Acquisition, Operational & Financial Update

RNS Number : 0641A

Kistos PLC

31 January 2022

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU WHICH IS PART OF DOMESTIC UK LAW PURSUANT TO THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310).

Kistos plc

("Kistos" or the "Company")

Greater Laggan Area Acquisition

Operational & Financial Update

Kistos (LSE: KIST), the low carbon intensity energy producer pursuing a strategy to acquire assets with a role in energy transition, is pleased to announce that it has entered into a conditional asset purchase agreement and a conditional share purchase agreement with TotalEnergies S.E. ("TotalEnergies") to acquire a 20% interest in the Greater Laggan Area ("GLA") producing gas fields and associated infrastructure alongside various interests in certain other exploration licences, including a 25% interest in the Benriach prospect as detailed below (the "Acquisition")

Details of the Acquisition:

· Kistos will acquire 20% working interests in the producing Laggan, Tormore, Edradour, and Glenlivet gas fields, located offshore the UK West of Shetland.

· In addition, the Acquisition includes a 20% interest in the undeveloped Glendronach gas field.

· The Acquisition also includes a 25% interest in block 206/4a, which contains the 638 Bcf (operator's P50 resource estimate) Benriach prospect.

· Kistos expects production from the assets to be acquired to average approximately 6,000 boe/d (net) during 2022 with 2P reserves as at the effective date of the Acquisition of 6.2 MMboe (operator's estimate).

· Emissions from GLA production operations are forecast by Kistos to be approximately 13 kg CO₂e/boe in 2022, which is significantly below the North Sea average of 22 kg CO₂e/boe (as estimated in the OGA's "UKCS natural gas carbon footprint analysis" of 26^th May 2020).

· The effective date of the Acquisition is 1^st January 2022.

· The consideration payable in respect of the Acquisition comprises initial cash consideration of US$125 million (subject to customary closing adjustments), payable on completion, and further contingent cash payments as follows:

o  In the event the average day-ahead gas price at the National Balancing Point exceeds 150p/therm in 2022, up to US$40 million will be payable in January 2023.

o  Should Benriach be developed, Kistos will pay US$0.25 per MMBtu of net 2P reserves after first gas.

The Company will finance the Acquisition from internal resources. Completion is expected to occur in the second quarter of 2022 subject to customary regulatory and partner consents and the Company expects to make a further announcement at such point.

Further background to the GLA assets:

· The producing GLA gas fields are located in water depths of approximately 300m to 625m and are located up to 125km north-west of the Shetland Islands.

· Development approval for the GLA was originally granted in 2010 and first gas was achieved at the Laggan and Tormore fields during 2016. The Glenlivet and Edradour fields received development approval in 2015 and subsequently came on-stream in 2017.

· The Glendronach field was discovered in 2018 and it is anticipated that the development will utilise existing infrastructure

· Produced gas is routed through two dedicated flowlines which surface at the purpose-built Shetland Gas Plant (SGP), where further processing is carried out prior to export to the St. Fergus Gas Terminal in Scotland.

Assets to be acquired

Licence	Block	Interest to be acquired	Partners
P.911	206/1a	20%	TotalEnergies E&P UK* Ineos E&P (UK) RockRose UKCS15
P.1159	205/5a and 205/5d	20%	TotalEnergies E&P UK* Ineos E&P (UK) RockRose UKCS15
P.1195	214/30a Glenlivet Area and Rest of Block	20%	TotalEnergies E&P UK* Ineos E&P (UK) RockRose UKCS15
P.1453	206/4a Rest of Block - excluding Benriach Area	20%	TotalEnergies E&P UK* Ineos E&P (UK) RockRose UKCS15
P.1453	206/4a Benriach Area	25%	TotalEnergies E&P UK* RockRose UKCS15
P.1678	205/4b	20%	TotalEnergies E&P UK* Ineos E&P (UK) RockRose UKCS15
P.2411	214/30d and 206/5c	25%	TotalEnergies E&P UK* RockRose UKCS15
P.2415	208/1c, 208/6, 214/4b, 214/5c, 214/9b, 214/10b and 214/14a	20%	TotalEnergies E&P UK CNOOC Petroleum Europe
P.2594	214/28b, 214/29b, 214/30e, 206/3, 206/4b and 206/8b	20%	TotalEnergies E&P UK Ineos E&P (UK) RockRose UKCS15
P.2604	214/12a, 214/13a, 214/14b, 214/17, 214/18a and 214/19a	14%	TotalEnergies E&P UK Shell UK

* Denotes operator

Kistos Operational & Financial Update

· As previously announced, the Prospector-1 jack-up drilling rig arrived on location at Q11-B in late-November 2021. After the Slochteren formation proved to be water wet, two shallower horizons were tested and produced at rates totalling more than 1,700 boe/d. The well is now being suspended for possible future use and the data gathered will be evaluated to establish recoverable volumes prior to taking a development decision.

· The Company continues to evaluate the results of the successful appraisal of the Vlieland sandstone formation in the Q07 and Q10 blocks offshore the Netherlands. This oil discovery has been named "Q10-Orion" and Rockflow Resources has been engaged to assist with the Concept Assess phase of the project.

· As well as appraising Q11-B and Q10-Orion, the drilling campaign that commenced in the summer of 2021 was designed to increase output from the producing Q10-A gas field through a series of workovers and the drilling of a sidetrack to the Q10-A04 well. This resulted in a year-end production rate of 10,800 boe/d (gross) versus 7,200 boe/d (gross) when Kistos acquired the asset in May 2021.

· Higher production and rising gas prices boosted cash flow following the shut-down of the P15-D platform for planned maintenance from mid-August to mid-September 2021. This enabled the Company to exit the calendar year with cash of approximately €77 million.

Andrew Austin, Executive Chairman of Kistos, commented:

"We are delighted to announce this transaction with TotalEnergies and look forward to working with them and the other partners in the Greater Laggan Area. The deal increases our gas production and complements Kistos' strategy in the Netherlands.

"On completion, we will have a solid foothold in both the UK and the Netherlands from which we can continue to implement our growth strategy. We expect the acquisition to increase the Company's 2P reserves by 6.2 MMboe and effectively double our end-2021 production rate to 13.5 kboe/d on a proforma basis."

Enquiries:

Kistos plc Andrew Austin, Executive Chairman c/o Camarco Tel: [phone] Panmure Gordon (Nomad, Joint Broker) Nick Lovering / Atholl Tweedie / James Sinclair-Ford Tel: [phone] Berenberg (Joint Broker) Emily Morris / Alamgir Ahmed Tel: [phone] Camarco (Public Relations Advisor) Billy Clegg / James Crothers Tel: [phone]

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 102.1 MMboe of contingent resources.

Kistos is a low carbon 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 CO₂e/boe since inception. This compares to an industry average of 22kg CO₂/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/  

Dr Richard Benmore, Non-Executive Director 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 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.

This announcement contains inside information for the purposes of Article 7 of Regulation 2014/596/EU which is part of domestic UK law pursuant to the Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310).

Glossary

2P reserves	the sum of proved and probable reserves, denotes the best estimate scenario of reserves
Bcf	billion cubic feet
boe	barrels of oil equivalent
boe/d	barrels of oil equivalent per day
contingent resources	those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable owing to one or more contingencies.
MMboe	millions of barrels of oil equivalent
Nm 3 /d	normal cubic metre per day

 

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