REG - Kistos Holdings PLC - Interim results
28/09/2023 07:00
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RNS Number : 9075N Kistos Holdings PLC 28 September 2023
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28 September 2023
Kistos Holdings plc
("Kistos", the "Company", or the "Group")
Interim results for the six months to 30 June 2023
Kistos (LSE: KIST), the low carbon intensity gas and oil producer pursuing
energy opportunities in line with the energy transition, is pleased to provide
its interim results for the period to 30 June 2023.
Highlights
Financial
Robust end-of-period cash position
· Net actual production for the period averaged 9,600 boepd, a 68%
increase compared to H1 2022, reflecting a full six months' contribution from
the GLA and one month from Norway following the acquisition of Mime
· Pro-forma net daily production averaged 9,200 boe/d across the
UK, Netherlands, and Norway
· Realised price decreased to €74/boe in H1 2023 from €139/boe
in H1 2022, reflecting significant gas price volatility
· Actual revenues and adjusted EBITDA decreased compared with H1
2022, driven by lower average commodity prices
· Net cash and cash equivalents stood at €247 million at the end
of the period, with net debt of €42 million following the assumption of Mime
Petroleum's outstanding bonds
Pro forma(1) unaudited 6 months ended 30 June 2023
H1 2023 H1 2022 Change %
Total production(2) kboe 1,659 2,205 (25)%
Total production rate(2) boe/d 9,200 12,200 (25)%
Revenue €'000 119,883 286,996 (58)%
Average realised sales price(2) €/boe €74/boe €139/boe (47)%
Adjusted EBITDA(3) €'000 68,613 261,397 (74)%
1.Pro forma figures include the results from Kistos Norway as if it had been
acquired on 1 January 2023. The acquisition completed on 23 May 2023. Pro
forma figures for H1 2022 include results from the GLA as if it had been
acquired on 1 January 2022. That acquisition completed on 11 July 2023. Minor
adjustments have been made to comparative pro forma information following
receipt of additional information after completion of the GLA acquisition and
to align with the Group's accounting policies and methodology as used in the
2022 Annual Report and Accounts.
2. Total production rate includes gas, oil and natural gas liquids and is
rounded to the nearest 100 barrels of oil equivalent per day. Actual
production rates include the impact from acquired businesses only from the
date of acquisition completion. Sales and production volumes are converted to
estimated boe using the conversion factors in the Appendix to the Interim
Financial Statements.
3. Non-IFRS measure. See note 2.2.1 to the Interim Financial Statements for
definition and reconciliation to the nearest equivalent IFRS measure.
Operational
Reporting production in line with guidance
· 2P reserves + 2C resources increased to 108 MMboe (end-2022)
following completion of the Mime Petroleum transaction, which marked Kistos'
entry into the Norwegian Continental Shelf, and the reinstatement of the M10a
and M11 licences in the Netherlands
· Planned maintenance and workover downtime across the UK and the
Netherlands reduced production uptime in H1
· Benriach well proved sub-commercial, minimal post-tax net cost to
Kistos (c.€3m) due to generous investment allowances granted under EPL
· 4D seismic acquisition campaign over the four producing GLA
fields completed
· Reinstated production at Ringhorne in May following a gas lift
issue identified by the Operator in February
· Full year production guidance maintained in 8,500 - 10,500 boepd
range
Outlook
Investing in the Company's future to maximise value
· Successful appeal to restore M10a and M11, extending licences by
5 years to August 2028 and increasing total Group estimated reserves and
resources by 41%
· Ongoing progress towards completion of the Orion oil field
Concept Select phase before executing FID in 2024
· Continuing to mature Edradour West opportunity towards FID and
ongoing evaluation of 4D seismic expected to lead to additional infill
opportunities across the GLA
· Further evaluation work underway at Q10-A with a view to
enhancing production from existing wells and/or pursuing infill drilling
opportunities
· Jotun FPSO upgrade remains on critical path and operator remains
focused on Balder Future production start-up by the end of 2024
Andrew Austin, Executive Chairman of Kistos, commented:
"We ended the half-year in a strong financial position. Our focus on pursuing
value-accretive opportunities to grow the business remains as sharp as ever.
This was reflected by our entry into Norway in May, acquiring a highly
experienced team with a clear path to medium-term growth, providing greater
flexibility across three North Sea jurisdictions. We have also successfully
progressed organic opportunities within our portfolio, such as the upcoming
Orion oil project in the Netherlands, where we are progressing through the
Concept Select phase, and Edradour West and Glendronach in the UK, where we
are assessing development options utilising existing infrastructure to keep
costs and the carbon footprint low.
"While the Benriach exploration well did not yield the desired result, it did
allow for an extensive data acquisition programme, and we benefitted from
enhanced capital allowances under the terms of the UK Government's EPL. The
excellent operational and HSE performance of all contractors involved with
this well was of particular importance and I thank them again for their
efforts in delivering a safe well, ahead of schedule. Looking ahead, we will
continue to pursue rapid, disciplined growth both organically and through
acquisitions for the benefit of our shareholders."
Enquiries
Kistos Holdings plc via Hawthorn Advisors
Andrew Austin, Executive Chairman
Panmure Gordon (NOMAD, Joint Broker) Tel: 0207 886 2500
John Prior / James Sinclair-Ford
Berenberg (Joint Broker) Tel: 0203 207 7800
Matthew Armitt / Ciaran Walsh
Hawthorn Advisors (Public Relations Advisor) Tel: 0203 745 4960
Henry Lerwill / Simon Woods
Camarco (Public Relations Advisor) Tel: 0203 757 4983
Billy Clegg
Notes to editors
Kistos was established to acquire and manage companies in the energy sector
engaging in the energy transition trend. The Company has undertaken a series
of transactions including the acquisition of a portfolio of highly cash
generative natural gas production assets in the Netherlands from Tulip Oil
Netherlands B.V. in 2021. This was followed in July 2022, with the acquisition
of a 20% interest in the Greater Laggan Area (GLA) from TotalEnergies, which
includes four producing gas fields . In May 2023, Kistos completed its third
acquisition, acquiring the total share capital of Mime Petroleum and its
Norwegian Continental Shelf Assets. These comprise a 10% stake in the Balder
joint venture which spans the Balder and Ringhorne oil fields.
Kistos is a low carbon intensity gas producer with estimated Scope 1 CO₂
emissions from its operated activities offshore of the Netherlands of less
than 0.01 kg/boe in 2022 (excluding necessary flaring during drilling
campaigns).
https://www.kistosplc.com (https://www.kistosplc.com)
Kistos Holdings plc - 2023 Interim Report
Highlights
In April 2023, Kistos announced that it had reached an agreement to acquire
Mime Petroleum AS (Mime) for an adjusted consideration of $111 million
(comprising the Mime debt being retained by Kistos or retired by Mime, less
Mime's cash balances at 31 March 2023 and less a tax refund due in December
2023) plus the issue of up to 6 million warrants exercisable into new Kistos
ordinary shares at a price of 385p each. When the transaction completed in May
2023, it marked the Group's entry into the Norwegian Continental Shelf (NCS).
Mime, which was subsequently renamed Kistos Energy (Norway) AS (KENAS), holds
a 10% interest in the Balder joint venture (JV) (comprising the Balder and
Ringhorne fields) and a 7.4% stake in the Ringhorne Øst unit. All of these
assets are operated by Vår Energi ASA.
KENAS' net production in the six months to 30 June 2023 was 312,000 barrels of
oil equivalent (boe). Output was impacted by a temporary shut-in due to issues
with a second stage separator in April, and the temporary unavailability of
gas lift for certain Ringhorne production wells due to an integrity issue
identified in February regarding the gas lift riser. However, the latter were
reinstated in May after safety and integrity evaluations confirmed that the
riser could continue to be used until its scheduled replacement in September
2023.
In the Netherlands, net production from the Kistos-operated Q10-A field was
3,100 boe per day (boepd) in the first half of 2023 (H1 2022: 5,700 boepd).
This was impacted by downtime from the start of the scheduled maintenance
period, which began in June, and a planned workover campaign that commenced in
Q4 2022 and concluded in Q1 2023. The results of this campaign were mixed,
mainly due to mechanical issues arising from utilising the existing well stock
rather than reservoir performance issues.
In the UK, net production was 4,300 boepd (H1 2022: 6,500 boepd), with
operations impacted in March by unscheduled downtime relating to a compressor
and an extensive planned maintenance and pipeline pigging campaign in April
2023. Whilst the Benriach exploration well proved sub-commercial, it was
completed safely and within budget, and the data gathered will prove valuable
as the Greater Laggan Area (GLA) partners consider future developments
including Glendronach and potential additional infill wells.
Kistos remains well-funded. The Group exited 2022 with cash of €212 million
offset by €82 million of Nordic Bonds issued by Kistos NL2. After assuming
$225 million of Nordic Bonds in May 2023 as part of the Mime acquisition,
Kistos exited the half year with net debt of €42 million, comprising total
cash of €247 million and debt of €289 million. This excludes $45 million
of hybrid bonds, that only becomes payable in full or part if the Jotun
floating production storage and offloading vessel (FPSO) has offloaded its
first cargo by 31 May 2025.
Given this financial strength and in line with its strategy, the Group
continues to evaluate several business development opportunities in the energy
security and transition spaces.
Pro forma(1) unaudited highlights for six months ended 30 June 2023
H1 2023 H1 2022 Change %
Pro forma production(2,3) boepd 9,200 12,200 (25)%
Pro forma revenue €'000 119,883 285,109 (58)%
Pro forma average realised price(3) €/boe 74 139 (47)%
Pro forma Adjusted EBITDA(4) €'000 68,613 261,397 (74)%
1. Pro forma figures include the results from Kistos Norway as if it had been
acquired on 1 January 2023. The acquisition completed on 23 May 2023. Pro
forma figures for H1 2022 include results from the GLA as if it had been
acquired on 1 January 2022. That acquisition completed on 11 July 2023. Minor
adjustments have been made to comparative pro forma information following
receipt of additional information after completion of the GLA acquisition and
to align with the Group's accounting policies and methodology as used in the
2022 Annual Report and Accounts.
2. Total production rate includes gas, oil and natural gas liquids and is
rounded to the nearest 100 barrels of oil equivalent per day. Actual
production rates include the impact from acquired businesses only from the
date of acquisition completion.
3. Sales and production volumes are converted to estimated boe using the
conversion factors in Appendix C to the Interim Financial Statements. Average
realised price is a non-IFRS measure. Refer to the definition within the
glossary.
4. Non-IFRS measure. See note 2.2.1 to the Interim Financial Statements for
definition and reconciliation to the nearest equivalent IFRS measure.
Outlook
Kistos' acquisition of Mime added 24 million barrels of oil equivalent (MMboe)
to the Group's 2P reserves (operator estimate) and is expected to boost the
Group's net output to more than 15,000 boepd in 2025, once the Jotun FPSO and
associated wells are fully onstream. This entry into Norway signified
management's commitment to securing sustainable growth opportunities across
the North Sea Basin and positioned Kistos as an influential independent
producer across three jurisdictions. Furthermore, the assets provide
visibility on a rising production profile over the next few years whilst
enabling the Group to maintain its industry-leading Scope 1 and Scope 2 CO₂
emissions intensity in the medium term.
In the UK, adverse changes to the fiscal environment and cost pressures from
suppliers mean that Edradour West, rather than Glendronach, is now anticipated
to be the next development in the GLA. When sanctioned this project will
increase Kistos' 2P reserves by 3.8 MMboe. In conjunction with expected new
third-party throughput across the Shetland Gas Plant (SGP), Edradour West
would extend the life of the existing facilities and give more certainty to
potential future developments such as Glendronach, additional infill wells,
and other third parties that are evaluating potential development plans/export
routes in the area.
In the Netherlands, the Concept Select phase of the Orion oil development is
nearing completion and the Final Investment Decision (FID) is targeted for the
first half of 2024 with first oil expected around the end of 2025. This
low-cost project is expected to utilise the existing facilities at Q10-A and
P15-D and the oil produced will be among the lowest-taxed barrels in the North
Sea. In parallel, the Group continues to evaluate opportunities to enhance
production from existing wells or drill infill wells at Q10-A.
During the first half of 2022, Kistos applied for an extension to the M10a and
M11 licences (Kistos 60%) north of the Wadden Islands beyond 30 June 2022.
Initially the extension was denied but, following successful objection
proceedings, Kistos was granted an extension to 2028. Kistos will now apply
for a permit to drill an appraisal well, and is actively engaging with the
relevant local municipalities and other stakeholders prior to commencing any
assessment phase planning work.
As a result of the acquisition of Mime and the successful M10a/M11 appeal, the
Group's 2P reserves plus 2C resources are estimated to have increased by over
300% to 108 MMboe since the end of 2022. As previously guided, Kistos'
production for the full year 2023 is expected to be in the 8,500-10,500 boepd
range.
Chairman's Statement
I am delighted to be able to report Kistos' interim results covering the six
months to 30 June 2023. Adjusted EBITDA for the period was in excess of €67
million. While it was disappointing not to encounter commercial quantities of
gas in the Benriach exploration well, an extensive data acquisition programme
was conducted that will help inform the geological interpretation of the area.
Although we benefitted from enhanced capital allowances in relation to the
Benriach well as a consequence of the Energy Profits Levy (EPL), we continue
to see this tax in particular and fiscal uncertainty in general as major
barriers to investment in the UK North Sea.
Cash balances at the end of the period were €247 million. Kistos' strong
financial position was one of the reasons we were able to acquire Mime in May
2023 and assume its bond debt. This resulted in a Group net debt position at
the end of the period of €42 million. Our balance sheet strength means we
remain well placed to grow the business, and after completing three
acquisitions in three years from a standing start, we continue to evaluate a
pipeline of business development opportunities.
While we assess other potential acquisitions, we are pursuing the organic
growth opportunities within our existing portfolio. In the Netherlands, the
Orion oil project has now progressed to the Concept Select phase, which should
complete later this year ahead of taking FID in the first half of 2024. As it
will utilise existing infrastructure at Q10-A and P15-D, Orion is expected to
be a relatively low-cost development and the barrels produced would attract a
tax rate of approximately 50%, which is considerably lower than elsewhere in
the North Sea.
Alongside our JV partners in the UK, we continue to assess the potential
single-well developments of the Edradour West and Glendronach gas fields, both
of which would utilise the existing GLA subsea infrastructure and the SGP.
Once sanctioned, Edradour West is expected to add 3.8 MMboe to our 2P reserves
while Glendronach could add a further 2.5 MMboe. These projects, coupled with
further potential infill drilling elsewhere in the GLA and third-party
opportunities could contribute substantially to the overall life extension of
the area, through the high-class Shetland Gas Plant and associated
infrastructure which has only been in operation since 2016.
On behalf of our shareholders, we remain intent on building a first-class
energy business that secures supplies close to home to ease the energy crisis
and to drive transition. We have taken great strides in a short period of
time, and we will continue to pursue rapid, disciplined growth both
organically and through acquisitions.
Andrew Austin
27 September 2023
Financial Review
Unaudited results for the 6 months ending 30 June 2023
30 June 2023 30 June 2023 30 June 2022 30 June 2022
(actual) (pro forma)(5) (actual) (pro forma)(5)
Total production(1) kboe 1,433 1,659 1,031 2,206
Production rate(1) boepd 9,600 9,200 5,700 12,200
Revenue €'000 105,149 119,883 137,502 285,109
Average realised sales price(2) €/boe 74 74 142 139
Adjusted EBITDA(3) €'000 67,071 68,613 130,207 260,987
(Loss)/profit before tax €'000 (5,216) n/a 102,539 n/a
Basic earnings per share € 0.16 n/a 0.63 n/a
Net cash from operations €'000 91,762 n/a 126,957 n/a
Total cash at 30 June €'000 247,698 247,698 148,446 148,446
Net cash/(debt)(4) €'000 (42,263) (42,263) 26,146 26,146
Note: The financial results are prepared in accordance with IFRS, unless
otherwise noted below:
1 Total production rate includes gas, oil and natural gas liquids and is
rounded to the nearest 100 barrels of oil equivalent per day. Actual
production rates include the impact from acquired businesses only from the
date of acquisition completion. Sales and production volumes are converted to
estimated boe using the conversion factors in Appendix C to the Interim
Financial Statements.
2. Non-IFRS measure. Refer to the definition within the glossary.
3. Non-IFRS measure. Refer to the definition within the glossary and
reconciliation in note 2.2.1.
4. Non-IFRS measure. Refer to the definition within the glossary and
reconciliation in Appendix B2.
5. Pro forma figures for 2023 include Kistos Norway as if it had been acquired
on 1 January 2023. The acquisition completed on 23 May 2023. Pro forma figures
for 2022 include GLA as if it had been acquired on 1 January 2022. The
acquisition completed in July 2022 and is therefore not included in the actual
results to 30 June 2022. Minor adjustments have been made to comparative pro
forma information following receipt of additional information after completion
of the GLA acquisition and to align with the Group's accounting policies and
methodology as used in the 2022 Annual Report and Accounts.
Production and revenue
Actual production on a working interest basis averaged 9,600 boepd in the
first half of 2023 (H1 2022: 5,700 boepd). This represents an increase of over
68% from a year earlier and reflects the inclusion of the Group's interests in
the GLA and production from interests in Norway from 23 May 2023.
On a pro forma basis (assuming Kistos had completed the acquisitions of the
GLA interests and Mime on 1 January 2022 and 1 January 2023 respectively),
production in the six months to 30 June 2023 averaged 9,200 boepd (six months
to 30 June 2022: 12,200 boepd). This decrease reflects natural decline,
coupled with periods of downtime in the Netherlands during the drilling
campaign in Q1 2023, planned annual maintenance at the P15-D platform in June,
and planned annual maintenance and pigging campaigns on the GLA in the UK
during April. This was offset by the addition of oil production from the
Balder Area in Norway.
The Group's average realised price across gas and oil sales during the period
was €74/boe, and total revenue from gas and oil sales was €105.1 million,
versus €142/boe and €137.5 million a year earlier. On a pro forma basis,
these figures were €74/boe and €119.9 million, a decrease from €139/boe
and €285.1 million realised in the equivalent 2022 period, reflecting the
significant volatility in the gas price across the periods.
In the Netherlands, the average realised gas price for the period was
€46/MWh (H1 2022: €105/MWh). In the UK, the average realised gas price for
the period was 91p/therm (H1 2022 pro forma: 204p/therm). The average realised
oil price from crude oil sales in Norway on a pro forma basis was $74/boe,
reflecting the norm price differential applied by the Norwegian Petroleum
Price Council to Balder crude for the period.
Costs
Total adjusted operating costs (which exclude non-cash accounting movements in
inventory) were €28.1 million (H1 2022: €4.2 million). On a pro forma
basis, adjusted operating costs were €38.3 million (H1 2022 pro forma:
€22.5 million), with this figure reflecting the inclusion of six months of
production costs in Norway.
Cash capital expenditure in the first half of 2023 was €46 million. Of this,
€20 million related to the drilling campaign on Q10-A, which concluded in
March 2023. Capital expenditure on the Benriach exploration well, which
spudded in March 2023 and completed operations in June 2023, was €17 million
net to Kistos, of which €12 million had been paid by 30 June. The total
effective post-tax cost of the well is anticipated to be c.€3 million after
taking into account the investment allowance available under the UK tax rules.
In Norway, Kistos' share of cash capital expenditure was €13 million, which
was spent on drilling, refurbishment costs on the Jotun FPSO, and other
facilities. Most of Kistos' capital expenditure in the second half of the year
is anticipated to be incurred on the Balder Future project in Norway, with no
drilling or well intervention campaigns planned in the UK or in the
Netherlands.
Adjusted EBITDA
The Group reported Adjusted EBITDA of €67.1 million in the six months to 30
June 2023. On a pro forma basis, Adjusted EBITDA for the period was €68.6
million (equivalent to €41.3/boe produced). These figures represented
decreases of 26% and 65% respectively from the comparable pro forma prior year
figures of €261.0 million or €118.4/boe. The decline was primarily driven
by the reduction in gas prices from the historic highs that were observed
during 2022.
Profit and loss before tax
The statutory operating loss for the period ended 30 June 2023 was €7.1
million (2022: operating profit of €112.5 million). After net finance income
of €1.9 million (2022: net finance charges of €9.9 million) principally
relating to bond interest expense offset by foreign exchange gains and
interest income, a loss before tax of €5.2 million was recorded (2022:
profit before tax of €102.5 million). The reduction in operating profit was
due to lower EBITDA following the decline in commodity prices compared to the
highs seen in 2022, higher operating costs and depreciation charge rates due
to the inclusion of a full period of GLA activity and approximately one month
of KENAS activity, and exploration impairments of €29.8 million, primarily
relating to the Benriach well in the UK.
Tax
The net tax credit for the period was €18.3 million, reflecting the deferred
tax impact of the Benriach well impairment, the EPL investment allowance on
capital expenditure in the UK, and pre-tax losses in Norway. The net current
tax charge for the period, (which only reflects tax due or receivable on
profits or losses made in the period) was €12.7 million, representing an
effective rate of 19% on EBITDA (H1 2022: €47.2 million, and an effective
rate of 37% on EBITDA). This reflects the statutory headline rates of 75%, 78%
and 50% in the UK, Norway and Netherlands respectively, offset by capital
allowances for capital expenditure from our drilling campaign at Benriach, the
well intervention activity on Q10-A, and the Balder Future project. Cash tax
payments for the period were €38.1 million (H1 2022: €nil), wholly
relating to the Netherlands. A cash tax refund of NOK 838 million (€71.7
million) is scheduled to be received by KENAS in December 2023.
Debt and liquidity
Cash balances at the end of the period were €247.3 million, and, following
the Mime acquisition, the Group had outstanding bonds (excluding the $45
million hybrid bond) with a face value of €289.6 million giving net debt of
€42.3 million. The Group's accounting debt at mid-year comprised €141.6
million of EUR-denominated bonds issued from its Dutch subsidiary (net of
€68.4 million bonds repurchased and held in treasury) and $271.6 million of
USD-denominated bonds issued from its Norwegian subsidiary. Of the latter, $45
million is non-interest-bearing, and is only fully payable in the event
500,000 bbl (gross) have been offloaded and sold from the Jotun FPSO by 31
December 2024. This amount will decline to $30 million from 1 January 2025 to
28 February 2025, to $15 million from 1 March 2025 to 31 May 2025, and to zero
thereafter. Further details on the bonds are outlined in note 5.1 to the
financial statements. No bonds were repurchased in the first half of 2023.
In the first half of 2022, 100,000 MWh per month of gas from Q10-A was hedged
at a price of €25/MWh from January 2022 - March 2022 inclusive. Prior to its
acquisition by Kistos, Mime closed out all of its Brent swaps in February
2023. Therefore, the Group is fully unhedged and, although, the position is
reviewed regularly, it does not have any immediate plans to enter new hedges.
Cash flow
€'000 6 months ended 6 months ended
30 June 2023 30 June 2022
Cash and cash equivalents at beginning of period 211,980 77,288
Net cash generated from operating activities 91,762 126,957
Net cash used in investing activities (52,104) (19,701)
Net cash (used in)/generated from financing activities (5,889) (35,831)
Net increase in cash and cash equivalents 33,769 71,425
Foreign exchange differences 1,577 (267)
Cash and cash equivalents at 30 June 247,326 148,446
Face value of debt (Appendix B2) (289,589) (122,300)
Net (debt)/cash at 30 June (42,263) 26,146
Review of Operations
Netherlands
Q10-A
Q10-A (Kistos 60% and operator) production in the first half of 2023 was 3.1
kboepd compared to 5.7 kboepd in the first half of 2022. Production was
adversely impacted by downtime during a planned workover campaign that
commenced in Q4 2022 and concluded in Q1 2023. The results of this campaign
were mixed, although that was mainly due to mechanical issues arising from
utilising the existing well stock rather than reservoir performance issues.
Production was also impacted by a planned maintenance shutdown of the P15-D
platform commencing in June 2023 and natural reservoir decline.
Kistos continues to evaluate opportunities to enhance production from existing
wells at Q10-A and to drill infill wells. The Group is also co-operating with
the operator and other users of the P15-D platform and associated
infrastructure to ensure volumes are maximised and unit operating costs are
minimised in the coming years. The objective of this collaborative exercise is
to extend the economic life of the hub for the benefit of all users.
Average realised gas prices fell by 45% to €46.2/MWh from €83.6/MWh a year
earlier. Combined with lower production rates, this caused total revenue in
the period to decrease by 71% to €40.1 million versus €137.5 million
during H1 2022.
Orion
The Q10-A Orion oil field (Kistos 60% and operator) is located in the Vlieland
sandstone formation, which is a stratigraphically shallower formation
deposited above the Q10-A gas field. This is a proven play in the area and
although this reservoir has low porosity and permeability, it also contains
natural fractures that can significantly enhance productivity. This was
demonstrated in the third quarter of 2021, when Kistos drilled an appraisal
well and flow tested an 825-metre horizontal section at a maximum rate of
3,200 boepd.
The Concept Select phase of the development is nearing completion, with FID
targeted for the first half of 2024. Assuming the project moves into the
development phase, first oil is expected around late 2025 or early 2026. This
relatively low-cost project is expected to utilise the existing facilities at
Q10-A and P15-D and, under currently enacted fiscal regimes, the oil produced
would be among the lowest taxed barrels in the North Sea at a rate of
approximately 50%.
M10a/M11
During the first half of 2022, Kistos applied for the M10a and M11 (Kistos
60.0%) licences north of the Wadden Islands to be extended beyond 30 June
2022. Initially the extension was denied but Kistos was granted an extension
to 31 August 2028 following successful objection proceedings. The area is
estimated by a reputable third-party consultancy to contain technically
recoverable 2C resources net to Kistos of 174 billion cubic feet (Bcf) or 31.7
Mmboe. Kistos will now apply for a permit for an appraisal well, engaging
closely with the local municipalities and other stakeholders prior to
commencing any assessment phase planning work.
Other
In January 2023, Kistos was awarded three new offshore exploration licences
(P12b, Q13b and Q14), which are adjacent to the existing Q10 block and cover a
total of 507 km(2). Kistos holds a 60% operated working interest in these
licences and is partnered with EBN (40%). Initial evaluation of the acreage
has now commenced with previously identified prospects being further worked
and ranked against our portfolio of exploration opportunities.
UK
Greater Laggan Area
In July 2022, Kistos marked its entry to the UK Continental Shelf with the
completion of the acquisition of a 20% interest in the GLA from TotalEnergies.
As part of the acquisition terms, an additional payment of €15.6 million was
made in January 2023. This was calculated by reference to the average gas
price and GLA production during 2022.
Average net production from the GLA in the six months to 30 June 2023 was in
line with expectations at an average rate of 4.3 kboepd. This period included
a period of unplanned outages during March as a result of compressor
unavailability, approximately three weeks of planned shut-ins during April to
allow for planned pipeline pigging operations, plus a three-day planned
maintenance window during May. Production from the single well on the Edradour
field is temporarily suspended due to facilities constraints relating to
monoethylene glycol (MEG) management. These constraints are expected to be
resolved during Q4 2023 and the well is anticipated to restart early in 2024.
During H1 2023, wells on the other GLA fields successfully compensated for the
production shortfall, with overall output for the period being within the
original forecast range.
On a pro forma basis, average realised gas prices fell by 55% to 91p/therm
from 204p/therm a year earlier, resulting in a decrease in revenue to €60.6
million from €149.5 million.
A 4D seismic survey was acquired over all four producing GLA fields, with
completion occurring in early July ahead of schedule and (due to favourable
weather conditions) significantly under budget. The primary aim of the
campaign is to de-risk potential infill opportunities over Laggan and Tormore
and to provide better reservoir monitoring and management on the GLA as a
whole. The acquired seismic will now be subject to processing with results
expected in early 2024.
The JV continued to progress options for the Edradour West development towards
a final investment decision, whilst the Glendronach development has passed all
technical stage gates with the operator and partners, and is awaiting the
easing of cost pressures caused by Covid supply chain issues. Both of these
projects, which the Kistos Board is ready to approve, exhibit highly accretive
economics, and would utilise the existing GLA subsea infrastructure and the
SGP. Once sanctioned, Edradour West is expected to add 2.5 MMboe to the
Group's net 2P reserves and unlock a further 1.3 MMBoe of reserves via
extending the life of the existing fields, while Glendronach is estimated to
add a further 2.5 MMboe.
Benriach
The Benriach exploration well, located on block 206/05c (Kistos 25%), was
spudded on 21 March by the Transocean Barents rig. A total measured depth of
approximately 4,400 metres was reached, and an extensive data acquisition
programme was conducted including rotary sidewall cores, full wireline
coverage, live pressures, and fluid samples. The campaign confirmed the
presence of gas-bearing sands in the target Royal Sovereign formation.
However, based on initial analysis, the discovered resource is expected to be
sub-commercial. Drilling concluded ahead of schedule in June 2023, with zero
lost time incidents (LTIs) or first aid cases and at a post-tax cost net to
Kistos of approximately €3 million. Analysis of the acquired data is now
being undertaken by the operator in order to inform future potential
developments on the immediate licence or adjacent licences (such as
Glendronach).
Other UK
Kistos is part of a TotalEnergies-led JV that has applied for certain
exploration blocks to the West of Shetland as part of the NSTA's 33rd Offshore
Oil and Gas Licensing Round. The acreage covers previously identified
prospects and Kistos' share in the application is 25%. Submissions were made
in January 2023 and a decision on any award is anticipated by the end of the
year.
The nearby Victory development (Shell 100%) is planned to be a single subsea
well tied-back to the existing GLA infrastructure, with a reported target
first gas date of Q4 2025. Should the development proceed, it will make a
significant contribution to the cost of operating the SGP. In turn, this will
result in reduced unit operating costs for the GLA partners and is expected to
provide life extension for the existing GLA fields.
Norway
Production and drilling activity
Net production from the Balder and Ringhorne fields (Kistos 10%) in the period
from acquisition to the end of June averaged 2,200 boepd. One cargo of crude
was lifted from the Balder Floating Production Unit (FPU) in the period
post-acquisition under the joint lifting arrangement with Vår, totalling 72
thousand barrels of oil equivalent (kboe) net to Kistos with a (provisional)
realised price of $68/bbl.
Production was positively impacted in the period by the restart of the
rich-gas riser between the Balder FPU and the Ringhorne platform in May, which
was temporarily shut in during the first quarter. It was permanently replaced
in September during the planned Balder FPU turnaround. Overall production
efficiency for Q2 2023 for Balder and Ringhorne improved to 83% from 80% in Q1
2023. The Ringhorne Øst field (Kistos 7.4%) had planned for zero production
during the period. A well intervention campaign to restore output from
Ringhorne Øst started ahead of schedule in mid-May and the C17 well resumed
production shortly after the period end. Drilling of the five Ringhorne Phase
IV wells started in June, and the remaining Ringhorne wells are anticipated to
be completed in early 2025.
KENAS' full year 2023 production (on a pro forma basis) is anticipated to
average approximately 2,000 boepd. This incorporates the positive impact of
production from three new wells from the Ringhorne infill drilling campaign
which have, or are scheduled to, come onstream during 2023.
Balder Future and other developments
The Balder Future project involves the drilling of fourteen new production
wells plus one new water injector on the Balder field alongside the
refurbishment of the Jotun FPSO which will be integrated within the Balder
area hub to increase processing and handling capacities across the Balder and
Ringhorne fields. The project's target is to extract an additional 143 MMboe
from the area, and also to provide future expansion capacity to tie in extra
wells to the FPSO after the completion of Balder Future drilling programme.
The upgrade of the Jotun FPSO for the Balder X/Future development project is
ongoing and the re-float of the vessel occurred in late June. This enabled the
safe completion of the heavy-lift installation of the turret, turntable, and
gantry in July. The subsea systems including flowlines, umbilical and risers
have now been installed, with templates, multi flow bases, flowlines and
buoyancy elements for risers also in place. Dewatering of the gas export line
and gas lift lines along with flushing of lines and umbilical testing have all
been conducted.
The overall project is currently estimated by the operator to be more than 80%
complete, with all production wells expected to be ready for start-up once the
Jotun FPSO is installed in the field. The operator has reported that the
upgrade of the FPSO remains on the critical path, and it remains focussed on
securing sail-away in the second quarter of 2024 and a production start-up in
the third quarter of 2024. However, the operator's gross capex estimate for
the project has increased by approximately NOK 4 billion (NOK 400 million net
pre-tax to KENAS), with the additional spend anticipated to be incurred in
2024. The increases, according to the operator, result from a tighter supplier
market, mitigation of schedule risk, and to improve construction productivity.
Capex guidance for the full year 2023 (pro forma) remains at c.$130 million
(net to KENAS), with the Balder Future project comprising c.80% of this budget
and the remainder relating to the Ringhorne drilling campaign and general
operating investments in the area.
Principal Risks and Uncertainties
The Directors do not consider that the principal risks and uncertainties have
changed since the publication of Kistos Holdings plc's 2022 Annual Report
dated 26 May 2023. There are a number of potential risks and uncertainties
that could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual results to
differ materially from expected and historical results. A detailed explanation
of the risks summarised below can be found in the section headed "Principal
Risks and Uncertainties" on page 24 of the Kistos Holdings plc 2022 Annual
Report dated 26 May 2023, which is available at www.kistosplc.com.
The key headline risks relate to the following:
· Political risk
· Taxation
· Growth of reserves base
· Climate change
· Cyber security
· Joint ventures
· HSE and compliance
· Hydrocarbon production and operational performance
· Project delivery
· Retention of key personnel
· Commodity price risk
· Liquidity
· Decommissioning costs and timing
Our Environmental, Social and Governance Ambitions
Kistos' role is crucial for supplying energy during the global energy
transition. As such, the Group is constantly exploring opportunities for
growth, adapting to support global sustainability efforts and adding value for
shareholders.
In 2022, Kistos undertook a thorough materiality assessment to identify the
most significant environmental, social and governance (ESG) issues, enabling
the Group to develop a full sustainability strategy and objectives aligned
with the United Nations Sustainable Development Goals (SDGs).
Kistos has a Code of Business Conduct in place alongside policies to ensure
consistency across the business for issues, including anti-bribery and
corruption, whistleblowing, major accident prevention, health, environment,
safety and security.
Building on existing health, safety and responsible business practices, Kistos
has broadened the scope of its stewardship approach to include enhanced
environmental considerations, encompassing its commitment to avoid unnecessary
depletion of natural resources. With the aim of creating an environmentally
aware work culture, Kistos also works with suppliers to educate and promote
sustainable practices.
As an operator in the Netherlands, an EU member state, Kistos is aligned with
the Paris Accord - the EU's target to reduce greenhouse gas emissions by 55%
by 2030 in an effort to reach net zero by 2050. The Directors are using the
net zero 2050 agenda as an opportunity to demonstrate leadership and are
confident that with their forward-looking stewardship mindset and industry
experience, they are able to drive sustainability without compromising
business growth.
The Group is confident that domestic offshore gas has a vital role to play as
a transition fuel both in the Netherlands and in the UK and will be imperative
in carbon reduction in the coming years. Already a low carbon producer of
natural gas, Kistos is well-placed to build on its existing position and has
committed to explore more sustainable ways to develop existing assets. The
Q10-A platform, which generates electricity from renewable energy sources and
produces gas with minimal Scope 1 emissions, will serve as a blueprint for
future projects.
To keep emissions as low as possible and exceed regulatory requirements,
Kistos has implemented the Lead Detection and Repair (LDAR) programme to
identify and prevent methane leaks from its operations. It plans to perform a
full platform inspection every year, surpassing the requirement to undertake
one every four years. Access points that are not measured through LDAR are
assessed using a forward-looking infrared (FLIR) camera to identify any leaks
as quickly as possible.
Cautionary Statement About Forward-Looking Statements
This half-year results announcement contains certain forward-looking
statements. All statements other than historical facts are forward-looking
statements. Examples of forward-looking statements include those regarding the
Group's strategy, plans, objectives or future operating or financial
performance, reserve and resource estimates, commodity demand and trends in
commodity prices, growth opportunities, and any assumptions underlying or
relating to any of the foregoing. Words such as 'intend', 'aim', 'project',
'anticipate', 'estimate', 'plan', 'believe', 'expect', 'may', 'should',
'will', 'continue' and similar expressions identify forward-looking
statements. Forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors that are beyond the Group's
control. Given these risks, uncertainties and assumptions, actual results
could differ materially from any future results expressed or implied by these
forward-looking statements, which speak only at the date of this report.
Important factors that could cause actual results to differ from those in the
forward-looking statements include: global economic conditions, demand, supply
and prices for oil, gas and other long-term commodity price assumptions (as
they materially affect the timing and feasibility of future projects and
developments), trends in the oil and gas sector and conditions of the
international markets, the effect of currency exchange rates on commodity
prices and operating costs, the availability and costs associated with
production inputs and labour, operating or technical difficulties in
connection with production or development activities, employee relations,
litigation, and actions and activities of governmental authorities, including
changes in laws, regulations or taxation. Except as required by applicable
law, rule or regulation, the Group does not undertake any obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. Past performance cannot be
relied on as a guide to future performance.
Interim Financial Statements (unaudited)
Condensed consolidated income statement
€'000 Note 6 months ended 6 months ended
30 June 2023 30 June 2022
Revenue 2.1 105,149 137,502
Other operating income 26 20
Exploration expenses (257) (281)
Production costs (33,228) (4,245)
Development expenses (382) (2,137)
General and administrative expenses (5,351) (3,498)
Depreciation and amortisation 2.3 (46,606) (14,877)
Impairment 2.4 (29,783) -
Release of contingent consideration 7.1 3,297 -
Operating (loss)/profit (7,135) 112,484
Interest income 3.2 2,625 -
Interest expenses 3.2 (8,826) (6,082)
Foreign exchange movements and other net finance income/(costs) 3.2 8,120 (3,863)
Net finance income/(costs) 1,919 (9,945)
(Loss)/profit before tax (5,216) 102,539
Tax credit/(charge) 6.1 18,307 (50,103)
Profit for the period 13,091 52,436
Basic earnings per share (€) 3.1 0.16 0.63
Diluted earnings per share (€) 3.1 0.16 0.63
Condensed consolidated statement of other comprehensive income
€'000 Note 6 months ended 6 months ended
30 June 2023
30 June 2022
Profit for the period 13,091 52,436
Items that may be reclassified to profit or loss:
Costs of cash flow hedge deferred and recognised in other comprehensive income - (9,404)
Cash flow hedge reclassified to profit or loss - 21,185
Tax relating to components of other comprehensive income - (5,891)
Foreign currency translation differences (343) (423)
Total comprehensive income for the period 12,748 57,903
Condensed consolidated balance sheet
€'000 Note 30 June 2023 31 December 2022
(Audited)
Non-current assets
Goodwill 2.4 39,979 10,913
Intangible assets 2.4 42,130 43,338
Property, plant and equipment 2.3 437,217 282,474
Deferred tax assets 1,215 566
Investment in associates 63 61
Other long-term receivables 598 102
521,202 337,454
Current assets
Inventories 18,369 9,688
Trade and other receivables 4.1 22,763 54,562
Current tax receivable 115,215 -
Cash and cash equivalents 247,326 211,980
403,673 276,230
Total assets 924,875 613,684
Equity
Share capital and share premium 9,464 9,464
Other equity 3,640 -
Other reserves 59,814 59,987
Retained earnings 46,352 33,261
Total equity 119,270 102,712
Non-current liabilities
Abandonment provision 2.5 193,396 123,503
Bond debt 5.1 278,075 80,800
Deferred tax liabilities 139,711 118,325
Other non-current liabilities 4.3 1,311 4,197
612,493 326,825
Current liabilities
Trade payables and accruals 4.2 47,468 21,317
Other liabilities 4.3 13,133 17,111
Current tax payable 127,684 143,134
Abandonment provision 2.5 4,827 2,585
193,112 184,147
Total liabilities 805,605 510,972
Total equity and liabilities 924,875 613,684
Condensed consolidated statement of changes in equity
€'000 Share capital and share premium Other equity Other reserves Retained earnings Total equity
At 1 January 2022 (audited) 103,808 - 9,226 (42,463) 70,571
Profit for the period - - - 52,436 52,436
Movement in the period - - 5,467 - 5,467
Total comprehensive income for the period - - 5,467 52,436 57,903
Share-based payments - - 242 - 242
At 30 June 2022 103,808 - 14,935 9,973 128,716
At 1 January 2023 (audited) 9,464 - 59,987 33,261 102,712
Profit for the period - - - 13,091 13,091
Movement in the period - - (343) - (343)
Total comprehensive income for the period - - (343) 13,091 12,748
Share-based payments - - 170 - 170
Issue of warrants (note 2.7) - 3,640 - - 3,640
At 30 June 2023 9,464 3,640 59,814 46,352 119,270
Condensed consolidated cash flow statement
€'000 Note 6 months ended 6 months ended
30 June 2023 30 June 2022
Cash flows from operating activities:
Profit for the period 13,091 52,436
Tax (credit)/charge 6.1 (18,307) 50,103
Net finance (income)/costs 3.2 (1,919) 9,945
Depreciation and amortisation 2.3 46,606 14,877
Impairment 2.4 29,783 -
Change in contingent consideration payable 2.7 (3,297) -
Share-based payment expense 170 242
Taxes paid (38,107) -
Deferred tax on hedge reserve - 5,890
Abandonment costs paid 2.5 (247) -
Movement in provisions (27) (267)
Decrease in trade and other receivables 41,056 14,501
Increase/(decrease) in trade and other payables 16,381 (19,897)
Decrease/(increase) in inventories 6,606 (844)
Net movement in other non-current assets and liabilities (27) (29)
Net cash flow from operating activities 91,762 126,957
Cash flow from investing activities:
Payments of contingent consideration (15,938) (7,500)
Deposit paid for GLA acquisition - (5,386)
Net cash acquired in acquisition of Mime 2.7 7,287 -
Payments to acquire tangible fixed assets (46,077) (6,815)
Interest received 2,624 -
Net cash flow from investing activities (52,104) (19,701)
Cash flow from financing activities:
Repayment of long-term payables (208) (31)
Bond interest paid (4,755) (6,428)
Repurchase of own bonds - (29,264)
Other interest and finance charges paid (926) (108)
Net cash flow from financing activities (5,889) (35,831)
Increase in cash and cash equivalents 33,769 71,425
Cash and cash equivalents at beginning of period (audited) 211,980 77,288
Effects of foreign exchange rate changes 1,577 (267)
Cash and cash equivalents at end of period 247,326 148,446
Notes to the interim condensed consolidated financial statements
Section 1 General information and basis of preparation
1.1 General information
These condensed consolidated financial statements for the six-month period
ended 30 June 2023 have been prepared in accordance with IAS 34 Interim
Financial Reporting and AIM Rule 18. These condensed consolidated financial
statements, along with the management report above, represent a 'half-yearly
report' as referred to in the AIM Rules. Accordingly, they do not include all
the information required for a full annual financial report. These condensed
consolidated financial statements are unaudited and do not constitute
statutory accounts as defined in section 434 of the Companies Act 2006 and
should be read in conjunction with the 2022 Annual Report and Accounts.
Interim period results are not necessarily indicative of results of operations
or cash flows for an annual period. The condensed consolidated financial
statements have not been subject to review or audit by independent auditors;
therefore all figures are unaudited (unless otherwise stated). The Group's
business is not seasonal by its nature, but gas prices (and therefore revenue
from gas sales) are typically higher in the European winter months than the
summer.
These condensed consolidated financial statements were authorised for issue by
Kistos Holdings plc's Board of Directors on 27 September 2023.
1.2 Going concern
These condensed consolidated financial statements have been prepared in
accordance with the going concern basis of accounting. The forecasts and
projections made in adopting the going concern basis take into account
forecasts of commodity prices, production rates, operating and general and
administrative (G&A) expenditure, committed and sanctioned capital
expenditure, and the timing and quantum of future tax payments. The Group's
cash balances as at the end of August 2023 (the latest practicable date of
preparing these financial statements) was €226 million. To assess the
Group's ability to continue as a going concern, management evaluated cash flow
forecasts for the period to December 2024 (the going concern period), by
preparing a base case forecast and various downside sensitivities. The base
case assumed the following:
· Q10-A production in line with latest internal forecasts;
· GLA and Balder/Ringhorne area production in line with latest
available operator forecasts;
· A first oil date from the Jotun FPSO by the end of 2024, in line
with operator targets (and thus triggering the $45 million hybrid bond payment
in full);
· Committed and contracted capital expenditure only (being
primarily the share of capital expenditure on the Balder project, taking into
account recently revised estimates of spend from the operator);
· Obligations under Decommissioning Security Agreements (DSAs)
satisfied via the purchase of surety bonds in Q3 2023 (in respect of
obligations for 2024);
· Material tax refunds due from the Norwegian authorities in
December 2023 and December 2024;
· A €47 million payment of the Solidarity Contribution Tax charge
in Q2 2024 (notwithstanding that the Group believes it may be out of scope of
the charge); and
· Flat commodity prices of 100p/therm and €40/MWh for UK and
Dutch gas respectively, and $70/bbl for crude oil.
This base case forecast demonstrated that the bond covenants (minimum
liquidity and leverage ratio) were complied with and that the Group had
sufficient cash to meet its obligations throughout the going concern period.
Various downside scenarios were also analysed, including reasonably possible
commodity price and production downsides, and a scenario where the Group has
to fully cover its estimated DSA obligations in cash. Individually these
scenarios demonstrated an ability to meet the bond covenants and have
sufficient cash available to continue in operational existence in the going
concern period. If the estimated DSA obligations for 2025 were required to be
fully covered in cash in Q3 2024 and either the commodity price or production
downside scenarios realised, then it is estimated that, with no mitigating
activities undertaken, the Group may fall below its liquidity covenants in or
around November 2024. As the Group has continued to receive support from the
surety market in respect of its current and future obligations, the
possibility that it will be unable to renew its surety bonds on the same basis
as is currently posted is considered unlikely.
As a result of the above, the Directors have concluded that there is a
reasonable expectation that the Group has adequate resources to continue in
operational existence throughout the going concern period, and therefore the
going concern basis is adopted in the preparation of these condensed
consolidated financial statements.
1.3 Accounting principles
The accounting principles used in these condensed consolidated financial
statements are consistent with the principles used in the Company's annual
financial statements for the year ended 31 December 2022. Certain amended
accounting standards and interpretations became applicable for the current
reporting period. The Group did not have to change its accounting policies or
make retrospective adjustments as a result of adopting these amendments, as
the Group's accounting policies are already aligned with the amended
standards, or they are not relevant to the Group's business. There are new and
revised accounting standards in issue that will become effective for future
periods, but it is not expected these standards and interpretations will have
a material impact on the Group's financial statements upon adoption.
In preparing these condensed consolidated financial statements, management has
made judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. The significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the audited annual financial statements at 31 December 2022, with the
addition of specific key sources of estimation uncertainty and critical
judgements that applied in assessing the fair value of assets and liabilities
acquired as part of the Mime acquisition:
· Estimated future cash flows from the acquired producing and
development assets
· Estimated quantity of reserves and contingent resources
· Estimated costs for abandonment provisions
· Estimated value of exploration and evaluation intangible assets;
and
· Critical judgements concerning the timing of first oil from the
Jotun FPSO
1.4 Foreign currencies and translation
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which each
entity operates (the functional currency). Transactions in currencies other
than the functional currency are translated to the entity's functional
currency at the foreign exchange rates at the date of the transactions.
Foreign exchange gains and losses resulting from the settlement of monetary
assets and liabilities denominated in foreign currencies are recognised in the
income statement. All UK-incorporated entities in the Group, including Kistos
Holdings plc, have a functional currency of pounds Sterling (GBP). All
Dutch-incorporated entities have a functional currency of euros (EUR).
Norwegian-incorporated entities have a functional currency of Norwegian
Krone (NOK).
These financial statements are presented in EUR, a currency different to the
functional currency of the reporting entity (which is GBP). All amounts have
been rounded to the nearest thousand EUR, unless otherwise stated.
The results and balance sheet of all the Group entities that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
· Assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet (except for
certain items in equity which are translated at the historical rate);
· Income and expenses for each income statement are translated at
average exchange rates for the period; and
· All resulting exchange differences are recognised in 'Other
comprehensive income'.
1.5 Significant events in the current period
The financial position and performance of the Group was affected by the
following events and transactions during the six months ended 30 June 2023:
· The acquisition of Mime in May 2023, resulting in additions of,
among other items, €174 million of fixed assets, €105 million of current
tax receivables, €28 million of goodwill and €200 million of debt (note
2.7) recognised at their provisional fair values on acquisition; and
· An exploration write-off of €29.8 million following the
Benriach well drilled during the period proving to be sub-commercial (note
2.4).
Section 2 Oil and gas operations
2.1 Revenue
€'000 6 months ended 6 months ended
30 June 2023 30 June 2022
Geographical region
Netherlands UK Norway Total Total
Sales of crude oil and liquids - 10,990 4,458 15,448 -
Sales of natural gas 40,111 49,590 - 89,701 137,502
Total revenue from contracts with customers 40,111 60,580 4,458 105,149 137,502
All revenue in the prior period was attributable to the Netherlands region.
2.2 Segmental information
2.2.1 Adjusted EBITDA
Adjusted EBITDA is used to assess the performance of the operating segments.
Adjusted EBITDA is a non-IFRS measure, which management believe is a useful
metric as it provides additional useful information on performance and trends.
Adjusted EBITDA is not defined in International Financial Reporting Standards
(IFRS) or other accounting standards, and therefore may not be comparable with
similarly described or defined measures reported by other companies. It is not
intended to be a substitute for, or superior to, any nearest equivalent IFRS
measure. Following the Mime acquisition, a new 'Norway' segment is now
reported.
Adjusted EBITDA excludes the effects of significant items of income and
expenditure that may have an impact on the quality of earnings. These include
non-cash charge such as provisions for impairment, depreciation, amortisation
and share-based payment expense; and non-recurring items such as transaction
costs, exploration expenses and development expenditure. A reconciliation of
Adjusted EBITDA by segment to profit before tax, the nearest equivalent IFRS
measure, is presented below.
€'000 Note 6 months ended 6 months ended
30 June 2023 30 June 2022
Adjusted EBITDA by segment:
Netherlands 31,113 131,760
UK 37,087 -
Norway 1,599 -
Head office costs and eliminations (2,728) (1,272)
Group Adjusted EBITDA 67,071 130,488
Development expenses (382) (2,137)
Exploration expenses (257) (281)
Share-based payment expense (170) (242)
Depreciation and amortisation 2.3 (46,606) (14,877)
Impairments 2.4 (29,783) -
Transaction costs (305) (467)
Changes in contingent consideration payable 7.1 3,297 -
Operating (loss)/profit (7,135) 112,484
Net finance income/(costs) 3.2 1,919 (9,945)
(Loss)/profit before tax (5,216) 102,539
2.3 Property, plant and equipment
€'000 Assets under construction Production facilities and wells Other Total
Cost
At 1 January 2023 (audited) 7,401 358,731 1,683 367,815
Acquisitions (note 2.7) - 166,033 167 166,200
Additions 11,981 16,242 159 28,382
Foreign exchange differences - 8,432 5 8,437
Other movements including reclassifications (18,740) 18,316 (80) (504)
At 30 June 2023 642 567,754 1,934 570,330
Accumulated depreciation and impairment
At 1 January 2023 (audited) - (85,048) (293) (85,341)
Depreciation charge for period - (46,381) (189) (46,570)
Foreign exchange differences and other movements - (1,259) 57 (1,202)
At 30 June 2023 - (132,688) (425) (133,113)
Net book value at 31 December 2022 (audited) 7,401 273,683 1,390 282,474
Net book value at 30 June 2023 642 435,066 1,509 437,217
Assets under construction relate to wells drilled but not yet producing. Other
includes office and IT equipment, including office leases held as right-of-use
assets.
Disposals relate to the removal of fully depreciated assets following the
conclusion of the abandonment campaign at the Donkerbroek Hemrik location in
the Netherlands.
2.4 Intangible assets and goodwill
€'000 Goodwill Exploration and evaluation assets Other Total
Cost
At 1 January 2023 (audited) 17,913 200,401 - 218,314
Acquisitions (note 2.7) 28,255 7,167 342 35,764
Additions - 18,982 1,031 20,013
Foreign exchange differences and other movements 811 1,590 14 2,415
At 30 June 2023 46,979 228,140 1,387 276,506
Accumulated amortisation and impairment
At 1 January 2023 (audited) (7,000) (157,063) - (164,063)
Amortisation charge for the period - - (36) (36)
Foreign exchange differences and other movements - (515) - (515)
Provision for impairment - (29,783) - (29,783)
At 30 June 2023 (7,000) (187,361) (36) (194,397)
Net book value at 31 December 2022 (audited) 10,913 43,338 - 54,251
Net book value at 30 June 2023 39,979 40,779 1,351 82,109
Exploration and evaluation assets include the exploration licence portfolio
acquired as part of the GLA acquisition, the Orion oil prospect on the Q10-A
licence and exploration prospects in Norway. Amounts impaired in the current
period relate to the Benriach licence following the exploration well drilled
proving to be sub-commercial. The Group's licence interests are shown in note
2.6.
2.5 Abandonment provision
€'000 Note 6 months ended
30 June 2023
At 1 January 2023 126,088
Acquisitions 2.7 64,642
Accretion expense 3.2 2,265
Changes in estimates to provisions 7,973
Utilisation of provisions (247)
Effect of changes to discount rate (6,801)
Foreign exchange differences 4,303
At 30 June 2023 198,223
Of which:
Current 4,827
Non-current 193,396
Total 198,223
Abandonment provisions primarily include:
· In the Netherlands, the Group's share of the estimated cost of
abandoning the producing Q10-A wells, decommissioning the associated
infrastructure, plugging and abandoning the currently suspended Q11-B well,
and removal and restoration of certain onshore pipelines and corresponding
land from historic assets.
· In the UK, the Group's share of the estimated cost of plugging
and abandoning the producing and suspended Laggan, Tormore, Edradour and
Glenlivet wells, removal of the associated subsea infrastructure, and
demolition of the SGP and restoration of the land upon which the plant is
constructed.
· In Norway, plugging and abandonment of drilled wells on Ringhorne
and Balder, and removal of the Balder FPU and Ringhorne platform.
The abandonment of the Q10-A wells and associated infrastructure is expected
to take place between seven and nine years from the balance sheet date, in
2025 for the Q11-B well (based on the regulatory requirement to abandon the
well by that time as, at the balance sheet date, no extension of the licence
or production consent had been concluded) and within one year for the onshore
pipelines and land restoration.
The abandonment of the UK fields and associated infrastructure is expected to
take place between 5 and fourteen years from the balance sheet date based on
current production and commodity price forecasts and sanctioned development
plans.
The utilisation of provisions in the period relates to the onshore abandonment
of the onshore Donkerbroek-Hemrik location and activity on the Ringhorne Phase
III and IV projects in Norway.
Abandonment provisions are initially estimated in nominal terms, based on
management's assessment of publicly available economic forecasts and
determined using inflation rates of 2.0 to 3.0% (2022: 2.5%) and a discount
rate of 2.5% to 4.5% (2022: 2.5% to 3.5%). The changes in estimates to
provisions arise primarily as a result of the increased inflation rate assumed
in certain regions.
The Group has in issue €27.4 million of surety bonds as at 30 June 2023 and
31 December 2022 to cover its obligations under DSAs for the GLA fields and
infrastructure. The amount of the bonds required is re-assessed each year,
changing in line with estimated post-tax cash flows from the assets, revisions
to the abandonment cost, inflation rates, discount rates and other inputs
defined in the DSAs.
As part of the original acquisition of the Balder and Ringhorne Øst interest
by Mime in 2019, KENAS is obliged to deposit to Vår Energi a post-tax amount
of $12.7 million (plus interest accruing at LIBOR +3%) three months after the
date of the first oil produced from the Balder and Ringhorne fields over the
Jotun FPSO. This amount will be repaid to KENAS upon decommissioning of the
fields.
2.6 Joint arrangements and licence interests
The Group has the following interests in joint arrangements that management
has assessed as being joint operations.
The operator of the licences held by Kistos Energy Limited is TotalEnergies
E&P UK Limited. The operator of the licences held by Kistos Energy
(Norway) AS is Vår Energi ASA.
Except where otherwise noted, the interest and status of licences is the same
as at the end of the prior period.
Field or licence Country Licence holder Licence type Status Interest at 30 June 2023
M10a & M11(1) Netherlands Kistos NL1 B.V. Exploration Operated 60%
Donkerbroek Netherlands Kistos NL1 B.V. Production Operated 60%
Donkerbroek-West Netherlands Kistos NL1 B.V. Production Operated 60%
Akkrum-11 Netherlands Kistos NL1 B.V. Production Operated 60%
Q07 Netherlands Kistos NL2 B.V. Production Operated 60%
Q08 Netherlands Kistos NL2 B.V. Exploration Operated 60%
Q10-A Netherlands Kistos NL2 B.V. Production Operated 60%
Q10-B Netherlands Kistos NL2 B.V. Exploration Operated 60%
Q11 Netherlands Kistos NL2 B.V. Exploration Operated 60%
P12b(2) Netherlands Kistos NL2 B.V. Exploration Operated 60%
Q13b(2) Netherlands Kistos NL2 B.V. Exploration Operated 60%
Q14(2) Netherlands Kistos NL2 B.V. Exploration Operated 60%
P911, P1159, P1195, P1453(3) and P1678 UK Kistos Energy Limited Production Non-operated 20%
(Laggan, Tormore, Edradour and Glenlivet)
P2411 and P1453(2) (Benriach) UK Kistos Energy Limited Exploration Non-operated 25%
P2415 (Bunnehaven)(4) UK Kistos Energy Limited Exploration Non-operated 25%
P2594 (Cardhu) UK Kistos Energy Limited Exploration Non-operated 20%
P2604 (Roseisle) UK Kistos Energy Limited Exploration Non-operated 14%
PL001 Norway Kistos Energy (Norway) AS Production Non-operated 10%
PL027(5) Norway Kistos Energy (Norway) AS Production Non-operated 10%(5)
PL027C Norway Kistos Energy (Norway) AS Production Non-operated 10%
PL027HS Norway Kistos Energy (Norway) AS Production Non-operated 10%
PL028 Norway Kistos Energy (Norway) AS Production Non-operated 10%
PL028S Norway Kistos Energy (Norway) AS Production Non-operated 10%
(1) Following successful appeal against non-renewal (decision received in July
2023), the licence was re-awarded to Kistos retroactively from 30 June 2022.
(2) Acquired or awarded during the current period.
(3) Licence P1453 is split into the portion including and excluding the
Benriach area.
(4) In process of being relinquished.
(5) Licence 027 comprises Balder and Ringhorne Øst fields. Kistos' share of
the Ringhorne Øst unit is 7.4%.
2.7 Business combinations
On 23 May 2023, the Group completed the acquisition of the entire share
capital of, and voting interests in, Mime Petroleum AS (Mime) from Mime
Petroleum S.a.r.l. (the vendor). The primary purposes of the acquisition were
to gain entry into the NCS and to increase and diversify the Group's
hydrocarbon production, reserves and contingent resources.
The acquisition consideration, management's assessment of the net assets
acquired, and subsequent goodwill arising are as follows:
€'000 At acquisition date
Consideration:
Cash(1) -
Fair value of warrants issued 3,640
Total consideration 3,640
Net assets acquired:
Property, plant and equipment 166,200
Intangible assets 7,509
Net working capital (19,238)
Inventory 14,048
Tax receivable 105,054
Cash and cash equivalents 7,287
Bond debt (200,045)
Abandonment provisions (64,642)
Net deferred tax liability (40,788)
Goodwill 28,255
Total net assets acquired 3,640
1. The cash consideration payable was $1.
The fair values of assets and liabilities acquired, the measurement of the
consideration transferred and the subsequent goodwill arising on acquisition
are considered to be provisional as management are assessing, or will need to
assess, to what extent recent information disclosed by Vår Energi (the
operator of Mime's licence interests) concerning the overall cost of the
Balder Future project, and the 2024 Norwegian Revised National Budget (RNB)
submission in respect of the life of field production and costs (which is due
to be submitted by the operator in October 2023) reflect facts and
circumstances existing at the acquisition date. Transaction costs of €0.3
million were incurred, recognised within 'General and administrative expenses'
within the income statement, and within operating cashflows in the cash flow
statement.
As part of the consideration, 5.5 million warrants over shares in Kistos
Holdings plc were issued to the vendor with an exercise price of 385p. 3.6
million of these warrants can be exercised until 18 April 2028, and 1.9
million can be exercised only between 30 June 2025 and 18 April 2028, but are
subject to cancellation as described below.
Upon completion of the transaction, the terms of certain Mime's existing bond
debt were amended. A summary of the bonds acquired is disclosed in note 5.1.
Included within the bond debt acquired is the hybrid bond, which carries no
interest but payment of which is contingent on an offload trigger being
achieved from the Jotun FPSO (part of the Balder Future project). The hybrid
bond will be settled in full ($45 million) in the event 500,000 bbl (gross)
have been offloaded and sold from the Jotun FPSO by 31 December 2024. This
will decline to $30 million if the milestone is met between 1 January 2025 and
28 February 2025, and to $15 million if the milestone is met between 1 March
2025 and 31 May 2025. If 500,000 bbl (gross) has not been offloaded and sold
from the Jotun FPSO by 31 May 2025, the hybrid bond will be cancelled in its
entirety and hybrid bondholders will instead be allocated up to 2.4 million
warrants exercisable into Kistos ordinary shares at a price of 385p each,
exercisable between 30 June 2025 and 18 April 2028. Simultaneously, up to 1.9
million of the 5.5 million warrants issued to the vendor as consideration for
the Mime shares will be cancelled. The 2.4 million warrants embedded within
the hybrid bonds are included within the fair value of the bond acquired and
are not separated from the host debt instrument as the bond has been accounted
for in its entirety at fair value through profit or loss. The fair value of
warrants issued to the vendor, adjusted for the estimated probability of
issuance, are recognised within 'Other equity' on the balance sheet.
Goodwill arises primarily from the requirements to recognise deferred tax on
the difference between the fair value and the tax base of the assets acquired.
This fair value uplift is not tax deductible and therefore results in a net
deferred tax liability and corresponding entry to goodwill.
The acquisition contributed €4.5 million of revenue and a profit after tax
of €4.5 million for the period. If the acquisition had completed on 1
January 2023, consolidated revenue for the Group would have been €119.9
million and the consolidated loss after tax is estimated to have been €19.2
million. The latter has been estimated as if the fair value adjustments to
fixed assets recognised at the acquisition date had occurred at the beginning
of the reporting period, but no changes to the timing or nature of debt
restructurings that occurred in the pro forma period. The impact to the
non-IFRS measures Adjusted EBITDA and EBITDA as if the acquisition had
completed on 1 January 2023 is disclosed in Appendix B1.
Section 3 Income statement
3.1 Earnings per share
6 months ended 6 months ended
30 June 2023
30 June 2022
Consolidated profit for the period, attributable to shareholders of the Group 13,091 52,436
(€'000)
Weighted average number of shares used in calculating basic earnings per share 82,863,743 82,863,743
Potential dilutive effect of:
Employee share options 26,752 137,782
Warrants(1) - -
Weighted average number of ordinary shares and potential ordinary shares used 82,890,495 83,001,525
in calculating diluted earnings per share
Earnings per share (€) 0.16 0.63
Diluted earnings per share (€) 0.16 0.63
1. The warrants issued during the period as part consideration for the
acquisition of Mime (note 2.7) are not dilutive as the average share price
from the issue date of 23 May 2023 to the period end was below the exercise
price.
3.2 Net finance costs
€'000 Note 6 months ended 6 months ended
30 June 2023
30 June 2022
Interest income 2,624 -
Total interest income 2,624 -
Bond interest payable (4,992) (6,009)
Other interest payable (21) (73)
Interest on tax payable (1,552) -
Surety bond costs (449) -
Total interest expenses (7,014) (6,082)
Accretion expense on abandonment provisions and other liabilities 2.5 (2,265) 63
Accretion expense on lease liabilities (52) -
Amortisation of bond costs (512) (551)
Loss on bond redemption - (2,982)
Fair value movement on hybrid bond 1,226 -
Net foreign exchange gains/(losses) 7,912 (267)
Total other net finance income/(costs) 6,309 (3,863)
Total net finance costs 1,919 (9,945)
Section 4 Working capital
4.1 Trade and other receivables
€'000 30 June 2023 31 December 2022
Audited
Trade receivables 6,553 -
Accrued income 5,021 47,962
Receivables due from joint operation partner 2,135 3,198
Other receivables and cash overcalls 3,806 1,594
Prepayments 4,359 679
VAT receivable 889 1,129
Total trade and other receivables 22,763 54,562
Accrued income represents amounts due in respect of gas and oil sales revenue
that had not been invoiced at the balance sheet date. All accrued income
amounts had been invoiced and collected in full within one month of the
corresponding reporting date.
4.2 Trade payables and accruals
€'000 30 June 2023 31 December 2022
Audited
Trade payables 9,601 7,271
Payables to joint operators 10,831 1,945
Accruals 27,036 12,101
Total trade payables and accruals 47,468 21,317
Trade payables are unsecured and generally paid within 30 days. Accrued
expenses are also unsecured and represents estimates of expenses incurred but
where no invoice has yet been received, and amounts accrued by joint operators
but not yet billed. The carrying value of trade payables and other accrued
expenses are considered to be fair value given their short-term nature. A
reclassification to the prior period has been made in order to present
'Payables to joint operators' within 'Trade payables and accruals' (previously
classified within 'Other liabilities').
4.3 Other liabilities
€'000 30 June 2023 31 December 2022
Audited
Bond interest payable 7,675 831
Salary and salary-related liabilities 1,762 202
Contingent consideration - 15,796
Lease liabilities 395 282
VAT payable 313 -
Overlift 2,988 -
Total other liabilities (current) 13,133 17,111
Contingent consideration - 3,268
Long-term employee benefit liabilities 452 -
Lease liabilities 859 929
Total other liabilities (non-current) 1,311 4,197
Section 5 Capital and debt
5.1 Bond debt
€'000 Bonds issued by KENAS Bonds issued by Kistos NL2 Total
At 1 January 2023 (audited) - 80,800 80,800
Acquisition of business (note 2.7) 200,045 - 200,045
Amortisation of bond costs and effective interest rate impact 1,610 206 1,816
Fair value movement on hybrid bond 1,226 - 1,226
Net foreign exchange gains and other movements (5,812) - (5,812)
At 30 June 2023 197,069 81,006 278,075
Details of the bonds outstanding are as follows:
30 June 2023 31 December 2022 (audited)
Bond Issuer Currency Nominal interest rate Maturity date Face value Carrying amount Face value Carrying amount
€'000 €'000
KENO01 Kistos Energy (Norway) USD 10.25%(1) November 2027 $105,000,271 79,933 - -
KENO02 Kistos Energy (Norway) USD 9.75%(2) September 2026 $121,574,725 104,797 - -
Hybrid bond Kistos Energy (Norway) USD n/a March 2083(3) $45,000,000 12,339 - -
€90 million bond Kistos NL2 EUR 8.75% November 2024 €21,572,000(4) 21,006 €21,572,000(4) 22,706
€60 million bond Kistos NL2 EUR 9.15% May 2026 €60,000,000 60,000 €60,000,000 60,000
Total 278,075 82,706
1. Interest payable wholly in kind via issuance of new bonds.
2. Interest payable partly in cash (4.5%) and partly in kind via issuance of
new bonds (5.25%).
3. Certain amounts of the hybrid bonds will be cancelled for nil consideration
should offload and sales thresholds related to the Jotun FPSO are not met,
starting 31 December 2024. In a situation where no crude oil has been lifted
and sold from the Jotun FPSO by 31 May 2025, all outstanding hybrid bonds will
be cancelled. See note 2.7.
4. At 30 June 2023 and 31 December 2022, net of €68.4 million of bonds held
in treasury.
The Group has call options to redeem bonds in whole or in part as follows:
Bond Call price Period of call option
KENO01(1) 100% From full discharge/redemption of KENO02 until maturity
KENO02(1) 100% Anytime until maturity
Hybrid bond(1) 100% From full discharge/redemption of both KENO01 and KENO02 until maturity
€90 million bond(2) 104% Up to November 2023
102.5% November 2023 - May 2024
100.5% May 2024 - maturity
€60 million bond(2) 104% Up to November 2023
102.5% November 2023 - May 2024
102% May 204 - November 2025
100.5% November 2025 - maturity
1. Must be called in full, not in part.
2. May be called in part, but must be called pro rata to each other.
5.1.1 Bond covenants
€90 million bond Requirement Effective date
Issuer minimum liquidity €10 million At all times
Issuer maximum leverage ratio (net debt to EBITDA) 2.50 Semi-annually from and including 1 January 2022
Consolidated group minimum liquidity €20 million At all times
Consolidated group maximum leverage ratio (net debt to EBITDA) 3.50 Semi-annually from and including 30 June 2022
€60 million bond Requirement Effective date
Issuer minimum liquidity €10 million At all times
Issuer maximum leverage ratio (net debt to EBITDA) 2.50 Semi-annually from and including 30 June 2022
Consolidated group minimum liquidity €20 million At all times
Consolidated group maximum leverage ratio (net debt to EBITDA) 3.50 Semi-annually from and including 30 June 2022
KENO01 and KENO02 Requirement Effective date
Issuer minimum liquidity $5 million Until 31 December 2023
Issuer minimum liquidity $10 million From 1 January 2024 until first oil from Balder Future
The issuers and Group have complied with the minimum liquidity covenants at
all times. On 30 June 2023, the Group had a leverage ratio of 0.41, calculated
as follows:
€'000 30 June 2023
Group pro forma EBITDA for the twelve months ended 30 June 2023 (Appendix B1) 360,606
Net debt for leverage ratio test at 30 June 2023 (Appendix B2) 32,003
Leverage ratio 0.09
Section 6 Tax
6.1 Tax credit or charge for period
€'000 6 months ended 6 months ended
30 June 2023 30 June 2022
Current tax charge 12,692 47,154
Deferred tax (credit)/charge (30,999) 2,949
Total tax (credit)/charge for the period (18,307) 50,103
The deferred tax credit in the current period arises primarily due to
impairments recognised in the period reducing the carrying value of fixed
assets in respect of which deferred tax liabilities had previously been
provided. The effective tax rate and tax charge disclosed in the comparative
interim period does not include the impact of the Solidarity Contribution Tax
(note 6.2), which was substantively enacted by the Dutch government in October
2022 but applied retrospectively to the full year 2022 taxable profits.
6.2 Uncertain tax positions
In October 2022, the EU member states adopted Council Regulation (EU)
1854/2022, which required EU member states to introduce a Solidarity
Contribution Tax for companies active in the oil, gas, coal and refinery
sectors. The Dutch implementation of this solidarity contribution has been
legislated by a retrospective 33% tax on 'surplus profits' realised during
2022, defined as taxable profit exceeding 120% of the average taxable profit
of the four previous financial years. Companies in scope are those realising
at least 75% of their turnover through the production of oil and natural gas,
coal mining activities, refining of petroleum or coke oven products.
The Group believes that there is an argument that Kistos NL2 may be out of
scope of the regulations as, in its opinion, less than 75% of its turnover
under Dutch GAAP (the relevant measure for Dutch taxation purposes) was
derived from the production of petroleum or natural gas, coal mining,
petroleum refining or coke oven products. Furthermore, the Group understands
the implementation of the tax, including its retrospective nature, is subject
to legal challenges by other parties. However, as there is no history or
precedent for this tax being audited or collected by the Dutch tax
authorities, the Directors, having taken all facts and circumstances into
account, applied IFRIC 23 Uncertainty over Income Tax Treatments and made a
provision of €46.9 million relating to the Solidarity Contribution Tax
within the current tax charge for the full year 2022. This is the single most
likely amount of the charge if it becomes payable. The Group expects to get
further certainty around this tax position in 2024.
Section 7 Other disclosures
7.1 Contingent liabilities
As part of the acquisition of Tulip Oil in 2021 the following contingent
payments remain potentially payable to the vendor should certain events and
milestones take place:
· Up to a maximum of €75 million relating to Vlieland Oil (now
Orion), triggered at FID and payable upon first hydrocarbons based on the net
reserves at time of sanction; and
· €10 million payable should Kistos take FID on the Q10-Gamma
prospect by 2025.
Based on management's current assessments and current status of the projects
and developments above, the contingent considerations above remain
unrecognised on the balance sheet.
The gas price contingent payment relating to the GLA acquisition was settled
in the period. Following the Benriach well proving to be sub-commercial,
management believe it is now unlikely that the contingent consideration that
would become payable upon successful development of that field will fall due.
Therefore, the carrying amount of €3.3 million (being the estimated fair
value of the contingent consideration) has been released in full to the income
statement.
In substance contingent payments relating to the acquisition of Mime are
incorporated via the hybrid bond and associated warrants (see note 2.7 and
5.1).
As part of the original acquisition of the Balder and Ringhorne Øst interest
by Mime in 2019, KENAS is obliged to deposit to Vår Energi a post-tax amount
of $12.7 million (plus interest accruing at LIBOR +3%) three months after the
date of the first oil produced from the Balder and Ringhorne fields over the
Jotun FPSO. This amount will be repaid to KENAS upon decommissioning of the
fields.
Contingencies arising from uncertain tax positions are disclosed in note 6.2.
7.2 Subsequent events
7.2.1 M10/M11 licence appeal
On 20 July 2023, the Group received notification from the Netherlands Ministry
of Economic Affairs that its appeal against the non-renewal of the M10/M11
licence in June 2022 was successful. As a result, ownership of the licence was
restored to Kistos (retroactively effective from 30 June 2022).
Appendix A; Glossary
2C - best estimate of contingent resources
2P - proved plus probable resources
Average realised sales price - calculated as revenue divided by volumes sold
for the period.
Bcf - billion cubic feet
boe - barrels of oil
equivalent
boepd - barrels of oil equivalent produced per day
CIT - Dutch Corporate Income Tax
Company - Kistos Holdings plc
DSA - Decommissioning Security Agreement
EBN - Energie Beheer Nederland
EIR - Effective interest rate
FID - Final Investment Decision
FPSO - Floating production storage and offloading vessel
FPU - Floating production unit
G&A - General and administrative expenditure
GLA - Greater Laggan Area
Group - Kistos Holdings plc and its subsidiaries
kboe - thousand barrels of oil equivalent
kboepd - thousand barrels of oil equivalent produced per day
JV - joint venture
KENAS - Kistos Energy (Norway) AS
LTI - lost time incident
MEG - monoethylene glycol
Mime - Mime Petroleum AS
MT - metric tonne
MWh - Megawatt hour
NCS - Norwegian Continental Shelf
Nm(3) - normal cubic metre
NSTA - North Sea Transition Authority
RNB - Norwegian Revised National Budget
ROU - right of use
scf - standard cubic feet
SGP - Shetland Gas Plant
Solidarity Contribution Tax - A tax levied by the Dutch Government, following
the adoption of Council Regulation (EU) 1854/2022, which required EU member
states to introduce a 'solidarity contribution' for companies active in the
oil, gas, coal and refinery sectors. The Dutch implementation of this
solidarity contribution has been legislated by a retrospective 33% tax on
'excess profit' realised during 2022, with 'excess profit' defined as that
profit exceeding 120% of the average profit of the four previous financial
years. Companies in scope are those realising at least 75% of their turnover
through the production of oil and natural gas, mining activities, refining of
petroleum or coke oven products
SPS - Dutch State Profit Share tax
SURF - Subsea, umbilicals, risers and flowlines
Appendix B: Non-IFRS Measures
Management believes that certain non-IFRS measures (also referred to as
'alternative performance measures') are useful metrics as they provide
additional useful information on performance and trends. These measures are
primarily used by management for internal performance analysis, are not
defined in IFRS or other GAAPs and therefore may not be comparable with
similarly described or defined measures reported by other companies. They are
not intended to be a substitute for, or superior to, IFRS measures.
Definitions and reconciliations to the nearest equivalent IFRS measure are
presented below.
B1: Pro forma information
Pro forma information shows the impact to certain results of the Group as if
the Mime acquisition had completed on 1 January 2023, and as if the GLA
acquisition had completed on 1 January 2022. Management believe pro forma
information is useful as it allows meaningful comparison of full year results
across periods. Pro forma EBITDA information for the previous twelve months is
also required for the purposes of calculating the leverage ratio covenant
under the terms of the 2024 bonds and 2026 bonds issued by Kistos NL2.
€'000 Revenue Adjusted EBITDA EBITDA
Six months ended 30 June 2023
As reported 105,149 67,071 69,254
Pro forma adjustments for period 14,734 1,542 (3,026)
Pro forma for six months ended 30 June 2023 119,883 68,613 66,228
Six months ended 31 December 2022 n/a n/a 283,473
Pro forma adjustment for six months ended 31 December 2022 n/a n/a 10,905
Pro forma for 12 months ended 30 June 2023 n/a n/a 360,606
Six months ended 30 June 2022
As reported 137,502 130,207 127,361
Pro forma adjustments for period(1) 149,494 131,190 130,390
Pro forma results for six months ended 30 June 2022 286,996 261,397 257,751
1. Minor adjustments have been made to comparative pro forma information
following receipt of additional information after completion of the GLA
acquisition and to align with the Group's accounting policies and methodology
as used in the 2022 Annual Report and Accounts.
B2: Net debt
Net debt is a measure that management believes is useful as it provides an
indicator of the Group's overall liquidity. It is defined as cash and cash
equivalents less the face value of outstanding bond debt (excluding the hybrid
bond issued by KENAS, which in management's view represents contingent
consideration rather than bond debt due to the payment triggers associated
with it). A positive figure represents net cash and a negative figure
represents a net debt position. The difference between management's definition
of net debt and net debt for the purposes of the leverage ratio calculation
for the bonds issued by Kistos NL2 is reconciled below.
€'000 Note 30 June 2023 31 December 2022
Cash and cash equivalents 211,980
247,326
Face value of bond debt (excluding hybrid bond) 5.1 (289,589) (81,572)
Net cash/(debt) (42,263) 130,408
Difference between carrying value and face value of bond debt 5.1 23,853 (1,134)
Carrying value of hybrid bond 5.1 (12,339) -
Lease liabilities 4.3 (1,254) (1,211)
Net (debt)/cash for leverage ratio covenant (32,003) 128,063
B3: Adjusted operating costs
Adjusted operating costs are operating costs per the income statement less
accounting movements in inventory, which are primarily those operating costs
capitalised into liquids inventory as produced and expensed to the income
statement only when the related product is sold.
€'000 6 months ended 6 months ended
30 June 2023 30 June 2022
Operating costs 33,228 4,245
Accounting movements in inventory (5,123) -
Adjusted operating costs 28,105 4,245
Pro forma period adjustment 10,221 18,270
Pro forma adjusted operating costs 38,326 22,515
Appendix C: Conversion factors
37.3 scf of gas in 1 Nm(3) of gas
5,561 scf of gas in 1 boe
149.2 Nm(3) of gas in 1 boe
1.7 MWh of gas in 1 boe
34.12 therms of gas in 1 MWh of gas
7 MT of natural gas liquids in 1 boe
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. END IR FLFITADIDFIVRecent news on Kistos Holdings
See all newsREG - Kistos Holdings PLC - Full-year results for the year ended 31/12/23
AnnouncementREG - Kistos Holdings PLC - Acquisition Completion of Gas Storage Assets
AnnouncementREG - Kistos Holdings PLC - UK Onshore Gas Storage Assets
AnnouncementREG - Kistos Holdings PLC - Balder Field Operational Update
AnnouncementREG - Kistos Holdings PLC - Development Approval for Victory Gas Field
Announcement