REG - Kistos PLC - Interim results
07/09/2022 07:00
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RNS Number : 5157Y Kistos PLC 07 September 2022
7 September 2022
Kistos plc
("Kistos", the "Company" or the "Group")
Interim results for the six months to 30 June 2022
Kistos (LSE: KIST), the low carbon intensity gas producer pursuing energy
opportunities in line with the energy transition, is pleased to provide its
interim results for the period to 30 June 2022.
Highlights
Financial
Strong cash generation in H1 2022 supported by increased production and high
gas price
· Net daily production from the Q10-A gas field averaged 6.1
kboe/d, 5% higher than H1 2021
· On a pro forma basis, the acquisition of the GLA assets more than
doubled daily production to 12.4 kboe/d
· Materially higher average pro forma realised gas price of
€82.65 per MWh (H1 2021: €20.71 per MWh)
· Pro forma EBITDA for the period was €261.0MM, with cash
balances on 30 June 2022 of €148.4MM
· Unhedged since 1 April 2022
Proforma(1) unaudited 6 months ended 30 June 2022
H1 2022 H1 2021(4) Change %
Gas production MM Nm(3) 320 156 +105%
Gas production '000 MWh 3,724 1,770 +110%
Revenue €'000 285,109 33,740 +745%
Unit opex(2) €/MWh 5.56 2.49 +123%
Adjusted EBITDA(3) €'000 260,987 30,057 +768%
Average realised gas price(2) €/MWh 82.65 20.71 +299%
1. Pro forma figures include the GLA as if it had been acquired on 1
January 2022. The acquisition completed on 10 July 2022. Pro forma figures for
H1 2021 include six months of Kistos NL1 and Kistos NL2 and 37 weeks of Kistos
plc since incorporation.
2. Non-IFRS measure. Refer to the definition within the glossary.
3. Adjusted EBITDA is calculated on a business performance basis.
Refer to the definition within the glossary.
4. Comparative figures for production, unit opex, Adjusted EBITDA and
average realised gas price have been restated to align with the production
reporting methodology and classification of operating costs as presented in
the audited full year 2021 annual report.
Operational
Operational excellence intertwined with Kistos' sustainability objectives
· Successful drilling and workover programme conducted between July
2021 and February 2022
· Unit operating expenditure remained very low during the period at
€2.28 per MWh or €5.56 per MWh on a pro forma basis
· Industry leading Scope 1 emissions from the Q10-A platform were
estimated at 1 gram of CO₂/boe in the first half of 2022 - operations
powered by wind and solar energy
Outlook
Focused on delivering returns to shareholders through both organic and
inorganic growth
· GLA development and exploration programmes to commence
imminently, utilising the investment allowance under the terms of the UK
Energy Profits Levy
o Glendronach development on track to be sanctioned by year-end 2022, with
production anticipated to commence by end 2024
o Preparations underway to drill the 638 Bcf Benriach prospect in 2023
· Further Q10-A drilling and workover programme due to get underway
in the fourth quarter of 2022, minimising production decline.
Andrew Austin, Executive Chairman of Kistos, commented:
"Our strong cash generation for the first half of the year has been driven
both by operational excellence across our assets in the Netherlands, and the
high demand for natural gas across Europe. This has further strengthened our
already robust balance sheet and will allow us to continue to capitalise on
the exploration, appraisal, and development opportunities within our
portfolio.
With the recent addition of our interest in the GLA assets in the UK North
Sea, our forecasted daily production rates are set to more than double.
Moreover, the GLA assets offer substantial development and exploration upside
in the form of Glendronach and Benriach.
"The Kistos Board and Management Team continues to assess opportunities that
align with our existing portfolio. Our recent Proposed Combination with Serica
Energy was a clear demonstration of our ambition, and while this proposal did
not progress, our appetite for M&A remains core to Kistos' ethos of
delivering material value for our stakeholders."
Enquiries
Kistos plc via Hawthorn Advisors
Andrew Austin
Panmure Gordon (NOMAD, Joint Broker) Tel: 0207 886 2500
John Prior / James Sinclair-Ford
Berenberg (Joint Broker) Tel: 0203 207 7800
Matthew Armitt / Jack Botros
Hawthorn Advisors (Public Relations Advisor) Tel: 0203 745 4960
Henry Lerwill / Simon Woods
Camarco (Public Relations Advisor) Tel: 0203 757 4983
Billy Clegg / Georgia Edmonds
Notes to editors
Kistos plc was established to acquire and manage companies in the energy
sector engaging in the energy transition trend. The Company has acquired Tulip
Oil Netherlands B.V., which has a portfolio of assets, including profitable,
highly cash generative natural gas production, plus appraisal and exploration
opportunities. In addition, Kistos acquired a 20% interest in the Greater
Laggan Area (GLA) from TotalEnergies in July 2022. The GLA includes four
producing gas fields and a development project.
Kistos is a low carbon intensity gas producer. The Q10-A gas field in the
Dutch North Sea (60% operated working interest) recorded an estimated Scope 1
carbon emissions intensity of 1g CO(2)e/boe in the first half of 2022. This
compares to an industry average of 22kg CO(2)/boe for gas extracted from the
UK continental shelf. The Q10-A normally unmanned installation is located
approximately 20 km from the Dutch shore. It is powered sustainably via wind
and solar power and is remotely operated, limiting offshore visits, which are
conducted by boat.
https://www.kistosplc.com (https://www.kistosplc.com)
Kistos plc
2022 Interim Report
Highlights
On 31 January 2022, Kistos announced that it had agreed to acquire from
TotalEnergies E&P UK ("TEPUK") a 20% working interest in the fields that
comprise the Greater Laggan Area ("GLA") as well as interests in certain
associated exploration prospects. With an effective date of 1 January 2022,
the transaction more than doubled Kistos' production to 12.4 kboe/d on a pro
forma basis in the first half of 2022.
In the meantime, output from the Kistos-operated Q10-A field in the Dutch
sector of the North Sea benefited from the drilling and workover campaign we
conducted between July 2021 and February 2022. Average daily production net to
Kistos' 60% interest in the field was 6.1 kboe/d in the six months to 30 June
2022 or 5% higher than the equivalent six-month period a year earlier.
Scope 1 emissions from the Q10-A platform remain industry-leading at
approximately 1 gram of CO2e/boe. This follows the 2021 upgrade of the wind
turbines on the renewably powered facility, which is also fitted with solar
panels and is only visited by boat.
Our business in the Netherlands benefited from higher gas prices in the first
half of 2022, with average realisations of €83.55/MWh versus €20.71/MWh in
the 6 months to 30 June 2021. Including pro forma realisations from the GLA,
average realisations for the period were €82.65/MWh. On an oil equivalent
basis, we estimate our pro forma revenue from Q10-A and GLA averaged
US$151.2/boe.
Kistos remains well-funded. The Group exited 2021 with cash of €77.3MM
offset by €150.0MM of Nordic Bonds issued by Kistos NL2. After buying back
€27.7MM of those bonds in February 2022, Kistos exited the half year with
total cash of €148.4MM and outstanding Nordic Bonds of €122.3MM (net).
After making the completion payment for the GLA acquisition and undertaking a
planned maintenance shutdown at Q10-A, the Group's cash balances on 31 August
were €153.6MM, meaning the Company had net cash of €31.3MM at that date.
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 6 months ended 30 June 2022
H1 2022 H1 2021(4) Change %
Pro forma gas production MM Nm(3) 320 156 +105%
Pro forma gas production '000 MWh 3,724 1,770 +110%
Pro forma revenue €'000 285,109 33,740 +745%
Pro forma unit opex(2) €/MWh 5.56 2.49 +123%
Pro forma Adjusted EBITDA(2,3) €'000 260,987 30,057 +768%
Pro forma average realised gas price €/MWh 82.65 20.71 +299%
1. Pro forma figures include the GLA as if it had been acquired on 1
January 2022. The acquisition completed on 10 July 2022. Pro forma figures for
H1 2021 include six months of Kistos NL1 and Kistos NL2 and 37 weeks of Kistos
plc since incorporation.
2. Non-IFRS measure. Refer to the definition within the glossary.
3. Adjusted EBITDA is calculated on a business performance basis.
Refer to the definition within the glossary.
4. Comparative figures for production, unit opex, Adjusted EBITDA and
average realised gas price have been restated to align with the production
reporting methodology and classification of operating costs as presented in
the audited full year 2021 annual report.
Outlook
Kistos' outlook has been transformed by the acquisition of a 20% interest in
the GLA, which completed on 10 July 2022. This group of assets is contributing
over half of the Company's current output and the initial acquisition cost
(US$125.0MM on the effective economic date of 1 January 2022) is expected to
be recovered from gas produced in the first 8 months of the year. Importantly,
this acquisition - like our acquisition in the Netherlands before it - offers
significant upside potential for stakeholders.
We are looking forward to participating in an exploration well on the Benriach
prospect (Kistos 25%), which has the potential to contain gross recoverable
resources of 638 Bcf (P50 operator's estimate) and is close to existing
producing infrastructure. In the meantime, we expect the GLA partnership to
sanction the development of the Glendronach field (Kistos 20%) in the fourth
quarter of 2022. This is expected to be onstream and supporting output from
the GLA before the end of 2024.
In the Netherlands, after undertaking detailed reviews of various rerouting
options, we have decided to continue exporting gas from Q10-A (Kistos 60%) via
the P15-D platform. This reduces future capital expenditure and removes the
risk of interruptions to production caused by the project.
Kistos is preparing to undertake a work programme at Q10-A. We are in advanced
negotiations to secure a rig and work is expected to commence in the final
quarter of the year. This will include:
· Installation of a velocity string in the A-06 well
· Installation of a velocity string in the A-05 well
· Sidetrack of the A-01 well into the Slochteren formation
· Stimulation of the Zechstein clastic formation in the A-04 well.
This campaign is forecast to cost approximately €30MM (gross) and is
designed to minimise production decline from Q10-A. It is expected to
accelerate the recovery of hydrocarbons from certain reservoirs whilst
improving the stability of other producing wells.
Elsewhere in the Netherlands, the Concept Assess phase of the Orion oil
development has completed successfully. Three potential development options
are being considered for the Concept Select phase. Two of these would utilise
the existing Q10-A platform while the third envisages the installation of a
new, minimal facilities Bridge Linked Platform (BLP) adjacent to Q10-A.
During the first half of 2022, Kistos applied for the M10a and M11 licences
(Kistos 60%) north of the Wadden Islands to be extended beyond 30 June 2022.
Historically, Kistos has had licences extended past their expiry date but, on
this occasion, the Company was informed that the extension had not been
granted by the Dutch authorities. Other operators have also had similar
applications rejected recently. Kistos has engaged in discussions with the
Dutch authorities and has lodged an appeal against this decision. It will
submit the full details of its reasons for doing so by the deadline of 14
September 2022. This submission will be accompanied by a draft Field
Development Plan (FDP) that the Board of Directors is prepared to commit the
capital required to implement. The appeal will be heard before the end of
2022.
Chairman's Statement
I am delighted to be able to report Kistos' interim results covering the 6
months to 30 June 2022. Adjusted EBITDA for the period was in excess of
€130MM. The tax rate on our €102.5MM pre-tax profit was 48.9%. I expect
the rate for the full year to be higher due to the contribution from our newly
acquired UK assets, which are taxed at a marginal rate of 65% since the Energy
Profits Levy (EPL) was implemented.
Our cash balances at the end of the period were €148.4MM. In addition, we
acquired €27.7MM of Kistos NL2's outstanding Nordic Bonds in February 2022
and continue to hold them. Clearly, this balance sheet strength means we are
well placed to grow the business.
After completing acquisitions in May 2021 and July 2022, your Company is
already producing ~12,000 boe/d from a standing start less than two years ago
and we continue to evaluate a pipeline of business development opportunities.
Nevertheless, if we are to add value for shareholders, it is critical that we
maintain our financial discipline and avoid overpaying for assets.
In this context, we decided not to pursue the Proposed Combination with Serica
Energy. Whilst both the Kistos and Serica boards agreed on the strong
industrial logic of a combination, terms could not be agreed that the Board
believes fully reflected the considerable value that Kistos has created since
inception.
Importantly, while we assess other potential acquisitions, we are pursuing the
organic growth opportunities within our existing portfolio. This time last
year, the then Chairman commented on the success of the Orion appraisal well
in the Netherlands and I am pleased to note that this project has completed
the Concept Assess phase. In addition, the Board has approved a further
drilling campaign designed to enhance production at Q10-A in the Netherlands
and Kistos' participation in the Benriach exploration well West of Shetland. I
look forward to reporting before the end of this year that it has also
sanctioned the Glendronach development in the GLA West of Shetland.
On behalf of our shareholders, we are striving to build 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
6 September 2022
Financial Review
Unaudited results for the 6 months ending 30 June 2022
30 June 2022 30 June 2022
(actual) (pro forma)(4)
Production boe/d 6,077 12,400
Revenue €'000 137,502 285,109
Unit Opex(1) €/MWh 2.28 5.56
Adjusted EBITDA(2) €'000 130,207 260,987
Profit before tax €'000 102,539 n/a
Basic earnings per share € 0.63 n/a
Net cash from operations €'000 126,957 n/a
Average realised gas price(3) €/MWh 83.55 82.65
Total cash at 30 June €'000 148,446 148,446
Note: The financial results are prepared in accordance with IFRS, unless
otherwise noted below:
1. Non-IFRS measure. Refer to the definition within the glossary. Pro
forma production costs for the 6 months ended 30 June 2022 were €4.4MM.
2. Adjusted EBITDA is calculated on a business performance basis.
Refer to the definition within the glossary.
3. Includes the impact of realised and unrealised gain on commodity
hedges.
4. Pro forma figures include the 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.
Production and revenue
Actual production on a working interest basis averaged 6.1 kboe/d in the first
half of 2022. This represents an increase of over 600% from a year earlier and
reflects a full six months contribution from our business in the Netherlands,
which was acquired on 20 May 2021. Pro forma production in the six months to
30 June 2022 was 12.4 kboe/d, an uplift of 136% from 5.8 kboe/d a year
earlier. These figures assume Kistos had completed the transactions with Tulip
Oil Holdings and TotalEnergies on the effective economic dates of 1 January
2021 and 1 January 2022 respectively.
The Group's average realised gas price during the period was €83.55/MWh and
total revenue from gas sales was €137.5MM versus €6.5MM a year earlier. On
a pro forma basis, these figures were €82.65/MWh and €274.6MM, up from
€33.2MM the previous year. This uplift represents a combination of higher
production and higher prices both on an actual and on a pro forma basis.
Revenue from liquids sales for the period ending 30 June 2022 was €nil, or
€10.5MM on a pro forma basis.
Costs
Kistos continued to keep tight control of operating costs, which were €4.2MM
or €2.28 per MWh during the period, a 9% reduction from the pro forma
operating costs of €2.49 per MWh in the first half of 2021. On a pro forma
basis, operating expenditure in the first half of 2022 was €5.56 per MWh,
with this figure reflecting the fact that costs are higher in the GLA than at
Q10-A. In turn, this is a function of the largely fixed cost of operating the
Shetland Gas Plant plus tariffs for the pipelines that transport the gas to St
Fergus.
Cash capital expenditure in the first half of 2022 was €6.8MM, most of which
was associated with the drilling programme in the Netherlands that started in
July 2021 and ended in February 2022. Capital expenditure in the second half
of the year is expected to be higher as another drilling campaign gets
underway in the Netherlands and long-lead items are ordered both for the
Glendronach development and for the Benriach exploration well.
Adjusted EBITDA
The Group reported Adjusted EBITDA of €130.2MM or €118.4 per boe in the
six months to 30 June 2022. On a pro forma basis, Adjusted EBITDA was
€261.0MM or €116.3 per boe in the period. These figures represented
increases of 768% and 306% respectively from the comparable pro forma prior
year figures of €30.1MM or €28.6 per boe.
Profit/loss before tax
There was an actual operating profit of €112.5MM during the period and,
after net finance charges of €9.9MM principally relating to the interest on
Nordic Bonds issued by Kistos NL2, a profit before tax of €102.5MM. This
compared with a loss before tax of €5.2MM in the first half of 2021, which
included a loss on redemption of €3.5MM relating to an €87MM Nordic Bond
refinancing.
Financial position
Before expenses, Kistos raised £102.1MM (€118.5MM) from equity investors
and issued €150.0MM of Nordic Bonds during 2021. After paying €222.8MM
(€140MM plus an €87MM bond refinancing and other adjustments) for the
Tulip Oil acquisition and capital expenditure of €20.0MM, this led to the
Company holding cash and cash equivalents of €77.3MM on 31 December 2021.
This figure had increased to €148.4MM by mid-2022, meaning that Kistos
exited the first half of the year with net cash (being cash and cash
equivalents, less the face value of bonds held by third parties) of €26.1MM.
Despite making the completion payment for the GLA acquisition in July and the
Q10-A gas field being subject to a planned shutdown from mid-July to
mid-August due to TAQA undertaking annual maintenance at its P15-D platform,
the Group's cash balance had increased to €153.6MM on 31 August 2022.
During the first half of 2021, Kistos hedged 100,000 MWh per month at a price
of €25/MWh for the 9-month period from July 2021 to March 2022. Since 1
April 2022, the Group has been unhedged and, although the position is reviewed
regularly, does not have any immediate plans to enter new hedges.
Cash flow
6 months ended 37 weeks ended
30 June 2022 30 June 2021
€'000
€'000
Cash and cash equivalents at beginning of period 77,288 -
Net cash generated from operating activities 126,957 2,894
Net cash used in investing activities (19,701) (100,733)
Net cash (used in)/generated from financing activities (35,831) 156,985
Net increase in cash and cash equivalents 71,425 59,146
Foreign exchange differences (267) -
Cash and cash equivalents on 30 June 148,446 59,146
Going concern
When assessing the going concern status of the Group, the Directors have
considered its financial position, including its significant balance of cash
and cash equivalents. The Directors have also considered the Group's commodity
price forecasts, expected production, operating cost profile, capital
expenditure, abandonment spend, financing plans, and the recently introduced
Energy Profits Levy (EPL) in the United Kingdom. The Directors have taken into
consideration the key risks which could impact the prospects of the Group,
with the most relevant risk being the gas price outlook. Robust down-side
sensitivity analyses have been performed, assessing the impact of a
significant deterioration in the gas price outlook. These stress tests all
indicated results which could be managed in the normal course of business.
Based on their assessment of the Group's prospects and viability, the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for at least 12 months from the date of
approval of the condensed consolidated interim financial statements.
Review of Operations
Q10-A
Gross production from the Q10-A gas field (Kistos 60% operated working
interest) averaged 1.5 MNm(3)/d (52 MMcf/d or 10.1 kboe/d) in the first half
of 2022 from six producing wells. This represented an increase of 0.5 kboe/d
or 5% from a year earlier, demonstrating the benefits of the 2021/22 drilling
campaign and, in particular, the sidetrack of the Q10-A-04 well to a new
location in the Slochteren formation. Following an upgrade of the wind
turbines in 2021, the renewably powered Q10-A platform maintained its
excellent emissions intensity track record during the period.
Orion
The Q10-A Orion oil field is located directly above the Q10-A gas field in the
Vlieland sandstone formation. 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 rate of 3,200 b/d. This result led
to a decision to commence the Concept Assess phase of development planning for
the field.
This involved building new static and dynamic reservoir models before
evaluating several development concepts. This work completed recently and a
shortlist of three development options are being considered for a more
detailed Concept Select phase of work. Two of these would utilise the existing
Q10-A platform while the third envisages the installation of a new, minimal
facilities Bridge Linked Platform (BLP) adjacent to Q10-A.
Q11-B
The Q11-B appraisal well was suspended in February 2022. We continue to
evaluate options for the development of this gas accumulation, particularly in
light of current gas prices.
GLA
After the period end, Kistos marked its entry to the United Kingdom
Continental Shelf with completion on 10 July of the acquisition of a 20%
interest in the GLA from TEPUK. The effective date of the transaction was 1
January 2022, meaning the Company enjoyed the economic benefits of the assets
in the first half of 2022 through a subsequent adjustment to the US$125MM
purchase price. This will be supplemented by contingent consideration payable
in January 2023 of up to US$40.0MM (see note 15 to the financial statements).
Average net production from the GLA in the six months to 30 June 2022 was in
line with expectations at 6.3 kboe/d and, on a pro forma basis, more than
doubled Group production to 12.4 kboe/d. During the period, the joint venture
continued to progress the Glendronach field towards a final investment
decision ("FID"), which we expect before the end of the year. In addition,
preparations are underway to drill the 638 Bcf Benriach prospect (Kistos 25%)
in 2023. A rig is expected to be secured for this well in the near future and
to arrive on location in Q2 2023.
Expenditure on Glendronach and Benriach is expected to qualify for the "super
deduction" investment allowance under the terms of the Energy Profits Levy
(EPL), which was enacted by the UK Government in July 2022. The investment
allowance rate is 80%, meaning that total tax relief on qualifying expenditure
can be as much as 91p for every £1.00 invested.
Principal Risks and Uncertainties
The Directors do not consider that the principal risks and uncertainties have
changed since the publication of Kistos plc's 2021 Annual Report dated 6 April
2022, except that production and revenue no longer comes from a single field
following the GLA acquisition. There are a number of potential risks and
uncertainties which 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 plc 2021 Annual
Report dated 6 April 2022, which is available at www.kistosplc.com.
Key headline risks relate to the following:
· Operational performance
· Commodity prices
· Reserves additions, development and project delivery
· Fluctuations in exchange rates
· Credit
· Changes in environmental and fiscal legislation.
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.
Operating in the Netherlands, an EU member state, Kistos is aligned with the
Paris Accord - the EU's target to reduce greenhouse gas emission 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 which 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.
Financial Statements
Profit and loss account
Note 6 months ended 37 weeks ended
30 June 2022 30 June 2021
Unaudited (restated)(1)
€'000 Unaudited
€'000
Revenue 2 137,502 6,638
Other operating income 20 -
Exploration expenses (281) (59)
Production costs (4,245) (735)
Development expenses (2,137) (765)
Depreciation and amortisation 9 (14,877) (2,267)
Other operating expenses (3,498) (2,740)
Total operating expenses (25,038) (6,566)
Operating profit 112,484 72
Interest and other income 6 - 15
Interest expenses 6 (6,082) (1,620)
Other financial expenses 6 (3,863) (3,679)
Net finance costs (9,945) (5,284)
Profit/(loss) before taxes 102,539 (5,212)
Tax (charge)/credit 7 (50,103) 508
Profit/(loss) for the period 52,436 (4,704)
Basic earnings per share (€) 4 0.63 (0.10)
Diluted earnings per share (€) 4 0.63 (0.10)
Other comprehensive income
6 months ended 37 weeks ended
30 June 2022
30 June 2021
Unaudited
Unaudited
€'000
€'000
Profit/(loss) for the period 52,436 (4,704)
Items that may be reclassified to profit or loss:
Costs of cash flow hedge deferred and recognised in other comprehensive income (9,404) (8,425)
Cash flow hedge reclassified to profit or loss 21,185 -
Tax relating to components of other (5,891) 4,212
comprehensive income
Foreign currency translation differences (423) (151)
Total comprehensive income/(expense) 57,903 (9,067)
for the period
1. See note 1b for explanation of restatement of
certain comparative line items.
Balance sheet
Note Unaudited Unaudited
30 June 2022
31 December 2021
€'000
€'000
Non-current assets
Goodwill 8 - -
Exploration and evaluation assets 8 51,855 45,771
Property, plant and equipment 9 157,267 171,227
Deferred tax assets 7 869 13,496
Total non-current assets 209,991 230,494
Inventories 1,746 902
Unbilled receivables 24,837 40,299
Other receivables 10 3,757 8,439
Cash and cash equivalents 148,446 77,288
Deposit paid for GLA acquisition 5,386 -
Total current assets 184,172 126,928
Total assets 394,163 357,422
Equity
Share capital 9,627 9,627
Share premium 94,181 94,181
Merger reserve* 14,734 14,734
Hedge reserve** - (5,890)
Foreign currency translation reserve*** (41) 382
Share-based payment reserve 242 -
Retained earnings 9,973 (42,463)
Total equity 128,716 70,571
Non-current liabilities
Abandonment provision 11 16,861 15,904
Bond payable 12 119,472 145,074
Deferred tax liability 7 53,501 57,288
Other non-current liabilities - 31
Total non-current liabilities 189,834 218,297
Current liabilities
Trade payables and accrued expenses 13 3,469 23,479
Tax payable 62,135 14,980
Abandonment provision 11 1,007 1,272
Other liabilities 14 9,002 28,823
Total current liabilities 75,613 68,554
Total liabilities 265,447 286,851
Total equity and liabilities 394,163 357,422
* The merger reserve represents the difference between the value of shares
issued as part of the total consideration of the acquisition of Kistos NL1 and
the nominal value per share.
** The hedge reserve represents gains and losses on derivatives classified as
effective cash flow
hedges.
***The foreign currency translation reserve represents exchange gains and
losses arising on translation of foreign currency subsidiaries.
Group statement of changes in equity (unaudited)
Share capital Share premium Hedge reserve Merger reserve Share-based payment reserve Foreign currency translation reserve Retained earnings Total equity
€'000
€'000
€'000
€'000
€'000
€'000
€'000
€'000
Equity as of beginning - - - - - - - -
of the period
Loss for the period - - - - - - (4,704) (4,704)
Shares issued 9,627 106,560 - - - - - 116,187
in the period*
Shares issued - - - - - - - -
payment charges
Movement in the period - - (8,425) - - (151) - (8,576)
Equity as of 9,627 106,560 (8,425) - - (151) (4,704) 102,907
30 June 2021
Equity as of 9,627 94,181 (5,890) 14,734 - 382 (42,463) 70,571
1 January 2022
Profit for the period - - - - - - 52,436 52,436
Movement in the period - - 5,890 - - (423) - 5,467
Total comprehensive income for the period 9,627 94,181 - 14,734 - (41) 9,973 128,474
Share-based payments - - - - 242 - - 242
Equity as of 9,627 94,181 - 14,734 242 (41) 9,973 128,716
30 June 2022
*Shares issued in the prior period includes shares issued in respect of the
acquisition of Kistos NL1 and NL2
Cashflow statement
Note Unaudited Unaudited
6 months ended
37 weeks ended
30 June 2022 30 June 2021
€'000
€'000
Cash flow from operating activities
Profit/(loss) for the period 52,436 (4,704)
Tax charge/(credit) 7 50,103 (508)
Net finance costs 6 9,945 5,284
Depreciation and amortisation 9 14,877 2,267
Share-based payment expense 242 -
Deferred tax 7 5,890 -
Movement in provisions (267) -
Decrease/(increase) in trade and other receivables 14,501 (366)
(Decrease)/increase in trade, other payables (19,897) 1,086
and provisions
Increase in inventories (844) (165)
Decrease in other non-current assets/liabilities (29) -
Net cash flow from operating activities 126,957 2,894
Cash flow from investing activities
Payments for acquisition of Kistos NL2 and NL1 5 (7,500) (100,696)
Deposit paid for acquisition of GLA 15 (5,386) -
Payments to acquire tangible fixed assets (6,815) (37)
Net cash flow from investing activities (19,701) (100,733)
Cash flow from financing activities
Proceeds from new bond loan - 60,000
Proceeds from share issue - 102,442
Repayment of long term payables (31) (16)
Costs incurred for share issue - (2,356)
Costs incurred in respect of bond refinancing - (3,069)
Repurchase of own bonds 12 (29,264) -
Net other finance charges - (17)
Interest paid (6,536) -
Net cash flow from financing activities (35,831) 156,985
Increase in cash and cash equivalents 71,425 59,146
Cash and cash equivalents at beginning of period 77,288 -
Effects of foreign exchange rate changes (267) -
Cash and cash equivalents at 30 June 148,446 59,146
Notes to the financial statements (unaudited)
Note 1a: General information
The condensed financial statements for the six-month period ended 30 June 2022
have been prepared in accordance with International Accounting Standard (IAS)
34 Interim Financial Reporting and the requirements of the Disclosure and
Transparency Rules (DTR) of the Financial Conduct Authority (FCA) in the
United Kingdom as applicable to interim financial reporting. The Condensed
financial statements represent a 'condensed set of financial statements' as
referred to in the DTR issued by the FCA. Accordingly, they do not include all
the information required for a full annual financial report. The Condensed
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 2021 annual report and accounts. Interim period results
are not necessarily indicative of results of operations or cash flows for an
annual period. These unaudited interim financial statements have not been
subject to review or audit by independent auditors.
These interim financial statements for Kistos plc consist of comparative
figures of the Company and Group following its incorporation on 14 October
2020. The comparative period for Kistos plc covers the 37 weeks ended 30 June
2021. On 20 May 2021, Kistos plc completed the acquisition of Tulip Oil
Netherlands B.V. (now called Kistos NL1 B.V.) and Tulip Oil Netherlands
Offshore B.V. (now called Kistos NL2 B.V.). The financial results include the
results of Kistos NL1 and Kistos NL2 from this date onwards. Further details
of the acquisition are included in note 5.
These unaudited interim financial statements were authorised for issue by
Kistos plc's Board of Directors on 6 September 2022.
Note 1b: Accounting principles
The accounting principles used for this interim report are consistent with the
principles used in the Company's and subsidiaries' annual financial statements
at 31 December 2021. A number of 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 a number of other new and
revised accounting standards in issue which 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. A new
accounting policy, 'Share-based payments', is disclosed below following the
introduction of share option awards made to certain employees of the Group
during the period.
In preparing these unaudited interim 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 2021.
The presentation and classification of certain line items within the profit
and loss account has been restated in order to align with the presentation of
those line items in the audited 2021 year-end financial statements. There has
been no change to the reported profit after tax or equity for the period ended
30 June 2021.
New accounting policy - Share-based payments
The Company and certain of its subsidiaries participate in equity-settled
share-based compensation plans, which will be settled on vesting by shares in
Kistos plc and are accounted for as equity-settled arrangements. The income
statement is charged with the expense with the corresponding entry to
share-based payment reserves within equity. Upon vesting, the obligation will
be settled by Kistos plc. The fair value of the employee services received in
exchange for the grant of options is recognised as an expense over the vesting
period and calculated using Black-Scholes models.
Note 2: Revenue
Unaudited Unaudited
6 months ended 37 weeks ended
(restated)
30 June 2022
€'000 30 June 2021
€'000
Crude oil - 101
Gas 137,502 6,537
Total petroleum revenues 137,502 6,638
Analysis of produced volumes
(thousand barrels of oil equivalent)
Liquids 5 1
Gas 1,095 168
Total produced volumes 1,100 169
Gas (million Nm(3)) 163 25
Gas ('000 MWh) 1,861 285
Comparative production information has been restated to align with the
presentation methodology as used in the audited full year 2021 financial
statements.
Note 3: Reconciliation of Adjusted EBITDA to operating profit
Unaudited Unaudited Unaudited
30 June 2022
30 June 2021
30 June 2021
€'000
€'000
(pro forma)*
€'000
Adjusted EBITDA 130,207 5,968 30,057
Depreciation and amortisation (14,877) (2,267) (9,238)
Impairment - - (7,471)
Transaction costs (467) (2,864) (2,864)
Development expenses (2,137) (765) (814)
Share-based payment expense (242) - -
Operating profit 112,484 72 9,670
*Pro forma information for the comparative period to 30 June 2021 is based on
six months of Kistos NL1 and Kistos NL2 and 37 weeks of Kistos plc.
Pro forma Adjusted EBITDA for the six months ended 30 June 2022 (including the
effect of the GLA acquisition from 1 January 2022) was €261.0MM
Note 4: Earnings per share
Unaudited Unaudited
30 June 2022
30 June 2021
€'000
€'000
Consolidated profit/(loss) for the period, attributable to shareholders 52,436 (4,704)
of the Group
Weighted average number of ordinary shares used in calculating basic 82,863,743 45,357,901
earnings per share
Potential dilutive effect of:
Employee share options 137,782 -
Weighted average number of ordinary shares and potential ordinary shares used 83,001,525 45,357,901
in calculating diluted earnings per share
Basic earnings per share (€) 0.63 (0.10)
Diluted earnings per share (€) 0.63 (0.10)
Note 5: Acquisitions
Acquisition of Tulip Oil
On 20 May 2021, Kistos plc completed the 100% acquisition of Tulip Oil
Netherlands B.V. (subsequently renamed to Kistos NL1 B.V.) and Tulip Oil
Netherlands Offshore B.V. (subsequently renamed to Kistos NL2 B.V.) for
consideration of €155MM, comprising cash consideration of €124MM and
non-cash consideration of
€31MM.
The transaction was accounted for as a business combination under IFRS 3 using
the acquisition method. The fair value of net assets acquired (including
measurement period adjustments) was €148MM, giving rise to goodwill of
€7MM on acquisition. This goodwill was subsequently fully impaired in the
year ended 31 December 2021.
The consolidated financial statements for the prior period include the fair
value of the identifiable assets and liabilities at the acquisition date and
the results of Kistos NL1 and Kistos NL2 from 21 May 2021 to 30 June 2021.
Contingent liabilities related to the acquisition of Tulip Oil
In addition to contingent consideration payable recognised on the balance
sheet (30 June 2022: €7.5MM and 30 June 2021: €15MM) as part of the
acquisition (see also note 14), the acquisition terms include the following
potential payments that could be made to the vendor which are disclosed as
contingent liabilities:
- up to a maximum of €75MM relating to Vlieland Oil (now Orion), triggered
at FID and payable upon first hydrocarbons based on the net reserves at time
of sanction;
- up to a maximum of €75MM relating to M10a and M11, triggered at FID and
payable upon first gas, based on US$3/boe of sanctioned reserves; and
- €10MM payable should Kistos take FID on the Q10-Gamma prospect by 2025.
Acquisition of working interests in Greater Laggan Area assets
In January 2022, Kistos plc entered into a conditional asset purchase
agreement and conditional share purchase agreement with TotalEnergies E&P
UK Limited to acquire a 20% interest in the Greater Laggan Area ('GLA')
producing gas fields and associated infrastructure alongside various interests
in certain other exploration licences, including a 25% interest in the
Benriach prospect, all located in the UK offshore West of Shetland. As part of
the entering into conditional purchase agreements, a deposit of US$6.25MM
(€5.4MM) was paid to the seller in January 2022. Completion of the
transaction was subject to customary regulatory and partner consents.
In July 2022, subsequent to the reporting period end, the GLA acquisition
completed - see note 15 for further details.
Note 6: Net finance costs
Unaudited Unaudited
6 months ended 37 weeks ended
30 June 2022 30 June 2021
€'000
€'000
Interest income - -
Other financial income - (15)
Total financial income - (15)
Interest expenses 6,009 1,619
Other interest expenses 73 1
Total interest expenses 6,082 1,620
Loss on redemption of bonds 2,982 3,528
Accretion expenses on abandonment provisions and ROU liabilities 63 8
Amortisation of bond costs 551 143
Foreign exchange losses 267 -
Total other financial expenses 881 151
Net finance costs 9,945 5,284
Note 7: Taxes
Unaudited Unaudited
6 months ended
37 weeks ended
30 June 2022 30 June 2021
€'000
€'000
Current tax expense
Current period 47,154 198
Deferred tax expense
Deferred tax assets expense 6,736 310
Deferred tax liability expense (3,787) -
Tax charge for the period 50,103 508
The estimated effective tax rate used for the period to 30 June 2022 is 49%
(30 June 2021: (10)%), compared to the Dutch statutory tax rate of 50%. The
effective tax rate is lower than the statutory tax rate mainly due to marginal
field incentive deductions (investment allowance) and expense uplift on SPS,
which are tax deductible.
Temporary differences
Tax losses Provisions Other Total
€'000
€'000
€'000
€'000
Deferred taxes for the period
Deferred tax asset at 7,015 4,168 2,313 13,496
1 January 2022 (audited)
Deferred tax on hedge reserve in OCI - - (5,891) (5,891)
Profit and loss account (7,015) 187 92 (6,736)
Deferred tax asset at - 4,355 (3,486) 869
30 June 2022
Deferred tax liability at - - 57,288 57,288
1 January 2022 (audited)
Profit and loss account - - (3,787) (3,787)
Deferred tax liability at - - 53,501 53,501
30 June 2022
The tax losses are made up of State Profit Share (SPS) losses in Kistos NL2.
SPS losses can be carried forward indefinitely. Provisions relate to temporary
differences on abandonment provisions, and other relates to temporary
differences on abandonment fixed assets and other. The deferred tax liability
is calculated based on a 50% tax rate that is applied to the fair value uplift
of the intangible assets following the acquisition of Kistos NL1 and Kistos
NL2. The deferred tax expense relates to the 50% tax impact on the
depreciation of the production licence.
Note 8: Exploration and evaluation assets
Goodwill Exploration and evaluation assets Total
€'000
€'000
€'000
Net book value at 31 December 2021 (audited) - 45,771 45,771
Cost at 1 January 2022 (audited) 7,000 158,573 165,573
Additions - 5,810 5,810
Changes in abandonment estimates - (531) (531)
Reclassifications - 805 805
Cost at 30 June 2022 7,000 164,657 171,657
Accumulated depreciation and impairments at 1 January 2022 (audited) (7,000) (112,802) (119,802)
Depreciation - - -
Impairment - - -
Accumulated depreciation and impairments at 30 June 2022 (7,000) (112,802) (119,802)
Net book value at 30 June 2022 - 51,855 51,855
The assets under exploration and evaluation assets have been recognised in
respect of Q11-B, Q10-B, Q10-A Orion and the Q10-G prospects. Additions during
the period primarily relate to capitalised expenditures of the Q11-B drilling
campaign which was completed early 2022. The changes in abandonment estimates
relate to the update on the cost estimates of the plugging and abandoning of
the currently suspended Q11-B well (see note 11). The abandonment costs for
the Q11-B suspended well are expected to be incurred in 2025 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. The reclassification during the year relates to the movement of
inventory items from wells in product ion to exploration and evaluation wells
(see note 9).
Note 9: Property, plant and equipment
Assets under construction Production facilities including wells Other Total
€'000
€'000
€'000
€'000
Net book value at - 171,018 209 171,227
31 December 2021 (audited)
Cost at 1 January 2022 (audited) 5,859 185,413 325 191,597
Additions - 280 38 318
Disposals - - (48) (48)
Changes in abandonment estimates - 1,431 - 1,431
Reclassification - (805) - (805)
Cost at 30 June 2022 5,859 186,319 315 192,493
Accumulated depreciation and impairments at 1 January 2022 (audited) (5,859) (14,395) (116) (20,370)
Depreciation - (14,803) (74) (14,877)
Disposals - - 21 21
Accumulated depreciation and impairments at 30 June 2022 (5,859) (29,198) (169) (35,226)
Net book value at 30 June 2022 - 157,121 146 157,267
Assets under construction
Assets under construction relate to wells drilled but not yet producing. As at
30 June 2022 and 31 December 2021, the carrying value of assets under
construction was fully impaired.
Impairment
Impairment tests of individual cash-generating units are performed when
impairment triggers are identified. During 2022 there have been no impairment
triggers identified.
Changes in abandonment estimates
The changes in abandonment estimates primarily relate to the update on the
inflation and discount rate of the abandonment provision of the Q10A wells,
facilities and pipelines in production (see note 11).
Note 10: Other receivables
Unaudited Unaudited
30 June 2022
31 December 2021
€'000
€'000
Amounts recoverable from joint operation partner 998 3,920
Other third party receivables 1,676 2,014
Pre-payments 733 163
VAT receivable 350 2,342
Total other receivables 3,757 8,439
The carrying value of other receivables is considered to be equivalent to
their fair value.
Note 11: Provision for abandonment liabilities
Unaudited
31 December 2021
€'000
Abandonment provisions as of beginning of period 17,176
Accretion expense 60
Additions -
Utilisation (268)
Effect of change in discount rate (1,779)
Change in estimates and incurred liabilities 2,679
Abandonment provisions at end of period 17,868
Of which:
Current 1,007
Non-current 16,861
Total 17,868
Abandonment provisions relate to the estimated cost of plugging and abandoning
the producing Q10-A wells and decommissioning the associated infrastructure,
and plugging and abandoning the suspended Q11-B well.
The utilisation of the abandonment provisions during the first half of 2022
relates to expenses incurred for the abandonment of the Donkerbroek-Hemrik
location, which is expected to conclude in the second half of 2022. The
changes in estimates relate primarily to an update of the inflation rate
assumption, discount rate assumption and cost estimations per well.
Abandonment provisions are determined using an inflation rate of 3.0% (2021:
1.0%) and a discount rate of 1.8% (2021: 0.5%) based on management's
assessment of publicly available economic forecasts. The abandonment costs for
the Q10-A wells and associated infrastructure are expected be incurred in 2030
(assuming no further development of the assets). The abandonment costs for the
Q11-B suspended well are expected to be incurred in 2025 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.
Note 12: Bonds payable
Long-term bond €90MM Long-term bond €60MM Bond costs Total
€'000
€'000
€'000
€'000
At 1 January 2022 88,042 60,000 (2,968) 145,074
Amortisation of bond costs - - 551 551
Unwinding EIR impact on 129 - - 129
€90MM bond
Derecognition on repurchase of €90MM bond (26,282) - - (26,282)
At 30 June 2022 61,889 60,000 (2,417) 119,472
Repurchase of bonds
In March 2022, Kistos NL2 repurchased €27.7MM in nominal value of its
€90MM bonds at an average price of 105.645%. Although the bonds cannot be
cancelled, under IFRS 9 the liability relating to the repurchased amount is
treated as being extinguished, and a loss on repurchase of €3.0MM has been
recognised in the income statement (see Note 6).
The net loss on repurchase of the bonds is reconciled as follows:
€'000
Total cash consideration paid 30,038
Less: settlement of accrued interest (774)
Cash consideration paid for repurchase of bond principal 29,264
Carrying value of bond derecognised (26,282)
Loss on repurchase of bond 2,982
Kistos NL1 B.V. and Kistos plc are Guarantors. Each guarantor irrevocably,
unconditionally, jointly and severally:
- guarantees to the Bond Trustee the punctual performance by Kistos NL2 of
all obligations related to the Bonds;
- agrees to make payment to the Bond Trustee on request in the event of
non-payment by Kistos NL2, together with any default interest;
- indemnifies the Bond Trustee against any cost, loss or liability incurred
in respect of the obligations of Kistos NL2.
Kistos NL2 has issued a security in favour of the Bond Trustee over its assets
for both the 2024 Bond and the 2026 Bond, including a pledge over all
intercompany receivables between Kistos NL2 and Kistos NL1 and Kistos plc. In
addition a Netherlands Pledge has been provided to the Bond Trustee covering
all receivables of Kistos NL2 and Kistos plc.
Terms and repayment schedule
Currency Nominal interest rate Year of maturity 30-Jun-22 30-Jun-22 31-Dec-21 31-Dec-21
Face value Carrying amount Face value Carrying amount
€'000
€'000
€'000
€'000
Secured bond issues EUR 8.75% 2024 62,300 61,889 90,000 88,042
Secured bond issues EUR 9.15% 2026 60,000 60,000 60,000 60,000
Total interest-bearing liabilities 122,300 121,889 150,000 148,042
The face value of the 8.75% 2024 bonds at 30 June 2022 is presented net of
€27.7MM bonds repurchased (but not cancelled) held by Kistos NL2.
Financial covenants
€90 million bond Requirement Effective date
Issuer (Kistos NL2)
Minimum liquidity € 10,000,000 At all times
Maximum leverage ratio 2.50 From and including 1 January 2022, tested at
30 June and 31 December
Group (Kistos consolidated)
Minimum liquidity € 20,000,000 At all times
Maximum leverage ratio 3.50 From and including 30 June 2021, tested at 30 June and 31 December
€60 million bond
Issuer (Kistos NL2)
Minimum liquidity € 10,000,000 At all times
Maximum leverage ratio 2.50 From and including 1 January 2022, tested at 30 June and 31 December
Group (Kistos consolidated)
Minimum liquidity € 20,000,000 At all times
Maximum leverage ratio 3.50 From and including 30 June 2021, tested at 30 June and 31 December
During 2022 and 2021 Kistos NL2 and plc complied with the minimum liquidity
covenant.
On 30 June 2022, Kistos NL2 had a leverage ratio of (0.09) calculated as
follows:
Calculation of leverage ratio Kistos NL2 €'000
Kistos NL2 EBITDA for the period 132,155
Book value of bond debt at 30 June 2022 121,889
Cash and cash equivalents at 30 June 2022 (133,777)
Net (cash) at 30 June 2022 (11,888)
Leverage ratio (Net debt/(cash) to EBITDA) (0.09)
Kistos plc had a leverage ratio of (0.20) calculated as follows:
Calculation of leverage ratio Kistos Group €'000
Kistos plc consolidated EBITDA for the period 130,207
Book value of bond debt at 30 June 2022 121,889
Cash and cash equivalents at 30 June 2022 (148,446)
Net (cash) at 30 June 2022 (26,557)
Leverage ratio (Net debt/(cash) to EBITDA) (0.20)
Note 13: Trade payables and accrued expenses
Unaudited Unaudited
30 June 2022
31 December 2021
€'000
€'000
Trade payables 1,976 9,018
Other accrued expenses 1,493 14,461
Total trade payables and accrued expenses 3,469 23,479
Trade payables are unsecured and generally paid within 30 days. Accrued
expenses are also unsecured and represent estimates of expenses incurred but
where no invoice has yet been received. The carrying value of trade payables
and other accrued expenses are considered to be fair value given their
short-term nature.
Note 14: Other liabilities
Unaudited Unaudited
30 June 2022
31 December 2021
€'000
€'000
Bond interest payable 1,306 1,854
Hedge liability - 11,781
Contingent consideration 7,500 15,000
Payroll liabilities 130 97
Right of use liability 66 91
Total other liabilities 9,002 28,823
Interest payable
The interest over the bonds is payable twice-yearly. The balance of €1.3MM
(2021: €1.8MM) presented as part of the other current liabilities relates to
the accrued interest over the bond payable at 30 June 2022 due November 2022.
Hedge liability
The hedge liability represented the potential fair value liability in respect
of the cash flow hedge for the remaining period of the contract. The fair
value was calculated by reference to the difference between the discounted
values of the remaining gas hedge and hedging instrument at the gas forward
curves discounted. At 30 June 2022 the hedge liability is nil (31 December
2021: €11.8MM), as Kistos NL2 undertook a partial hedge of 100,000 MWh of
production in the nine months up to 31 March 2022. At 30 June 2022 and at the
date of this report no hedges are in place in respect of future production.
Contingent consideration payable
Following the acquisition of Kistos NL1 and Kistos NL2, contingent
consideration of €15MM payable to the vendor was recognised on the balance
sheet as follows:
- €7.5MM payable by February 2022 upon confirmation by Kistos over the
intention to proceed with exploitation activities in respect of Vlieland Oil
(now Orion); and
- €7.5MM payable by February 2022 upon confirmation by Kistos over its
intention to retain ownership of the M10/M11 licences.
The contingent consideration in respect of Vlieland Oil (now Orion) was paid
in full in February 2022. The contingent consideration in respect of the
M10/M11 licences has not been paid nor derecognised, as, at the balance sheet
date and to the date of approval of these financial statements, an extension
to the exploration licence had not been concluded with the Ministry of EZK.
Contingent consideration relating to the acquisition of Kistos NL1 and Kistos
NL2 not recognised on the balance sheet is disclosed in note 5.
Note 15: Subsequent events
Greater Laggan Area acquisition
In January 2022, the Group entered into a conditional asset purchase agreement
and conditional share purchase agreement with TotalEnergies E&P UK Limited
to acquire a 20% interest in the Greater Laggan Area ('GLA') producing gas
fields and associated infrastructure alongside various interests in certain
other exploration licences, including a 25% interest in the Benriach prospect,
all located in the UK offshore West of Shetland (together, the 'GLA
Acquisition'). As part of the entering into conditional purchase agreements, a
deposit of US$6.25MM (€5.4MM) was paid to the seller in January 2022.
Completion of the GLA Acquisition was subject to customary regulatory and
partner consents.
The GLA Acquisition completed on 10 July 2022. The cash paid on completion
comprised the initial cash consideration payable of US$125.0MM (€122.7MM),
less the deposit paid in January, post-tax cashflows between the economic
effective date of 1 January 2022 and the completion date and working capital
and other adjustments.
The completion payment amount is subject to customary closing adjustments and
is expected to be finalised in Q4 2022.
In addition to the payments already made, further contingent cash payments in
respect of the GLA Acquisition fall due as follows:
- In the event the average day-ahead gas price at the National Balancing
Point exceeds 150p/therm in 2022, up to US$40.0MM will be payable in January
2023. Based on gas prices to date and forecasts for the balance of the year,
it is expected that the maximum amount of US$40.0MM (€39.3MM) will become
payable.
- Should Benriach be developed, Kistos will pay US$0.25 per MMBtu (c.$1.45
per boe) of net 2P reserves after first gas. This payment is not expected to
crystallise until 2027 at the earliest.
If the acquisition had completed on 1 January 2022, consolidated pro forma
revenue and Adjusted EBITDA would have been €285.1MM and €261.0MM
respectively.
Glossary
Adjusted EBITDA - Adjusted EBITDA is used as a measure to assess the
performance of the Group. This measure excludes the effects of significant
items of income and expenditure which may have an impact on the quality of
earnings such as reversal of provisions and impairments when the impairment is
the result of an isolated non-recurring event
Average realised oil/gas price - calculated as revenue divided by sales
production for the period. Sales production for the period may be different
from production for the period
boe - barrels of oil
equivalent
boe/d - barrels of oil equivalent produced per day
Company - Kistos or Kistos plc
Earnings per share - calculated as profit for the financial period divided by
the weighted average number of shares in issue for the period
EIR - Effective interest rate
FID - Final Investment Decision
GLA - Greater Laggan Area
Group - Kistos plc and its subsidiaries
kboe/d - thousand barrels of oil equivalent produced per day
ROU - right of use
Unit opex - calculated as production costs (per the income statement) divided
by gas production (in MWh) for the same period
Conversion factors
37.3 standard cubic feet (scf) in 1 normal cubic metre (Nm(3))
5,561 scf in 1 barrel of oil equivalent (boe)
149.2 Nm(3) in 1 boe
1.7 MWh in 1 boe
34.12 therms in 1 MWh
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