Kistos set to complete Dutch deal in Q2: Austin

AIM-listed Kistos intends to complete its reverse takeover of Dutch producer Tulip Oil Netherlands following a vote at the shareholders' meeting May 14, its non-executive chairman Andrew Austin told analysts April 30. He said that financing was lined up; he knew the limited number of shareholders in Kistos; and he was not expecting any surprises. "It is good to go," he said.

Kistos was set up last year with the aim of making an acquisition in Q1 2021 and completing it in Q2. He said the company is now doing that. It placed a new €90 ($109)mn senior secured bond issue earlier in April.

The attraction of the deal was two-fold: it meets the investors' appetite for low-carbon production – its scope 1 emissions are only 10 grams of CO₂/barrel of oil – and it has very low production costs. "Tulip is an outlier, that is why we bought it," he said.

The company is planning to reduce its scope 2 emissions – those released when delivering production to market – by building a pipeline directly to shore, 25 km distant. This will bypass the older platform, P-15, where the gas is compressed. The production platform however, Q-10-A, is new and powered by wind and solar, only using a diesel generating set on those rare occasions when it is manned.

Production costs of $4-5/barrel of oil equivalent sit nicely with a present Dutch gas price of €22/MWh, which translates into about $44/boe, he said. Even last year, when the low gas demand and prices saw output trimmed, the asset still yielded pre-tax profits of €33mn, he said. And at today's carbon price of €40-50/mt, that adds another $1.20/boe to the competitive advantage of Kistos' production relative to the UKCS for example, which has a carbon intensity of 22 kg CO₂/boe

There is also an oilfield above the Q-10-A gas field which the company plans to bring on stream and other assets, although some, in the north of the Netherlands, are in an environmentally sensitive area. "There is a lot of running-room in Tulip," he said. Production could rise to 40,000-45,000 boe/d without recourse to further equity.

As to other acquisitions, they would have to fit with the energy transition and Kistos' low-carbon profile, he said.  That could mean carbon capture and storage, gas storage or other production assets whose value was not reflected in the share price or which could be repurposed for other, lower-carbon activities.

That rules out pure exploration plays. He also did not discuss moving outside the North Sea. He said Ireland was tricky owing to government plans to limit oil and gas production, but the UK, Norway and the Netherlands were on the radar.