Katherine Roe, CEO at Wentworth Resources talks through the Ruvuma gas development in Tanzania. Watch the full video here.
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Backdrop - European gas markets remain tight whilst Europe continues to grapple with the security of energy supply following the Russian invasion of Ukraine. So far, continued pipeline flows from Russia, US liquefied natural gas (LNG) cargos and weaker demand owing to warmer weather have eased pricing slightly and helped rebuild inventories. At 537 TWh, gas storage is currently 49% filled, 5% below the five-year average for this time of year, having bottomed in mid-March at 25.5%. I continue to expect the market to remain tight, especially as we head into next winter, given that reliance on Russian flows remains unsolved and expectations that competition for LNG molecules remains intense. Therefore the environment remains very attractive for gas exposed E&P’s… with the generation of strong cash flows and attractive FCF yields
Drilling down - The current portfolio comprises production and development assets in the Netherlands (acquired for €223m in May 2021) and the Greater Laggan Area (announced in January 2022). The investment case is supported by low unit costs and high European gas prices (European gas prices (TTF) averaged €99.5/MWh in Q1 2022, and UK gas prices (NBP) averaged 232p/therm), ensuring that production growth is highly cash generative. Pro forma costs for 2021E c$6.40/boe, sit at the lower end of our coverage. Kistos generates a FCF of £296m and is trading on FY 2022/23 EV/EBITDA of 0.4x/0.5x …our risked is NAV 886p/sh.
PRODUCING ASSETS -
Kistos’s current net gas production originating from the Q10-A gas field, sits at c16mmboe. Based on our long-term modelling, we arrive at a risked NPV of Gbp661 per share contribution to Kistos
GLA - assets possess a CO2 intensity of c13kg/boe, roughly 40% below the UK North Sea average of 22kg/boe. Current gas output originating from the GLA stands at 4mmboe net… leading to GBp209 per share on a risked basis
UNDEVELOPED ASSETS: Glendronach development adds a risked incremental value of c€89m net to Kistos (January 2023). The licence partners are working to mature the project to FID during 2022, with first gas expected in 2024. Further, Orion holds c43mmboe net, which we currently expect to be brought onstream in 2024, contributing 619p to our risked NAV (at a 75% chance of success). In addition, despite the Q11-B appraisal result the company continues to examine a potential tie-back to the Q10-A platform with an update also expected later in 2022.
IEA chief warns Europe to prepare for total shutdown of Russian gas exports
Leverage our market expertise..https://www.ft.com/content/f7990162-395f-488e-9d23-13f3cce83e24.....urope must prepare immediately for the complete severance of Russian gas exports
Europe must prepare immediately for the complete severance of Russian gas exports
Strange opening this morning ..... hummm !!
"In a nutshell… Kistos' (Buy, TP GBp730) is probably the best exposed E&P in our coverage universe for investors wanting exposure to the strong backdrop for EU gas and the role of gas as a transition fuel. It also comes with an incredibly compelling relative valuation (FY 2022/23 EV/EBITDA of 0.4x/0.5x, EV/DACF of 0.7x/1.3x). Recall, the company currently produces c12 kboe/d (set to grow with the GLA deal closure) and sits with a very favourable balance sheet position of €6m net cash, leaving the company primed for potential compelling future shareholder returns coupled with scope for significant in-organic growth. The company is currently fully unhedged on its exposure to European gas markets .. which on the Berenberg commodity deck drives a FY 2022 FCF yield of c71% and a risked NAV of 886p/sh. The risk/reward here looks very favourable in my view – especially as we look beyond summer seasonality and the prospect for yet another tight winter in global gas markets."
LoveACruise - you are the one currently posting under negative headlines on this board. You are a hypocrite and a troll
I believe that the last update shows that they are in the position now of being debt free - from memory they had a net £6m cash - so that would now be larger figure.
It would be interesting to know if the 20% interest in the new acquisition, which would be backdated to 1st Jan 2022, would cover the initial contractual payment and the additional payment of £40m, which I assume would be due, would be covered out of cashflow for the remainder of this year.
Barring no further Acquisitions then id expect Kistos to be completely debt free October / November this year .
Anyone have any idea how long it will take to pay off all debt if prices stay this elevated? They are already in a net cash position
This time last year the TTF price was around 30 and the original Tulip deal was done prior to that - so at 30 it was a commercially compelling proposition. Any price increase would be marginally all profit - the only downside on the purchase was the unsuccessful field development.
Since Jan we would also have had the contribution from the new acquisition, which should be completely self financing.
I hate the cause for the TTF hike but will be holding on to my shares, having increased it last week.
I still wait for a full, in depth, disclosure that gives a complete picture once the deal had been concluded.
TTF now 130!
TTF gone up significantly after Russia cuts flows to Germany by 60%. Now KIST aren’t hedged, this will result in significant cash generation for them
I’m still amused by the comment that gas prices had peaked
Good strong recovery today against a backdrop of poor market conditions... :-)
10 June 2022 Reuters KIST.L ? Kistos’s asset portfolio provides significant organic upside since its
acquisition from Tulip Oil in May 2021, and in the Greater Laggan
Area, announced in January 2022.
? High European and UK gas prices are supportive of the company
increasing production from its operating assets and bringing online
? Low-carbon intensity production makes the company an attractive
participant in the energy transition.
? Management’s track record of delivering shareholder returns
reflects the strength of the team and supports the investment case.
? Valuation methodology: Our primary valuation methodology is a
risked NAV using full life-of-field economics and a 10% discount rate.
Bloomberg KIST LN
Current price Price target
GBp 410 GBp 730
Kistos has provided the following operational and trading update ahead of the Company’s Annual General Meeting which is being held today at 11.00 a.m. as a virtual meeting. The information contained herein has not been audited and may be subject to further review and amendment.
· Pro forma net production for the five months to end of May 2022 was 12.0 kboe/d, unhedged as of 1 April 2022
· Cash balances on 31 May 2022 were €128.6 million
· Acquired €27.7 million (nominal) of Kistos NL2 bonds in February 2022
· Net cash on 31 May 2022 of €6.3 million
· Acquisition of 20% interest in the Greater Laggan Area (GLA) West of Shetland from TotalEnergies progressing towards completion. The transaction has an effective economic date of 1 January 2022
· Development studies are ongoing for the Q11-B gas discovery and the Orion oil discovery
· The Q10-Gamma exploration prospect and infill drilling opportunities at the producing Q10-A gas field are also being evaluated
· In line with its strategy, the Group continues to evaluate several potential growth opportunities that meet its investment criteria
Andrew Austin, Kistos’ Chairman, commented:
“Kistos has started the year strongly, delivering a solid operational performance and benefiting from high gas prices.
“With almost €130 million of cash at our disposal, we have the financial strength, capital discipline and track record to grow the business and deliver shareholder value.
We remain guided by our founding principle to play a role in the energy transition and are evaluating several attractive opportunities in the North Sea. We continue to benefit from high gas prices in the Netherlands, and we are assessing opportunities in the UK that would enable us to take full advantage of the investment allowances implicit in the recently introduced UK Energy Profits Levy.”
This is another very positive announcement from Kistos, production was in line with guidance and that has led to net cash of €6.3m at the end of May. Strongly cash flow positive on unhedged, strong gas prices have meant that €27.7m of bonds have been paid off.
The Looney tax was clearly unwanted but with more than 50% of production in premium Dutch gas and of course expenditure at Glendronach and Benriach will benefit from the 80% allowance. As usual I expect Kistos to have an eye for a deal to mitigate that levy and give another boost to the value of the the company and the shares are extraordinarily cheap on that basis.
Thanks mate - they sounded exciting at least!
Neavo, the bonus share is just a mechanism to reduce the book value of the company such that dividends can be paid and share buybacks also (I think - as I'm no financial expert). It won't have any impact on your share holding as they'll be granted and then cancelled, and their value knocked off the capital value of the company.
Also on bonus shares (below) what is the point in giving holders bonus shares when you can’t sell them on? Can someone more intelligent enlighten me?
Therefore, it is proposed that the Company capitalises the amount of €14,734,000 standing to the credit of the Merger Reserve of the Company by applying that sum in paying up special bonus shares. The bonus shares will be issued to Shareholders on the basis of one bonus share for every Ordinary Share held on a specific record date (which the Company will announce by RNS in due course). Shareholders are also being asked to approve the cancellation of the bonus shares issued pursuant to Resolution 15 (Capitalisation of the merger reserve and cancellation of bonus shares) with the sum arising on the cancellation being credited to the Company’s retained earnings reserve. The bonus shares will not be admitted to trading on AIM, or on any other market or stock exchange
I think I am right in that until the end of March a large portion of production had been hedged - so would not have been generating any super profit on that amount.
GamblingAnalysis - ah okay so now you have changed your argument / analysis to compare cash generation relative to market cap / EV. Your previous points IMO are still wrong as you were arguing that €16m of FCF a month when producing c.7kboepd is not impressive in this current market. No need to change the parameters of the debate when you have been corrected. Let's leave it there
Hello Guys - unable to attend AGM call, does anyone have some notes they could share?
GamblingAnalyst - in which normal gas market would a c.7k boepd producer be generating €16m of FCF a month? If you think that can be achieved in a normal market then we can agree to disagree
Had a cash balance of €77m at year end. Cash balance is now €129m after buying €27m of bonds back. Suggests they have generated €79m in the first 5 months of the year so around €16m a month. A cash cow that GamblingAnalyst can't seem to have done the analysis on lol
I tried to get a code from my broker to be able to log in but they were less than helpful - so relying on others or an RNS - annoying.