reserves to PDP whilst also complying with Zhaikmunai’s PSA obligations.
Investor information
GRI 2-1
Contact information
Investor contacts
Investor Relations
ir@nog.co.uk
Tel: +44 20 3740 7430
Registered office
Nostrum Oil & Gas PLC
20 Eastbourne Terrace
London W2 6LG
United Kingdom
Tel: +44 20 3740 7430
Registered number: 8717287
Place of registration: England and Wales
VAT GB302 9250 35
Zhaikmunai LLP registered office
Zhaikmunai LLP
43/1 Alexander Karev Street
Uralsk, 090000
Republic of Kazakhstan
Tel: +7 7112 933900
Fax: +7 7112 933901
Auditor
MHA
2 London Wall Place
Barbican, London
EC2Y 5AU
United Kingdom
Registrar
Link Group
10th Floor, Central Square,
29 Wellington Street
Leeds LS1 4DL
United Kingdom
Tel: +44 371 664 0391
Nostrum Associated
Investments LLP
Activity: Dormant
Registered office and
principal place of business:
43B Karev Street
090000 Uralsk
Republic of Kazakhstan
General Director:
Malika Saudasheva
Nostrum Services Central Asia LLP
Activity: Service company
Registered office and
principal place of business:
Building 75/38
Microrayon Aksay 3a
050031 Almaty
Republic of Kazakhstan
General Director:
Michael Wagner
Nostrum Oil & Gas Holding
Limited
Activity: Holding company
Registered office and principal place
of business:
20 Eastbourne Terrace
London W2 6LG
United Kingdom
Directors:
Ulugbek Makhmadiyarov
Thomas Hartnett
Positiv Invest LLP
Activity: Operating company
Registered office and principal
place of business:
Dostyk str., 310/15
Almaty, Republic of Kazakhstan
General Director:
Damir Bastaubayev
Nostrum Oil & Gas BV
Activity: Holding Company
Registered office and
principal place of business:
Bloemendaalseweg 139
Hofstede Sparrenheuvel
2061 CH
Bloemendaal
The Netherlands
Directors:
Thomas Hartnett
Ulugbek Makhmadiyarov
Nostrum Oil & Gas Coöperatief UA
Activity: Holding Company
Registered office and
principal place of business:
Bloemendaalseweg 139
Hofstede Sparrenheuvel
2061 CH
Bloemendaal
The Netherlands
Directors:
Ulugbek Makhmadiyarov
Thomas Hartnett
Nostrum Oil & Gas Finance BV
Activity: Finance Company
Registered office and
principal place of business:
Bloemendaalseweg 139
Hofstede Sparrenheuvel
2061 CH
Bloemendaal
The Netherlands
Directors:
Ulugbek Makhmadiyarov
Thomas Hartnett
Nostrum Services NV
Activity: Service company
Registered office and
principal place of business:
Chaussée de Wavre 20
1360 Perwez
Belgium
Directors:
Thomas Hartnett BVBA
Ulugbek Makhmadiyarov
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 165
REGULATORY INFORMATION Investor information
Website and electronic communications details
Nostrum’s website provides information on the activities of the Company, both regulatory and other, as well as the opportunity to sign up
to our mailing list to ensure stakeholders are kept up to date with the most recent information. Please see www.nog.co.uk for more
information.
In addition, to reduce our impact on the environment, we encourage all shareholders to opt for electronic shareholder communications,
including annual reports and notices of meetings.
Share price information
Exchange
Ticker
Reuters code
ISIN code
Capitalisation-weighted index of FTSE 350 E&P.
Earnings per share (as at 31 December 2022): US$(0.14)/share
Book value per share (as at 31 December 2022): US$(4.44) negative per share
Financial calendar 2024
Q1 2024 Operational and Financial results
H1 2024 Operational and Financial results
Q3 2024 Operational and Financial results
Share price performance
Equity financing
Equity raising
IPO
Timing
March 2008
Secondary equity issue
September 2009
Amount
US$100m
US$300m
London Stock Exchange
NOG.LN
NOGN.L
GB00BQVVS097
21 May 2024
20 August 2024
19 November 2024
Lead manager
ING Bank NB
ING Bank NV
Mirabaud Securities
Renaissance Securities
NOSTRUM OIL & GAS PLC
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0
3
2
n
a
J
3
2
b
e
F
Price (GBP)
3
2
r
a
M
3
2
r
p
A
3
2
y
a
M
3
2
n
u
J
3
2
l
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J
3
2
g
u
A
3
2
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e
S
3
2
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O
3
2
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166 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Debt financing
Previous bonds issued by Nostrum Oil & Gas Finance B.V., which were extinguished on 9 Febuary 2023 are detailed in the following table:
Settlement
Maturity
Currency
Amount (m)
Coupon
Jul 2017
Jul 2022
US$
725
8.000%
Listing
Dublin
Feb 2018
Feb 2025
US$
400
7.000%
Dublin
CUSIP
ISIN
RegS
Rule 144A
N64884AB0
66978CAB8
USN64884AB02
US66978CAB81
Common Code
16453439
164534073
CUSIP
ISIN
N64884AD6
66978CAC6
USN64884AD67
US66978CAC64
Common Code
176959886
176959878
For a summary of certain covenants relating to the 2017 and 2018 Notes, please see the consolidated financial statements.
Outstanding bond issues as at 9 February 2023 for Nostrum Oil & Gas PLC are detailed in the following table:
Title
SSN
Settlement Maturity
Currency Amount (m) Coupon
Feb 2023 Jun 2026 US$
250
5.000%
PIK
—
Listing
TISE
RegS
Rule 144A
CUSIP
N64884AF1
66978CAF9
ISIN
USN64884AF16
US66978CAF95
SUN
Feb 2023 Jun 2026 US$
300
1.000%
13.000% TISE
CUSIP
N64884AE4
66978CAD4
ISIN
USN64884AE41
US66978CAD48
Internally held bond financing of the Nostrum Group
Bond issues wholly owned by Nostrum Oil & Gas Finance BV are provided in the following table:
Settlement
Maturity
Currency
Amount (m)
Coupon
Listing
Feb 2014
Jan 2033
US$
400
9.5%
Dublin/
Almaty
CUSIP
ISIN
RegS
Rule 144A
N64884AA2
66978CAA0
USN64884AA29
US66978CAA09
Nov 2012
Jun 2033
US$
560
9.5%
Common Code
103302323
103302307
Dublin/
Almaty
CUSIP
ISIN
N97716AA7
98953VAA0
USN97716AA72
US98953VAA08
Common Code
085313177
085259776
Credit ratings
Nostrum Oil & Gas PLC is currently being rated by two credit rating agencies: Standard and Poor’s and Moody’s Investor Services:
Agency
Standard and Poor’s
Moody’s
Rating
Outlook
SD
Ca
NM
Negative
Zhaikmunai LLP is a wholly-owned indirect subsidiary of Nostrum and its equity is not listed, while Nostrum’s equity is listed on the standard
segment of the London Stock Exchange.
The Group’s investor relations programme aims to develop open and transparent communication between the Group (including Zhaikmunai
LLP) and its shareholders, providing information about the financial and operational performance of the Company. The Investor Relations
department of the Group seeks to ensure all questions received from any of the Group’s stakeholders are dealt with in a timely manner
based on the underlying principle that the Group is approachable and responsive to any potential queries.
1. Yield to worst was not calculated following the default in payment of interest.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 167
REGULATORY INFORMATION Investor information
NOSTRUM US$250M SENIOR SECURED NOTES 5% CASH COUPON 30-JUNE-2026
90
80
70
60
50
40
30
20
10
0
3
2
0
2
/
2
0
/
2
2
3
2
0
2
/
3
0
/
2
2
Price
3
2
0
2
/
4
0
/
2
2
3
2
0
2
/
5
0
/
2
2
3
2
0
2
/
6
0
/
2
2
3
2
0
2
/
7
0
/
2
2
3
2
0
2
/
8
0
/
2
2
3
2
0
2
/
9
0
/
2
2
3
2
0
2
/
0
1
/
2
2
3
2
0
2
/
1
1
/
2
2
3
2
0
2
/
2
1
/
2
2
NOSTRUM US$300M SENIOR UNSECURED NOTES 1% CASH COUPON, 13% PIK 30-JUNE-2026
50
40
30
20
10
0
3
2
0
2
/
3
0
/
1
0
3
2
0
2
/
4
0
/
1
0
Price
3
2
0
2
/
5
0
/
1
0
3
2
0
2
/
6
0
/
1
0
3
2
0
2
/
7
0
/
1
0
3
2
0
2
/
8
0
/
1
0
3
2
0
2
/
9
0
/
1
0
3
2
0
2
/
0
1
/
1
0
3
2
0
2
/
1
1
/
1
0
168 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Glossary
GRI 2-1
Glossary
2010 Notes
2012 Notes
2014 Notes
2017 Notes
2018 Notes
A
API
API gravity
appraisal well
associated gas
B
barrel/bbl
basin
bcm
Boe
Boepd
Bopd
C
C1
C2
C3
C4
C5
C6
C7
CAC
Cash
Casing
10.500% notes issued in 2010.
7.125% notes issued in 2012.
6.375% notes issued in 2014.
8.000% notes issued in 2017.
7.000% notes issued in 2018.
American Petroleum Institute.
The industry standard method of expressing specific density of crude oil or other liquid hydrocarbons
as recommended by the American Petroleum Institute. Higher API gravities mean lower specific
gravity and lighter oils. When the API gravity is greater than 10, the product is lighter and floats on
water; when it is less than 10, it is heavier than water and sinks. Generally speaking, oil with an API
gravity between 40 and 45 commands the highest prices.
A well or wells drilled to follow up a discovery and evaluate its commercial potential.
Gas which occurs in crude oil reservoirs in a gaseous state.
The standard unit of volume: 1 barrel = 159 litres or 42 US gallons.
A large area holding a thick accumulation of sedimentary rock.
Billion cubic metres.
Barrels of (crude) oil equivalent, i.e. the factor used by Nostrum to convert volumes of different
hydrocarbon production to barrels of oil equivalent.
Barrels of (crude) oil equivalent per day.
Barrels of crude oil per day.
Methane.
Ethane.
Propane.
Butane.
Pentane.
Hexane.
Heptane.
A pipeline with two branches originating in Turkmenistan and meeting in Kazakhstan before crossing
into Russia and connecting to the Russian pipeline system, with an annual throughput capacity of
60.2 billion cubic metres.
Cash and cash equivalents, including current and non-current investments.
Relatively thin-walled, large diameter steel rods that are screwed together to form a casing string,
which is run into a core hole or well and cemented in place.
Caspian region
Parts of countries adjacent to the Caspian Sea.
CDP
CDP is an organisation based in the United Kingdom which supports companies in disclosing their
environmental impact (formerly known as the Carbon Disclosure Project).
Chinarevskoye field
The Chinarevskoye oil and gas condensate field.
CO2
commissioning
Competent Authority
condensate
Carbon dioxide.
Process to assure a facility or plant, such as Nostrum’s GTU 3, is tested to verify it functions according
to technical objectives and specifications before use.
The State’s central executive agency, designated by the Government to act on behalf of the State to
exercise rights relating to the execution and performance of subsoil use contracts, except for contracts
for exploration and production of commonly occurring minerals. This is the Ministry of Energy of the
Republic of Kazakhstan (“MOE”) with respect to the oil and gas industry.
Hydrocarbons which are gaseous in a reservoir, but which condense to form a liquid as they rise to the
surface where the pressure is much less.
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 169
REGULATORY INFORMATION Glossary
contingent resources
cost oil
crude oil
D
development
downstream
Development Plans
Directors or Board
dry gas
E
E&P
EBITDA
Deposits that are estimated, on a given date, to be potentially recoverable from known accumulations
but that are not currently considered commercially recoverable.
Cost oil denotes an amount of crude oil produced in respect of which the market value is equal to
Nostrum’s monthly expenses that may be deducted pursuant to the PSA (q.v.) (including all operating
costs, exploration costs and development costs up to an annual maximum of 90% of the annual gross
realised value of hydrocarbon production).
A mixture of liquid hydrocarbons of different molecular weights.
During development, engineering teams design the most efficient development options to build wells
and associated infrastructure to produce hydrocarbons from a gas field within a proven productive
reservoir (as defined by exploration and appraisal activities). The three phases of development are
exploration and appraisal, development and production.
Downstream refers to all petroleum operations occurring after delivery of crude oil or gas to a refinery
or fractionation plant.
The development plans approved by the SCFD in March 2009.
The Directors of the Company.
Dry gas is natural gas (methane and ethane) with no significant content of heavier hydrocarbons. It is
gaseous at both sub-surface and surface conditions.
Exploration and production.
Profit before tax + non-recurring expenses + finance costs + foreign exchange loss /(gain) + employee
share option adjustments + depreciation – interest income + other expenses / (income).
Environmental Code
The Kazakhstan Environment Code (No. 212, dated 9 January 2007, as amended).
Exploration Permit
exploration phase
The geological allotment (Annex to the Licence) issued by the Competent Authority to Zhaikmunai
LLP.
The phase of operations which covers the search for oil or gas by carrying out detailed geological and
geophysical surveys, followed up where appropriate by exploratory drilling.
exploration well
Well drilled purely for exploratory (information-gathering) purposes in a particular area.
F
farm-in
farm-out
FCA
FCA Uralsk
field
FOB
FSU
G
G&A
gas
Transfer of a percentage of an oil or gas permit held by the farmor in return for (partial or complete)
delivery of the work programme by the farmee(s). Note that this work would normally have had to have
been delivered and paid for by the farmor.
A contractual agreement with the holder of an oil and gas permit to assign all (or a percentage of) that
interest to another party in exchange for delivering the work programme required by the permit, or
fulfilling other contractually specified conditions.
Financial Conduct Authority of the United Kingdom.
Sales made under free carrier terms according to which Nostrum delivers to the terminal in Uralsk and
transportation risk and risk of loss are transferred to the buyer after delivery to the carrier.
An area consisting of a single reservoir or multiple reservoirs all grouped in or related to the same
individual geological structure feature and/or stratigraphic condition.
Sales made under “free on board” terms.
Former Soviet Union.
General and administrative expenses.
Petroleum that consists principally of light hydrocarbons. It can be divided into lean gas, primarily
methane, but often containing some ethane and smaller quantities of heavier hydrocarbons (also
called sales gas), and wet gas, primarily ethane, propane and butane, as well as smaller amounts of
heavier hydrocarbons; partially liquid under atmospheric pressure.
gas condensate
The mixture of liquid hydrocarbons that results from condensation of petroleum hydrocarbons
existing initially in a gaseous phase in an underground reservoir.
Gas Treatment Facility (GTF)
Facility for the treatment of associated gas and gas condensate resulting in different products
(stabilised condensate, LPG and dry gas) for commercial sales.
GTU 1 means the first unit of Nostrum’s Gas Treatment Facility.
GTU 2 means the second unit of Nostrum’s Gas Treatment Facility.
GTU 3 means the third unit of Nostrum’s Gas Treatment Facility.
GDRs
The global depository receipts of Nostrum Oil & Gas LP.
greenhouse gas
A gas that contributes to the greenhouse effect by absorbing infrared radiation, e.g. carbon dioxide.
Group or Company or Nostrum Nostrum Oil & Gas PLC and, as the context requires, its direct and indirect consolidated subsidiaries.
170 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
H
HSE
hydrocarbons
Health, safety and environment.
Compounds formed from the elements hydrogen (H) and carbon (C), which may be in solid, liquid or
gaseous form.
hydrocarbon reserves
Hydrocarbon reserves that have been proved, and are referred to as 3P, 2P and 1P depending on the
likelihood of commercial production from a given field.
I
IAS
IFRS
INED
IPIECA
J
joint venture
International Accounting Standards.
International Financial Reporting Standards.
Independent Non-Executive Director.
International Petroleum Industry Environmental Conservation Association.
A joint venture is a set of trading entities who have agreed to act in concert to share the cost and
rewards of exploring for and producing oil or gas from a permit.
joule
Unit of energy used for measuring gas volumes.
megajoules = 106
gigajoules = 109
terrajoules = 1012
petajoules = 1015
Kazakhstan Stock Exchange.
The Republic of Kazakhstan.
State-owned oil and gas company of Kazakhstan.
Onshore oil and gas exploration production subsidiary of KazMunaiGas.
A tie-in to the KTO pipeline enables crude oil export sales via the Atyrau-Samara international export
pipeline.
Licence series MG No. 253-D (Oil) issued to Zhaikmunai LLP by the Government on 26 May 1997,
including amendments.
The Kazakhstan Law “On Licensing” (No. 214, dated 11 January 2007, as amended, which came into
effect on 9 August 2007).
A sales product in liquid form produced as a result of further processing by the onshore plant; for
example, condensate and LPG.
Liquefied natural gas. Comprises mainly methane.
K
KASE
Kazakhstan
KazMunaiGas
KazMunaiGas Exploration
Production (“KMG EP”)
KazTransOil (KTO) pipeline
L
Licence
Licensing Law
liquids
LNG
Listing Rules
The listing rules made by the Financial Services Authority (FSA) under section 73A of the FSMA.
LSE
LPG
LTIP
M
m
m3
m3/d
Man–hour
Mboe
London Stock Exchange.
Liquefied petroleum gas, the name given to the mix of propane and butane in its liquid state.
Long-term incentive plan.
Metre(s).
Cubic metres.
Cubic metres per day.
An hour regarded in terms of the amount of work that can be done by one person within this period.
Thousands of barrels of oil equivalent.
Mechanical completion
Final construction or installation phase, after which a facility can undergo commissioning activities.
Mmbbls
Mmboe
Mmcf
Millions of barrels of oil.
Millions of barrels of oil equivalent.
Million cubic feet
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 171
REGULATORY INFORMATION Glossary
N
NBK
NED
Nostrum
Nostrum Oil & Gas PLC
O
OPEC
operator
P
Partnership
PCR testing
petroleum
Possible Reserves (3P)
Probable Reserves (2P)
processing
Production Permit
production well
Profit oil
Prospective resources
Proven Reserves (1P)
PRMS
Production Sharing
Agreement (PSA)
PSA Law
Q
QHSE
R
recovery
Reservoir
National Bank of Kazakhstan.
Non-Executive Director.
Nostrum Oil & Gas PLC, the listed company of the Group.
Registered Office:
9th Floor
20 Eastbourne Terrace
London
W2 6LG
United Kingdom
The Organisation of the Petroleum Exporting Countries.
The individual or company responsible for conducting oil and gas exploration, development and
production activities on an oil and gas lease or concession on its own behalf and/or if applicable,
for other working interest owners, generally pursuant to the terms of a joint operating agreement
or comparable agreement.
Nostrum Oil & Gas LP, which was the holding company of the Group before the reorganisation.
Polymerase chain reaction testing, a test for COVID-19.
Hydrocarbons, whether solid, liquid or gaseous. The proportion of different compounds in a petroleum
find varies from discovery to discovery. If a reservoir primarily contains light hydrocarbons, it is
described as a gas field. If heavier hydrocarbons predominate, it is called an oil field. An oil field may
feature free gas above the oil and contain a quantity of light hydrocarbons, also called associated gas.
Possible Reserves are those reserves that, to a low degree of certainty (10% confidence), are
recoverable. There is relatively high risk associated with these reserves. Proven, Probable and Possible
Reserves are referred to as 3P.
Probable Reserves are those reserves that analysis of geological and engineering data suggests are
more likely than not to be recoverable. There is at least a 50% probability that reserves recovered will
exceed Probable Reserves. Proven plus Probable Reserves are referred to as 2P.
Processing of saleable product from hydrocarbons sourced from oil wells and gas wells.
The mining allotment (Annex to the Licence), issued by the Competent Authority to Zhaikmunai LLP.
A well that has been drilled for producing oil or gas, or one that is capable of production once the
producing structure and characteristics are determined.
Profit oil is the difference between cost oil and the total amount of crude oil produced each month,
which is shared between the State and Zhaikmunai LLP.
Quantities of petroleum which are estimated, on a given date, to be potentially recoverable from
undiscovered accumulations.
Proven or Proved Reserves (1P) are those reserves that, to a high degree of certainty (90% confidence),
are recoverable. There is relatively little risk associated with these reserves. Proven Developed
Reserves are reserves that can be recovered from existing wells with existing infrastructure and
operating methods. Proven Undeveloped Reserves require development.
2007 Petroleum Resources Management System, which is a set of definitions and guidelines designed
to provide a common reference for the international petroleum industry, sponsored by the Society for
Petroleum Engineers, the American Association of Petroleum Geologists, the World Petroleum
Council and the Society for Petroleum Evaluation Engineers.
The contract for additional exploration, production and production sharing of crude oil hydrocarbons
in the Chinarevskoye oil and gas condensate field in the West-Kazakhstan oblast No. 81, dated
October 31 1997, as amended, between Zhaikmunai LLP and the Competent Authority (currently
MOE), representing the State.
Kazakhstan Law No. 68-III “On Production Sharing Agreements for Constructing Offshore Petroleum
Operations”, dated 8 July 2005.
Quality, Health, Safety and the Environment.
The second stage of hydrocarbon production during which an external fluid such as water or gas is
injected into the reservoir to maintain reservoir pressure and displace hydrocarbons towards the
wellbore.
A porous and permeable underground formation containing a natural accumulation of producible oil
and/or gas that is confined by impermeable rock or water barriers, and is individual and separate from
other reservoirs.
172 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
RoK
Royalty
Ryder Scott
S
sales gas
seismic
shut in
Republic of Kazakhstan.
An interest in an oil and gas property entitling the owner to a share of oil or gas production free of
costs of production.
Independent petroleum consultants Ryder Scott Company LP, headquartered at 621 Seventeenth
Street, Suite 1550, Denver, Colorado, 80293, USA.
Natural gas that has been processed by gas plant facilities and meets the required specifications
under gas sales agreements.
The use of shock waves generated by controlled explosions of dynamite or other means to ascertain
the nature and contours of underground geological structures.
Cease production from a well.
side-track well
A well or borehole that runs partly to one side of the original line of drilling.
social infrastructure
Assets that accommodate social services, e.g. hospitals, schools, community housing etc.
spud
stakeholder
State
State share
Suspended well
T
TCFD
TISE
The commencement of drilling operations.
A person or entity who may affect, be affected by or perceive themselves to be affected by an entity’s
decisions or activities.
Republic of Kazakhstan.
The share of hydrocarbon production due (in cash or kind) to the Republic of Kazakhstan under the
PSA (q.v.).
A suspended well is not currently used for assessment or production and has been shut in. It will either
be returned to assessment or production, or will be plugged and abandoned.
Task Force on Climate-related Financial Disclosures.
The International Stock Exchange
tenge or KZT
The lawful currency of the Republic of Kazakhstan.
tonne
trillion
U
UNGG
Metric tonne.
10 to the power of 12.
Refers to the Uralsk Oil and Gas Explorations Expedition. The Government of the Kazakh Soviet
Socialist Republic decided in March 1960 to create a consortium “Uralskneftegazrazvedka” for
conducting oil and gas exploration in the Uralsk region. In the 1960s, the consortium was involved in
more than 59 exploration projects. In 1970, the consortium was renamed “Uralsk Enlarged Oil-Gas
Exploration Expedition”.
UK Corporate Governance Code Set of principles of good corporate governance for listed companies promulgated by the UK Financial
Ural O&G
W
well
wellhead
work programme
workover
Reporting Council.
Ural Oil&Gas LLP
A hole drilled to test an unknown reservoir or to produce from a known reservoir.
The wellhead includes the forged or cast steel fitting on top of a well (welded or bolted to the top of
the surface casing), as well as casingheads, tubingheads, Christmas tree, stuffing box and pressure
gauges.
A schedule of works agreed between parties (permit holders, farmees and government) contracted to
be delivered in a defined timeframe.
Routine maintenance or remedial operations on a producing well in order to maintain, restore or
increase production.
WUP or Water Use Permit
The permit granted by the relevant government authority with respect to water use pursuant to the
Water Code.
Z
Zhaikmunai LLP
Principal operating entity of the Group
Corporate office:
43/1 Karev str.
Uralsk, 090000
Republic of Kazakhstan
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 173
REGULATORY INFORMATION GRI context index
GRI content index
Statement of use
Nostrum Oil & Gas PLC has reported the information cited in this GRI content index for the period ended
31 December 2023 with reference to the GRI Standards.
GRI 1 used
GRI 1: Foundation 2021
GRI standard
GRI 2: General
Disclosures 2021
Disclosure
2-1 Organisational details
GRI sector standard ref. No.
Location
2-2 Entities included in the organisation’s sustainability reporting
2-3 Reporting period, frequency and contact point
2-6 Activities, value chain and other business relationships
2-7 Employees
2-8 Workers who are not employees
2-9 Governance structure and composition
2-10 Nomination and selection of the highest governance body
2-11 Chair of the highest governance body
2-14 Role of the highest governance body in sustainability reporting
2-15 Conflicts of interest
2-18 Evaluation of the performance of the highest governance body
2-19 Remuneration policies
2-20 Process to determine remuneration
2-22 Statement on sustainable development
2-23 Policy commitments
2-25 Processes to remediate negative impacts
Health and safety – Emergency response and accidents preparatory activities;
2-26 Mechanisms for seeking advice and raising concerns
2-27 Compliance with laws and regulations
2-26 Mechanisms for seeking advice and raising concerns
2-29 Approach to stakeholder engagement
3-1 Process to determine material topics
3-2 List of material topics
201-2 Financial implications and other risks and opportunities due to
climate change
203-2 Significant indirect economic impacts
204-1 Proportion of spending on local suppliers
11.2.2
11.14.5
11.14.6
GRI 3: Material Topics
2021
GRI 201: Economic
Performance 2016
GRI 203-1: Indirect
economic impacts 2016
GRI 204: Procurement
Practices 2016
174 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
All the entities in the organization’s financial reporting are also included in the sustainability reporting perimeter
(see Note 1 – General of the consolidated financial statements which lists these entities).
Investor information – Contact information
Strategic report – Business model
Additional disclosures – Glossary;
Additional disclosures – Structure chart;
The report is published annually.
Strategic report – Business model;
Strategic report – Market review;
Strategic report – Our products;
Strategic report – Infrastructure
ESG review – Our people
ESG review – Contractors
Corporate governance – Board of Directors;
Corporate Governance – Our Governance framework
Corporate governance – Nomination and Governance Committee report
The chair of the highest governance body is not a senior executive in the Company.
The Senior Management HSE and ESG committees have responsibility for ESG related matters, including
climate and sustainability reporting (see Taskforce on Climate-related Financial Disclosure).
Our governance framework – Conflicts of interest
No board evaluation took place in 2023.
Remuneration Committee report – Annual statement from the Chairman;
Remuneration Committee report – 2023 annual report on remuneration
Remuneration Committee report – 2023 annual report on remuneration
Strategic report – CEO's letter
Governance Framework – Board policies and governance arrangements;
Governance Framework – Bribery, corruption and whistleblowing;
Our people – Human Rights Policy:
Our people – Open Door Policy
Health and safety – Oil spill prevention
Our people – Whistleblowing policy;
Our people – Workforce representation;
Our people – Whistleblowing policy;
Our governance framework – Bribery, corruption and whistleblowing;
Stakeholder engagement – Understanding our stakeholders;
Our people – Workforce representation
ESG review – Material ESG issues
ESG review – Material ESG issues
Taskforce on Climate-related Financial Disclosure (TCFD)
Strategic report – Prinicpal risks and uncertainties
Strategic report – CEO’s letter;
Strategic report – Section 172(1) statement;
Social Responsibility – Economic responsibility: Spend with local suppliers
Our governance Framework – Bribery, corruption and whistleblowing;
There were no instances of non-compliance with laws or regulations during the reporting period.
Page
167
11
171-175
180
132
10-13
6-9
24-25
30-31
60-62
55-56
84-85
90
99
75-76
92
100
101-115
101-115
16
91
92
63
63
57
58
63
92
62
63
92
20-21
62
52, 54
75-81
53
37
16
20
64
GRI standard
GRI 2: General
Disclosures 2021
Disclosure
2-1 Organisational details
GRI sector standard ref. No.
Location
Investor information – Contact information
Strategic report – Business model
Additional disclosures – Glossary;
Additional disclosures – Structure chart;
All the entities in the organization’s financial reporting are also included in the sustainability reporting perimeter
(see Note 1 – General of the consolidated financial statements which lists these entities).
The report is published annually.
Strategic report – Business model;
Strategic report – Market review;
Strategic report – Our products;
Strategic report – Infrastructure
ESG review – Our people
ESG review – Contractors
Corporate governance – Board of Directors;
Corporate Governance – Our Governance framework
Corporate governance – Nomination and Governance Committee report
The chair of the highest governance body is not a senior executive in the Company.
The Senior Management HSE and ESG committees have responsibility for ESG related matters, including
climate and sustainability reporting (see Taskforce on Climate-related Financial Disclosure).
Our governance framework – Conflicts of interest
No board evaluation took place in 2023.
Remuneration Committee report – Annual statement from the Chairman;
Remuneration Committee report – 2023 annual report on remuneration
Remuneration Committee report – 2023 annual report on remuneration
Strategic report – CEO's letter
Governance Framework – Board policies and governance arrangements;
Governance Framework – Bribery, corruption and whistleblowing;
Our people – Human Rights Policy:
Our people – Open Door Policy
Health and safety – Emergency response and accidents preparatory activities;
Health and safety – Oil spill prevention
Our people – Whistleblowing policy;
Our governance Framework – Bribery, corruption and whistleblowing;
There were no instances of non-compliance with laws or regulations during the reporting period.
Our people – Workforce representation;
Our people – Whistleblowing policy;
Our governance framework – Bribery, corruption and whistleblowing;
Stakeholder engagement – Understanding our stakeholders;
Our people – Workforce representation
ESG review – Material ESG issues
ESG review – Material ESG issues
Taskforce on Climate-related Financial Disclosure (TCFD)
Strategic report – Prinicpal risks and uncertainties
Strategic report – CEO’s letter;
Strategic report – Section 172(1) statement;
GRI 204: Procurement
204-1 Proportion of spending on local suppliers
Social Responsibility – Economic responsibility: Spend with local suppliers
2-2 Entities included in the organisation’s sustainability reporting
2-3 Reporting period, frequency and contact point
2-6 Activities, value chain and other business relationships
2-7 Employees
2-8 Workers who are not employees
2-9 Governance structure and composition
2-10 Nomination and selection of the highest governance body
2-11 Chair of the highest governance body
2-14 Role of the highest governance body in sustainability reporting
2-15 Conflicts of interest
2-19 Remuneration policies
2-18 Evaluation of the performance of the highest governance body
2-20 Process to determine remuneration
2-22 Statement on sustainable development
2-23 Policy commitments
2-25 Processes to remediate negative impacts
2-26 Mechanisms for seeking advice and raising concerns
2-27 Compliance with laws and regulations
2-26 Mechanisms for seeking advice and raising concerns
2-29 Approach to stakeholder engagement
GRI 3: Material Topics
3-1 Process to determine material topics
3-2 List of material topics
2021
GRI 201: Economic
Performance 2016
GRI 203-1: Indirect
economic impacts 2016
Practices 2016
201-2 Financial implications and other risks and opportunities due to
11.2.2
climate change
203-2 Significant indirect economic impacts
11.14.5
11.14.6
Page
167
11
171-175
180
132
10-13
6-9
24-25
30-31
60-62
55-56
84-85
90
99
75-76
92
100
101-115
101-115
16
91
92
63
63
57
58
63
92
62
63
92
20-21
62
52, 54
53
75-81
37
16
20
64
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 175
ADDITIONAL DISCLOSURES
GRI context index
GRI content index continued
GRI standard
Disclosure
GRI sector standard ref. No.
Location
GRI 205:
Anti-corruption 2016
205-1 Operations assessed for risks related to corruption
205-3 Confirmed incidents of corruption and actions taken
GRI 207: Tax 2019
207-4 Country-by-country reporting
GRI 302: Energy 2016
302-1 Energy consumption within the organisation
GRI 303: Water and
Effluents 2018
303-1 Interactions with water as a shared resource
303-2 Management of water discharge-related impacts
303-3 Water withdrawal
303-4 Water discharge
GRI 305: Emissions 2016
305-1 Direct (Scope 1) GHG emissions
305-2 Energy indirect (Scope 2) GHG emissions
305-4 GHG emissions intensity
305-5 Reduction of GHG emissions
GRI 306: Waste 2020
306-1 Waste generation and significant waste-related impacts
306-3 Waste generated
11.20.4
11.21.7
11.1.2
11.6.2
11.6.3
11.6.4
11.6.5
11.1.5
11.1.6
11.1.8
11.2.3
11.5.2
11.5.4
GRI 401:
Employment 2016
GRI 403: Occupational
Health and Safety 2018
401-1 New employee hires and employee turnover
11.10.2
Our people – Hiring and staff turnover
401-3 Parental leave
11,10.4, 11.11.3
403-2 Hazard identification, risk assessment, and incident investigation
11.9.3
403-3 Occupational health services
403-5 Worker training on occupational health and safety
403-7 Prevention and mitigation of occupational health and safety
impacts directly linked by business relationships
403-9 Work-related injuries
GRI 404: Training and
Education 2016
404-2 Programs for upgrading employee skills and transition assistance
programs
GRI 405: Diversity and
Equal Opportunity 2016
405-1 Diversity of governance bodies and employees
GRI 413: Local
Communities 2016
413-1 Operations with local community engagement, impact
assessments, and development programs
Additional disclosures
GRI: Effluents and
Waste 20161
206-3 Significant spills
11.9.4
11.9.6
11.9.8
11.9.10
11.10.7
11.11.5
11.15.2
11.8.2
1. The effluents-related content of the GRI Standard GRI 306: Effluents and Waste 2016 has been superseded by GRI Standard GRI 303: Water and Effluents 2018,
and the waste-related content has been superseded by GRI 306: Waste 2020. The spills-related content in GRI 306: Effluents and Waste 2016 remains in effect.
176 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
Our governance framework – Bribery, corruption and whistleblowing;
Risk management – Principal risks and uncertainties – Other Risks
No confirmed corruption cases were identified in 2023 (see Our governance framework – Bribery,
corruption and whistleblowing).
Social responsibility – Civil duty: Payment to governments;
Financial review
Environment – Renewable energy use
Environment – Waste, water and soil management – Water management
Environment – Waste, water and soil management – Water management
Environment – Waste, water and soil management – Water management
Environment – Waste, water and soil management – Wastewater discharges
Environment – GHG emissions reporting approach,
GHG emission results
GHG emission results
Environment – GHG emissions reporting approach,
Environment – Emissions intensity ratio
Environment – Current and future GHG reduction initiaitives
Environment – Waste, water and soil management –
Waste management
Waste management
Environment – Waste, water and soil management –
Our people – Strength through diversity
Health and Safety – Hazard Observation Cards;
Health and Safety – Incidence rates and investigation
Health and Safety – Process safety
Health and Safety – In-house HSE training and examination process;
Health and Safety – HSE communication and awareness
Health and Safety – Process safety
Health and Safety – Incidence rates and investigation
Our people – Education and training
Our people – Strength through diversity, Diversity Action plan;
Governance framework – Equality and diversity
Social responsibility – Philanthropy: 2023 key initiatives;
In 2023, there were no oil spills (see Health and safety – Oil spill prevention & Oil Spill Response Plan).
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68-69
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68-69
69-70
65-67
71-72
71-72
72
66-67
68
68
68
68
62
60
57
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58
60-61
Disclosure
GRI sector standard ref. No.
Location
Our governance framework – Bribery, corruption and whistleblowing;
Risk management – Principal risks and uncertainties – Other Risks
No confirmed corruption cases were identified in 2023 (see Our governance framework – Bribery,
corruption and whistleblowing).
Social responsibility – Civil duty: Payment to governments;
Financial review
Environment – Renewable energy use
GRI 303: Water and
303-1 Interactions with water as a shared resource
Environment – Waste, water and soil management – Water management
Environment – Waste, water and soil management – Water management
Environment – Waste, water and soil management – Water management
Environment – Waste, water and soil management – Wastewater discharges
Environment – GHG emissions reporting approach,
GHG emission results
Environment – GHG emissions reporting approach,
GHG emission results
Environment – Emissions intensity ratio
Environment – Current and future GHG reduction initiaitives
Environment – Waste, water and soil management –
Waste management
Environment – Waste, water and soil management –
Waste management
Our people – Hiring and staff turnover
Our people – Strength through diversity
Health and Safety – Hazard Observation Cards;
Health and Safety – Incidence rates and investigation
Health and Safety – Process safety
Health and Safety – In-house HSE training and examination process;
Health and Safety – HSE communication and awareness
403-7 Prevention and mitigation of occupational health and safety
11.9.8
Health and Safety – Process safety
Health and Safety – Incidence rates and investigation
Our people – Education and training
Our people – Strength through diversity, Diversity Action plan;
Governance framework – Equality and diversity
Social responsibility – Philanthropy: 2023 key initiatives;
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92
38
92
64
41-47
70
68-69
68-69
68-69
69-70
65-67
71-72
71-72
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68
68
68
68
62
60
57
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206-3 Significant spills
In 2023, there were no oil spills (see Health and safety – Oil spill prevention & Oil Spill Response Plan).
58
GRI standard
GRI 205:
Anti-corruption 2016
205-1 Operations assessed for risks related to corruption
205-3 Confirmed incidents of corruption and actions taken
GRI 207: Tax 2019
207-4 Country-by-country reporting
GRI 302: Energy 2016
302-1 Energy consumption within the organisation
Effluents 2018
303-2 Management of water discharge-related impacts
303-3 Water withdrawal
303-4 Water discharge
GRI 305: Emissions 2016
305-1 Direct (Scope 1) GHG emissions
GRI 306: Waste 2020
306-1 Waste generation and significant waste-related impacts
305-2 Energy indirect (Scope 2) GHG emissions
305-4 GHG emissions intensity
305-5 Reduction of GHG emissions
306-3 Waste generated
GRI 401:
Employment 2016
GRI 403: Occupational
Health and Safety 2018
401-1 New employee hires and employee turnover
11.10.2
401-3 Parental leave
11,10.4, 11.11.3
403-2 Hazard identification, risk assessment, and incident investigation
11.9.3
403-3 Occupational health services
403-5 Worker training on occupational health and safety
impacts directly linked by business relationships
403-9 Work-related injuries
GRI 404: Training and
404-2 Programs for upgrading employee skills and transition assistance
11.10.7
Education 2016
programs
GRI 405: Diversity and
405-1 Diversity of governance bodies and employees
413-1 Operations with local community engagement, impact
assessments, and development programs
Equal Opportunity 2016
GRI 413: Local
Communities 2016
Additional disclosures
GRI: Effluents and
Waste 20161
11.20.4
11.21.7
11.1.2
11.6.2
11.6.3
11.6.4
11.6.5
11.1.5
11.1.6
11.1.8
11.2.3
11.5.2
11.5.4
11.9.4
11.9.6
11.9.10
11.11.5
11.15.2
11.8.2
NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023 177
ADDITIONAL DISCLOSURES
Structure chart
GRI 2-1
Nostrum Group structure chart
as at 31 December 2023
Nostrum Oil & Gas PLC
Incorporated under the laws of
England and Wales
100%
Nostrum Oil & Gas Holding Limited
Incorporated under the laws of
England and Wales
100%
>99.9%
Nostrum Oil & Gas Coöperatief UA
Incorporated and principal place of
business in the Netherlands
Nostrum Oil & Gas BV
Incorporated and principal place
of business in the Netherlands
<0.1%
100%
Nostrum Oil & Gas
Finance B.V.
Incorporated and
principal place of
business in the
Netherlands
100%
(save for one share
held by Nostrum
Oil & Gas BV)
100%
100%
100%
Nostrum Services
N.V.
Incorporated and
principal place of
business in Belgium
Zhaikmunai LLP
Incorporated and
principal place of
business in Kazakhstan
Nostrum Associated
Investments LLP
Incorporated and
principal place of
business in Kazakhstan
Nostrum Services
Central Asia LLP
Incorporated and
principal place of
business in Kazakhstan
Minority
participants
80%
20%
Positiv Invest LLP
Incorporated and principal place
of business in Kazakhstan
178 NOSTRUM OIL & GAS PLC ANNUAL REPORT & ACCOUNTS 2023
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