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Kistos PLC Interim results for the 37 weeks to 30 June 2021

14/09/2021 7:00am

UK Regulatory (RNS & others)


Kistos (LSE:KIST)
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TIDMKIST

RNS Number : 6308L

Kistos PLC

14 September 2021

14 September 2021

Kistos plc

("Kistos", the "Company" or the "Group")

Interim results for the 37 weeks to 30 June 2021

Kistos (LSE: KIST), the low carbon intensity gas producer pursuing a strategy to acquire assets with a role in energy transition, is pleased to provide its interim results for the period to 30 June 2021.

The numbers referred to as "actual" in this announcement include the results of Kistos plc from incorporation on 14(th) October 2020 and the results of Kistos NL1 and Kistos NL2 from acquisition on 20 May 2021. The "pro forma" numbers include the results of Kistos plc from incorporation on 14(th) October 2020 and the results of Kistos NL1 and Kistos NL2 as if they had been part of the Group from 1(st) January 2021.

Highlights

Following the incorporation and listing on AIM of Kistos plc in the final quarter of 2020, the Company completed the acquisition of Tulip Oil Netherlands B.V. and its wholly owned subsidiary Tulip Oil Netherlands Offshore B.V. (subsequently renamed Kistos NL1 B.V. and Kistos NL2 B.V. respectively) for EUR223MM (comprising EUR140MM plus an EUR87MM bond refinancing and other adjustments) in May 2021.

This acquisition brought 2P reserves of 19.7 MMboe plus 2C resources of 99.1 MMboe. The Q10-A gas field, which is operated by Kistos NL2 with a 60% working interest, produced at an average rate of 1.42 MM sm(3) /d (gross), equivalent to 48 MMcf/d or 8.6 kboe/d, in the six months to 30 June 2021.

Our scope 1 emissions of 0.09 kg CO(2) e/boe in 2020 are industry leading. Kistos expects that position to be maintained following the recent upgrade of wind turbines on the renewably powered Q10-A platform during the period.

Kistos remains well-funded after issuing EUR150MM of Nordic Bonds and raising over GBP100MM from equity investors since incorporation. Cash balances on 30 June 2021 were EUR59.1MM. Given this financial strength and in line with its strategy, the Group continues to evaluate several business development opportunities in the energy transition space.

Proforma unaudited period ended 30 June 2021

 
                                     H1 2021   H1 2020   Change % 
------------------  --------------  --------  --------  --------- 
 Production          million sm(3)     155       190       -19% 
 Production          000 MWh          1,598     2,230      -28% 
 Revenue             EUR'000         33,740    17,141      97% 
 Unit opex           EUR/MWh          3.00      1.60       88% 
 Adjusted EBITDA     EUR'000         29,243    12,415      136% 
 Average realised 
  gas price          EUR/MWh          20.76     7.69       170% 
------------------  --------------  --------  --------  --------- 
 

1. Proforma figures are based on six months of Kistos NL1 and Kistos NL2 in each half year period and 37 weeks of Kistos plc since incorporation.

2. Non-IFRS measures. Refer to the alternative performance measures definition within the glossary at the end of this document.

3. Adjusted EBITDA is calculated on a business performance basis. Refer to the alternative performance measures definition within the glossary at the end of this document.

Outlook

Kistos is currently undertaking a work programme to enhance production at the Q10-A field and appraise the Q11-B gas discovery and the Vlieland light oil discovery. Borr Drilling's Prospector-1 jack-up drilling rig has been on location since mid-July and is expected to remain on contract with Kistos until the end of November.

As a result of this campaign, Kistos expects the Q10-A field to exit 2021 with gross production of more than 2.0MM sm(3) /d (71 MMcf/d or 12.7 kboe/d). The appraisal drilling is designed to start the process of converting approximately 100 MMboe (gross) of 2C resources into 2P reserves. If successful, it could lead to a further significant uplift in Kistos' production by the mid-2020s.

We were pleased to report earlier this month that the initial results of the appraisal of the Vlieland sandstone formation, which was the first stage of the drilling campaign, were highly encouraging. After encountering the target formation on prognosis at a depth of 1,562 metres TVDss, an 825 metres horizontal section was drilled by the Prospector-1. The Q10-A-04 A well was then flow tested for 5 days between 26(th) and 31 August 2021.

During this time, a maximum stable rate of 3,200 barrels of oil per day (bopd) was achieved. This was higher than anticipated and the oil is of good quality with an API of 33 degrees. The information obtained from the well, along with reservoir and surface samples taken during the flow test, will be analysed as Kistos prepares a field development plan for this project. Kistos has previously estimated 2C resources for this accumulation of over 70 MMbbl (gross). This estimate was independently audited by Sproule and will be refined following review of all the data.

Chairman's comment

"I am delighted to be able to report Kistos' maiden set of interim results covering the period from incorporation to 30 June 2021, which included approximately six weeks of production from the Q10-A field. I am also pleased to announce the successful integration of the two companies acquired from Tulip Oil Holdings into the wider Group.

After the success of the oil test from the Vlieland sandstone formation, we are looking forward to sharing further results of the current drilling campaign with stakeholders. In the meantime, the Company continues to mature further opportunities within its existing portfolio. This work is expected to lead to additional drilling in the medium term. We are also evaluating an active pipeline of business development opportunities.

On behalf of our shareholders, we are striving to build a first-class energy transition business. 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."

Richard Benmore, Interim Chairman

Enquiries:

 
 Kistos plc 
  Andrew Austin                      c/o Camarco Tel: 0203 757 4983 
 Panmure Gordon 
  Nick Lovering / Atholl Tweedie     Tel: 0207 886 2500 
  / Ailsa MacMaster 
 Camarco 
  Billy Clegg / James Crothers       Tel: 0203 757 4983 
 

Notes to editors

Kistos plc was established to acquire and manage companies in the energy sector engaging in the energy transition trend. The Company has acquired Tulip Oil Netherlands B.V., which has a portfolio of assets, including profitable, highly cash generative natural gas production, plus appraisal and exploration opportunities. The Company has 19.5 MMboe of 2P reserves and an additional 99.1 MMboe of contingent resources.

Kistos is a low carbon intensity gas producer. The Q10-A gas field in the Dutch North Sea (60% operated working interest) has recorded a Scope 1 carbon emissions intensity of 13g CO(2) e/boe since inception. This compares to an industry average of 22kg CO(2) /boe for gas extracted from the UK continental shelf. The Q10-A normally unmanned installation is located approximately 20 km from the Dutch shore. It is powered sustainably via wind and solar power and is remotely operated, limiting offshore visits, which are conducted by boat.

https://kistosplc.com/

Financial Review

Unaudited results for the 37 weeks ending 30 June

 
                                             30 June 2021(actual)      30 June 2021 
                                                                     (pro forma)(4) 
--------------------------  --------------  ---------------------  ---------------- 
 Production                  million sm(3)                     24               155 
 Production                       '000 MWh                    248             1,598 
 Revenue                           EUR'000                  6,638            33,740 
 Unit Opex(1)                      EUR/MWh                   4.84              3.00 
 Adjusted EBITDA(2)                EUR'000                  5,203            29,243 
 (Loss)/profit before 
  tax                              EUR'000                (5,212)             2,625 
 Earnings per share              EUR cents                 (10.4)               n/a 
 Net cash from operations          EUR'000                  2,894               n/a 
 Average realised 
  gas price                    EUR/MWh (3)                  26.40             20.76 
 Total cash                        EUR'000                 59,146            59,146 
--------------------------  --------------  ---------------------  ---------------- 
 

Note The financial results are prepared in accordance with IFRS, unless otherwise noted below:

1. Non -IFRS measures. Refer to the alternative performance measures definition within the glossary at the end of this document.

2. Adjusted EBITDA is calculated on a business performance basis. Refer to the alternative performance measures definition within the glossary at the end of this document.

3. Average realised gas prices exclude the impact of realised and unrealised gain on commodity hedges

4. Pro forma information in respect of the enlarged Group is based on six months of Kistos NL1 and Kistos NL2 and 37 weeks of Kistos plc.

Production and revenue

Actual production on a working interest basis totalled 24 MM sm(3) (0.8 kboe/d) in the first half of 2021. This reflects the acquisition of Tulip Oil Netherlands ("TON") on 20 May 2021. Had Kistos acquired TON on 1(st) January 2021, average production in the first half of 2021 would have been 155 MM sm(3) or 0.86 MM sm(3) /d (5.1 kboe/d).

The Group's average realised gas price from the date of acquisition was EUR26.40/MWh and total revenue from gas sales was EUR6.5MM. On a pro forma basis, these figures were EUR20.76/MWh and EUR33.2MM. Revenue from condensate sales, for the period ending 30 June 2021 was EUR0.1MM or EUR0.5MM on a pro forma basis.

Costs

Operating expenses for the period following the acquisition of TON was EUR1.2MM or EUR4.84 per MWh. The latter figure would have been 38% lower or EUR3.00 per MWh if the acquisition of TONO had completed on 1(st) January 2021. Operating expenses include certain pre-FID costs relating to the proposed new export pipeline to Ijmuiden. Excluding those costs, the underlying pro forma unit operating expense for the first half was EUR2.63 per MWh while the reported number would have been EUR3.00 per MWh. Because Q10-A did not require compression or annual structural surveys in the very early stages of its life, its underlying operating costs in the first half of 2020 were lower than in the first half of 2021.

Adjusted EBITDA

 
 EURMM                            30 June 2021 (actual)   30 June 2021 (pro 
                                                                  forma)(1) 
-------------------------------  ----------------------  ------------------ 
 Adjusted EBITDA                                  5,203              29,243 
 Depreciation and amortisation                  (2,267)             (9,238) 
 Impairment                                           -             (7,471) 
 Transaction costs                              (2,864)             (2,864) 
 Operating profit                                    72               9,670 
-------------------------------  ----------------------  ------------------ 
 

1. Pro forma information in respect of the enlarged Group is based on 6 months of Kistos NL1 and Kistos NL2 and 37 weeks of Kistos plc.

The Group reported adjusted EBITDA of EUR5.2MM or EUR20.98 per MWh in the 37 weeks to 30 June 2021. On a pro forma basis, adjusted EBITDA was of EUR29.2MM or EUR18.30 per MWh in the period. The impairment of EUR7.47MM relates to amounts previously capitalised for the A-04 well at the Q10-A field, which is being recompleted as part of the Company's 2021 drilling campaign.

Profit / loss before tax

There was an actual operating profit of EUR0.1MM during the period but a loss before tax of EUR5.2MM. This deficit reflected a combination of interest charges relating to the EUR150MM of Nordic Bonds issued by Kistos NL2 during the period plus a loss on redemption of EUR3.5MM relating to an EUR87MM Nordic Bond refinancing. On a pro forma basis, there was a EUR2.6MM pre-tax profit for the period. This figure reflects the redemption loss and interest charges on the new bonds as well as interest charges relating to the EUR87MM bond prior to its redemption.

Financial position

 
 EUR'000                                         30 June 2021 pro forma) 
----------------------------------------------  ------------------------ 
 Cash and cash equivalents at beginning 
 Net cash generated from operating activities                      2,894 
 Net cash used in investing activities                         (100,733) 
 Net cash used in financing activities                           156,985 
 Net increase/(decrease) in cash and 
  cash equivalents                                                59,146 
 Cash and cash equivalents on 30 June                             59,146 
----------------------------------------------  ------------------------ 
 

1. Pro forma information in respect of the enlarged Group is based on 6 months of Kistos NL1 and Kistos NL2 and 37 weeks of Kistos plc.

Before expenses, Kistos raised GBP102.1MM (EUR118.5m) from equity investors and issued EUR150.0MM of Nordic Bonds during the period. After paying EUR222.8MM (EUR140MM plus an EUR87MM bond refinancing and other adjustments) for the Tulip Oil Acquisition and other expenses, this led to the Company holding cash and cash equivalents of EUR59.1MM on 30 June 2021.

During the first half of 2021, Kistos hedged 100,000 MWh per month at a price of EUR25/MWh for the nine-month period from July 2021 to March 2022. Based on the prevailing gas price of EUR33/MWh, this resulted in the creation of a EUR8.4MM hedge reserve at mid-year.

Going concern

When assessing the going concern status of the Group, the Directors have considered in particular its financial position, including its significant balance of cash and cash equivalents. The Directors have also considered the Group's commodity price forecasts, expected production, operating cost profile, capital expenditure, abandonment spend, and financing plans. The Directors have taken into consideration the key risks that could impact the prospects of the Group, with the most relevant risk being the gas price outlook. Robust down-side sensitivity analyses have been performed, assessing the impact of a significant deterioration in the gas price outlook. These stress-tests all indicated results which could be managed in the normal course of business. Based on their assessment of the Group's prospects and viability, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the condensed consolidated interim financial statements.

Review of Operations

Q10-A

Production from the Q10-A gas field (Kistos 60% operated working interest) averaged 1.35 MMcm/d (48 MMcf/d or 8.6 kboe/d) in the first half of 2021 from five producing wells. A planned upgrade of the wind turbines on the renewably powered Q10-A platform was undertaken during the period. The new configuration has resulted in improved generation capacity due to the wider operating window of the equipment. In turn, this has reduced diesel consumption by the back-up generator and ensured that the platform continued its excellent emissions track record.

Export route

Kistos' plans to build a 23 km gas export pipeline from Q10-A to a new gas treatment facility (GTF) at IJmuiden continued to progress in the first half of 2021. Visits to the proposed onshore site were undertaken to verify and investigate that portion of the route and the GTF concept selection was completed in April. In May, an offshore geophysical survey of the proposed pipeline route was undertaken using a hybridised vessel.

Other options continue to be evaluated ahead of a final investment decision on the IJmuiden route. However, at the present time, Kistos continues to believe that the Ijmuiden solution is best placed to meet the Company's objectives. These include:

-- providing reliable infrastructure for the future of the field

-- enhancing the Company's low carbon credentials

-- eliminating reliance on mature third-party infrastructure

-- reducing operating costs

On 1(st) September 2021, Kistos announced that it had entered into exclusive negotiations to acquire Windpark Ferrum. This comprises three wind turbines on the site in IJmuiden where Kistos proposes to reroute gas production from Q10-A and build a compression station adjacent to an existing facility. The wind farm can produce up to 7MW of electricity and would enable Kistos to supply a material proportion of the power required by the new facility from a renewable source. This would have the effect of materially reducing the overall carbon emissions of the new plant.

Drilling campaign

Borr Drilling's Prospector-1 jack-up drilling rig arrived on location at the Q10-A field in mid-July and commenced the Company's 2021 drilling campaign. This is scheduled to last approximately four months and will include:

-- a flow test of the Vlieland light oil discovery, which is located in a naturally fractured reservoir overlying the producing Q10-A field. It is estimated to contain gross 2C resources of more than 70 MMbbl.

-- a sidetrack the Q10-A-04 well, which is not currently onstream, to a new location in the Slochteren formation. This is the field's primary producing reservoir.

-- a re-perforation of the Q10-A-06 well to increase output.

-- an appraisal well on the Q11-B gas discovery, which is estimated to contain 2C resources of over 170 Bcf or 30.8 MMboe (gross).

The recent success of the Vlieland light oil test could lead to over 70 MMbbl of gross 2C resources being converted to 2P reserves and to a further significant uplift in Kistos' production by the mid-2020s. Similarly, the forthcoming appraisal of the Q11-B gas discovery could convert over 30 MMboe of 2C resources to 2P reserves and result in the field coming onstream as early as 2023. In the meantime, the work programme is expected to boost production from the Q10-A field to more than 2.0 MMcm/d (71 MMcf/d or 12.7 kboe/d).

Principal Risks and Uncertainties

The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Admission Document dated 20 April 2021. 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 "Risk Factors" in Part III of the Admission Document dated 20 April 2021, which is available at www.kistosplc.com.

Key headline risks relate to the following:

-- operational performance

-- production and revenues come from one eld

-- commodity prices

-- reserves additions, development and project delivery

-- fluctuations in exchange rates

-- credit

-- changes in environmental legislation

Our Environmental, Social and Governance Ambitions

Our work is always in transition. We constantly explore opportunities for growth, adapting to support global sustainability efforts and adding value for our shareholders.

In 2021, Kistos will carry out a thorough materiality assessment, to identify the environmental, social and governance (ESG) issues that are most important to the business, and to our stakeholders. This exercise will enable us to develop a full sustainability strategy, formed around key performance indicators (KPIs) that align with the United Nations Sustainable Development Goals (SDGs).

We already have a Code of Business Conduct in place, along with policies to ensure consistency across the business for issues such as anti-bribery and corruption, whistleblowing, major accident prevention, health, environment, safety and security.

Taking a stewardship approach

Building on our existing health, safety, and responsible business practices, we are broadening the scope of our stewardship approach to include enhanced environmental considerations. For example, our current Sustainability Policy outlines our dedication to working safely and avoiding unnecessary depletion of natural resources.

We are creating an environmentally aware work culture, working with suppliers to promote sustainable practices, learning from and reporting any incidents that occur. In alignment with the Paris Accord, the European Union (EU) has set a target to reduce greenhouse gas (GHG) emissions by 55% by 2030, aiming to reach net zero by 2050. As we operate in the Netherlands, an EU member state, this target may become legally binding.

In this era of transition to cleaner energy, many exploration, production and infrastructure companies have been slow to respond to sustainability challenges. The Kistos Directors fully embrace the Net Zero 2050 agenda as an opportunity to demonstrate leadership. Our forward-looking stewardship mindset, combined with our industry experience, instils confidence that we can drive sustainability without compromising business growth.

Making sustainability central to our projects

Since May 2021, we have been integrating sustainability considerations across our operations and continuing to review and improve upon our performance. We believe domestic offshore gas, which has a much lower carbon footprint than coal supplies, has a vital role to play as a transition fuel in the Netherlands.

We are well placed to become low carbon producers of natural gas and we are committed to exploring opportunities to develop our existing assets in ways that contribute to realizing a more sustainable future.

For example, our Q10-A platform, located in an oil field 20km offshore from the Netherlands, was designed to minimize GHG emissions and will serve as a blueprint for future projects. It provides power from south-facing solar panels and two wind turbines, producing gas with minimal Scope 1 emissions.

To keep emissions as low as possible and exceed regulatory requirements, Kistos has implemented the Lead Detection and Repair (LDAR) program to identify and prevent methane leaks from its operations. We plan to perform a full platform inspection every year, surpassing the four-year inspection requirement. 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 as at the date of this report. Important factors that could cause actual results to differ from those in the forward-looking statements include: global economic conditions, demand, supply and prices for oil, gas and other long-term commodity price assumptions (as they materially affect the timing and feasibility of future projects and developments), trends in the oil and gas sector and conditions of the international markets, the effect of currency exchange rates on commodity prices and operating costs, the availability and costs associated with production inputs and labour, operating or technical difficulties in connection with production or development activities, employee relations, litigation, and actions and activities of governmental authorities, including changes in laws, regulations or taxation. Except as required by applicable law, rule or regulation, the Group does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Past performance cannot be relied on as a guide to future performance.

Financial Statements

Profit and loss account

 
 EUR'000                          Note   37 weeks ended 30 June 
                                                           2021 
-------------------------------  -----  ----------------------- 
 Revenue                           2                      6,638 
 
 Exploration expenses                                      (58) 
 Production costs                                       (1,500) 
 Depreciation and amortisation     9                    (2,267) 
 Other operating expenses                               (2,740) 
 
 Total operating expenses                               (6,566) 
 
 Operating profit                                            72 
 
 Interest and other income         6                         15 
 Interest expenses                 6                    (1,620) 
 Other financial expenses          6                    (3,679) 
 
 Net finance costs                                      (5,284) 
 
 (Loss)/profit before taxes                             (5,212) 
 
 Tax (charge)/credit               7                        509 
 
 (Loss)/profit for the period                           (4,704) 
 
 Basic (loss)/earnings per 
  share (cents)                    4                     (10.4) 
-------------------------------  -----  ----------------------- 
 
 
 EUR'000                                    37 weeks ended 30 June 
                                             2021 
----------------------------------------   ----------------------- 
 (Loss)/profit for the period                              (4,704) 
 Items that may be reclassified 
  to the income statement in subsequent 
  periods: 
 Foreign currency translation 
  reserve                                                    (151) 
 Cash flow hedge: 
    Gain/(loss) arising in the period                      (8,425) 
 Tax relating to components of 
  other comprehensive (expense)/income                       4,213 
 Total comprehensive expense 
  for the period                                           (9,067) 
-----------------------------------------  ----------------------- 
 

Balance Sheet

 
 EUR'000                                     Note   30 June 2021 
------------------------------------------  -----  ------------- 
  ASSETS 
  Goodwill                                    5           19,100 
  Intangible exploration and evaluation 
   assets                                    5,8          67,500 
  Property, plant and equipment               9          136,686 
  Deferred tax assets                         7           19,810 
  Total non-current assets                               243,096 
 
  Inventories                                                780 
  Trade receivables                                        8,340 
  Other short-term receivables                               464 
  Cash and cash equivalents                               59,146 
 
  Total current assets                                    68,730 
 
  TOTAL ASSETS                                           311,826 
 
  EQUITY AND LIABILITIES 
  Equity 
  Share capital                                            9,627 
  Share premium                                          106,560 
  Hedge reserves(1)                                      (8,425) 
  Foreign currency translation reserve(2)                  (151) 
  Retained earnings                                      (4,704) 
  Total equity                                           102,907 
 
  Non-current liabilities 
  Abandonment provision                       10          12,967 
  Borrowings                                  11         146,733 
  Deferred tax liability                                  29,523 
  Other non-current liabilities                               33 
 
  Current liabilities 
  Trade and other payables                                 6,521 
 Abandonment provision                                     1,199 
  Other current financial liabilities                      1,621 
  Other liabilities                                       10,322 
  Total current liabilities                               19,663 
  Total liabilities                                      208,919 
 
  TOTAL EQUITY AND LIABILITIES                           311,826 
------------------------------------------  -----  ------------- 
 

1. The hedge reserve represents gains and losses on derivatives classified as effective cash flow hedges

2. The foreign currency translation reserve represents exchange gains and losses arising on translation of foreign currency subsidiaries

Group statement of changes in equity

 
 EUR'000                    Share      Share     Retained      Foreign       Hedge      Total 
                            capital    premium    earnings     currency      reserve    equity 
                                                              translation 
                                                                reserve 
------------------------  ---------  ---------  ----------  -------------  ---------  -------- 
 Equity as of beginning       -          -           -            -            -             - 
  of the period 
 Profit/(loss) for the 
  period                      -          -        (4,704)         -            -       (4,704) 
 Shares issued in the 
  period                    9,627     108,915        -            -            -       118,542 
 Shares issued payment 
  charges                     -       (2,355)        -            -            -       (2,355) 
 Movement in the period       -          -           -          (151)       (8,425)    (8,576) 
------------------------  ---------  ---------  ----------  -------------  ---------  -------- 
 Equity as of 30 June 
  2021                      9,627     106,560     (4,704)       (151)       (8,425)    102,907 
------------------------  ---------  ---------  ----------  -------------  ---------  -------- 
 

Cashflow Statement

 
 EUR'000                                           Note   37 weeks ended 
                                                           30 June 2021 
------------------------------------------------  -----  --------------- 
  Cash flow from operating activities 
  Profit/(loss) for the period                                   (4,704) 
  Tax charge/(credit)                               7              (509) 
  Net finance costs                                 6              5,284 
  Depreciation and amortisation                     9              2,267 
  (Increase)/decrease in trade and other 
   receivables                                                     (366) 
  Increase/(decrease) in trade, other 
   payables and provisions                                         1,087 
  (Increase)/decrease in inventories                               (165) 
  Net cash flow from operating activities                          2,894 
 
  Cash flow from investment activities 
  Payments for acquisition of Kistos NL2 
   and NL1                                                     (100,696) 
  Payments to acquire tangible fixed assets                         (37) 
  Net cash flow from investment activities                     (100,733) 
 
  Cash flow from financing activities 
  Proceeds from bond issue                                        60,000 
  Proceeds from share issue                                      102,442 
  Repayment of long-term payables                                   (16) 
  Costs incurred for share issue                                 (2,356) 
  Costs incurred in respect of bond refinancing                  (3,069) 
  Other finance charges (net)                                       (16) 
  Interest paid                                                        - 
  Net cash flow from financing activities                        156,985 
 
  Increase/(decrease) in cash and cash 
   equivalents                                                    59,146 
  Cash and cash equivalents at beginning                               - 
   of the period 
  Cash and cash equivalents at 31 December                        59,146 
------------------------------------------------  -----  --------------- 
 

Notes to the financial statements (unaudited)

Note 1a: General information

The condensed financial statements for the six-month period ended 30 June 2021 have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting and the requirements of the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority (FCA) in the United Kingdom as applicable to interim financial reporting. The Condensed financial statements represent a 'condensed set of financial statements' as referred to in the DTR issued by the FCA. Accordingly, they do not include all the information required for a full annual financial report. The Condensed financial statements are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

These interim financial statements for Kistos plc are the first interim financial statements of the Company and Group following incorporation on 14 October 2020. The initial period for Kistos plc covers the 37 weeks ended 30 June 2021. On 20 May 2021, Kistos plc completed the acquisition of Tulip Oil Netherlands B.V. (now called Kistos NL1 BV) and its wholly owned subsidiary Tulip Oil Netherlands Offshore B.V. (now called Kistos NL2). The financial results include the results of Kistos NL1 and Kistos NL2 from this date onwards. Further details of the acquisition are included in note 5.

These unaudited interim financial statements were authorised for issue by Kistos plc's ("Kistos") Board of Directors on 13 September 2021.

Note 1b: Accounting principles

The accounting principles used for this interim report are consistent with the principles used in the Kistos NL2 B.V. annual financial statements as at 31 December 2020.

In preparing these unaudited interim financial statements, management has made judgements, estimates and assumptions concerning the future that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Different estimates, assumptions and judgements could significantly affect the information reported, and actual results may differ from the amounts included in these financial statements and notes.

Note 2: Segment analysis

 
  EUR'000               Netherlands     37 weeks ended 30 June 
                                                          2021 
--------------------  ---------------  ----------------------- 
                       Sale of crude 
 Revenue by product     oil                                101 
  Sale of gas                                            6,537 
 Revenue                                                 6,638 
 Adjusted EBITDA                                         5,203 
 
 Production (gas)      million sm(3)                        24 
  000 MWh                                                  248 
 ------------------------------------  ----------------------- 
 

Note 3: Reconciliation of adjusted EBITDA to operating profit

Actual unaudited 37 weeks ended 30 June 2021

 
 EUR'000                                   37 weeks ended 
                                             30 June 2021 
---------------------------------------   --------------- 
 Adjusted EBITDA                                    5,204 
 Depreciation and amortisation expense            (2,267) 
 Impairment                                             - 
 Transaction costs                                (2,864) 
 Operating profit                                      72 
----------------------------------------  --------------- 
 

Proforma unaudited 6 months ended 30 June 2021

 
 EUR'000                                   6 months ended 
                                             30 June 2021 
---------------------------------------   --------------- 
 Adjusted EBITDA                                   29,243 
 Depreciation and amortisation expense            (9,238) 
 Impairment                                       (7,471) 
 Transaction costs                                (2,864) 
 Operating profit                                   9,670 
----------------------------------------  --------------- 
 

The impairment of EUR7.47MM relates to amounts previously capitalised for the A-04 well at the Q10-A field, which is being recompleted as part of the Company's 2021 drilling campaign.

Note 4: (Loss)/earnings per share

The calculation of basic (loss)/earnings per share is based on the loss for the period after taxation attributable to equity holders of the parent of EUR4.7MM and a weighted average number of shares in issue of 45.4MM.

Note 5: Acquisition

On 20 May 2021, Kistos plc completed the 100% acquisition of Tulip Oil Netherlands B.V. (now called Kistos NL1 BV) and its wholly owned subsidiary Tulip Oil Netherlands Offshore B.V. (now called Kistos NL2) for EUR140MM.

The transaction assets constitute a business and the acquisition has been accounted for using the acquisition method, in accordance with IFRS3 business combinations. The consolidated financial statements include the fair value of the identifiable assets and liabilities as at the acquisition date and the results of Kistos NL1 and Kistos NL2 from 21 May 2021 till 30 June 2021.

 
  EUR'000                                Provisional 
                                          fair value 
------------------------------------   ------------- 
  Deferred tax assets                         19,477 
  Cash and cash equivalents                   23,529 
  Trade and other receivables                  8,602 
  Inventory                                      615 
  Property, plant and equipment              138,781 
  Exploration and evaluation assets           67,500 
  Trade and other payables                   (4,500) 
  Provisions                                (17,710) 
  Deferred tax liability                    (30,000) 
  Borrowings                                (85,419) 
  Net assets acquired                        120,875 
  Total consideration paid                   139,975 
  Goodwill                                    19,100 
-------------------------------------  ------------- 
 

The table above shows management's assessment of the provisional calculated fair values. As the date of the acquisition is close to the reporting date, management's assessment of the provisional fair values is ongoing. Any adjustments made to the provisional assessment of fair values within 12 months will result in the fair values being revised. Any adjustments made beyond 12 months will be recognised in the income statement as a change in estimate.

 
 EUR'000                                  Cash    Non-cash     Total 
----------------------------------   ---------  ----------  -------- 
  Cash                                  60,000           -    60,000 
  Cash raised through additional 
   borrowings                           60,000           -    60,000 
  Surplus cash extraction                5,108           -     5,108 
  Other SPA adjustments                  (883)           -     (883) 
  Shares in Kistos plc                       -      15,750    15,750 
  Total consideration transferred      124,225      15,750   139,975 
  Cash held in Kistos NL2             (23,529) 
  Cash outflow on acquisition          100,696 
-----------------------------------  ---------  ----------  -------- 
 

Note 6: Net finance costs

 
 EUR'000                           37 weeks ended 30 June 2021 
--------------------------------  ---------------------------- 
 Interest income                                             - 
 Other financial income                                   (15) 
 Total financial income                                   (15) 
 
 Interest expenses                                       1,619 
 Other interest charges                                      1 
 Total interest expenses                                 1,620 
 
 Loss on redemption                                      3,528 
 
 Unwinding of bond discount                                  - 
 Accretion expenses                                          8 
 Amortised bond costs                                      143 
 Total other financial expenses                            151 
 
 Net finance costs                                       5,284 
--------------------------------  ---------------------------- 
 

Note 7: Taxes

Deferred tax assets of EUR19.8MM at the end of June 2021 mainly comprise State Profit Share (SPS) losses in Kistos NL2.

The tax losses are made up of SPS losses. SPS losses can be carried forward indefinitely. Provisions relate to temporary differences on abandonment provisions and other relates to temporary differences on abandonment fixed assets and other provisions/liabilities.

The deferred tax liability of EUR29.5MM at the end of June 2021 arises on the fair value step-up recognised on the acquisition of Kistos NL1 BV and Kistos NL2 BV.

Note 8: Intangible exploration and evaluation assets

Exploration and evaluation intangible assets of EUR67.5MM relates to the step-up on assets acquired following the acquisition of Kistos NL2 BV.

The assets relate principally to Q11B, Q10 Gamma and Q10-B Gas in the Netherlands.

Note 9: Property, plant, and equipment

 
 EUR'000                          Assets under   Production      Fixtures     Total 
                                  construction    and wells    & fittings 
------------------------------  --------------  -----------  ------------  -------- 
 Cost at beginning of the                    -            -             -         - 
  period 
 Additions                                  35          121            16       172 
 Acquisition of Kistos NL2               5,796      132,844           141   138,781 
 Cost on 30 June 2021                    5,831      132,965           157   138,953 
 
 Depreciation at beginning                   -            -             -         - 
  of the period 
 Depreciation for the period                 -      (2,247)          (20)   (2,267) 
 Impairment                                  -      (2,247)          (20)   (2,267) 
 Depreciation on 30 June 2021 
 
 Net book value at beginning                 -            -             -         - 
  of the period 
 Net book value on 30 June 
  2021                                   5,831      130,718           136   136,686 
------------------------------  --------------  -----------  ------------  -------- 
 

Impairment tests of individual cash-generating units are performed when impairment triggers are identified. Kistos plc and its subsidiaries have taken measures in response to the COVID-19 outbreak, including provisions for business continuity and a reduction in expenditure levels. Given the COVID-19 situation the Q10-A asset has been retested for impairment. No impairment has been identified.

Note 10: Provision for abandonment liabilities

 
                                                        30 June 2021 
 Provisions as of beginning of the period                          - 
 Accretion expense                                                 8 
 Additions                                                    14,158 
 Change in estimates and incurred liabilities                      - 
 Total abandonment provision at period end                    14,166 
 
 Analysis of the abandonment provision to short-term 
  and long-term liabilities 
 Short-term                                                    1,199 
 Long-term                                                    12,967 
 Total abandonment provision                                  14,166 
-----------------------------------------------------  ------------- 
 

Following clarifications of the proposed legislative changes regarding abandonment requirements, the cost to abandon is now estimated based on cleaning and leaving the pipeline between Q10-A and P15 in place. Abandonment provisions are determined using an inflation rate of 1.0% (2020: 1.0%) and a discount rate of 0.5% (2020: 0.5%) in line with publicly available economic forecasts.

Note 11: Borrowings

 
 EUR'000                             30 June 2021 
----------------------------------  ------------- 
 9.15% Senior secured bond EUR60m 
  due 2026                                 60,000 
 8.75% Senior secured bond EUR90m 
  due 2024                                 90,398 
 Bond issue costs                         (3,726) 
 Total borrowings                         146,672 
----------------------------------  ------------- 
 

During the period, Kistos NL2 refinanced an existing EUR87MM bond with a new EUR90MM bond that has a coupon of 8.75% per annum and a maturity date of November 2024. An additional EUR60MM bond, with a coupon of 9.15% and a maturity date of May 2026, was issued to Tulip Oil Holdings in conjunction with the acquisition of Kistos NL2 by Kistos plc. The refinancing incurred a loss on redemption of EUR3.5MM disclosed under finance charges.

Included under borrowings in the balance sheet are also other ROU liabilities of EUR61K.

Glossary

 
 2C resources       best estimate of contingent resources 
 2P reserves        the sum of proved and probable reserves, denotes 
                     the best estimate scenario of reserves 
 Adjusted EBITDA    The Board uses Adjusted EBITDA as a measure to 
                     assess the performance of the Group. This measure 
                     excludes the effects of significant items of 
                     income and expenditure which may have an impact 
                     on the quality of earnings such as reversal of 
                     provisions and impairments when the impairment 
                     is the result of an isolated non-recurring event. 
 Average realised   calculated as revenue divided by sales production 
  oil/gas price      for the period. Sales production for the period 
                     may be different from production for the period. 
 bbls               barrels of oil 
 boe                barrels of oil equivalent 
 bopd               barrels of oil per day 
 Earnings per       calculated as profit for the financial period 
  share              divided by weighted average number of shares 
                     for the period 
 MMbbl              million barrels of oil 
 MMboe              Million barrels of oil equivalent 
 MM sm(3) /d        millions of normal cubic metres per day 
 TVDss              true vertical depth sub-sea 
 Unit opex          calculated as production costs divided by production. 
-----------------  ------------------------------------------------------ 
 

Dr Richard Benmore, Interim Chairman of Kistos with a Bachelors, Masters, and PhD in Geosciences and who has been involved in the energy industry for more than 37 years, has read and approved the disclosure in this regulatory announcement.

The Company's internal estimates of resources contained in this announcement were prepared in accordance with the Petroleum Resource Management System guidelines endorsed by the Society of Petroleum Engineers, World Petroleum Congress, American Association of Petroleum Geologists and Society of Petroleum Evaluation Engineers.

The information contained within this announcement is considered to be inside information prior to its release, for the purposes of Article 7 of Regulation (EU) No 596/2014 (as it forms part of retained EU law as defined in the European Union (Withdrawal) Act 2018).

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