Kistos NL2 BV

Kistos NL2 BV 2021 Interim Report

Highlights

RevenueQ10-A production was 155MM Sm3 compared to 190MM Sm3 in the first half of 2020. Realised gas prices increased by 170% to €20.76/MWh from €7.69 a year earlier. As a result, total revenue in the period increased by 97% to €33.7MM versus €17.1MM a year earlier.

Operating costsTotal production costs for the period were €4.8MM versus €3.6MM a year earlier. Operating expenses include certain pre-FID costs relating to the proposed new export pipeline to IJmuiden. Excluding those costs, the underlying unit operating expense for the first half was €2.63 per MWh. As 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.

Unaudited H1 2021

Unaudited H1 2020

(restated)

Production MM Sm3 155 216

Production 000 MWh 1,598 2,230

Revenue €’000 33,740 17,141

Average realised gas price €/MWh 20.76 7.69

Unit opex €/MWh1 3.00 1.60

Adjusted EBITDA2 €’000 27,915 12,415

Profit/(loss) for the period €’000 (2,312) (357)

Net cash from operations €’000 20,619 15,606

Capital expenditure (cash) €’000 3,239 715

Total (cash) €’000 26,262 16,475

Unaudited results for the six months ended 30 June

Adjusted EBITDAThe 125% year-on-year increase in EBITDA from €12.4MM to €27.9MM reflects the changes in revenue and operating costs referred to above.

Operating profitAfter applying depreciation and impairment, operating profit in the first half of 2021 was €11.6MM versus €4.0MM in 2020.

Interest-bearing debtDuring the period, Kistos NL2 refinanced an existing €87MM bond with a new €90MM bond that has a coupon of 8.75% per annum and a maturity date of November 2024. An additional €60MM 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.

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 to the half-year financial report.

2. Adjusted EBITDA is calculated on a business performance basis. Refer to the alternative performance measures definition within the glossary to the half-year financial report.

During the period, two quarterly interest payments were made in relation to the €87MM bond. The Company also incurred costs of €3.5MM as a consequence of the refinancing.

Cash flow from operationsThe Company generated positive cash flow of €20.6MM for the period (H1 2020: €15.6MM).

Financial positionCash at the end of the period was €26.3MM. Gross debt was €150.4MM and net debt was €124.1MM.

Kistos NL2 BV 2021 Interim Report 2

FinancialStatements


Note UnauditedSix months ended

30 June 2021€’000

UnauditedSix months ended

30 June 2020 (restated)

€’000

Revenue 3 33,740 17,141

Exploration expenses (231) (147)

Production costs (4,794) (3,564)

Depreciation and amortisation (8,847) (8,462)

Impairments 3 (7,471) –

Other operating expenses (800) (1,015)

Total operating expenses (22,143) (13,188)

Operating profit 11,597 3,953

Interest and other income 4 15 2

Interest expenses 4 (2,328) (2,710)

Other financial expenses 4 (4,040) (512)

Net finance costs (6,353) (3,220)

Profit before taxes 5,244 733

Tax (charge)/credit 5 (7,556) (1,090)

Profit for the period (2,312) (357)

€ ‘000 UnauditedSix months ended

30 June 2021

Unaudited Six months ended

30 June 2020(restated)

(Loss)/profit for the period (2,312) (357)

Items that may be reclassified to the income statement in subsequent periods:

Cash flow hedge:

Gain/(loss) arising in the period (8,425) –

Tax relating to components of other comprehensive (expense)/income 4,212 –

Total comprehensive expense for the period (6,525) (357)

Note Unaudited 30 June 2021

€’000

Unaudited 30 June 2020

(restated)€’000

Assets

Property, plant and equipment 6 89,482 107,913

Deferred tax assets 5 19,811 23,680

Receivables from parent 60,000 –

Total non-current assets 169,293 131,593

Inventories 780 830

Trade receivables 4,555 1,164

Other receivables 2,057 1,043

Cash and cash equivalents 26,262 16,475

Total current assets 33,654 19,512

Total assets 202,947 151,105

Equity and liabilities

Equity

Share capital – –

Share premium 20,517 20,517

Hedge reserve (8,425) –

Retained earnings 11,994 10,836

Total equity 24,086 31,353

Non-current liabilities

Abandonment provision 7 13,247 13,181

Borrowings 8 146,672 84,997

Interest-bearing loans from affiliates 1,804 3,700

Other non-current liabilities 94 106

Current liabilities

Trade payables 586 947

Accrued expenses 3,499 6,841

Liabilities against affiliates 1,030 6,888

Other current financial liabilities 1,621 1,315

Other current liabilities 10,308 1,777

Total current liabilities 17,044 17,768

Total liabilities 178,861 119,752

Total equity and liabilities 202,947 151,105

Income statement

Statement of comprehensive income and expense

Balance sheet


Share capital

€’000

Share premium

€’000

Retained earnings

€’000

Hedge reserve

€’000

Total equity €’000

Equity as of 31 December 2019 – original – 20,517 13,443 – 33,960

Prior year adjustment – – (2,250) – (2,250)

Equity as of 31 December 2019 – restated – 20,517 11,193 – 31,710

Profit/(loss) for the period – – (357) – (357)

Equity as of 30 June 2020 –restated – 20,517 10,836 – 31,353

Profit/(loss) for the period – – 3,470 – 3,470

Equity as of 31 December 2020 – restated – 20,517 14,306 – 34,823

Profit/(loss) for the period – – (2,312) – (2,312)

Movement in the period – – – (8,425) (8,425)

Equity as of 30 June 2021 – 20,517 11,994 (8,425) 24,086

Statement of changes in equity (unaudited)Six months ended 30 June 2021

Note UnauditedSix months ended

30 June 2021€’000


30 June 2020€’000

Cash flow from operating activities

Profit/(loss) for the period (2,312) (357)

Tax charge/(credit) 6 7,556 1,090

Net finance costs 5 6,353 3,220

Depreciation and amortisation 10 8,847 8,462

Impairment losses 7,471 –

Taxes paid (1,406) (1,848)

(Increase)/decrease in trade and other receivables 1,466 6,928

Increase/(decrease) in trade, other payables and provisions (7,949) (1,424)

(Increase)/decrease in inventories 593 (465)

Net cash flow from operating activities 20,619 15,606

Cash flow from investment activities

Payments to acquire tangible fixed assets (3,239) (715)

Net cash flow from investment activities (3,239) (715)

Cash flow from financing activities

Repayment of loan to parent Company – (500)

Repayment of long-term payables (1,896) (17)

Other finance charges (net) (20) (11)

New bond loan proceeds 60,000 –

Loan to parent company (60,000) –

Bond refinancing costs (3,021) –

Interest paid 5 (3,872) (3,959)

Net cash flow from financing activities (8,809) (4,487)

Increase/(decrease) in cash and cash equivalents 8,571 10,404

Cash and cash equivalents at 1 January 17,691 6,071

Cash and cash equivalents at 30 June 12 26,262 16,475

Cash flow


These unaudited interim financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU (‘IFRS’) IAS 34 ‘Interim Financial Reporting’. Thus the unaudited interim financial statements do not include all information required by IFRS and should be read in conjunction with the Company’s audited annual financial statements as at 31 December 2020. The unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the dates and interim periods presented. Interim period results are not necessarily indicative of results of operations or cash flows for an annual period. These unaudited interim financial statements have not been subject to review or audit by independent auditors.

These unaudited interim financial statements were authorised for issue by Kistos NL2’s Board of Directors on 21 September 2021.

1. Accounting principlesThe accounting principles used for this interim report are consistent with the principles used in the Company’s (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.

The significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the audited annual financial statements as at 31 December 2020.

Consistent with the audited 2020 year-end financial statements, prior mid-year figures have been reclassified, where necessary.

Notes to the financial statements (unaudited)

2a. Revenue


30 June 2021€’000


30 June 2020€’000

Revenue by product Sale of gas 33,189 17,141

Sale of crude oil 551 –

Revenue 33,740 17,141

Adjusted EBITDA 27,915 12,415

Production (gas) MM Sm3 155 190

000 MWh 1,598 2,230

2b. Adjusted EBITDA


30 June 2021€’000


30 June 2020 (restated)

€’000

Adjusted EBITDA 27,915 12,415

Depreciation and amortisation expense (8,847) (8,462)

Impairment (7,471) –

Operating profit 11,597 3,953

3. ImpairmentsImpairment tests of individual cash-generating units are performed when impairment triggers are identified. Kistos NL2 and its business partners 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 other than the abandonment of the A04 drilling path, which leads to a partial impairment of the existing well of €7.47MM (H1 2020: Nil).


4. Net finance costs


30 June 2021€’000


30 June 2020€’000

(restated)

Interest income – –

Other financial income (15) (2)

Total financial income (15) (2)

Interest expenses 2,189 2,537

Interest on loans from affiliates 119 162

Other interest charges 20 11

Total interest expenses 2,328 2,710

Loss on redemption 3,528 –

Unwinding of bond discount 135 174

Accretion expenses 35 81

Amortised bond costs 342 257

Total other financial expenses 512 512

Net finance costs 6,353 3,220

5. Taxes

Taxes for the period UnauditedSix months ended

30 June 2021€’000


30 June 2020(restated)

€’000

Current tax expense

Current period 1,443 (1,823)

Deferred tax expense

Origination and reversal of temporary differences 6,113 733

Tax credit/(charge) 7,556 (1,090)

Deferred taxes for the period Unaudited

Tax losses€’000

Provisions€’000

Other€’000

Total€’000

At 31 December 2019 – restated 21,710 14,593 (13,356) 22,947

Profit and loss account 573 (9,683) 9,843 733

At 30 June 2020 22,283 4,910 (3,513) 23,680

At 31 December 2020 – restated 21,320 3,715 889 25,924

Profit and loss account (4,044) (308) (1,761) (6,113)

At 30 June 2021 17,276 3,407 (872) 19,811

The tax losses are made up of State Profit Share (SPS) losses. SPS losses can be carried forward indefinitely. Provisions relate to temporary differences on abandonment provisions, other relates to temporary differences on abandonment fixed assets and other


6. Tangible fixed assetsUnaudited

AUC €’000

Unaudited Production

€’000

Unaudited Other €’000

Unaudited Total

€’000

Cost at 1 January 2021 17,073 122,399 132 139,604

Additions 2,251 – 100 2,351

Disposals – – – –

Other – (108) – (108)

Costs at 30 June 2021 19,324 122,291 232 141,847

Depreciation at 1 January 2021 (5,859) (30,136) (52) (36,047)

Depreciation for the period – (8,805) (42) (8,847)

Impairment (7,471) – – (7,471)

Disposals – – – –

Depreciation at 30 June 2021 (13,330) (38,941) (94) (52,365)

Net book value at 1 January 2021 11,214 92,263 80 103,557

Net book value at 30 June 2021 5,994 83,350 138 89,482

Unaudited AUC

(restated) €’000

Unaudited Production(restated)

€’000

Unaudited Other


Unaudited Total


Cost at 1 January 2020 25,053 130,312 129 155,494

Additions 843 438 4 1,286

Reclassification 39 (39) – –

Other (1,650) (16,706) – (18,356)

Costs at 30 June 2020 24,285 114,005 134 138,422

Depreciation at 1 January 2020 (5,859) (16,181) (8) (22,048)

Depreciation for the period – (8,441) (21) (8,462)

Depreciation at 30 June 2020 (5,859) (24,622) (29) (30,510)

Net book value at 1 January 2020 19,194 114,131 121 133,446

Net book value at 30 June 2020 18,426 89,383 105 107,913


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 oil/gas price – calculated as revenue divided by sales production for the period. Sales production for the period may be different from production for the period.

bbls – barrels of oil.

boe – barrels of oil equivalent.

bopd – barrels of oil per day.

Earnings per share – calculated as profit for the financial period divided by weighted average number of shares for the period.

MMbbl – million barrels of oil.

MMboe – million barrels of oil equivalent.

MM Sm3/d – millions of normal cubic metres per day.

TVDss – true vertical depth sub-sea.

Unit opex – calculated as production costs divided by production.

7. Provision for abandonment liabilities

Unaudited30 June 2021

€’000


€’000

Provisions as of beginning of the period 13,214 31,457

Accretion expense 33 80

Additions – –

Change in estimates and incurred liabilities – (18,356)

Total abandonment provision at period end 13,247 13,181

Breakdown of the abandonment provision to short-term and long-term liabilities

Short-term 1,199 –

Long-term 12,048 13,181

Total abandonment provision 13,247 13,181

Abandonment provisions are determined using an inflation rate of 1.0% (2020: 1.5%) and a discount rate of 0.5% (2020: 0.5%) in line with publicly available economic forecasts. The changes in estimates and incurred liabilities during the first half of 2020 relate to an update of the cost estimates to abandon the Q10-A platform, pipeline and wells and an update of the inflation rate assumption. 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.

8. Borrowings



Senior secured bond 60MM 9.15% 60,000 –

Senior secured bond 90MM 8.75% 90,398 86,188

Bond issue costs (3,726) (1,191)

Total borrowings 146,672 84,997

During the period, Kistos NL2 refinanced an existing €87MM bond with a new €90MM bond that has a coupon of 8.75% per annum and a maturity date of November 2024. An additional €60MM 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 €3.5MM disclosed under finance charges.


Kistos Energy 9th Floor 107 Cheapside London EC2V 6DN

Documents

Kistos NL2 BV