Kistos condemns windfall taxes even as earnings surge

Gas producer Kistos reported average production of 10,600 barrels of oil equivalent per day in its full-year results on Tuesday, up from 4,300 equivalent daily barrels in the prior year.

The AIM-traded firm put the growth down to the full-year contribution from the Q10-A gas field located offshore the Netherlands, as well as nearly six months of production from the Greater Laggan Area (GLA), offshore the UK.

Its adjusted pro forma EBITDA surged to €517.2m in the 12 months ended 31 December, from €102.9m in 2021.

During the year, Kistos successfully completed the acquisition of a 20% interest in the GLA from TotalEnergies E&P UK.

The board said the acquisition effectively doubled the company’s net daily production capacity, further strengthening its position in the market and enhancing its growth prospects.

Its year-end proved plus probable (2P) reserves also saw a substantial increase, rising from 12.7 million barrels of oil equivalent to 36.3 million equivalent barrels, after the completion of the Mime Petroleum transaction.

“Kistos' accelerated evolution over the course of 2022 has been driven by targeted value-accretive acquisitions which have provided both immediate and longer-term upside for the group,” said executive chairman Andrew Austin.

“Our entry into the UKCS, followed this year by Norway, has created a diversified and flexible portfolio across multiple jurisdictions.

“The group benefited from strong commodity prices resulting in significant cash generation, which will allow us to continue to capitalise on the exploration, appraisal, and development opportunities within our portfolio.”

However, Austin said the strong commodity prices had resulted in authorities imposing “so-called windfall taxes” on the company’s operations.

“This is difficult to comprehend, given that greenhouse gas emissions associated with imported hydrocarbons are typically much higher than those associated with those produced locally.

“This tax instability has already resulted in Kistos and companies with international asset portfolios cancelling or scaling back North Sea projects and diverting capital elsewhere, with significant implications for local energy security of supply.

“In particular, the imposition of the retrospective and regressive Solidarity Contribution Tax on our Netherlands profits means that the group, and other energy industry participants in the EU, will find it difficult to justify future material investments and developments due to the risk of confiscation of profits should oil or gas prices rise again.”

Andrew Austin said Kistos believed its Dutch subsidiary was “out of scope” of the charge, but had nonetheless made a provision for it in its results, pending further clarification and the outcome of legal challenges from other parties.

“From a standing start in 2020, we have built an excellent platform, and we will seek to deploy further capital in the right opportunities or make distributions to shareholders.

“The instability of the fiscal regimes in which we operate has prompted us to review our investment options and, as we have already demonstrated with our entry into Norway, our pipeline of business development opportunities includes assets in jurisdictions other than the UK and the Netherlands in which we can continue to generate substantial returns for investors.”

At 1514 BST, shares in Kistos Holdings were down 6.42% at 228.8p.

Reporting by Josh White for Sharecast.com.