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Good day, and thank you for standing by. Welcome to the Nostrum Oil & Gas Q1 2022 Financial Results Conference Call. [Operator Instructions] And please be advised that your call is recorded.
I would now like to hand the conference over to your first speaker today, Shane Drader. Thank you. Please go ahead.
Thank you, operator, and good afternoon, everyone. Welcome to this call to present the financial results for Nostrum Oil & Gas for the 3 months ended 31st March 2022. I'm Shane Drader, the Chief Financial Officer at Nostrum. I'm joined on the call today by our Chief Executive Officer, Arfan Khan.
We'll be following the presentation of our Q1 financial results. It's available on our website and also through the link in this morning's results announcement. As usual, throughout the presentation, we'll refer to the page numbers that appear in the bottom right-hand side of each page. And at the end, we'll open up the floor for any questions.
I refer listeners to Page 3 of the presentation, and we'll now hand over to Arfan, who will provide some opening remarks.
Thank you, Shane, very much. We are on Page 3, the summary page. We presented our full year 2021 results at the start of this month and provided a detailed overview of performance last year, as well as an update on performance in 2022 so far. As such, we will be brief with our presentation today.
I'm pleased to report good results in Q1 despite a challenging market environment, including the political unrest that took place in Kazakhstan in early January. The restructuring continues to progress, and I'm confident that our new capital structure will provide us the right balance sheet to pivot towards growth.
Operationally, our production continues to fall at circa 20% with the natural decline of the Chinarevskoye field. We recorded 14,683 barrels of oil equivalent per day in production available for sale with a corresponding 14,059 barrels of oil equivalent per day sold in the first quarter.
We are continuing the well workover intervention strategy in the field. And while the success rate has been mixed, the strategy continues to be a cost-effective way to help with the production decline.
Financially, we had a good quarter. Our revenues are up 30% year-on-year, and our EBITDA is up 50% year-on-year. We generated over $15 million in free cash flow in Q1, leaving us with a total unrestricted cash of $180.8 million. More importantly, I'm pleased that we concluded this quarter without any major HSE incidents. Health and safety is our top priority, and we continuously strive to ensure operations are conducted in a safe and professional manner. We're also on target to be within the allocated [indiscernible] emissions targets set by the state.
Our Q1 performance was achieved despite unprecedented challenges in 2022 so far. The political and social unrest in Kazakhstan [indiscernible] in the early part of '22 has led to a change in the [indiscernible] administration and policies that have a strong domestic agenda. Adding to this is the Russian-Ukraine war, which has led to substantial sanctions that we have to comply with as a British publicly-traded company.
I'm very proud of our workforce and the company arising to these challenges. Business has continued with minimal disruptions. And none of our employees have been harmed through COVID or the recent geopolitical events. We remain fully compliant with all the international sanctions against Russia.
I'll switch to on Page 4, the operational overview. The first chart exhibits steady decline of the quarterly production over the last 5 quarters. And as you know, [indiscernible] production declines while maintaining financial discipline is a constant focus of our team. Since drilling stopped in 2019, we have continued to conduct subsurface studies to identify low-risk infill drilling opportunities. Some of these will be considered for investment in the future post restructuring.
As I stated previously, our workover and rigless intervention campaigns while progressing, are also maturing and expect to have only a limited impact on [indiscernible] the production decline. Total average production for the quarter was 14,683 barrels of oil equivalent per day with 41% crude, 12% LPG and 47% dry gas.
Total sales volume for the quarter averaged 14,059 barrels of oil equivalent per day, which was higher than Q4 2021 due to an additional tanker condensate being sold in Q1. Our full year '22 guidance is 12,750 to 13,750 barrels of oil equivalent per day production and 11,500 to 12,500 barrels of oil equivalent per day for sales volumes.
Lastly, I jump to Page 7, which is about getting for the future. I won't go into all the details on this slide as we covered this during our full year results. Just a reminder that monetizing the 4.2 bcm [indiscernible] processing infrastructure that we own and operate remains our top strategic goal. We have continued to mature dialogue with potential stakeholders and partners and are optimistic that these efforts would bear fruit post restructuring, at which point, we will be able to enter into formal commercial negotiations and contracts.
The Ural Oil & Gas Project is progressing per the timetable. And we have begun upgrading our facilities to receive the Ural Oil & Gas as per the schedule in late 2023.
That wraps up my brief summary. I will now hand over to Shane.
Thank you, Arfan. As Arfan mentioned at the top of the presentation, Q1 was a successful quarter for the group. Our revenues have continued to increase over the last 5 quarters in line with rising prices across most of our hydrocarbon products. Mainly crude oil and condensate and LPG all saw rising prices in the quarter.
Brent averaged $97.9 per barrel in the first quarter of 2022 versus $61.8 per barrel in the same quarter last year. Furthermore, LPG prices have been buoyant in 2021 and into 2022, resulting in some of the best LPG netbacks the company has achieved. The price impact more than outweighed the offsetting impact from lower production volumes, resulting in total revenues of USD 60.2 million. This is 30% higher compared to the first quarter of last year.
We at the company are being proactive in managing our netbacks, trying to ensure we can optimize our netbacks from the market [indiscernible] Whilst we have been successful in doing so with oil over $100 per barrel, we do however note that our discount against Brent reference is widening for both crude and condensate sales. Our discount is the delta between Brent reference and [indiscernible] reference, which is currently fluctuating between USD 30 and USD 40 per barrel for crude and $15 to $20 per barrel for condensate.
As a result, we are not achieving the full Brent reference price for trading condensate while Brent remained at these high levels. Despite this, we still recorded strong revenue growth and ultimate cash generation. We benefit from high operating leverage. Our cost base is largely fixed, and we have done extremely well to keep those costs low in an inflationary world. The result of this is our EBITDA was 50% higher in Q1 2022 versus the same period last year. Our EBITDA margin also reached a high of 67% in the quarter, which is testament to the operating leverage we benefit from, but also the strong cost discipline that we continue to demonstrate on an ongoing basis.
We've continued to build cash on our balance sheet in the absence of any debt interest payments on the existing notes. The group generated over $15 million in free cash for the quarter, leaving our total unrestricted cash balances at $180 million on March 31, 2022.
As a reminder to our listeners, we also have $22.7 million sitting in a restricted bank account under the terms of our forbearance agreement. This reflects the cash generative-nature of the Chinarevskoye field with the right capital structure in place. I note for the listeners that annual interest payments under the proposed restructuring will be between $16 million to $20 million per annum, which is a more manageable debt service level for a company of our size and performance going forward.
Our aim remains to preserve and grow our cash reserves to continue netback optimization and cost discipline, the purpose of which will provide returns to our stakeholders and help fund strategic projects.
I'll now move on to Page 6 to remind listeners of the proposed restructuring terms. We reached an agreement with both our noteholders and shareholders on the terms of a restructuring. We signed a lock-up agreement in terms of a restructuring with noteholders on the 23rd of December of last year. And these terms were subsequently approved by 99.99% of voting shareholders at a general meeting on April 29, 2022.
Following the backing of all our stakeholders, we officially launched the U.K. scheme of arrangement pursuant to restructuring via the insurance of proxy statement letter to our noteholders on the 11th of May. I provided a detailed overview of the terms of the restructuring of the full year's results.
But in summary, we expect the following structure at closing. Firstly, there will be a reinstatement of 2 notes, the $250 million senior secured note with a 5% cash coupon payment and the $300 million senior unsecured note with a 1% cash coupon and 13% payment-in-kind interest. Both sets of reinstated notes have a 5-year maturity window to June 2026, and the interest begins accruing from the 1st of January of this year. The $300 million note is essentially convertible to equity at maturity, while the $250 million note is not.
The second element of the conversion to equity of the remainder of the notes and accrued interest. Upon closing of the restructuring, existing shareholders will now be diluted to 11.11% with the expanded share capital of the company. Attached to the reinstated notes are warrants which if exercised upon certain conditions will further dilute existing shareholders down to 10% of the expanded capital of the company.
There are also a number of agreed corporate governance arrangements. The cash fleet mechanism will be put in place for free cash flow above a certain amount to be swept into the restricted accounts administered by a trustee and controlled by independent directors. There will also be a debt service retention accounts where future coupon payments will be held. The group will have access to an operating account with cash sufficient to conduct business operations.
We will also have access to the restricted accounts under certain conditions with the approval of the majority of the independent directors. The company's listing will also move from the premium segment of the London Stock Exchange to the standards listing. We'll still be required to follow the guidelines of the U.K. Corporate Governance Code [indiscernible] basis, but the transfer listing will remove certain listing requirement obligations.
Finally, our initial Board post restructuring will comprise of 7 directors and the 5 currently in place today. We still have several other milestones to reach, including final court sanction of the scheme and the necessary Republic of Kazakhstan government consents. All workstreams are progressing in parallel as we speak. And our current expectation is to close out the restructuring in Q3 of this year, providing timely receipt of the aforementioned government consents.
This brings us to the end of the presentation. I'll now hand back to the operator to open the floor to any questions.
[Operator Instructions] No questions at this time. Please continue.
Operator, we'll give another 30 seconds to see if there's any questions.
Okay.
Well, in the absence of any questions, we'd again like to thank you for attending the call, and we wish you and your families remain safe and well. Thank you very much, and goodbye.
Thank you.
And this concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.