TIDMKIST
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 EUR74/boe in H1 2023 from
EUR139/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 EUR247 million at the
end of the period, with net debt of EUR42 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 EUR'000 119,883 286,996 (58)%
Average realised sales
price(2) EUR/boe EUR74/boe EUR139/boe (47)%
Adjusted EBITDA(3) EUR'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.EUR3m) 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 Tel: 0203 745 4960
Advisor)
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 CO 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
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 Ø st unit. All of these assets are operated by V å r
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
EUR212 million offset by EUR82 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 EUR42 million, comprising total cash of EUR247 million
and debt of EUR289 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 EUR'000 119,883 285,109 (58)%
Pro forma average realised price(3) EUR/boe 74 139 (47)%
Pro forma Adjusted EBITDA(4) EUR'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 CO 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 EUR67 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 EUR247 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
EUR42 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 EUR'000 105,149 119,883 137,502 285,109
Average realised
sales price(2) EUR/boe 74 74 142 139
Adjusted EBITDA(3) EUR'000 67,071 68,613 130,207 260,987
(Loss)/profit
before tax EUR'000 (5,216) n/a 102,539 n/a
Basic earnings
per share EUR 0.16 n/a 0.63 n/a
Net cash from
operations EUR'000 91,762 n/a 126,957 n/a
Total cash at
30 June EUR'000 247,698 247,698 148,446 148,446
Net cash/(debt)(4) EUR'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 EUR74/boe, and total revenue from gas and oil
sales was EUR105.1 million, versus EUR142/boe and EUR137.5 million
a year earlier. On a pro forma basis, these figures were EUR74/boe
and EUR119.9 million, a decrease from EUR139/boe and EUR285.1
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 EUR46/MWh (H1 2022: EUR105/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 EUR28.1 million (H1 2022:
EUR4.2 million). On a pro forma basis, adjusted operating costs
were EUR38.3 million (H1 2022 pro forma: EUR22.5 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 EUR46
million. Of this, EUR20 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 EUR17 million net to Kistos,
of which EUR12 million had been paid by 30 June. The total
effective post-tax cost of the well is anticipated to be c.EUR3
million after taking into account the investment allowance
available under the UK tax rules. In Norway, Kistos' share of cash
capital expenditure was EUR13 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 EUR67.1 million in the six
months to 30 June 2023. On a pro forma basis, Adjusted EBITDA for
the period was EUR68.6 million (equivalent to EUR41.3/boe
produced). These figures represented decreases of 26% and 65%
respectively from the comparable pro forma prior year figures of
EUR261.0 million or EUR118.4/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 EUR7.1 million (2022: operating profit of EUR112.5 million).
After net finance income of EUR1.9 million (2022: net finance
charges of EUR9.9 million) principally relating to bond interest
expense offset by foreign exchange gains and interest income, a
loss before tax of EUR5.2 million was recorded (2022: profit before
tax of EUR102.5 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 EUR29.8 million, primarily relating to the Benriach
well in the UK.
Tax
The net tax credit for the period was EUR18.3 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 EUR12.7 million, representing an
effective rate of 19% on EBITDA (H1 2022: EUR47.2 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 EUR38.1 million (H1 2022: EURnil),
wholly relating to the Netherlands. A cash tax refund of NOK 838
million (EUR71.7 million) is scheduled to be received by KENAS in
December 2023.
Debt and liquidity
Cash balances at the end of the period were EUR247.3 million,
and, following the Mime acquisition, the Group had outstanding
bonds (excluding the $45 million hybrid bond) with a face value of
EUR289.6 million giving net debt of EUR42.3 million. The Group's
accounting debt at mid-year comprised EUR141.6 million of
EUR-denominated bonds issued from its Dutch subsidiary (net of
EUR68.4 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 EUR25/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
EUR'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 EUR46.2/MWh from
EUR83.6/MWh a year earlier. Combined with lower production rates,
this caused total revenue in the period to decrease by 71% to
EUR40.1 million versus EUR137.5 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 EUR15.6 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 EUR60.6 million from EUR149.5 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 EUR3 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 V å r, 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
EUR'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 (EUR) 3.1 0.16 0.63
Diluted earnings per share (EUR) 3.1 0.16 0.63
Condensed consolidated statement of other comprehensive
income
EUR'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
EUR'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
EUR'000 Share Other Other Retained Total
capital equity reserves earnings equity
and
share
premium
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 119,
2023 9,464 3,640 59,814 46,352 270
--------------------- --------- -------- ---------- ---------- ---------
Condensed consolidated cash flow statement
EUR'000 Note 6 months 6 months
ended 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 EUR226 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 EUR47 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 EUR40/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, EUR174 million of fixed assets, EUR105
million of current tax receivables, EUR28 million of goodwill and
EUR200 million of debt (note 2.7) recognised at their provisional
fair values on acquisition; and
-- An exploration write-off of EUR29.8 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
EUR'000 6 months ended 6 months
30 June 2023 ended
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.
EUR'000 Note 6 months 6 months
ended 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 67,0 71 130,488
--------------------------------------------- ----- -------------- --------------
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
EUR'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
EUR'000 Goodwill Exploration Other Total
and evaluation
assets
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
EUR'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 EUR27.4 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
Ø st interest by Mime in 2019, KENAS is obliged to deposit to V å r
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 V å r 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 Licence Status Interest
holder type at 30 June
2023
Kistos NL1
M10a & M11(1) Netherlands B.V. Exploration Operated 60%
Kistos NL1
Donkerbroek Netherlands B.V. Production Operated 60%
Kistos NL1
Donkerbroek-West Netherlands B.V. Production Operated 60%
Kistos NL1
Akkrum-11 Netherlands B.V. Production Operated 60%
Kistos NL2
Q07 Netherlands B.V. Production Operated 60%
Kistos NL2
Q08 Netherlands B.V. Exploration Operated 60%
Kistos NL2
Q10-A Netherlands B.V. Production Operated 60%
Kistos NL2
Q10-B Netherlands B.V. Exploration Operated 60%
Kistos NL2
Q11 Netherlands B.V. Exploration Operated 60%
Kistos NL2
P12b(2) Netherlands B.V. Exploration Operated 60%
Kistos NL2
Q13b(2) Netherlands B.V. Exploration Operated 60%
Kistos NL2
Q14(2) Netherlands B.V. Exploration Operated 60%
P911, P1159, P1195, P1453(3)
and P1678
(Laggan, Tormore, Edradour Kistos Energy
and Glenlivet) UK Limited Production Non-operated 20%
Kistos Energy
P2411 and P1453(2) (Benriach) UK Limited Exploration Non-operated 25%
Kistos Energy
P2415 (Bunnehaven)(4) UK Limited Exploration Non-operated 25%
Kistos Energy
P2594 (Cardhu) UK Limited Exploration Non-operated 20%
Kistos Energy
P2604 (Roseisle) UK Limited Exploration Non-operated 14%
Kistos Energy
(Norway)
PL001 Norway AS Production Non-operated 10%
Kistos Energy
(Norway)
PL027(5) Norway AS Production Non-operated 10%(5)
Kistos Energy
(Norway)
PL027C Norway AS Production Non-operated 10%
Kistos Energy
(Norway)
PL027HS Norway AS Production Non-operated 10%
Kistos Energy
(Norway)
PL028 Norway AS Production Non-operated 10%
Kistos Energy
(Norway)
PL028S 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 Ø st fields.
Kistos' share of the Ringhorne Ø st 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:
EUR'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 V å r 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 EUR0.3 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 EUR4.5 million of revenue and a
profit after tax of EUR4.5 million for the period. If the
acquisition had completed on 1 January 2023, consolidated revenue
for the Group would have been EUR119.9 million and the consolidated
loss after tax is estimated to have been EUR19.2 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
(EUR'000) 13,091 52,436
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 in
calculating
diluted earnings per share 82,890,495 83,001,525
---------------------------------------------------------------------------------- --------------- ---------------
Earnings per share (EUR) 0.16 0.63
Diluted earnings per share (EUR) 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
EUR'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
EUR'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
EUR'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
EUR'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
EUR'000 Bonds issued Bonds issued Total
by KENAS by Kistos
NL2
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 Maturity Face value Carrying Face value Carrying
interest date amount amount
rate EUR'000 EUR'000
Kistos
Energy November
KENO01 (Norway) USD 10.25%(1) 2027 $105,000,271 79,933 - -
Kistos
Energy September
KENO02 (Norway) USD 9.75%(2) 2026 $121,574,725 104,797 - -
Kistos
Energy March
Hybrid bond (Norway) USD n/a 2083(3) $45,000,000 12,339 - -
EUR90
million Kistos November
bond NL2 EUR 8.75% 2024 EUR21,572,000(4) 21,006 EUR21,572,000(4) 22,706
EUR60
million Kistos
bond NL2 EUR 9.15% May 2026 EUR60,000,000 60,000 EUR60,000,000 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 EUR68.4 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
EUR90 million 104% Up to November 2023
bond(2)
102.5% November 2023 - May 2024
100.5% May 2024 - maturity
EUR60 million 104% Up to November 2023
bond(2)
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
EUR90 million bond Requirement Effective date
Issuer minimum liquidity EUR10 million At all times
Issuer maximum leverage ratio 2.50 Semi-annually from
(net debt to EBITDA) and including 1 January
2022
Consolidated group minimum EUR20 million At all times
liquidity
Consolidated group maximum 3.50 Semi-annually from
leverage ratio (net debt to and including 30 June
EBITDA) 2022
EUR60 million bond Requirement Effective date
Issuer minimum liquidity EUR10 million At all times
Issuer maximum leverage ratio 2.50 Semi-annually from
(net debt to EBITDA) and including 30 June
2022
Consolidated group minimum EUR20 million At all times
liquidity
Consolidated group maximum 3.50 Semi-annually from
leverage ratio (net debt to and including 30 June
EBITDA) 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:
EUR'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
EUR'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 EUR46.9 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 EUR75 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
-- EUR10 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 EUR3.3 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
Ø st interest by Mime in 2019, KENAS is obliged to deposit to V å r
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.
EUR'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.
EUR'000 Note 30 June 2023 31 December 2022
Cash and cash
equivalents 247,326 211,980
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.
EUR'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 FLFITADIDFIV
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