Kistos Holdings Regulatory News (KIST)

20 April 2021

THIS ANNOUNCEMENT, INCLUDING THE INFORMATION CONTAINED IN IT, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN KISTOS PLC OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF KISTOS PLC.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (THE "EUWA")) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

PLEASE SEE THE IMPORTANT NOTICE WITHIN THIS ANNOUNCEMENT.

For immediate release

Kistos plc ("Kistos", the "Company" or the "Group")

Acquisition of Tulip Oil Netherlands B.V. ("TON") for €222.75 million

Equity Financing to raise up to £52.5 million at 155 pence per share

Admission of the Enlarged Share Capital to trading on AIM

and

Notice of General Meeting

Kistos (AIM: KIST) is pleased to provide further information in respect of its proposed acquisition of the entire issued and outstanding share capital of Tulip Oil Netherlands B.V. ("TON") from Tulip Oil Holding B.V. (the "Vendor") (the "Acquisition"), as announced by the Company on 12 March 2021.

The Acquisition constitutes a reverse takeover for the purposes of Rule 14 of the AIM Rules for Companies and, as such, is conditional, inter alia, upon Shareholder approval.

The Company also announces its intention to issue up to 42,613,743 New Ordinary Shares at a price per share of 155 pence. This figure comprises 8,742,775 Consideration Shares, which are being issued to Tulip Oil Holding B.V. (the "Vendor") pursuant to the Acquisition, and between 27,096,774 and 33,870,968 New Ordinary Shares, which are being issued pursuant to the Equity Financing. The Equity Financing will raise gross proceeds of between £42.0 million and £52.5 million, which will be used to pay the cash consideration payable under the terms of the Acquisition (EUR 60 million) and for general working capital purposes.

The Placing is being conducted through an accelerated bookbuilding process (the "Bookbuild") which will be launched immediately following this Announcement by Panmure Gordon (UK) Limited ("Panmure Gordon"), in its capacity as sole broker and bookrunner to the Company in connection with the Placing.

The result of the Equity Financing is expected to be announced later today.

Highlights

· Kistos proposes the acquisition of the entire issued and outstanding share capital of TON, which, via its wholly-owned subsidiary, Tulip Oil Netherlands Offshore B.V. ("TONO"), owns an operating interest in the Q10-A offshore gas field and interests in other fields in the Dutch North Sea, including the Q10-B, Q11-B and M10/M11 discoveries, and other exploration and appraisal projects.

· The headline consideration payable by the Company to the Vendor to be satisfied at completion of the Acquisition amounts to EUR 222.75 million, comprising:

(i) the sum of EUR 60 million in cash;

(ii) the issuance to the Vendor of Consideration Shares representing a monetary value of EUR 15.75 million credited as fully paid;

(iii) the issue by TONO of EUR 60 million of Consideration Bond to the Vendor; and

(iv) the refinancing of the existing bonds issued by TONO (the "Existing TONO Bond") by new bonds to be issued by TONO (the "New TONO Bond"), to the value of EUR 87 million in aggregate, with associated locked box and working capital adjustments.

· Contingent consideration of up to EUR 163 million (based on an exchange rate of $1.19:EUR 1) is also payable based on the achievement of certain development milestones. For the avoidance of doubt, no warrants will be issued by Kistos in connection with the Acquisition.

· ABG and Pareto have conditionally agreed to use their reasonable endeavours to place, as agent for the Company, the New TONO Bond which will be used to refinance the Existing TONO Bond. It is expected that the New TONO Bond will be placed, in full, prior to Admission.

· Following a review conducted by the Board, it has been resolved that, conditional on Admission, Andrew Austin, currently Non-Executive Chairman of the Company, will assume the role of Interim Chief Executive Officer and Richard Benmore, currently Independent Non-Executive Director of the Company, will assume the role of Interim Independent Non-Executive Chairman. The Company will appoint a Chief Financial Offer to its Board within 12 months of Admission.

· The Company expects to post the Admission Document to those Kistos Shareholders who have elected to receive hard copy documentation from the Company and publish an electronic copy of the Admission Document on its website, www.kistosplc.com on 21 April 2021. The Admission Document includes a notice convening a General Meeting of the Company on at 11.00 a.m. on 14 May 2021.

· It is anticipated that admission of the Existing Ordinary Shares to trading on AIM will be cancelled and the Enlarged Share Capital will be admitted to trading on AIM shortly following the General Meeting. Admission and dealings in the Enlarged Share Capital are expected therefore to take place on 17 May 2021.

· Completion of the Acquisition and the issue of the New TONO Bond are expected to take place shortly following Admission.

Andrew Austin, Chairman of Kistos, commented:

"I am delighted to be announcing the acquisition, and the associated fundraising, this morning. This represents the culmination of many months of work and is, in my view, a hugely exciting development for stakeholders in Kistos. The portfolio of assets that we have acquired include profitable and cash generative producing assets, plus exploration and appraisal assets from which we are looking to deliver significant upside for our shareholders. Crucially, commercial production from the Q10-A field operated during 2020 with Scope 1 carbon emissions of just 9g CO2e/boe, compared to an industry average of 22kgCO2/boe for gas extractions from the UK continental shelf. We therefore see this acquisition as absolutely in line with Kistos' strategy of managing assets with a role in Energy Transition."

Directors' participation in the Subscription

Certain Directors intend to subscribe for Subscription Shares pursuant to the Subscription. As at 19 April 2021 (being the latest practicable date prior to the notification of this Announcement) and, as expected to be immediately following Admission, the interests of each such Director in the issued share capital of the Company are as follows:

1 Note: 6,000,000 Ordinary Shares are held by Mr Austin personally and 7,500,000 Ordinary Shares are held in his self-invested personal pension scheme.

Related party transactions

The participation in the Subscription of certain Directors, as stated above, constitute related party transactions for the purposes of the AIM Rules. The Director who is independent of the related party transactions, being Julie Barlow, having consulted with Panmure Gordon (UK) Limited ("Panmure Gordon"), the Company's nominated adviser for the purposes of the AIM Rules, considers the terms of participation of each of Andrew Austin, Richard Benmore and Alan Booth in the Subscription to be fair and reasonable insofar as Shareholders are concerned.

Exchange rate

Unless otherwise indicated, any numbers stated in pounds sterling which are derived from a Euro denominated number have been translated into pounds sterling at an effective exchange rate of £1:EUR 0.8604 (which is the spot pounds sterling to Euro exchange rate quoted on Bloomberg on 19 April 2021, the latest practicable date prior to the date of this Announcement).

This Announcement should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notices" section below and the Appendices to this Announcement (which form part of this Announcement), which comprise the following:

Appendix I Further details on the Acquisition, Equity Financing and Debt Refinancing

Appendix II A description of the TON assets

Appendix III Risk factors

Appendix IV Unaudited pro forma statement of net assets of the Enlarged Group

Appendix V Historical financial information on TON and TONO

Appendix VI A competent person's report on the TON assets

Appendix VII The terms and conditions of the Placing

Appendix VIII Definitions and glossary

Appendix IX Expected timetable of principal events

Market soundings (as defined in UK MAR) were taken in respect of the Placing and Subscription with the result that certain persons became aware of inside information (as defined in UK MAR), as permitted by UK MAR. This inside information is set out in this Announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

Persons who have chosen to participate in the Placing, by making an oral or written offer to acquire Placing Shares, will be deemed to have read and understood this Announcement in its entirety (including the Appendices) and to be making such offer on the terms and subject to the conditions herein and, in respect of those persons participating in the Placing, to be providing the representations, warranties, agreements, confirmations, acknowledgements and undertakings contained in Appendix VII.

For the purposes of UK MAR, the person responsible for arranging for the release of this Announcement on behalf of Kistos is Andrew Austin, Executive Chairman.

ENDS 

Enquiries:

IMPORTANT INFORMATION

This Announcement does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities in the United States, Canada, Australia, Japan or the Republic of South Africa or in any other jurisdiction in which such offer or solicitation is unlawful, prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. The distribution of this Announcement and other information in connection with the placing and admission in certain jurisdictions may be restricted by law and persons into whose possession this Announcement, any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this Announcement nor any part of it nor the fact of its distribution shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

Panmure Gordon, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company as Nominated Adviser and Broker in connection with the placing and admission, and will not be responsible to any other person for providing the protections afforded to customers of Panmure Gordon or advising any other person in connection with the placing and admission. Panmure Gordon's responsibilities as the Company's Nominated Adviser under the AIM Rules for Companies and the AIM Rules for Nominated Advisers will be owed solely to the London Stock Exchange and not to the Company, the directors or to any other person in respect of such person's decision to subscribe for or acquire ordinary shares. Apart from the responsibilities and liabilities, if any, which may be imposed on Panmure Gordon by the Financial Services and Markets Act 2000, as amended or the regulatory regime established under it, Panmure Gordon does not accept any responsibility whatsoever for the contents of this Announcement, and no representation or warranty, express or implied, is made by Panmure Gordon with respect to the accuracy or completeness of this Announcement or any part of it and no responsibility or liability whatsoever is accepted by Panmure Gordon for the accuracy of any information or opinions contained in this Announcement or for the omission of any material information from this Announcement.

This Announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this Announcement and include statements regarding the directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this Announcement are based on certain factors and assumptions, including the directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by applicable law or regulation, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this Announcement that may occur due to any change in the directors' expectations or to reflect events or circumstances after the date of this Announcement.

This Announcement is directed only at: persons who are (a) in a member state of the European Economic Area who are qualified investors (within the meaning of the Prospectus Regulation (EU) 2017/1129) ("EU Prospectus Regulation"), (b) in the United Kingdom qualified investors as defined in article 2(e) of the EU Prospectus Regulation as it forms part of UK domestic law by virtue of the EUWA, (the "UK Prospectus Regulation"), who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ("Order") (investment professionals) or (ii) who fall within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations etc.) and (c) those persons to whom it may otherwise be lawfully communicated.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than AIM.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this Announcement.

UK Product Governance Requirements

Solely for the purposes of the product governance requirements contained within the FCA Handbook Product Intervention and Product Governance Sourcebook (the "UK Product Governance Rules") , and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any 'manufacturer' (for the purposes of the UK Product Governance Rules) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail clients, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA , (b) investors who meet the criteria of professional clients as defined in Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA and (c) eligible counterparties as defined in the FCA Handbook Conduct of Business Sourcebook ("COBS"); and (ii) eligible for distribution through all distribution channels as are permitted by Directive 2014/65/EU (the "UK Target Market Assessment"). Notwithstanding the UK Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The UK Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the UK Target Market Assessment, Panmure Gordon will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the UK Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of COBS; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

EU Product Governance Requirements

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any 'manufacturer' (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of retail clients and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "EU Target Market Assessment"). Notwithstanding the EU Target Market Assessment, distributors should note that: the price of the Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The EU Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the placing. Furthermore, it is noted that, notwithstanding the EU Target Market Assessment, Panmure Gordon will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the EU Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase or take any other action whatsoever with respect to the Placing Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

Appendix I

Further details on the Acquisition, Equity Financing and Debt Refinancing

1. Introduction

Kistos was established as a closed-ended investment company incorporated in England and Wales on 14 October 2020. The Company was established with the objective of creating value for its investors through acquisition and management of companies or businesses in the energy sector. Since admission to trading on AIM on 25 November 2020, the Company has been an "investing company" for the purposes of the AIM Rules for Companies.

"Kistos" (Greek) is a genus of flowering plants in the rockrose family "Cistaceae", containing about 20 species (Ellul et al. 2002). They are perennial shrubs found on dry or rocky soils. With the Kistos genus being hardy plants, the Board considered the Company's name to be reflective of the principles underlying its Investing Policy and strategy.

On 12 March 2021, the Company announced that it had entered into an Acquisition Agreement, subject to customary conditions precedent, to acquire the entire issued and outstanding share capital of TON from the Vendor.

TON owns an operating interest in the M10/M11 discoveries and, via its wholly owned subsidiary, TONO, owns an operating interest in the Q10-A offshore gas field and interests in other fields in the Dutch North Sea, including the Q10-A Vlieland oil, Q10-B and Q11-B discoveries, as well as additional exploration acreage.

The headline consideration payable by the Company to the Vendor to be satisfied at completion of the Acquisition amounts to EUR 222.75 million, comprising:

(i) the sum of EUR 60 million in cash;

(ii) the issuance to the Vendor of Consideration Shares representing a monetary value of EUR 15.75 million credited as fully paid;

(iii) the issue by TONO of EUR 60 million of Consideration Bond to the Vendor; and

(iv) the Bond Refinancing, to the value of EUR 87 million in aggregate,

with associated locked box and working capital adjustments

Contingent consideration of up to EUR 163 million (based on an exchange rate of $1.19:EUR 1) is also payable based on the achievement of certain development milestones. Further details regarding the contingent consideration are set out in paragraph 12 below.

Assets to be acquired

Figure 1: Table of Key Tulip assets

Source: Sproule CPR, Table I-1 on page T-18.

The Acquisition includes a majority (60%) interest in the Q10-A offshore gas field (with the remaining 40% being held by joint venture partner, EBN), together with interests in a suite of offshore exploration and production licences in the Dutch North Sea. The Q10-A field straddles licence blocks Q07 and Q10a, has 2P reserves of 19.95 mmboe and generated total net production of 5.47 mboe/d in 2020. The remaining gas field discoveries, the Q11-B, Q10-B, M10a and M11 fields, in aggregate comprise 312 Bcf of gas, equating to 56.2 mmboe of unrisked contingent resources, providing material growth opportunities for Kistos going forward. In addition, the Q10-A Vlieland oil discovery is estimated to hold net contingent resources of 42.9 mmboe, resulting in an overall 2P reserves and 2C resources position of 19.95 mmboe reserves plus 99.1 mmboe 2C resources as at 1 January 2021.

The Q10-A field was successfully brought on-stream ahead of schedule in early 2019, and has since produced 7.32 mmboe to year-end 2020 at a very low unit average operational expenditure (OPEX) costs of EUR 4.54/boe in the year to 31 December 2020 (2019: EUR 4.90/boe). As a result, Tulip recorded aggregated EBITDA of EUR 30.60 million in the year to 31 December 2020 (2019: EUR 36.27 million) against a realised gas price of EUR 11.58/MWh (2019: EUR 12.55/MWh). The realised prices and forward curve imply an average 2021 gas price of EUR 17.91/MWh.

For information relating to the Q07 and Q10a production licences, refer to paragraphs 1 and 2 of Appendix II below.

Environmental credentials

The Q10-A platform primarily generates power through solar and wind generation. The facility is a normally unmanned installation, and infrequent visits are conducted solely by boat. As a result, the Q10-A field Scope 1 emissions intensity from production operations were 9g CO2e/boe in 2020 and 17g CO2e/boe in 2019. These are significantly below the North Sea average of 22 kg CO2/boe. The Directors accordingly consider that the Acquisition is in line with the Company's strategy to acquire assets with a role in the energy transition. Plans for the future developments of the assets to be acquired by Kistos in the Acquisition also utilise wind and solar power, which the Directors believe will make the Company one of the lowest CO2/boe emitters of Scope 1 emissions from upstream operations in North West Europe.

2. Background to the Acquisition

The Company had cash balances of £34.47 million following receipt of the balance of funds in respect of Original Admission in November 2020.

The Company was admitted to trading on AIM in November 2020 with the objective of creating value for Shareholders through the acquisition and/or management of companies and businesses in the energy sector. The Company outlined certain key objectives, against which any prospective acquisitions should be reviewed, in its November 2020 Admission Document, which included:

· maximising Kistos' low carbon footprint credentials, playing a role in energy transition;

· focussing on businesses which have proven cash flow generation; and

· creating value for Shareholders by implementing a progressive dividend policy.

During the period from the Original Admission on 25 November 2020 to the signing of the Acquisition Agreement on 12 March 2021, the Company evaluated multiple acquisition opportunities.

3. Reasons for the Acquisition

One of the key objectives outlined in Kistos' acquisition strategy set out in the November 2020 Admission Document was that acquisitions should play a role in energy transition, and the Directors believe that the interests and exploration acreage held by TON accord with that strategy.

It is the Directors' belief that the Acquisition achieves these objectives. The assets to be acquired achieve industry-leading Scope 1 carbon emissions intensity. In addition to minimising scope one emissions, there is the opportunity to reduce Scope 2 carbon emissions through activity which is budgeted to reduce the reliance on third-party infrastructure. The 2019 and 2020 TONO financial accounts demonstrate substantial positive cash flow generation from the Q10-A gas field against a backdrop of subdued gas prices during the period.

The Acquisition also provides significant near-term appraisal opportunities, which the Directors view as having a reasonably high chance of being progressed to future developments, creating potential additional value for the Company and its Shareholders.

Following completion of the Acquisition, it is the Directors' intention to mitigate 100% of the Enlarged Group's Scope 1 emissions on an ongoing basis.

For information relating to the environmental credentials of the TONO assets, refer to paragraph 7 of Appendix II of this Announcement.

4. Information on Tulip

TON owns an operating interest in the M10/M11 discoveries and, via its wholly owned subsidiary, TONO, owns an operating interest in the Q10-A offshore gas field and interests in other fields in the Dutch North Sea, including the Q10-A Vlieland oil, Q10-B and Q11-B discoveries, as well as additional exploration acreage.

The tables below set out selected historical financial information of TON and TONO for the periods indicated. The financial information for the three years ended 31 December 2018, 2019 and 2020 has been extracted without material adjustment from the audited financial statements of TON and TONO for those periods.

Summary historical financial information on TON

Source: 2020, 2019 and 2018 Annual Reports and Audited Financial Statements for TON

Summary historical financial information on TONO

Source: 2020, 2019 and 2018 Annual Reports and Audited Financial Statements for TONO

5. Investment opportunity

The Acquisition has an effective date of 1 January 2021. As detailed in Figure 1 above, the licensed acreage held by TON's wholly owned subsidiary, TONO, carries a 60% net working interest and operatorship, with the remaining 40% being held by joint venture partner, EBN. The assets that Kistos proposes to acquire are considered by the Directors to provide established cashflows through a producing reserves base of 19.95 mmboe from the Q10-A field, along with expected near term upside from independently verified contingent resources of 99.1 mmboe from a number of discoveries located throughout the licensed acreage.

Two appraisal wells targeting the Q11-B gas discovery and the Q10-A Vlieland oil discovery are planned for the second half of 2021, on top of a work programme at the existing Q10-A field. The Directors view these discoveries as representing a significant opportunity for the Company to grow the Enlarged Group's near-term production and reserves base and it is expected that the associated work programme will be funded from existing cashflows.

6. Current trading and prospects

Kistos

Kistos is currently an investing company and does not trade. Since the Company was incorporated on 14 October 2020, it has not generated any revenue or carried out any trading or corporate activities other than in relation to the Original Admission and the assessment of prospective target transactions.

Tulip

TONO reported, in aggregate, revenue of €33.27 million in the year to 31 December 2020, which represented a reduction from €47.83 million in 2019. The Directors attribute this decrease primarily to the COVID-19 pandemic, which materially reduced economic activity across Europe, and expect Tulip's revenues to recover during 2021 as economic activity returns to levels approximating pre-COVID-19 conditions.

Tulip net production averaged 6,521 boe/d in the 3-month period from 1 January 2021 to 31 March 2021and the Company's expectation is that production will continue under a moderate natural decline until the annual scheduled maintenance shutdown of the third-party P15-D platform in the middle of the third quarter 2021. At that time, rig activities will be executed on development activity for two wells at the Q10-A field to increase production potential for the fourth quarter of 2021. The Q10-A-04 well will target the known Zechstein clastic and Slochteren reservoirs, whilst the Q10-A-06 well will be re-stimulated in the Volpriehausen siltstone and re-perforated in the Volpriehausen sandstone. As part of the 2021 drilling programme, Tulip also intends to appraise the Vlieland oil discovery, with a flow test designed to establish whether commercial volumes can be produced. The final well in the campaign will appraise the Q11-B discovery, where data suggests that significant volumes exist up-dip of the discovery well. A number of exploration targets have also been identified, the highest ranking of which is called Q10-Gamma, located approximately 4 km to the west of the Q10-A field. It is intended that an exploration well will be drilled in the future, potentially building on the gas resources in the core acreage which Tulip holds.

7. The market, market drivers and trends

Gas market fundamentals

Consumption

As shown in Figure 2 below, European gas consumption between 2000 and 2019 remained broadly constant, albeit that the level has declined since its peak in 2005-2010:

Figure 2: Natural gas consumption in the European Union from 1998 to 2019

https://d1ssu070pg2v9i.cloudfront.net/pex/kistos/2021/04/20014740/Kistos-placing-launch-announcement-1.pdf

Consumption levels during 2020 show a decline from historical levels, as a result of factors including the repercussions of the COVID-19 pandemic, combined with a warm winter and strong wind power generation.[1] In the first three quarters of 2020, gas consumption in Europe amounted to 274 bcm, down by 14 bcm (5%) compared to the same period of 2019, as shown in Figures 3 and 4 below:

Figure 3: European gas consumption

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Figure 4: Year-on-year change in European gas consumption in each quarter 2017-2020 (%)

https://d1ssu070pg2v9i.cloudfront.net/pex/kistos/2021/04/20014740/Kistos-placing-launch-announcement-1.pdf

Reports vary on possible levels of demand for gas on an ongoing basis and it appears likely that there may be some decline in demand over the next 10 years. However, the decrease is not expected to have a material impact on the TONO assets during their lifetime, with the International Energy Agency forecast stating that EU gas demand would fall by 8% between 2019 and 2030 (https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/101320-iea-slashes-2040-european-gas-demand-forecast-by-further-21-bcm).

Production

As stated above, European gas production in 2020 was affected by the COVID-19 pandemic. In the third quarter of 2020 European gas production reached approximately 11.5 bcm, 29% (4.7 bcm) less than in the same quarter of 2019 (as detailed in Figure 5 below).

In the Netherlands (the largest European producer), natural gas production in the third quarter of 2020 decreased by 41% (by 3.1 bcm) to 4.4 bcm, which was the lowest quarterly production figure in the last seven years. According to an announcement by the Dutch government on 22 September 2020, the production cap for the Groningen gas field is set to 8.1 bcm[2] for the 2020 gas year (1 October 2020 to 30 September 2021). In the previous gas year the production cap was set to 11.8 bcm (1 October 2019 to 30 September 2020), which was supposed to decline further to 9.3 bcm as of 1 October 2020; however, the Dutch government announced a sharper than expected cut in order to curb earthquakes and reduce gas supply in order to track the decrease in demand resulting from the COVID-19 pandemic.

In the first three quarters of 2020 gas production in Europe amounted to 41.3 bcm, down from 53.9 bcm in the same period of 2019. The Netherlands produced 18.4 bcm gas (vs. 26.2 bcm the year before).

Figure 5: Monthly gas production in Europe

https://d1ssu070pg2v9i.cloudfront.net/pex/kistos/2021/04/20014740/Kistos-placing-launch-announcement-1.pdf 

Over recent months, the EC has adopted several initiatives that might significantly impact European gas markets, especially in the longer run. On 8 July 2020, both the EU hydrogen strategy for a climate-neutral Europe[3] and the EU strategy for energy system integration were adopted.

Energy system integration will change the traditional way of thinking on separate sectors, including, but not limited to, electricity, gas, heating and transport. The EU hydrogen strategy rolls out the action plans for alternative fuels, such as hydrogen, which will serve as a replacement to natural gas, especially after 2030. The Climate Target Plan ("Stepping up Europe's 2030 climate ambition"[4], adopted by the EC on 17 September 2020) led in December 2020 to the raising of the EU's wide greenhouse gas emission reduction target to 55% by 2030. On 14 October 2020, the EC adopted the EU Methane strategy[5], which also has relevance in the gas sector, particularly in relation to natural gas flaring and venting.

However, it must be noted that production of hydrogen is still costly compared to other forms of energy. Whereas at the end of September 2020 the spot gas wholesale price on the TTF hub stood at EUR 12/MWh, the hydrogen price assessment in the Netherlands reached EUR 70/MWh, with alkaline electrolysis technologies, and EUR 78/MWh with polymer electrolyte membrane (PEM) fuel cells[6], not taking into account CAPEX costs. This reflects the need for technological development for hydrogen production and/or financial support measures to make hydrogen competitive against mature energy production sources.

European gas markets

European energy commodity markets

After the steep price fall seen in the first quarter of 2020 and the recovery in the second quarter of 2020, the dated Brent crude price remained relatively stable in the third quarter of 2020, and was in a range of US$ 40-45/bbl (EUR 32-38/bbl) during most of the period. The significant discount of the dated Brent to the year-ahead contract was narrower in the third quarter of 2020 than in the previous quarter, amounting to only US$ 3-4/bbl (EUR 2.8-3.6/bbl).

The Dutch TTF spot gas price started July 2020 at EUR 5.6/MWh and rose as high as EUR 12.4/MWh by the end of September 2020, which had not been seen since the end of 2019. Since 21 May 2020, when the Dutch TTF spot gas price reached a historic low (EUR 3.1/MWh), to the end of September 2020 the spot gas price practically quadrupled. This significant increase was due to a general correction in energy commodity prices, as spot price lows registered on the oil and gas markets could not be justified by market fundamentals.

Wholesale price developments in Europe

Figure 6: Historical Futures Prices Endex Dutch TTF Gas Base Load Futures, Continuous Contract #1

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Figure 6 above shows the historical price of the front month Dutch TTF Gas Base Load Futures over the last five years based on spot-month continuous contract calculations. 2020 saw historically low prices, typified in May 2020, when the price dropped below €4/MWh, compared to an average price of €15.861 over the five-year period. The price recovered to levels more commensurate with 2019 levels, during the second half of the year. The highest prices in the period, of up to €29.244, were reached in September 2018.

Figure 7: Dutch TTF Gas Futures, Monthly Contract Prices May 2021 to December 2022

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Prices for Dutch TTF Natural Gas Futures in May 2021 traded at €18.994 per MWh as at 31 March 2021. As is detailed in Figure 7 above, forward prices peaked at €20.622 for February 2022 contracts before reaching a nadir of €16.225 for June 2022 contracts. As at 7 April 2021, the price for futures in December 2022 was €18.717.

Gas trade on the European hubs

For the first time in several years, liquidity on the main European gas hubs decreased year-on-year in the third quarter of 2020: the total traded volume amounted to around 13,235 TWh (equivalent to around 1,105 bcm and in monetary terms representing EUR 110 billion), 8% less in volume than in the third quarter of 2019. In the second quarter of 2020 the year-on-year increase in traded volumes were 7%, following a rate of 32% in the first quarter of 2020, which turned into a decrease by the third quarter of 2020. The traded volume in the third quarter of 2020, however, was around 19 times more than the gas consumption in the seven EU member states covered by the analysis in July-September 2020.

Traded volumes in the third quarter of 2020 remained practically unchanged year-on-year on the most-liquid European hub, the Dutch TTF. On two German hubs (Gaspool and NGC) aggregate traded volumes fell by 17% over the same period. In Italy (PSV), the volume decreased by 23% and in Austria on the VTP hub, traded volumes went down by 21%. Traded volume on the French TRF fell by 16%. The steepest fall in traded volumes could be observed on the Belgian Zeebrugge hub (by 70%) in the third quarter of 2020 year-on-year, and total volumes amounted to only 31 TWh (whereas on the TTF volumes reached 9,715 TWh).

In contrast to the other hubs in Europe, where significant drops occurred in traded volumes, trade on the Dutch TTF hub managed to preserve the volumes year-on-year, implying that the share of Dutch TTF hub increased further among the observed hubs in Europe, reaching 73% in the third quarter of 2020 (a year earlier its share in the third quarter of 2020 was 67%). If looking at only European countries, its share is even bigger, 88%). TTF has emerged as a liquid continental benchmark, having the advantage of Euro denomination, and benefiting from its good connection to various supply sources and access to seasonal storage as well.

8. Competition and competitive landscape

Gas is a commodity and, accordingly, the gas market is a global one with gas being transported around the world, primarily in the form of LNG. Europe remains a net importer of natural gas with imports both in the form of LNG cargoes and non-liquified product from around the world and is served by direct pipeline links with the Scandinavian countries and Russia.

Figure 8: European imports of natural gas by source, 2017-2020

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As shown in Figure 8 above, due to decreasing import volumes and falling average import prices, in the third quarter of 2020 Europe's estimated gas import bill fell to as low as EUR 7 billion (in comparison to EUR 10.6 billion in the third quarter of 2019, falling by 34% year-on-year). Wholesale gas prices in Europe, albeit recovering from the historic lows in the second quarter of 2020, were still lower by 28% in the third quarter of 2020 year-on-year. The quarterly gas import bill however was slightly up in the third quarter of 2020 compared to the previous quarter (EUR 6.2 billion). In the first three quarters of 2020 the total gas import bill was EUR 23.1 billion, down from EUR 45 billion in the same period of 2019.

Nevertheless, Europe currently remains energy dependent and whilst longer-term competition to gas may come from solar, wind, biomass and other green energy sources it is, in the Directors' view, unlikely that the market for low carbon gas is likely to be impacted materially in the context of the life of TON's reserves and contingent resources.

9. Regulatory and operating environment

Legislation and regulators

The Mining Act provides the legislative framework for the licence regime and state participation in the exploration and production of minerals and geothermic heat, and for underground storage of minerals and CO2 onshore in the Netherlands, and offshore in the Dutch part of the continental shelf underlying the North Sea. The Mining Act applies to minerals to the extent that these occur at a depth of more than 100 metres. In addition, detailed regulations are elaborated in network codes determined by the Dutch regulator (the Authority for Consumers and Markets). These codes provide secondary legislation on tariffs, technical conditions and procedures with respect to, inter alia, system access, system operation and measuring services.

The Mining Act assigns principal regulatory powers in upstream oil and gas, apart from those involving the environment and spatial planning in general, to the Dutch MEA and the Dutch SSM.

Licences

Ownership of the minerals is transferred to the licence holder(s) at the point of production of the minerals under a production licence issued by the Dutch MEA. The Dutch MEA may grant a licence for exploration, production or storage. Licence requirements for exploration are, inter alia, financial and technical capabilities and the agreement of a development plan satisfactory to the Dutch MEA. The holder of an exploration licence that demonstrates the commerciality of a gas reservoir then has priority to apply for a production licence. The holder of the production licence is exclusively entitled to the production from a reservoir within the licence area. The current mining legislation is still based on an historical licensing regimes and traditional principles. A production licence is granted, provided the licensee enters into an agreement of co-operation, within one year from the issuance of the licence, with the EBN, which confers on the EBN a 40% financial share in production. The Dutch MEA may grant an exemption to this obligation only in circumstances where, if the EBN was to enter into such agreement, the Dutch State could reasonably be estimated to suffer financial loss. The co-operation agreement is subject to approval from the Dutch MEA. Licence holders are subject to various requirements in respect of, inter alia, wastewater discharges. Compliance with these requirements is monitored by the Dutch SSM and enforced by the Dutch MEA.

The EBN thus acts as an independent (non-operating) partner in the majority of Dutch fields. Upon the acquisition of its participating interest, the EBN must reimburse licence holders its percentage share of expenditures incurred in the exploration for and appraisal of the prospect, and any further capital investment in production facilities. The EBN may request the Dutch MEA's permission for ancillary activities provided that such activities are closely related to and will not jeopardise the statutory duties and serve the general energy policy interest. For such other activities, the EBN must maintain ring-fenced accounts.

The licence will stipulate the activity, the mineral, the term and the area of land or seabed concerned. The exploration licence contains a certain date prior to which the exploration activities are to be initiated, the Dutch MEA may stipulate specific conditions in the licence. The application for a licence is published in the Dutch Government Gazette and in the Official Journal of the EU. During a period of 13 weeks, other parties are entitled to submit an application for a licence in that same area. If more than one person applies for a licence, they are considered as joint applicants and when the licence is granted, they will jointly hold the licence, and one of the licensees will be designated as the operator.

Apart from corporate income tax, the Dutch State charges certain taxes directly to the licence holder, such as surface duties (offshore exploration licence or production licence), royalties relating to the amount of natural gas produced (production licence) and the Dutch SPS.

The Dutch SPS, at a rate of 50%, is levied from the holder or co-holders of a production licence on profits that can be directly and indirectly attributed to the extraction of hydrocarbons (the ring fence). The allocation principles have been established in practice and case law. The Dutch SPS is calculated similar to corporate income tax, but with (most) expenses 'uplifted' by an additional 10% and eligible CAPEX uplifted by 40% (pursuant to the latest amendment to the Mining Act). To prevent corporate income tax and the Dutch SPS from accumulating, a notionally calculated amount (generally referred to as the 'creditable amount') can be credited against the Dutch SPS.

Ownership and market access restrictions

The Mining Act does not contain (foreign) ownership constraints. Licence applications can only be denied if the applicant fails to demonstrate its technical and financial capabilities. There are no restrictions applicable with respect to ownership of mining works or installations.

Transfers of control and assignments

Transfers of licences require the prior written approval of the Dutch MEA. The Mining Act does not require such consent in the event of an indirect transfer through a change of control of the licence holder. However, the Dutch MEA may withdraw a licence under certain circumstances, such as incorrect information provided at the application or the licensee being in default under licence obligations. In the event that an operator no longer qualifies (regarding financial or technical capabilities), the Dutch MEA may designate another operator. Therefore, the transfer of a licence interest via a change of control of the participating entity is often notified to the Dutch MEA, in particular in the case of an operated interest. The transfer of a licence interest is also subject to accession to the agreement of cooperation with the EBN. The disposal of a licence interest is subject to the fulfilment of decommissioning and abandonment obligations. These obligations rest with the last operator and the last co-holders of the licence.

10. Strategy

Kistos was formed to focus initially on offshore and onshore hydrocarbon production, energy storage, infrastructure and energy generation projects. The targeted geographies are the UK and Continental Europe. The investment strategy is to acquire assets with a role in energy transition with an execution strategy of pursuing a rigorous approach to asset selection and active forward-looking stewardship. The strategy is reflective of, and builds upon the experience of the Board in the sector to date and also encompasses areas and opportunities which the Board see as having future potential including asset repurposing in the context of the "Net Zero 2050" agenda, originally formulated by the European Climate Foundation and now adopted by both the Dutch and UK Governments.

The Directors fully embrace the "Net Zero 2050" and energy transition agenda and believe it will create opportunities for Kistos because many exploration, production and infrastructure companies are yet to substantially respond or adapt to the issues raised. The Directors also believe that the consequences of this transition may lead to a number of industry players choosing to exit the area, which may create opportunities for the Enlarged Group.

The Directors consider that the Acquisition fully complies with Kistos' stated strategy, representing low carbon, cash generative gas production, based on gas' role in energy transition. The Directors confirm that they continue to seek complementary asset and business acquisitions which support the low carbon agenda and are committed to minimising Scope 1 emissions from its assets while seeking to mitigate Scope 2 emissions where possible. Following Admission, the Company will cease to be an "investing company" for the purposes of the AIM Rules for Companies.

11. Directors

The Board currently comprises four Non-Executive Directors. The Directors are ultimately responsible for managing the Company's business in accordance with the Articles and assessing the appropriateness of its Investing Policy and strategy. The Directors also have overall responsibility for the Company's activities, including its acquisition activities, and reviewing the performance of the Company's acquisitions.

The Board currently comprises Andrew Austin, as Non-Executive Chairman and Richard Benmore, Julie Barlow and Alan Booth as Independent Non-Executive Directors, details of each of whom are set out below. 

In the November 2020 Admission Document, the Company stated that upon completion of the Acquisition, the composition of the Board would be reviewed to ensure it remains appropriate for the Company.

As a result of a review conducted by the Board, it has been resolved that, conditional on Admission, Andrew Austin will assume the role of Interim Chief Executive Officer and Richard Benmore will assume the role of Interim Independent Non-Executive Chairman. As a consequence of the Acquisition the Company will gain an experienced senior management and finance team.

The Board have resolved that, after due consideration and in light of the Acquisition delivering an experienced operational team with in-depth knowledge of the acquired assets, further additions to the Board are not currently necessary. Kistos will appoint a Chief Financial Officer to its Board within 12 months of Admission.

The Directors are as follows:

Andrew Austin - Non-Executive Chairman (assuming the role of Interim Chief Executive Officer on Admission) (aged 55)

Mr Austin served as Executive Chairman of RockRose from 2016 until 2020, delivering a 42x return to shareholders through a strategy of counter-cyclical acquisitions of legacy / non-core assets in the North Sea and wider UK oil sector. RockRose was sold to Viaro Energy in August 2020 at a price per share of £18.50, representing a premium to the prevailing share price of 64%. Prior to RockRose, Andrew jointly founded IGas in 2004 and developed it to become the leading onshore hydrocarbon producer in the UK, delivering natural gas and crude oil to Britain's energy market. Andrew left IGas in 2015, having delivered partnerships with Total, GDF and Ineos. Prior to his tenure at IGas, Andrew spent six years in management and consulting roles with clean tech companies including Generics Group and Whitfield Solar. Andrew spent 17 years working in investment banking in the City of London with Merrill Lynch, Nomura, Citibank and Barclays Capital.

Richard Benmore B.Sc, M. Sc, Ph.D - Independent Non-Executive Director (assuming the role of Interim Independent Non-Executive Chairman on Admission) and Chair of the Nominations Committee (aged 62)

Richard Benmore has 35 years' experience in the Oil and Gas industry with Conoco, Oryx Energy, Nimir Petroleum, EnCana, Nexen Petroleum and IGas. Richard has held a variety of roles starting his career as a petroleum geologist before moving into various commercial, business development and E&P managerial positions. He recently managed Nexen's unconventional projects in the U.K. and Poland and was a board member of Nexen Exploration U.K. Richard was a non-executive director of RockRose.

Julie Barlow - Independent Non-Executive Director and Chair of Audit Committee (aged 55)

Julie Barlow joined the Pentex Group of companies in 1999 as Financial Controller. As a result of a MBO in 2003, she was retained as Group Financial Controller and Company Secretary. In 2005 the Star Energy Group acquired the Pentex Group and Julie was promoted, initially to Financial Controller and then Managing Director of the Production Division. In 2008 the Star Energy Group became part of the PETRONAS Global Group of Companies. In 2011, the Production Division of the Star Energy Group was acquired by IGas. Since 2017, Julie has been an independent contractor, latterly working with RockRose, supporting its M&A capability and integration of acquisitions. Julie is a chartered management accountant.

Alan Booth - Senior Independent Non-Executive Director and Chair of the Remuneration Committee (aged 62)

Alan Booth has 30 years' experience in oil and gas exploration. He is currently a director of Storegga Geotechnologies, which champions and delivers carbon storage (CCS), hydrogen and other subsurface renewable projects in the UK and internationally. Between 2013 and 2018, Alan was a non-executive director of Ophir Energy plc, an Official List company, becoming CEO in May 2018. In this role, he led Ophir through its £391 million recommended offer from Ophir Medco Energi Global PTE Limited, which completed in May 2019. Previously, Alan was founder and CEO of EnCore Oil plc, an AIM-listed oil and gas exploration company and was the founder and director of EnCounter Oil Ltd. Alan holds a BSc in Geology from the University of Nottingham and MSc. DIC. in Petroleum Geology from the Royal School of Mines, Imperial College. He is a former president of the UK Offshore Operators Association (UKOOA) and was a director of the Oil and Gas Independents Association (OGIA) between 2006 and February 2020.

12. Principal terms of the Acquisition

Pursuant to the Acquisition Agreement, the Company has agreed to purchase the entire issued and outstanding share capital of TON.

The headline consideration payable by the Company to the Vendor to be satisfied at completion of the Acquisition amounts to EUR 222.75 million, comprising: (i) the sum of EUR 60 million in cash; (ii) the issuance to the Vendor of Consideration Shares representing a monetary value of EUR 15.75 million credited as fully paid; (iii) the issue by TONO of EUR 60 million of Consideration Bond to the Vendor; and (iv) the Bond Refinancing, with associated locked box and working capital adjustments. Contingent consideration of up to EUR 163 million (based on an exchange rate of $1.19: EUR 1) is payable based on the achievement of the following development milestones:

· Q10 Gamma: EUR 10 million cash payment conditional upon FID being reached;

· Q10 A Vlieland: (1) following the appraisal well in the third quarter of 2021, the Company has nine months to decide whether to 'proceed', triggering a payment of EUR 7.5 million to TOH. This can be satisfied with cash or equity; and (2) upon FID, a payment of USD 4.50/bbl is triggered, based upon the net reserves at the time of sanction and capped at EUR 75 million, payable upon first hydrocarbons; and

· M10a and M11: (1) following a nine-month period to review the asset, if the Company decides to retain ownership, then a payment of EUR 7.5 million will be due to TOH. This can be satisfied with either cash or equity; and (2) upon FID, a payment of up to USD 75 million will be triggered, based on USD 3/boe of sanctioned reserves, net to the Company. This will be paid upon first gas.

If the Company does not declare intention to proceed under the Acquisition Agreement, TOH has the right to repurchase each of the fields for EUR 1.

The Vendor's liability under the warranties (other than as to title and capacity) and tax covenant in the Acquisition Agreement is EUR 1. The Company had the option to seek insurance coverage for potential claims under the warranties and the tax covenant, however, having sought a variety of market quotes for full and partial insurance coverage and based upon the results of due diligence investigations the Directors decided, in light of the short operating history of the assets covered by the Acquisition, that the cost of such insurance would be disproportionate to the risks of a claim arising in connection with the Acquisition.

Completion of the Acquisition under the Acquisition Agreement is conditional on, inter alia, Admission. Where any of the conditions are not satisfied or waived on or prior to the date falling three months after the date of the Acquisition Agreement (being three months after 12 March 2021) and the parties to the Acquisition Agreement have not decided to extend such period, either party to the Acquisition Agreement has the right to terminate by way of notice to the other party.

The Consideration Shares will (following issue) rank pari passu in all respects with the Existing Ordinary Shares.

13. Details of the Fundraising

The Fundraising comprises the Equity Financing, which incorporates the Placing, the Subscription and the PrimaryBid Offer, and the Debt Financing, which incorporates the Bond Refinancing and the issue of the Consideration Bond by the Company to the Vendor, the details of which can be found below.

The Fundraising is conditional on, inter alia, Admission occurring on or before 8.00 a.m. on 17 May 2021 (or such later date as Panmure Gordon and the Company may agree, being not later than 31 May 2021). The Placing, the Subscription and the PrimaryBid Offer are all inter-conditional. The Debt Financing is conditional upon Admission but will close contemporaneously with the completion of the Acquisition following Admission.

Equity Financing

The Company intends to raise gross proceeds of between £42.0 million and £52.5 million (in each case, before commission and expenses) by way of the Equity Financing. Assuming the maximum of £52.5 million is raised in the Equity Financing, the Equity Financing Shares will represent approximately 40.9% of the Enlarged Share Capital on Admission.

The Placing

The Placing is inter-conditional on the closing of the Subscription and PrimaryBid Offer and Admission.

The Placing Shares are not being offered generally in the UK or elsewhere and no applications have or will be accepted other than under the terms of the Placing Agreement and the Terms and Conditions set out in Appendix VII of this Announcement. It is expected that the proceeds of the Placing due to the Company will be received by it soon after Admission.

The Placing Shares are in registered form and will be free from restrictions on transfer and freely transferable.

The Placing Shares will, on Admission, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive dividends and other distributions declared, made or paid in respect of the Ordinary Shares and will be issued free of any expenses and stamp duty.

The Placing, which is not underwritten, is conditional on, inter alia, Admission occurring on or before 8.00 a.m. on 17 May 2021 (or such later date as the Company and Panmure Gordon may agree, being not later than 31 May 2021).

The Subscription

The Subscription is conditional on Admission.

The Subscription Shares are in registered form and will be free from restrictions on transfer and freely transferable.

The Subscription Shares are not being offered generally in the UK or elsewhere. It is expected that the proceeds of the Subscription due to the Company will be received by it soon after Admission.

The Subscription Shares will, on Admission, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive dividends and other distributions declared, made or paid in respect of the Ordinary Shares and will be issued free of any expenses and stamp duty.

The Subscription, which is not underwritten, is conditional on, inter alia, Admission occurring on or before 8.00 a.m. on 17 May 2021.

The PrimaryBid Offer

The PrimaryBid Offer is conditional on Admission.

The PrimaryBid Shares are in registered form and will be free from restrictions on transfer and freely transferable.

PrimaryBid has conditionally agreed, pursuant to the PrimaryBid Engagement Letter, to act as arranger for the Company. The PrimaryBid Offer is not being underwritten.

The PrimaryBid Shares are not being offered generally in the UK or elsewhere. It is expected that the proceeds of the PrimaryBid Offer due to the Company will be received by it soon after Admission.

The PrimaryBid Shares will, on Admission, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive dividends and other distributions declared, made or paid in respect of the Ordinary Shares and will be issued free of any expenses and stamp duty.

The PrimaryBid Offer, which is not underwritten, is conditional on, inter alia, Admission occurring on or before 8.00 a.m. on 17 May 2021.

Debt Financing

Bond Refinancing

ABG and Pareto have conditionally agreed to use their reasonable endeavours to place, as agent for the Company, the New TONO Bond which will be used to refinance the Existing TONO Bond. It is expected that the New TONO Bond will be placed, in full, prior to Admission, however Admission is not conditional upon the issue of the New TONO Bond (which will occur after Admission and contemporaneously with the completion of the Acquisition).

The Existing TONO Bond is in the aggregate amount of EUR 87 million and denominated in Euro, with a term from October 2017 to ultimate repayment in October 2022. The Existing TONO Bond was issued at 98% of its face value, carries an interest rate of 3-month EURIBOR plus 8.5% (with EURIBOR being deemed to be zero in the case it is a negative figure) and the principal payable falls due in October 2022 and interest is paid on a quarterly basis. TONO is the issuer of the Existing TONO Bond and TON and the Vendor are guarantors. No covenants currently apply to the Existing TONO Bond except for the minimum liquidity restrictions and the reserving of bond interest related payments.

The Existing TONO Bond is secured by inter alia an intra-group loan pledge over all current intra-group loans made by the Vendor to TON, granted by the Vendor in favour of the Bond Trustee on first priority basis, as security for the obligations and liabilities outstanding under the Existing TONO Bond; a share pledge over all of the shares in TON, granted by the Vendor in favour of the Bond Trustee on first priority basis, as security for the obligations and liabilities under the Existing TONO Bond; a subordinated loans pledge by TON over all subordinated loans made by TON to TONO, granted by TON in favour of the Bond Trustee on first priority basis, as security for the obligations and liabilities under the Existing TONO Bond; a Dutch law governed omnibus pledge granted by TONO in favour of the bond holders on first priority basis, as security for the obligations and liabilities under the Existing TONO Bond and comprising: (a) a receivables pledge of all TONO monetary claims under or with respect to any insurances required to be taken out; (b) a receivables pledge over each of TONO's existing bank accounts held with Dutch banks (except for the bond escrow account and the debt service retention account related to the Existing TONO Bond); (c) a receivables pledge over the earnings from the sale of hydrocarbons; and (d) a receivables pledge over monetary claims under or with respect to any loans granted by TONO to any other group company.

The terms of the Acquisition provide that upon a change of control of TON and TONO, Kistos will procure the replacement of the Existing TONO Bond with a new bond and procure the release of the Vendor from its guarantee obligations. Upon a change of control of TON and TONO, a mandatory redemption event arises and bondholders of the Existing TONO Bond are entitled to repayment at 103% of the outstanding nominal value of the Existing TONO Bond.

Consideration Bond

As part of the consideration due to the Vendor under the terms of the Acquisition Agreement, Kistos will procure the delivery to the Vendor of the Consideration Bond with a face value of EUR 60 million.

The Consideration Bond is denominated in Euro, with a term from May 2021 to ultimate repayment in May 2026. The Consideration Bond will be issued at face value and carries an interest rate of 3-month EURIBOR plus a percentage margin to be announced in due course. The principal falls due in May 2026 and interest is paid on a bi-annual basis. TONO is the issuer of the Consideration Bond and TON and Kistos are guarantors. The covenants and security package attaching to the Consideration Bond are set out below under the heading "Further Terms of the New Bonds" and are common with the covenants and security package applicable to the New Bonds. The issue of the Consideration Bond is conditional upon Admission and is issued upon, and conditional upon, the completion of the Acquisition.

New TONO Bond

TONO will issue the New TONO Bond shortly after Admission (contemporaneously with completion of the Acquisition). The New TONO Bond is in the aggregate amount of EUR 90 million and is denominated in Euro, with a term from May 2021 to ultimate repayment 42 months from the date of issue. The proceeds of the New TONO Bond will be utilised to refinance the Existing TONO Bond, which is repayable within 30 days of a direct or indirect change of control of TONO (such a change of control being occasioned by the Acquisition) at a price of 103% of the face value of the Existing TONO Bond.

The New TONO Bond will be issued at face value and carries an interest rate of 3-month EURIBOR plus a percentage margin to be announced in due course. The principal falls due on 42 months from the date of issue and interest is paid on a bi-annual basis. Upon a change of control of TON and TONO, a mandatory redemption event arises and bondholders of the New TONO Bond will be entitled to repayment at 103% of the outstanding nominal value of the New TONO Bond.

The process governing the issue of the New TONO Bond and the redemption of the Existing TONO Bond allows for holders of the Existing TONO Bond to "roll" into the New TONO Bond on a cashless participation basis. The issue of the New TONO Bond is not underwritten. The issue of the New TONO Bond is conditional upon Admission but is not conditional upon the issue of the Consideration Bond (although it is expected that the New TONO Bond and the Consideration Bond will be issued contemporaneously with the completion of the Acquisition.

Further terms of the New Bonds

No material covenants apply to the New Bonds save for a minimum liquidity covenant of EUR 10 million and maximum leverage ratio of 2.5x at TONO level and, at the Kistos level, a minimum liquidity covenant of EUR 20 million and maximum leverage ratio of 3.5x and restrictions and provisions for the reserving of bond interest related payments. In addition, dividends and distributions by Kistos to its Shareholders are restricted to the extent that after any such dividend or distribution Enlarged Group liquidity is at least EUR 25 million and Enlarged Group leverage does not exceed 3x.

The New Bonds will carry a shared security package, which will be governed by an intercreditor agreement, affording the two bonds pari passu treatment as between them as regards the security package.

The New Bonds will be secured by parental guarantees from Kistos and TON in favour of the bond trustee as security for the obligations and liabilities outstanding under the New Bonds; a share pledge over all of the shares in TON, granted by Kistos in favour of the bond trustee on first priority basis, as security for the obligations and liabilities under the New Bonds; a subordinated loans pledge by TON over all subordinated loans made by TON to TONO, granted by TON in favour of the bond trustee on first priority basis, as security for the obligations and liabilities under the New Bonds; a Dutch law governed omnibus pledge granted by TONO in favour of the bond holders on first priority basis, as security for the obligations and liabilities under the New Bonds and comprising: (a) a receivables pledge of all TONO monetary claims under or with respect to any insurances required to be taken out; (b) a receivables pledge over each of TONO's existing bank accounts held with Dutch banks (except for the bond escrow account and the debt service retention account related to the New Bonds); (c) a receivables pledge over the earnings from the sale of hydrocarbons; and (d) a receivables pledge over monetary claims under or with respect to any loans granted by TONO to any other member of the Enlarged Group.

Following Admission, TONO will have issued bonds to the value of EUR 150 million, being the aggregate of the New Bonds.

14. Details of capital structure

The Company's capital structure has no warrants, convertibles, share options, other founder incentive ratchets or other complex and/or dilutive instruments. Accordingly, the Directors consider the capital structure to be simple and transparent for Shareholders.

The New Ordinary Shares (being the Equity Financing Shares and the Consideration Shares) will represent 51.4% of the Enlarged Share Capital.

15. Reasons for Admission and use of proceeds

Reasons for Admission

The Company is seeking Admission in accordance with its stated strategy. As was explained in the admission document of November 2020, as a closed ended investment vehicle, any acquisition made by the Company of a nature that would result in the Company becoming a trading company or the holding company would constitute a Reverse Takeover and, subject to the approval of Shareholders would result in the Company being treated as a new applicant to AIM and the triggering of the requirement to produce a new admission document reflecting the business and prospects of the Enlarged Group.

Use of proceeds

Assuming the maximum of £52.5 million is raised in the Equity Financing, the net proceeds of the Equity Fundraising will be approximately £50.0 million.

The gross proceeds of the Fundraising are expected to be approximately £181.6 million (EUR 211.0 million).

The Board intends to use the net proceeds of the Fundraising (excluding, for the avoidance of doubt, the Consideration Bond) as follows:

· the proceeds of the EUR 90 million New TONO Bond will be used to refinance the Existing TONO Bond (whose redemption will be triggered by the change of control resulting from completion of the Acquisition);

· approximately EUR 60 million of the net proceeds (subject to adjustments in accordance with the leakage provisions and the tax covenant in the Acquisition Agreement) will be used in paying the cash consideration payable under the terms of the Acquisition; and

· the balance of the net proceeds of the Fundraising will be used for the development of the acquired TON and TONO businesses and for general working capital purposes.

16. Lock-in and orderly market undertakings

The Locked-In Persons, who, assuming the maximum of £52.5 million is raised in the Equity Financing, at Admission are expected to hold in aggregate 24,252,453 Ordinary Shares (representing approximately 29.3% of the Enlarged Share Capital), have undertaken, save in limited circumstances, not to dispose of any of their interests in Ordinary Shares (including Ordinary Shares that they may acquire). In the case of Mr Austin, Mr Benmore and Mr Booth, the period of the lock-up runs until 25 November 2021 and in the case of the Vendor until the first anniversary of Admission.

In addition, in order to ensure an orderly market in the Ordinary Shares: (i) the Locked-In Persons have further undertaken, in respect of themselves and each of their connected persons, that for a further period of 12 months thereafter they will not (subject to certain limited exceptions) deal or otherwise dispose of any such interests other than through Panmure Gordon (or such other broker appointed by the Company from time to time); and (ii) the original pre-IPO subscribers of Ordinary Shares (other than the Locked-In Persons) have undertaken, in respect of themselves and each of their connected persons, that for a period of 12 months following Admission they will not (subject to certain limited exceptions) deal or otherwise dispose of any of their interests in the Ordinary Shares other than through Panmure Gordon (or such other broker appointed by the Company) from time to time.

17. Dividend policy

The Company is committed to a progressive dividend policy. Covenants on the Company's debt will restrict dividends to 50% of net profit on a trailing basis. The Directors will also consider capital expenditure commitments prior to declaring dividends. However, the Directors believe that paying regular dividends is key to the Company's growth and relationship with Shareholders.

18. Corporate governance

The Directors are committed to maintaining a high standard of corporate governance and intend to comply with those aspects of the UK Corporate Governance Code which they consider appropriate, taking into account the size of the Company and the nature of its business.

19. Takeover Code

The Company is a public company incorporated in England and Wales and its Ordinary Shares will be admitted to trading on AIM. Accordingly, the Takeover Code applies to the Company.

The Takeover Code governs, inter alia, transactions which may result in a change of control of a company to which the Takeover Code applies. Under Rule 9.1 of the Takeover Code any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested or in which persons acting in concert with him are interested, carry 30% or more of the voting rights of a company which is subject to the Takeover Code, that person will, except with the consent of the Panel, be required to make a general offer to all the remaining shareholders to acquire their shares. Similarly, Rule 9.1 of the Takeover Code also provides that when any person, together with persons acting in concert with him is interested in shares which in aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, then, except with the consent of the Panel, such person shall extend offers, on the basis set out in Rules 9.3, 9.4 and 9.5 of the Takeover Code, to the holders of any class of equity capital whether voting or non-voting and also to the holders of any other class of transferable securities carrying voting rights.

An offer under Rule 9 must be in cash and must be at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company in question during the 12 months prior to the announcement of the offer.

Where any person who, together with persons acting in concert with him, holds shares carrying more than 50% of the voting rights of a company, and such person or any person acting in concert with him, acquires any further shares carrying voting rights, the concert party as a whole will not generally be required to make a general offer to the other shareholders to acquire the balance of their shares, though Rule 9 of the Takeover Code would remain applicable to individual members of a concert party who would not be able to increase their percentage interests in the voting rights of such company through or between Rule 9 thresholds without Panel consent.

The Takeover Code defines persons "acting in concert" as comprising persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control of a company or to frustrate the successful outcome of an offer for a company. "Control" means an interest, or interests, in shares carrying in aggregate 30% or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control. A person and each of its affiliated persons will be deemed to be acting in concert with each other. The Takeover Code sets out a non-exhaustive list of persons who will be presumed to be acting in concert with other persons in the same category unless the contrary is established.

20. Taxation

Shareholders who are in any doubt as to their tax position or who are subject to tax in jurisdictions other than the UK are strongly advised to consult their own independent financial adviser or other professional adviser immediately.

21. Admission, settlement and CREST

An application will be made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and dealings will commence in the Enlarged Share Capital at 8.00 a.m. on 17 May 2021.

The Ordinary Shares are not dealt on any other recognised investment exchange and no application has been or is being made for the Ordinary Shares to be admitted to any such exchange.

The Articles permit the Company to issue Ordinary Shares in uncertificated form in accordance with the CREST Regulations. CREST is a voluntary computerised share transfer and settlement system. The system allows shares and other securities to be held in electronic form rather than paper form.

Settlement of transactions in Ordinary Shares may take place within the CREST system if any individual Shareholder so wishes. Shareholders who wish to receive and retain share certificates are able to do so and share certificates representing the New Ordinary Shares (comprising the Equity Financing Shares to be issued pursuant to the Equity Financing and the Consideration Shares to be issued to the Vendor in connection with the Acquisition) are expected to be despatched by post to such Shareholders by no later than 27 May 2021, at the Shareholders' own risk.

The New Ordinary Shares will be issued in registered form. The Register will be maintained by the Registrar.

It is expected that, subject to Admission, the Equity Financing Shares will be registered in the name of the Placee, Subscriber or PrimaryBid client, as applicable, subscribing for them and the Consideration Shares will be registered in the name of the Vendor, and in each case issued or transferred either:

· in CREST, where the such Shareholder so elects and only if such Shareholder is a "system member" (as defined in the CREST Regulations) in relation to CREST, with delivery (to the designated CREST account) of the New Ordinary Shares expected to take place on 17 May 2021; or

· otherwise, in certificated form, with the relevant share certificate expected to be despatched by post at the risk of such Shareholder by 27 May 2021.

Notwithstanding the election by any Placee, Subscriber, PrimaryBid client or the Vendor as to the form of delivery of the New Ordinary Shares, no temporary documents of title will be issued, and all documents or remittances sent by or to Shareholders or as they may direct will be sent through the post at their risk.

Pending despatch of definitive share certificates or crediting of CREST stock accounts (as applicable), the Registrar will certify any instrument of transfer against the Register.

22. General Meeting and resolutions

The Notice of General Meeting will convene a general meeting of Shareholders to be held remotely at 11.00 a.m. on 14 May 2021.

The purpose of the General Meeting is to seek the necessary Shareholder approval to proceed with the Acquisition in accordance with the requirements of AIM Rule 14 and to take new authorities to issue shares.

In light of the ongoing COVID-19 pandemic and with a view to taking appropriate measures to safeguard its Shareholders' health and make the General Meeting as safe and efficient as possible, the Company is invoking certain of the meeting provisions in the Articles. These provisions allow the Company to hold virtual and semi-virtual meetings if necessary.

Details of the operation of the General Meeting and the voting process will be provided in the Admission Document and Notice of General Meeting.

23. Recommendation

The Directors recommend that Shareholders vote in favour of all the resolutions to be proposed at the General Meeting as they intend to do in respect of the 14,800,000 Ordinary Shares (representing 36.8% of the issued Ordinary Shares) that they own or are interested in.

Appendix II

A description of the TON assets

1. Introduction

The Company intends to purchase TON, along with its wholly owned subsidiary, TONO.

The Q Blocks shown in Figure 9 below form the core area of TONO's licensed acreage.

Figure 9: Location of production and exploration licences currently held by TON

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Q10-A gas field

TONO holds a 60% working interest, subject to the Netherlands offshore fiscal regime, in the Q10a production licence, some 53.19 km2 in size, and the Q07 production licence, some 472.09 km2 in size, located in the Dutch sector of the Southern North Sea, approximately 22 km offshore and 46 km north-west of Amsterdam in the Netherlands.

The producing field is referred to as Q10-A and lies on the boundary between, and is covered by, the two licences. The Q10-A field currently produces gas from the Slochteren, Zechstein and Volpriehausen reservoirs via five producing wells. First gas was achieved ahead of schedule in January 2019, fewer than 14 months after the FID was taken. The produced gas is exported through a dedicated 42 km pipeline to the P15-D production facilities, for processing and onward transport to market. Tulip has previously indicated that it intends to construct a pipeline to new gas processing and handling facilities onshore, at IJmuiden, resulting in a re-route of the current export path by 2023. The differing forecast profiles can be observed on Figure 10 below. The Q10-A field is estimated to contain 19.95 mmboe of net 2P reserves as at the effective date of the Acquisition.

Figure 10: Historical production and forecast cases for the Q10-A gas field

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Q10-A Vlieland oil discovery

The Vlieland sandstone formation is a large anticlinal trap overlying the Q10-A gas field. This formation is a producing play in the P- and Q-quadrants in the vicinity of the Q10-A field. The reservoir has proven oil in the Q10a production licence; all wells drilled in the Q10-A field have oil shows in the Vlieland sandstone formation, and an oil sample was taken in the Q10-A-03A well, proving the presence of an oil accumulation. An appraisal well to test the productivity of the Vlieland sandstone formation is planned in the third quarter of 2021 and the Vlieland oil discovery remains a target for future development.

The proposed development plan includes up to 8 wells, across two platforms with associated gas exported along a short pipeline to the Q10-A platform and oil exported through a dedicated line to shore. The Q10-A Vlieland oil discovery has been independently audited and is estimated to contain 42.92 mmboe of contingent resources in the "mid" case, net to TONO. The forecast "low-best-high" cases can be seen in Figure 11 below.

Figure 11: "Low-best-high" forecast cases for the Q10-A Vlieland oil discovery

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Q10-B discovery

TONO holds a 60% working interest, subject to the Netherlands offshore fiscal regime, in an exploration licence awarded as a combined licence comprising areas Q10b, Q08 and Q11, some 757.7 km2 in size, located in the Dutch sector of the Southern North Sea.

TONO is applying for a production licence for the Q10b, Q08 and Q11 areas that are currently exploration licences held by TONO. The proposed Q10-B development area is located approximately 5 km south of the Q10-A field, in the north east corner of the Q10b part of the licence area.

The Q10-B field was discovered by the Q10-03 well drilled in 1986 by Mobil, but was never developed. Tulip has previously stated that it intends to appraise the prospective upside volumes in the Slochteren formation with a view to developing these along with the proven volumes in the Zechstein carbonate and the Zechstein sands. Currently the net contingent resources associated with the Q10-B field are estimated at 1.79 mmboe.

Q11-B discovery

The proposed Q11-B development area is located approximately 13 km south east of the Q10-A field within the Q11 part of the Q10b-Q08-Q11 exploration licence. The Q11-B field was discovered with the well Q11-01-S2, drilled by NAM in 1969. Whilst the field is of a similar structure to Q10-A, it is slightly deeper and was never developed.

Recent mapping of the in-place volume, using a 2019 reprocessed seismic dataset, re-evaluated petrophysics of the discovery well and offset well data, suggests that a large up dip gas accumulation could be present within the Slochteren formation, as detailed in Figure 12 below, which is the primary reservoir target in the field. An appraisal well is planned on the field during the second half of 2021, which will test and stimulate all targets which are currently classified as contingent resource. The forecast production profile for Q11-B can be seen in Figure 13 below.

It is estimated that the Q11-B field contains 18.45 mmboe of net 2C contingent resources and it is expected that an FID will be taken following the appraisal of the field. The development plan includes provision for a minimal wellhead platform, incorporating four development wells and mimicking the design of the Q10-A platform, which is a normally unmanned, low cost platform which is powered predominantly by solar and wind generation. It is expected that gas will be exported through a 13 km pipeline from Q11-B to Q10-A and onwards for processing and sales transportation.

Figure 12: SW to NE Seismic cross section across the Q11-B discovery, highlighting the potential hydrocarbon volume that is mapped up dip of the well Q11-01-S2

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Figure 13: "Low-best-high" forecast cases for the contingent Q11-B gas field

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M10-A and M11-A discoveries

Since 2013, TON has held a 60% operated working interest, subject to the Netherlands offshore fiscal regime, in exploration licence M10a / M11, some 109.91 km2 in size, as detailed in Figure 1 above, located in the Dutch sector of the Southern North Sea in the north of the Netherlands. The location of the fields is indicated in Figure 14 below. The acreage contains two discoveries, M11-A and M10-A, as well as several undrilled prospects. The M10-A field was discovered in 1977 by Pennzoil and is the smaller of the two discoveries. The M11-A field was discovered by NAM in 1982 with a vertical well which was cased, perforated and tested. Due to various technical reasons the well was plugged and abandoned and the field was never developed. The fields are estimated to contain a total of 35.94 mmboe of net contingent resources, along with additional prospective volumes in adjacent undrilled fault blocks. The prospective volumes were deemed immaterial and so were not assessed as part of the CPR. Thus, they are excluded from the numbers quoted in this Announcement.

It is proposed that the fields will be developed through a main treatment platform at M11, along with a minimal facilities wellhead platform at M10. It is expected that 8 wells will be required on the M11-A field to produce the contingent resource, although provision for an additional 3 wells will be provided. The M10-A field will be developed via 2 wells, with provision for an additional 2 well slots. The M10 platform will be tied back to M11 through an 8.5 km pipeline and co-mingled gas streams will be exported via an east-bound 42 km pipeline to the existing Noordgastransport subsea tie-in point.

Figure 14: Location and outline of the M10-A and M11-A field discoveries

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2. Assets

Q10a and Q07 licences

Q10-A gas field

The Q10-A field straddles the Q10a and Q07 production licences, as detailed in Figure 15 below. It is located on the IJmuiden Platform, a horst block that separates the Broad Fourteens Basin to the north from the west Netherlands Basin to the south. The field produces gas from the Volpriehausen, Zechstein Carbonate, Zechstein Clastics and Slochteren reservoirs, with a reported quality of 1,043 Btu/scf and is under primary recovery by natural depletion. Gas production commenced in January 2019, and 5 wells are currently producing. The average daily gas production rate in January 2021 was approximately 65 MMscf/d with an average water-gas ratio of 17.5 bbl/MMcf (raw).

The wells are currently producing via the Q10-A platform, connected by a 42 km pipeline to the P15-D production facilities south-west of Q10-A where it is processed and transported to market. The use of the P15-D facilities was one of two scenarios assessed for commercial production of the Q10-A field. The second, called the IJmuiden Project, involves the construction of a dedicated pipeline to new gas processing and handling facilities onshore.

TONO is currently reactivating the IJmuiden project that will allow production of gas from Q10-A to the onshore processing plant via a new pipeline. Permitting is at an advanced stage and the project is scheduled to start up in the first quarter of 2023. The new IJmuiden project will significantly reduce the operating costs for the Q10-A field through elimination of the P15-D processing fees, and will ensure the long term economic viability of all TONO's projects in this area without being dependent on the continued operations of P15-D. For the purposes of the CPR, the developed producing reserves scenario assumed continuation of the use of the P15-D platform and payment of the associated operating costs for life of reserves. The capital for the construction of the pipeline and the processing facilities indicates this to be an undeveloped scenario for reserves purposes and as a result a reduction of processing costs has been provided for upon the start up of the pipeline project in 2023 due to the use of TONO's owned facilities.

The Q10-A-01 and Q10-A-05 wells were drilled through the deepest gas bearing zone penetrated, the Slochteren, and encountered the gas water contact. Water production was experienced early in the producing life of the wells. Production logging and other analysis has indicated the water influx is due to cement integrity issues, effectively providing free access behind the casing for water to flow upwards to the perforations in the gas bearing part of the formation. A remedial cement job was performed in September 2019 on the Q10-A-05 well, successfully reducing the water production in that well but not eliminating it entirely. Additional remedial work to isolate the water zone is in the planning stage.

There are two development activities in the field scheduled to take place in the third quarter of 2021. The Q10-A-04 well will be side-tracked to the main fault block in the producing horizon. It will contain a 3 to 4 stage hydraulic stimulation in the Zechstein Clastics and perforation in the Slochteren reservoir, up dip and away from the gas water contact. The Q10-A-06 well will be fracture stimulated in the Volpriehausen siltstone and reperforated in some parts of the Volpriehausen sandstone member to enhance productivity.

Figure 15: Location of the Q Block Gas Fields in relation to licenced acreage and proprietary reprocessed seismic coverage

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Q10-A Vlieland oil discovery

The Vlieland sandstone formation oil play is a proven play in the area around the Q10-A field. The P09 Horizon field and the P15 Rijn field are notable examples of successful developments in the same formation. The primary reservoir properties of the Vlieland sandstone formation vary strongly across the region, depending on the position within the depositional system. The Vlieland Sandstone in the P09 Horizon field has very similar properties to those in the Q10-A area. The reservoir properties (porosity and permeability) are low for oil production; however, in the Horizon field, natural fractures significantly increase the productivity, resulting in commercially viable flow rates and a successful commercial development.

All wells in the Q10-A field have oil shows in the Vlieland sandstone formation, and an oil sample was taken in the Q10-A-03A well, proving the presence of an oil accumulation. The Q07-06-S1 well was drilled down-dip in the same structure and produced oil to surface. Oil saturations on logs appear to be low, but saturation height functions derived from P09-Horizon core material indicate that the measured saturation is consistent with the structure being filled to the structural spill point, which implies an oil column of approximately 270 metres. As the Horizon field has shown, the presence of natural fractures is of crucial importance.

The drilling-mud losses are very common in the Vlieland Sandstone in the area of interest and occur in several wells that penetrated the Vlieland Sandstone within the Q10-A closure. This may be an indicator for the presence of open natural fractures. Seismic data has been utilized to map the fracture density. Curvature attributes and Vp/Vs ratio (obtained by elastic inversion) show some features which might be a good indication for potential fractures, however, this can only be confirmed by gathering additional data from the planned appraisal well, Q10-A-04.

The drilling of the Q10-A-04 gas well side-track planned for the third quarter of 2021 provides an opportunity for a low-cost Vlieland oil test well before plugging back, and side-tracking to drill its main targets in the Zechstein Clastics and Slochteren.

The development plan of the field includes 8 wells and two platforms connected with a 2 km pipeline. There will be 4 wells per platform each with 2 spare slots and with ESPs, and the main platform will have separation and gas compression facilities. The separated gas will be transported to Q10A via a 1 km gas pipeline and the oil will be transported to shore via a 25 km oil pipeline.

Q10b and Q11 licences

Q10-B field

Located within exploration licence Q10b is the Q10-B field, which was discovered by the Q10-03 well drilled by Mobil in 1986. TONO has conducted subsurface and economic studies and is planning to develop the proven volumes in the Zechstein Carbonate, fringe sands and up dip prospective upside in the Slochteren Formation.

The Zechstein carbonate and clastics deposits display gas effect on the logs in the discovery Q10-03 well. The carbonate was tested and produced gas to surface at relatively low rates from the matrix. The Slochteren Formation reservoir was interpreted to be water wet. On the newly reprocessed seismic dataset, Z3TUP_R2019A, the Slochteren can be mapped up dip from the well to the northwest, and it will be targeted by an appraisal-development well in the future. In addition to the Zechstein gas discovery, Vlieland and Delfland oil shows were encountered; however, they were not tested and are considered as an upside.

The Q10-03 well logs did not indicate a GWC. The gas saturated interval was estimated down to the base of the Zechstein Z1 sandstone, at approximately 2,880 metres TVD sub-sea. This was interpreted to be a GDT and has been used as the GWC for the low-case volumetric estimates.

The WUT level at 2,902 metres TVD sub-sea (top of the Rotliegend) was interpreted to be the GWC for the high-case volumes. The GWC for the best-case volumes was taken in the middle.

The development plan assumes that Q10-B is commercialised through the use of a minimal wellhead platform, with two well slots and a short gas export pipeline, approximately 5 km in length, to the Q10-A platform. Whilst the contingent resource associated with Q10-B is smaller than that of Q11-B, the Company expects the anticipated incremental operating costs to be very low, thus providing a commercially attractive opportunity.

Q11-B field

The Q11-B field in the offshore block Q11 was discovered in 1969 with the well Q11-01-S2 drilled by NAM but was never developed. The field is of a similar structure to Q10-A, although slightly deeper.

The Volpriehausen Formation in the Q11-01-S2 well shows gas on logs from top to bottom and produced gas to surface during a production test at low rates. The Zechstein carbonate and clastic deposits are also gas-bearing on logs. The Slochteren Formation was tested open hole below the gas-water contact and produced water. TONO evaluated the in-place volume by mapping the recently reprocessed Z3TUP R2019A seismic dataset, using re-evaluated petrophysics of the Q11-01-S1 well, and offset well data.

As detailed in Figure 16 below, Slochteren Formation reservoir has good quality on logs, and because of the steeply dipping nature of the structure, a large up dip gas accumulation is expected in this formation.

The Volpriehausen reservoirs are clearly gas-bearing on logs; the base of the gas-bearing interval is considered to be as a gas-down-to (GDT) due to a lithological change in the rock rather than a true gas-water contact. The pool closure for the low case volumes was made using GDT contour taken from the logs at 2,392 meters TVD sub-sea. For the high case, the deepest closing contour of the Volpriehausen structure was used at 2,415 metres TVD sub-sea. For the best case, a contour in the middle between the low and high cases was used.

The logs in the Permian section of the Q11-01-S2 well do not indicate a clear GWC. High gas saturations occur down to the base of the Zechstein Z1 sandstone. This was considered as a GDT and the depth of 2,794 metres TVD sub-sea has been used as GWC for the low-case volumes. The water up-to (WUT) level at 2,826 metres TVD sub-sea (the top of the Rotliegend Formation) was assumed to be the GWC for the high-case volumes. The mid-case GWC was taken in the middle.

Figure 16: Q11-01-S2 Petrophysical Well Log showing the Slochteren formation which is interpreted to be of good quality

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The development plan for the Q11-B field includes four development wells with the main reservoir targets being the Volpriehausen and Slochteren formations. The planned appraisal well in the third quarter of 2021 will test and stimulate all target reservoirs. It is intended that it will be retained as a development well, which is similar to how the Q10-A field was brought onto production. It is envisaged that the well will be completed predominantly as a Slochteren producer, but optionality will be retained to selectively produce the other zones. The remaining development wells will include dedicated horizontal wells into each of the Volpriehausen and Zechstein carbonate formations, both of which will be stimulated. A final well will provide for commingled production across the Slochteren and Zechstein reservoirs.

The Q11-B platform will be developed with a simplified four slot wellhead platform, accompanied by a 13 km pipeline to Q10-A for onward gas export and treatment to meet sales-gas specification. It is envisaged that the platform will be normally unmanned, and will incorporate the technology already in operation on the Q10-A platform, providing wind and solar power generation. The incremental operating costs are anticipated to be low, as there will be significant opportunity for synergies with existing operations, such as combined mobilisations for offshore visits and maintenance.

Q Block area exploration

The Directors believe that significant exploration opportunity exists within the Q Block's core area acreage. Whilst a number of discoveries, which have been explained above, were made through the middle of the 20th century, and are being appraised with a view to development, improvements in technology have led to the indication of numerous other prospects and leads, as detailed in Figure 17 below. An area of 1880 km2 of 3D seismic datasets was re-processed during 2019 with a view to improving the imaging of the reservoirs of interest which are proven plays in the Q10-A field, as well as nearby third-party acreage. The resultant outputs are believed to provide significant improvements compared to the datasets which were relied upon to discover the Q10-A, Q10-B and Q11-B fields.

Of the prospects and leads which have so far been identified, the Q10-Gamma exploration opportunity has been ranked the highest by Tulip. It is estimated to have GIIP in the ranges of 3 - 13.9 - 24.8 Bcm gross, of which TONO holds a 60% working interest. The key subsurface risks associated with the Q10-Gamma prospect are anticipated to be structural definition and reservoir quality.

It is intended that an exploration well will be drilled in the future, potentially through a step-out from the Q10-A platform, which is located 4 km to the east (as detailed in Figure 17 and Figure 18 below).

Figure 17: A map of the core area acreage, highlighting the outline of a number of prospects and leads, including Q10-Gamma

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Figure 18: A seismic cross section showing the Q10-A field in relation to a planned exploration well on the mapped Q10 Gamma exploration opportunity

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M10-A and M11-A fields

The primary target interval in both the M10-A and M11-A fields is the Permian Slochteren Formation. The Slochteren reservoir quality changes from the excellent aeolian sands of the Netherlands onshore towards a shalier environment in the area of interest.

Of the two discoveries, the M11-A field has better reservoir quality and the largest in-place gas volume. Tulip has therefore decided to drill the first appraisal-development well in the M11-A main block.

Structurally, the area is dominated by two distinct fault trends that dissect the Slochteren in the area into rhomb-shaped highs and lows (as detailed in Figure 19 below). The data quality of the 3D seismic data sets in the M10-A and M11-A fields is generally good for seismic interpretation purposes. Major fault definition is well imaged, and the key horizons are generally clear. As a result, the structural interpretation has been done with a high degree of confidence. There is no major evidence of basin inversion affecting the area, and faulting in the overburden section is very limited. The Slochteren Formation is well positioned to receive hydrocarbon charge from underlying Carboniferous sediments directly below and from a large catchment area to the west and north.

The gas bearing sands in the M10-A and M11-A discoveries occur in the Ten Boer, and the Upper and Lower Slochteren. The Upper Slochteren is the proven producing reservoir in most of the nearby discoveries and producing fields of L12 and L15 to the west and the Ameland complex to the east.

Tulip's deterministic volume assessment is based on integrating the geophysical, geological and petrophysical studies done on the fields, and a 3D GRV Petrel model. The GRV uncertainty range is believed to be adequately captured by combining the top structure (depth conversion) uncertainty and the uncertainty on the depth of the GWC.

Figure 19: A SWW to NEE seismic cross section through the M10-A and M11-A fields, illustrating the dominant fault trends that dissect the Rotliegend reservoir

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Donkerbroek (main), Donkerbroek (west) and Akkrum

The Donkerbroek and Akkrum well sites, located onshore Netherlands, are shown in Figure 20 below, with the three existing wells HRK-01, DKK-03 and DKK-04 also highlighted. Until 2018 these wells produced gas which was treated by, and exported from, the gas processing plant depicted in Figure 21 below. These wells are currently closed in and continue to be subject to regular well integrity management.

Intra-field and export pipelines with a total length of 24 km cross a number of land parcels in private ownership, and a right of way has been leased. The gas treatment facilities are in the process of being sold to Vermilion for a gross consideration of EUR 3.5 million of which EUR 0.2 million has been pre-paid (representing EUR 0.12 million net to TON). Vermilion will absorb all costs to dismantle, package and transport these facilities. Once these facilities have been removed, TON and joint venture partner EBN intend to formally declare cessation of production, which is expected to occur in the fourth quarter of 2021. Within one year, TON is required to submit a decommissioning plan for approval with execution currently expected to occur in 2023.

The decommissioning activities consist of plugging and abandoning the three closed in wells, at an estimated cost of EUR 1.05 million gross. Thereafter the remaining facilities, namely a single production location and two well sites, will be restored at a total cost estimated at EUR 0.45 million (gross; 60% net to TON). Therefore, the total decommissioning cost is estimated at EUR 1.5 million gross (EUR 0.9 million net cost to TON) and will be funded by the outstanding payment from Vermillion of EUR 3.3 million gross (EUR 1.98 million net to TON).

Figure 20: Location of onshore surface sites

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Figure 21: Picture of gas processing plant.

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3. Reserves and resources

A Competent Person's Report on TON's assets has been prepared by Sproule. The tables below set out reserve, resource and economic information regarding TON's oil and gas assets as at 31 January 2021, extracted without adjustment from the Competent Person's Report and in accordance with reserves and resources estimates presented here have been prepared according to the classifications and definitions of the Petroleum Resources Management System (PRMS), sponsored by Society of Petroleum Engineers (SPE), World Petroleum Council (WPC), American Association of Petroleum Geologists (AAPG), Society of Petroleum Evaluation Engineers (SPEE), Society of Exploration Geophysicists (SEG), Society of Petrophysicists and Well Log Analysts (SPWLA), and the European Association of Geoscientists & Engineers (EAGE).

Source: Sproule CPR, Page 39

Source: Sproule CPR, Page 40

4. Historical production data

The Q10-A field officially started producing gas on 14 February 2019, with gas being exported from the Q10-A platform to the P15-D reception facilities. It is noted that the field did produce gas to P15-D for a number of consecutive days in late January 2019, during the final phases of testing and commissioning of the dedicated export pipeline to the third-party facility. The primary recovery mechanism is production via natural depletion. The published 1P - 2P - 3P reserves estimates assume that the Q10-A field achieves ultimate recovery factors of 72% - 77% - 82%, respectively.

Between February 2019 and November 2020, the produced gas was exported without compression. As per the field development plan, the producing reservoirs have steadily depleted during the production period, impacting the flow rate of associated hydrocarbons being exported to P15-D. To combat this, compression of the Q10-A field commenced on the P15-D platform in November 2020, reducing back pressure to the wells, and arresting the associated decline in production rates. As illustrated in Figure 22 below, during the summer of 2020, when gas prices hit historic lows, a conscious decision was taken by Tulip management to choke back the wells to a gross field rate of 1 million Nm3 per day. Effectively, this decision allowed value to be preserved for when higher gas prices prevailed. During the year to 31 December 2020, the Q10-A field produced 9.11 mboe/d Gross (5.47 mboe/d Net) whilst in 2019 it achieved 10.8 mboe/d Gross (6.47 mboe/d Net) respectively. It is forecast that the Q10-A field will produce 11.08 mboe/d Gross (6.65 mboe/d Net) during 2021, benefitting from the drilling campaign scheduled for the third quarter of 2021.

The P15-P18 offshore hub, which contains the third-party operated platform that receives and processes the raw gas from the Q10-A field requires a minimum annual shutdown of one month per year. For planning purposes, this annual shutdown is normally taken during September and is reflected in the profiles detailed in Figure 22 below. During 2019, the P15-P18 facilities experienced significant additional downtime relating to corrosion under insulation, which can be observed through the periods of April and May. This negatively impacted the annualised production rates of the Q10-A field. During 2020, the one month planned shutdown over ran, resulting in a 42-day shutdown. Future forecasts incorporate the proposed TAR periods of the P15-D platform, whilst it is anticipated that the completion of the planned export re-route to IJmuiden will remove this constraint from 2023 onwards.

Figure 22 - Production History of the Q10-A Gas Field since first gas

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5. Abandonment / decommissioning liabilities

Tulip's near-term decommissioning liabilities are associated with the onshore licences Donkerboek (main), Donkerbroek (west), and Akkrum 11. It is expected that the net cost of plugging and abandoning three closed-in wells, plus the reclamation of two well sites and one production location will cost approximately EUR 1 million and is expected to be completed by the end of 2023.

The remaining abandonment liabilities within TONO's portfolio are those associated with the Q10-A asset. The Q10-A field is currently produced via five active wells; a sixth well is suspended. The facilities include a six well slot steel jacket with minimal topsides and a 42 km export pipeline to the third-party platform, P15-D. The latest indicative decommissioning security agreement envisages a cost of EUR 25.4 million gross (EUR 15.2 million net) to remove the platform topsides and steel jacket, as well as full plugging and abandonment of all wells. The pipeline will be flushed of residual hydrocarbons and left in situ. Currently, security payments to cover the cost of decommissioning are not anticipated to be required until 2032 at the earliest.

6. Historical financial information on Tulip

Section A of Appendix V of this Announcement presents that audited historical financial information on TON for the financial years ended 31 December 2020, 31 December 2019 and 31 December 2018, prepared in accordance with IFRS and Section 2:362(9) of the Netherlands Civil Code.

Section B of Appendix V of this Announcement presents that audited historical financial information on TONO for the financial years ended 31 December 2020, 31 December 2019 and 31 December 2018, prepared in accordance with IFRS and Section 2:362(9) of the Netherlands Civil Code.

7. Environmental credentials

In line with one of the key objectives of Kistos' acquisition strategy set out in the November 2020 Admission Document, that acquisitions should play a role in energy transition, the Directors believe that the Acquisition represents not only industry-leading Scope 1 carbon emissions intensity but also that the opportunity exists in the future to substantially reduce Scope 2 carbon emissions as well.

The Q10-A field commenced commercial production in February 2019, and for the year ended 31 December 2019 TONO, as operator, was able to report Scope 1 carbon emissions intensity from the production of gas of 17g CO2e/boe. This included a spillage of methane during commissioning of the export pipeline. During the year ended 31 December 2020, TONO reported Scope 1 emissions of just 9g CO2e/boe, giving an average since inception of 13g CO2e/boe. This compares to an industry average of 22 kg CO2/boe for gas extracted in the UK continental shelf, according to the UK Oil & Gas Authority.

The Directors consider that the basis of design for the Q10-A platform assumed production with a minimal environmental footprint, as well as providing for low cost, efficient extraction of natural gas. An array of solar panels is installed on the south side of the platform whilst wind turbines are located on the main deck to the western edge. The Directors consider that this allows for the Q10-A platform to produce power sustainably, with an estimated seasonal daily output of 91.4 kWh/d, and battery storage on board, creating additional redundancy for periods of low light or wind. A diesel generator acts as an emergency back-up and the emissions from the infrequent use of this power source are included in the reported emissions intensity.

The array of three wind turbines have recently been upgraded to a two-turbine configuration, installed on 31 March 2021 and expected to be operational in April 2021. It is expected that these will provide for a broader operating range during periods of variable wind speeds, resulting in higher electricity generation capacity on the platform. The Directors consider that the development plans of future fields such as Q11-B and M10-A/M11-A will be designed on the basis of similar renewable power generation, thus providing similarly low carbon emissions intensity during the extraction of hydrocarbons.

The Company has re-activated a project to export gas to shore, known as the IJmuiden Project. The intention is to build a dedicated pipeline, with compression and processing facilities located at a new surface site within an existing industrial area. The IJmuiden Project has been evaluated within the scope of the CPR, and the volumes associated with it have been independently verified as reserves. The re-route and associated facilities are estimated to cost EUR 64.8 million gross (EUR 38.9 million net) and it is anticipated that the IJmuiden Project will be executed out of existing cash flows, through the second half of 2021 and 2022 in order to receive gas by early 2023. Re-routing the gas produced from the Q10-A field from its current destination; P15-D, which is a large, mature offshore installation, is expected to provide a significant reduction in Scope 2 emissions.

Gas has been identified as a key transition fuel as developed economies works towards collective goals of net zero carbon emissions. The use of gas as a source of fuel is especially relevant in the Netherlands due to the historical reliance on the onshore Groningen field, the largest gas field to be discovered in northwest Europe. Due to enhanced seismicity, and land subsidence as a result of the extraction of gas from the reservoir, production of the Groningen field has been rapidly scaled back during recent years, and it is anticipated to cease production entirely by mid-2022.[7] As a result of this, the Netherlands became a net importer of gas for the first time in 2018, a year where gas still accounted for 40% of the country's energy needs. In an attempt to counter the decline of domestic gas production, fiscal policy has been introduced in the form of the 'marginal field allowance', which provides for tax shelter/benefit for parties who develop these fields offshore, enhancing the economic case for companies. Domestically produced gas is considered to have the added benefit of a lower carbon footprint than that of its imported counterparts, be it through pipelines or LNG, the latter of which are especially high, estimated to have an emissions intensity of 59 kg CO2/boe.[8]

Appendix III

Risk factors

An investment in Ordinary Shares involves a high degree of risk. Accordingly, before making a final decision, prospective investors should carefully consider the specific risk factors set out below in addition to the other information contained in this Announcement before investing in Ordinary Shares. No assurance can be given that Shareholders will realise a profit or will avoid a loss on their investment.

The Board has identified the following risks which it considers to be the most significant for potential investors in Ordinary Shares. The risks referred to below do not purport to be exhaustive and are not set out in any particular order of priority and potential investors should review this Announcement carefully in its entirety and consult with their professional advisers before acquiring Ordinary Shares.

If any of the following events identified below occur, conditional on Shareholder approval of the Acquisition and Admission, the Enlarged Group's business, financial condition, capital resources, results and/or future operations and prospects could be materially adversely affected. In that case, the market price of the Ordinary Shares could decline and investors may lose part or all of their investment.

Additional risks and uncertainties relating to an investment in the Ordinary Shares and to the Enlarged Group's business, its industry and the macroeconomic environment in which it operates, that are not currently known to the Enlarged Group, or that the Directors currently deem immaterial, may individually or cumulatively also have a material adverse effect on the Enlarged Group's business, results of operations, financial condition and/or prospects. In particular, the Enlarged Group's performance may be affected by changes in the market and/or economic conditions and in legal, regulatory and tax requirements. If any such risks occur, the price of the Ordinary Shares may decline, and you could lose all or part of your investment. An investment in Ordinary Shares described in this Announcement is speculative.

RISKS RELATING TO THE business carried on by the enlarged group

Tulip may not perform in line with expectations

If the financial results and cash flows generated by Tulip and its future prospects are not in line with the Company's expectations, a write-down may be required against the carrying value of Company's investment in Tulip and/or accounting goodwill and other intangible assets generated upon completion of the Acquisition. Such a write-down may affect the Company's and the Enlarged Group's business and may also reduce the Company's ability to generate distributable reserves by the extent of the write-down and consequently affect its ability to pay dividends.

Tulip's production and revenues comes from one field

Tulip's current production of oil and gas is based on the Q07/Q10a field. Any disruption of production at this field will therefore have a substantial negative impact on Tulip's total production. If mechanical problems, storms or other events curtail a substantial portion of the Tulip's production, following the Acquisition, the Company's and the Enlarged Group's results of operations and financial condition could be adversely affected. Tulip has further assets in its portfolio to be developed and brought on production in the future; there will remain development risk around these assets until such time as they are on stream.

The Company cannot accurately predict Tulip's future decommissioning liabilities

Conditional on completion of the Acquisition, the Enlarged Group will assume certain obligations in respect of the decommissioning of Tulip's fields and related infrastructure. These liabilities are derived from legislative and regulatory requirements concerning the decommissioning of wells and production facilities and will require the Enlarged Group to make provision for and/or underwrite the liabilities relating to such decommissioning. Although the financial accounts of Tulip make a provision for such decommissioning costs, there can be no assurances that the costs of decommissioning will not exceed the amount of the long-term provision set aside to cover such decommissioning costs. In addition, governments may require decommissioning to be carried out in circumstances where there is no express obligation to do so, which may result in higher decommissioning costs than expected at the time when provisions were made, and it may be required to provide cash-back guarantees, blocked cash deposits or similar upfront relating to future decommissioning costs. It is difficult to forecast accurately the costs that will be incurred by the Enlarged Group in satisfying its decommissioning obligations and the Enlarged Group may have to draw on funds from other sources to bear such costs. Any significant increase in the actual or estimated decommissioning costs that the Enlarged Group incurs could have a material adverse effect on the Enlarged Group's business, results of operation, financial condition and prospects.

It is unlikely that the Company will have recourse to the Vendor for any loss or damage suffered in relation to Tulip which might otherwise be recovered through a claim for breach of the warranties

Under the terms of the Acquisition Agreement, the Vendor's liability under the warranties (other than as to title and capacity) and tax covenant is EUR 1. The Company had the option to seek insurance coverage for potential claims under the warranties and the tax covenant, however, having sought a variety of market quotes for full and partial insurance coverage and based upon the results of due diligence investigations the Directors decided, in light of the short operating history of the assets covered by the Acquisition, that the cost of such insurance would be disproportionate to the risks of a claim arising in connection with the Acquisition.

Accordingly whilst liability for breach of the fundamental warranties relating to title to the shares being sold is capped at EUR 60 million, if there is a breach of the general warranties relating to the state of the business and its assets and liabilities or the warranties relating to the tax position of TON and/or TONO it is unlikely that the Company will have recourse to the Vendor for any loss or damage suffered as a result. The financial position of the Enlarged Group could be significantly and/or materially prejudiced as a result.

The Enlarged Group will be reliant on certain information technology systems

All of the businesses of the Enlarged Group are dependent on technology to some degree and information systems are critical for the effective management and provision of services. The Enlarged Group will depend upon ongoing investments in advanced computer database and telecommunications technology as well as upon their ability to protect their telecommunications and information technology system (including those managing their reservoirs and production assets) against damage or system interruptions from cyber-attacks, natural disasters, technical failures and other events beyond their control.

In order for the Enlarged Group to compete effectively, it must maintain its information technology systems in good working order as well as invest in improved technology. Information security has also become an important issue in recent years as a result of several high-profile losses of data and the growing threat and prevalence of cyber-attacks. Any future breach in the data security and systems of the Enlarged Group could have a harmful impact on its business and reputation. A temporary or permanent loss of any of the systems or networks of the Enlarged Group could cause significant disruption to its business operation, or damage to its reputation resulting in a loss of revenue and potentially higher costs in the future, which could have a material adverse effect on its business, financial condition or results of operations.

The availability, cost and terms of debt finance may have an adverse impact on the Enlarged Group

The Enlarged Group's ability to access liquidity to fund its businesses in the longer term may be affected during periods of tight credit conditions or the absence of funds at a reasonable cost. The availability and cost of debt finance may influence the Enlarged Group's profitability and the Enlarged Group's ability to participate in development opportunities.

In addition, if the Enlarged Group fails to pay any amount when due under, or otherwise fails to comply in any material respect with the terms of, any of its existing (and any future) financings this may ultimately lead to an event of default under the terms of such financing which could lead to acceleration and enforcement proceedings being brought against it by its creditors.

An inability to obtain future funding on reasonable terms, restrictions on its operational flexibility contained in its financing agreements and/or a material failure to comply with the terms of its existing or future financings, could have a material adverse effect on the Enlarged Group's business, financial condition or results of operations.

Legislative and regulatory risks

Any business in the natural resource sector is subject to changes in regulation and legislation. As the direction and impact of changes in regulations can be unpredictable, there is a risk that regulatory developments will not bring about positive changes and opportunities, or that the costs associated with those changes and opportunities will be significant. In particular, there is a risk that regulatory change will bring about a significant downturn in the prospects of one or more acquired businesses, rather than presenting a positive opportunity.

Regulatory compliance risk

Tulip's operations are subject to the risk of liability arising from various environmental, health, safety and other laws and regulations, including those inherent to the oil and gas exploration and production industries. In particular, petroleum operations are subject to extensive environmental laws and regulations. Non-compliance with such regulations by the Enlarged Group could lead to fines, public reprimands, damage to reputation, increased prudential requirements, enforced suspension of operations or, in extreme cases, withdrawal of authorisations to operate.

Any future regulatory changes may potentially restrict the operations of the Enlarged Group, impose increased compliance and regulatory capital costs, reduce investment returns or increase associated fees, increase corporate governance/ supervision costs, reduce the competitiveness of any business of the Enlarged Group, reduce the ability of the Enlarged Group to hire and retain key personnel or impose restrictions on whether individuals may be appointed or retained as directors or senior managers of the Enlarged Group and impose other restrictions and obligations which could adversely affect the Enlarged Group's profitability.

A substantial or extended decline in oil, natural gas and power prices or consumption may adversely affect the Enlarged Group's prospects, business, financial condition and results of operations

Historically, hydrocarbon and energy prices have been subject to large fluctuations in response to a variety of factors beyond the control of individual companies, including operation issues, natural disasters, weather, political instability or conflicts, economic conditions or actions by major oil-exporting countries. Price fluctuations can affect business assumptions, investment decisions and financial position of the companies in the upstream oil gas and power sector and therefore prospectively the Enlarged Group. In particular, a substantial or extended decline in the price or consumption of oil and gas could have a short- or long-term effect on the Enlarged Group's strategy and ultimately its business financial condition. Lower hydrocarbon prices or reduced demand for oil and gas or power could reduce the economic viability of the Enlarged Group's strategy and ultimately its business, result in a reduction in revenues or net income, adversely affect the Enlarged Group's ability to maintain working capital requirements, impair its ability to make planned expenditures and could materially adversely affect its prospects, financial condition and results of operations.

Oil and natural gas exploration and development are highly speculative activities

Oil and natural gas exploration is a highly speculative activity and there are a number of risks which may impact on the overall investment. There is no certainty that following the completion of the Acquisition, the expenditures the Enlarged Group makes towards the search and evaluation of oil and gas deposits will result in discoveries of commercial quantities. The Enlarged Group's longer-term profitability is directly related to the success of the project development and exploration activities. In the event that an exploration project is unsuccessful, the value of the Enlarged Group's business and any associated exploration Licences may be diminished.

The Enlarged Group's longer-term success may be dependent on accessing oil and natural gas resources

The results of appraisal of discoveries are uncertain and may involve unprofitable efforts, not only from dry wells, but also from wells that are productive but uneconomic to develop. Appraisal and development activities may be subject to delays in obtaining governmental approvals or consents, shut-ins of connected wells, insufficient storage or transportation capacity or other geological and mechanical conditions all of which may variously increase the Enlarged Group's costs of operations. Producing natural gas reservoirs are typically characterised by declining production rates that vary depending upon reservoir characteristics and other factors. In addition, the Enlarged Group may not be able to economically develop, find, or acquire future reserves at acceptable costs.

The Enlarged Group's actual future exploration and generation costs may differ materially from estimates, which may materially and adversely affect its viability in the long term

Exploration and generation expenditure estimates are based on certain assumptions with respect to the method and timing of exploration. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs may materially differ from estimates and assumptions. Additionally, unconventional methods of exploration are required which can be more expensive than conventional exploration methods. This could materially and adversely affect the Enlarged Group's viability and long-term prospects.

There are significant risks as to the longer-term viability of owning and developing assets in light of public policy relating to energy transition and Governmental commitments to the "Net Zero 2050" policy objective

The oil and gas sector are large users of energy and the reduction of the use of fossil fuels are primary objective of Government policy to attain the overall policy of "Net Zero 2050". Various regulatory measures aimed at reducing GHG emissions and improving energy efficiency may affect the Enlarged Group's operations and acquisition opportunities. Policy developments at an international, regional, national and subnational level, including those related to the 2015 Paris Agreement and emissions trading systems, such as the EU Emissions Trading System, could adversely affect the Enlarged Group's profitability if projects that it invests in have material GHG-intensive and energy-intensive assets.

In addition, the impact of climate change on Tulip and any of the Enlarged Group's potential future acquisitions is uncertain and will depend on circumstances at individual operating sites. These may increase costs, reduce production levels or otherwise impact the results of operations of the Enlarged Group and those of its potential acquisitions.

The Company expects GHG emission costs to increase from current levels and for regulations targeting reduced GHG emissions to have a wider geographical application than today. There is continuing uncertainty over the detail of anticipated regulatory and policy developments, including the targets, mechanisms and penalties to be employed, the timeline for legislative change, the degree of global cooperation among nations and the homogeneity of the measures to be adopted across different regions. This ambiguity, in turn, creates uncertainty over the long-term implications for the Enlarged Group's expected projects and operating costs and the constraints the Enlarged Group may face in order to comply with any such new regulations. For example, to meet regulatory targets imposed in the future, the Enlarged Group may be required to adopt new technological solutions for its assets within a limited timeframe to reduce GHG emissions, and there can be no assurance that the Enlarged Group would be successful in making such adaptions.

The expense of meeting environmental regulations could cause a significantly negative effect on the Enlarged Group's long-term profitability, as could failure to obtain certain necessary environmental permits

There can be no guarantee that required planning permissions might ever be obtained. Opposition to future projects could lead to the involvement in appeals or public enquiries where costs to the Enlarged Group could be potentially large and the ultimate outcome uncertain including failure to obtain the permissions necessary to pursue development and/or production or, if granted, to enable development and/or production to be pursued economically. This may mean that the cash flow of the Company and/or the Enlarged Group could be adversely affected which could in turn materially adversely affect its prospects, financial condition and results of operations, and, accordingly, reduce the amount of distributions paid to, and by, the Company.

The Enlarged Group may be unable to obtain or renew required Licences and/or such Licences may be suspended, terminated or revoked prior to their expiration

An acquired company or business may conduct its operations pursuant to a wide variety of Licences. Any delay in obtaining or renewing any Licence may result in a delay in investment or development of a resource and may have a material adverse effect on the acquired business' results of operations, cash flows and financial condition. There is no guarantee that all required Licences will be granted in accordance with the applications, nor that they will be granted on conditions satisfactory for the Enlarged Group to operate its business. Such Licences contain conditions and requirements that must be met in order to maintain such Licences. The Licences may be suspended, terminated or revoked if the Enlarged Group fails to comply with the relevant requirements. Further, there can be no assurance that the relevant authorities will not significantly alter the conditions or area of, or that any third-party will not challenge, the Licences held by the Enlarged Group. There can further not be any assurance that an expired licence will be renewed. In addition, a licence may be revoked, in whole or in part, by the relevant competent authority in the Netherlands in a limited number of circumstances set out in the Mining Act.

If the Enlarged Group fails to fulfil the specific terms of any of its Licences or if it operates its business in a manner that violates applicable law, government regulators may impose fines or suspend or terminate the Licences, any of which could have a material adverse effect on the Enlarged Group's results of operations, cash flows and financial condition.

The Enlarged Group may suffer material losses from uninsurable or uninsured risks or insufficient insurance coverage

The Enlarged Group may be subject to substantial liability claims due to the inherently hazardous nature of the business of the target company or for acts and omissions of subcontractors, operators or joint venture partners. Any contractual indemnities it may receive from such parties may be difficult to enforce if such sub-contractors, operators or joint venture partners lack adequate resources. There can be no assurance that the proceeds of insurance applicable to covered risks will be adequate to cover related losses or liabilities. In addition, the Enlarged Group may also suffer material losses from uninsurable or uninsured risks. The occurrence of any of these risks could adversely affect the Company's financial performance.

Estimation of resources, reserves and production profiles are based on judgements and assumptions

In general, there is inherent risk in estimates of oil reserves, gas reserves and power generation, and their anticipated production profiles, because it involves subjective judgements and determinations based on available geological, technical, contractual and economic information. They are not exact determinations and the actual resources, reserves and production may be greater or less than those calculated. In addition, these judgements may change based on new information from production or drilling activities or changes in economic factors, as well as from developments such as acquisitions and disposals, new discoveries and extensions of existing fields and the application of improved recovery techniques. If any estimates of hydrocarbon resources, reserves or production profiles (including any competent persons reports upon which the Enlarged Group relies upon in making any operational decision) prove to be substantially incorrect, the Enlarged Group may be unable to recover and produce the estimated levels or quality of hydrocarbons set out in such estimates and the business, prospects, financial condition or results of operations of the Enlarged Group could be materially adversely affected.

The Enlarged Group will be a relatively small operator compared to many other companies in its industry and may not have the resources (both financial and technical) that larger, more established operators may have

The Enlarged Group will operate within a challenging business environment where there is intense competition for access to exploration acreage, gas markets, oil services and rigs, technology and processes, and human resources. The Enlarged Group's competitors include companies with, in many cases, greater financial resources, the benefit of economies of scale, local contacts, staff and facilities. Competition for exploration and production licences as well as other regional investment or acquisition opportunities may increase in the future. This may lead to increased costs in the carrying on of the Enlarged Group's long-term activities and reduced available growth opportunities. Therefore, any failure on the Enlarged Group's part to compete effectively could adversely affect its long-term operating results and financial condition.

The Enlarged Group's operations and assets expose it to significant compliance costs and liabilities in respect of EHS matters

The operations and assets in which the Enlarged Group will be involved are affected by numerous laws and regulations concerning EHS matters including, but not limited to, those relating to discharges of hazardous substances into the environment, the handling and disposal of waste and the health and safety of employees. The technical requirements of these laws and regulations are becoming increasingly complex, stringently enforced and expensive to comply with and this trend is likely to continue. Any failure to comply with EHS laws and regulations may result in regulatory action (which strict, joint and several liability can include statutory orders requiring steps to be taken or prohibiting certain operations), the imposition of fines or the payment of compensation to third parties. All of these liabilities and any other regulatory actions could have a material adverse effect on the Enlarged Group's business, financial condition, results of operations and prospects.

A violation of EHS requirements and the occurrence of any accidents could disrupt the Enlarged Group's operations and increase operating costs

EHS authorities (such as the Dutch SSM, the UK Department for Business, Energy & Industrial Strategy, UK HSE and Safety Executive and the UK Offshore Safety Directive Regulator) have extensive enforcement powers under EHS laws and regulations. These powers extend to statutory notices to require operational steps and to prohibit certain activities or operations until compliance is achieved. A violation of EHS laws and regulations, or failure to comply with the instructions of the relevant EHS authorities could therefore lead to, inter alia, a temporary shutdown of all, or a portion of, the Enlarged Group's facilities and the imposition of costly compliance procedures.

If EHS authorities shut down all, or a portion of, the Enlarged Group's facilities or impose costly compliance measures, the Enlarged Group's business, financial condition, results of operations and prospects would be materially and adversely affected. The nature of the operations in which the Enlarged Group will be participating creates a risk of accidents and fatalities among its workforce, and the Enlarged Group may be required to pay compensation or suspend operations as a result of such accidents or fatalities, which could have a material adverse effect on the Enlarged Group's business, financial condition, results of operations and prospects.

Changes in global supply and demand owing to an economic downturn may adversely affect the business, results of operations, cash flows and financial condition of the Enlarged Group

Commodity prices are affected by global supply and demand, as well as widespread trading activities by market participants and others, either seeking to secure access to such commodities or to hedge against commercial risks, or as part of investment portfolio activity. Fluctuations in commodity prices give rise to commodity price risk for the Enlarged Group. Historically, such prices can be subject to substantial variation which cannot be accurately predicted. If the global economic environment experiences a substantial downturn or remains relatively weak for the medium to long term, the ability of the Enlarged Group to grow or maintain revenues in future years may be adversely affected, and at certain long term price levels for a given commodity, extractive operations with respect to that commodity may not be economically viable. Adverse and volatile economic conditions may also limit the Enlarged Group's ability to anticipate revenues and costs and can affect the Enlarged Group's ability to implement planned projects. In addition, industry analysts are likely to take such conditions into account when assessing the prospective business and creditworthiness of the Enlarged Group and any adverse determinations, may make it more difficult for the Enlarged Group to raise capital in the future to finance the business.

The oil and gas, exploration, development and production sector is subject to commodity price fluctuations, which may adversely impact the results of operations, financial conditions and prospects of the Enlarged Group

The Enlarged Group, through its operations and assets, may be a market participant as seller (and may, in certain situations, be a buyer) in any one or more commodities. Accordingly, the Enlarged Group's revenue and earnings may depend upon prevailing prices for the commodities it relies on and produces. These commodities are globally traded and as a result, and in common with its competitors, the Enlarged Group is unable to control the prices it receives for such commodities.

In addition, the range of the commodities which the activities produce may not be sufficiently broad and/or the acquired activities may be concentrated in one or more commodities within the oil and gas, exploration, development and production sector. As a result, the Enlarged Group may not be able to offset price changes in one commodity with countercyclical changes in another commodity within the Enlarged Group's range of commodities in an attempt to mitigate the effects of adverse price changes.

Historically, commodity prices have been volatile and subject to wide fluctuations for many reasons. It is impossible to predict accurately future commodities price movements and commodities prices may not remain at their current levels. Any material declines in commodities prices, to the extent they are not addressed by meaningful hedging arrangements, could result in a reduction of the Enlarged Group's net production revenue.

Restrictions on the Enlarged Group's ability to access necessary infrastructure services, including transportation and utilities, may adversely affect the Enlarged Group's operations. In addition, the Enlarged Group participates in and is reliant upon shared infrastructure

Inadequate supply of the critical infrastructure elements for drilling production, transport, terminalling and processing could result in reduced production or sales volumes, which in turn could have a negative effect on the Enlarged Group's financial performance. Disruptions in the supply of essential utility services to its critical infrastructure could halt the Enlarged Group's production for the duration of the disruption and, when unexpected, may cause loss of life or damage to its drilling equipment or facilities, which may in turn affect its ability to recommence operations on a timely basis.

Adequate provision of transportation services, such as timely pipeline and terminal access, are critical to distributing products and disruptions to such services, or increased costs in relation to accessing them (which may be outside the control of the Enlarged Group) may affect the Enlarged Group's operations including resulting in the shutting-in of producing wells if production cannot be off-taken. The Enlarged Group will be dependent on third-party providers of utility and transportation services.

Shared infrastructure carries associated risks when multiple fields and operators feed into a common infrastructure, in particular there are risks of contamination or off-specification gas or fluids entering the shared infrastructure which may result in the rejection of gas or fluids at the terminal point and/or shut-downs of the infrastructure, all of which may affect the Enlarged Group's operations.

TONO is party to the TPOSA, under which all natural gas and condensate from the Q10 field is processed, transported and delivered.

The provision of services, maintenance of networks and contingency plans under the TPOSA may be largely outside of the Enlarged Group's control. The P15-P18 Group may also cease to provide services under the TPOSA, which would have a significant adverse effect on the Enlarged Group's business unless it was able to make appropriate alternative arrangements.

Exploration, development and production activities are capital intensive and inherently uncertain in their outcome. As a result, the Enlarged Group may not generate a return on its investments or recover its costs and it may not be able to generate cash flows or secure adequate financing for its discretionary capital expenditure plans

Exploration, development and production activities are capital intensive and inherently uncertain in their outcome. The Enlarged Group's future oil and gas, exploration, development and production projects may involve unprofitable efforts, either from dry wells or from wells that are productive but do not produce sufficient net revenues to return a profit after development, operating and other costs. Furthermore, completion of a well does not guarantee a profit on the investment or recovery of the costs associated with that well. In addition, drilling hazards or environmental damage could significantly affect operating costs, and production from successful wells may be adversely affected by conditions including delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, aged or defective facility components, insufficient storage or transportation capacity or adverse geological conditions. Production delays and declines, whether or not as a result of the foregoing conditions, may result in lower revenue or cash flows from operating activities until such time, if at all, that the delay or decline is cured or arrested.

Political, legal and commercial instability, as well as political and fiscal pressure on governments, in the countries and territories in which the oil and gas, exploration, development and production sector may operate could affect the viability of the Enlarged Group's operations and assets

The Enlarged Group may have operations and assets in jurisdictions with varying degrees of political, legal and commercial stability. Political, civil and social pressures may result in administrative change, policy reform, changes in law or governmental regulations, which in turn can result in expropriation or nationalisation of a target's assets. Renegotiation or nullification of pre-existing agreements, concessions, leases and permits held by a target business, changes in fiscal policies (including increased tax or royalty rates) or currency restrictions are all possibilities. Commercial instability caused by bribery may lead to similar consequences, any of which could have a material adverse effect on the profitability, the ability to finance or, in extreme cases, the viability of an operation.

In addition, fiscal constraints or political pressure may also lead governments to impose increased taxation on operations in the oil and gas, exploration, development and production sector within a given jurisdiction. Such taxes or other expropriation of assets could be imposed by any jurisdiction in which the Enlarged Group operates. If operations are delayed or shut down as a result of political, legal or commercial instability, or if the Enlarged Group's operations are subjected to increased taxation or other expropriation, the Enlarged Group's earnings growth may be constrained and the ability of the Enlarged Group to generate long term value for Shareholders could be adversely impacted.

Inflation and other cost increases may have an adverse effect on the Enlarged Group's results of operations and cash flows

Significant inflation or other production cost increases in the countries in which the Enlarged Group may operate could increase operational costs without a corresponding increase in the sales price of the commodities the Enlarged Group may produce. Alternatively, a lag in the reduction of input costs relative to declining commodity prices will have a similar adverse effect on the Enlarged Group's operations. Any such increased costs or delays in cost reductions may adversely affect the Enlarged Group's profitability, cash flows and results of operations.

Existing and proposed legislation and regulation affecting GHG and other emissions may adversely affect certain of the Enlarged Group's operations and assets

Many participants in the oil and gas, exploration, development and production sector are subject to current and planned legislation in relation to the emission of carbon dioxide, methane and other GHGs, together with other pollutants, including nitrous oxide.

Failure to comply with existing legislation or any future legislation could adversely affect the Enlarged Group's profitability if its business has material GHG intensive assets. Future legislative initiatives designed to reduce the consumption of hydrocarbons could also have an impact on the ability of the Enlarged Group to market its commodities and/or the prices which it is able to obtain. These factors could have a material adverse effect on the Enlarged Group's business, results of operations, financial condition or prospects.

The use of independent contractors in the Enlarged Group's operations may expose those operations to delays or suspensions of activities

Independent contractors are typically used in operations in the oil and gas, exploration, development and production sector to perform various operational tasks, including carrying out drilling and mining activities and delivering raw commodities to processing or beneficiation plants. In periods of high commodity prices, demand for such contractors may exceed supply resulting in increased costs or lack of availability of key contractors. Disruptions of operations or increased costs also can occur as a result of disputes with contractors or a shortage of contractors with particular capabilities. Additionally, because the Enlarged Group will not have the same control over independent contractors as it does over its own employees, there is a risk that such contractors will not operate in accordance with the Enlarged Group's safety standards or other policies. Any of the foregoing circumstances could have a material adverse effect on the Enlarged Group's operating results and cash flows.

Drilling operations are vulnerable to natural disasters, operating difficulties and damage to or breakdown of a physical asset, any of which could have a material impact on the productivity of the operations and not all of which may be covered by insurance

Drilling operations are vulnerable to natural disasters, including earthquakes, drought, floods, fire, tropical storms and the physical effects of climate change, all of which are outside the Enlarged Group's control. Operating difficulties, such as unexpected geological variations that could result in significant failure, could affect the costs and viability of its operations for indeterminate periods. In addition, damage to or breakdown of a physical asset, including as a result of fire, explosion or natural catastrophe, can result in a loss of assets and subsequent financial losses. Insurance can provide protection from some, but not all, of the costs that may arise from unforeseen events. Although the Enlarged Group intends to maintain suitable insurance, the Enlarged Group's insurance may not cover every potential risk associated with its operations. Adequate coverage at reasonable rates is not always obtainable. In addition, the Enlarged Group's insurance may not fully cover its liability or the consequences of any business interruptions such as equipment failure or labour dispute. The occurrence of a significant adverse event not fully or partially covered by insurance could have a material adverse effect on the Enlarged Group's business, results of operations, financial condition and prospects.

Labour disruptions could have an adverse effect on the Enlarged Group's results of operations, cash flows and financial condition

There is a risk that strikes or other types of conflict with unions or employees may occur at any one of the Enlarged Group's operations or in any of the geographic regions in which the Enlarged Group operates. Any labour disruptions could increase operational costs and decrease revenues by delaying the business activities of the Enlarged Group or increasing the cost of substitute labour, which may not be available. Furthermore, if such disruptions are material, they could adversely affect the Enlarged Group's results of operations, cash flows and financial condition.

Exploration, development and production activities are inherently subject to a number of potential drilling and production risks and hazards which may affect the ability of the Enlarged Group, if it acquires or establishes any oil and gas, exploration, development and production activities to produce oil and gas at expected levels, increase operating costs and/or expose the Enlarged Group and/or its directors and officers to legal liability

The production and development operations of the Enlarged Group will involve risks normally associated with such activities, including blowouts, explosions, fires, equipment damage or failure, geological uncertainties, unusual or unexpected rock formations and abnormal pressures, risks related to allocation and commingling of gas and off-spec gas, and environmental hazards such as accidental spills, releases or leakages of petroleum liquids, gas leaks, ruptures or discharges of toxic gas. Operations are also subject to hazards inherent in marine operations, which include damage from severe weather conditions, capsizing or sinking, and damage to pipelines and subsea facilities from fishing nets, anchors and vessels. The occurrence of any of these events could result in production delays or the failure to produce oil and gas in commercial quantities from the affected operations. These events could also lead to environmental damage, injury to persons and loss of life or the destruction of property, any of which could expose the Enlarged Group and/or its directors and officers to the risk of litigation and clean-up or other remedial costs. Damages claimed in connection with any consequent litigation and the costs to the Enlarged Group in defending itself against such litigation are difficult to predict and may be material.

In addition, the Enlarged Group could experience adverse publicity as a result of any such litigation. Any loss of production or adverse legal consequences stemming from production hazards could have a material adverse effect on the Enlarged Group's business, results of operations, financial condition or prospects.

Risk relating to the Acquisition

Completion of the Acquisition is subject to the satisfaction (or waiver) of a number of conditions contained in the Acquisition Agreement including the approval of the Acquisition by the Shareholders at the General Meeting and Admission. If Shareholders do not approve the Acquisition at the General Meeting, the Acquisition will not complete.

RISKS RELATED TO THE NEW BONDS

The New TONO Bond is not underwritten and Admission is not conditional upon the completion of the Acquisition and/or the issue of the New TONO Bond. There is accordingly a risk that Admission will occur and the Equity Financing will complete, but that Kistos will be unable procure the replacement of the Existing TONO Bond with the New TONO Bond and/or to procure the release of the Vendor from its guarantee obligations

Upon a change of control of TON and TONO, a mandatory redemption event arises and bondholders of the Existing TONO Bond are entitled to repayment at 103% of the outstanding nominal value of the Existing TONO Bond. Whilst ABG and Pareto have conditionally agreed to use their reasonable endeavours to place, as agent for the Company, the New TONO Bond (which will be used to refinance the Existing TONO Bond) the New TONO Bond is not underwritten. Whilst it is expected that the New TONO Bond will be placed, in full, prior to Admission, Admission is not conditional upon the issue of the New TONO Bond (which will occur after Admission and contemporaneously with the completion of the Acquisition). There is accordingly a risk to subscribers in the Equity Financing that the Acquisition could complete and the change of control is triggered but that Kistos and/or TONO are unable to meet the obligation to repay the holders of the Existing TONO Bond, or that Admission occurs and that completion of the Acquisition is delayed or deferred until alternative sources of finance can be secured, of which there can be no guarantee.

The Enlarged Group may not be able to generate sufficient cash to service all of its indebtedness, including the New Bonds, and may be forced to take other actions to satisfy its obligations under agreements governing its indebtedness, which may not be successful

The Enlarged Group's ability to make payments on and to refinance its indebtedness, including the New Bonds, and to fund planned capital expenditures and other general corporate purposes will depend, among other things, on its ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. The Enlarged Group cannot assure you that its business will generate sufficient cash flow from operations or that future capital will be available to it in an amount sufficient to enable the Enlarged Group to make payments on or to refinance our indebtedness, including the New Bonds, or to fund its other liquidity needs. If the Enlarged Group's cash flow and capital resources are insufficient to allow it to make payments on its indebtedness, the Enlarged Group may need to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance all or a portion of its indebtedness, including the New Bonds, on or before maturity. The Enlarged Group cannot assure you that we will be able to refinance any of its indebtedness, including the New Bonds, on commercially reasonable terms or at all or that the terms of such indebtedness will allow any of the above alternative measures or that these measures would satisfy its debt service obligations. If the Enlarged Group is unable to generate sufficient cash flow or refinance its indebtedness on favourable terms, it would significantly adversely affect the Enlarged Group's financial condition, the value of its outstanding indebtedness and its ability to make any required cash payments under its indebtedness.

The guarantees are effectively subordinated to the secured debt of the guarantors

The New Bonds will be guaranteed by the Enlarged Group. Each guarantee will be the respective guarantor's senior unsecured obligations and rank equal in right of payment with any other senior unsecured indebtedness of such guarantor. Each guarantee, however, will be effectively subordinated to all of the guarantors existing or future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.

Restrictive covenants in any future debt facilities of the Enlarged Group will impose financial and other restrictions

The New Bonds will, and the Enlarged Group's potential future loan facilities might, impose, operating and financial restrictions on the Enlarged Group. These restrictions may, inter alia, limit the Enlarged Group's ability to pay dividends, incur additional indebtedness, create liens on its assets, and additional actions which may otherwise be beneficial for the Enlarged Group. The New Bond Terms will contain, inter alia, significant restrictions, including dividend restrictions, financial covenants and various covenants as to the operations of the business.

Risk of insufficient amount upon foreclosure

Although the New Bonds are secured, there can be no assurance that the value of the Enlarged Group's assets will be sufficient to cover all the outstanding New Bonds together with accrued interest, and there can be no assurance of the value of the transaction security. A liquidation scenario may also make it difficult to obtain full market value for the secured assets, which may leave bondholders impaired.

If the Enlarged Group defaults on its obligations to make payments in respect of the New Bonds, the amount of proceeds that ultimately would be distributed in respect of the New Bonds upon a foreclosure or other enforcement action may not be sufficient to satisfy the obligation under the New Bonds. Although the New Bonds are secured, there can be no assurance that the proceeds from any sale or liquidation of this collateral will be sufficient to meet the obligations under the New Bonds. If the proceeds of any sale of collateral are not sufficient to repay all amounts due on the New Bonds, the holders of the New Bonds (to the extent not repaid from the proceeds of the sale of the collateral) would have only a senior unsecured claim against any remaining assets of the Enlarged Group and the guarantors.

The Enlarged Group may not have the ability to raise funds necessary to finance any change of control offer required under the New Bond Terms

If a "change of control event" under the New Bond Terms occurs, holders of the New Bonds will have the right to require the Enlarged Group to repurchase the New Bonds, in whole or in part, at a purchase price equal to 103% of the principal amount of the New Bonds, plus accrued and unpaid interest, if any, to the date of repurchase. The Enlarged Group's ability to repurchase the New Bonds upon such a "change of control event" would be limited by its access to funds at the time of the repurchase and the terms of agreements governing the Enlarged Group's other indebtedness (if any).

RISKS RELATING TO THE COMPANY'S INTENT TO PURSUE ADDITIONAL ACQUISITIONS

The Enlarged Group's ability to complete an additional acquisition

The Enlarged Group's future success may dependent upon its ability to not only identify further investment opportunities but also to execute further acquisitions. There can be no assurance that the Enlarged Group will be able to conclude agreements with any further target business and/or shareholders in the future and failure to do so could result in the loss of some or all of an investor's investment. In addition, the Enlarged Group may not be able to raise additional funds that may be required to acquire any future target business and fund its working capital requirements in accordance with its acquisition strategy.

Identifying and acquiring suitable additional acquisition targets

Suitable acquisition targets which generate acceptable returns may not always be readily available and there is no guarantee that the Enlarged Group will be successful in sourcing further suitable assets or making any additional investments. If the Enlarged Group cannot identify and/or complete further acquisitions the Enlarged Group may remain solely focussed on Tulip and its business.

Future acquisition targets may be delayed or made at a relatively slow rate because, inter alia:

· the Company intends to conduct detailed due diligence prior to approving acquisition targets;

· the Company may conduct extensive negotiations in order to secure and facilitate acquisition targets;

· it may be necessary to establish certain structures in order to facilitate an acquisition target;

· covenants in existing debt finance agreements may restrict or constrain the Enlarged Group's ability to raise further debt;

· competition from other investors, market conditions or other factors may mean that the Company cannot identify additional attractive acquisition targets or such acquisition targets may not be available at the rate the Company currently anticipates;

· the Company may be unable to agree on acceptable terms;

· the Company may need to obtain Shareholder approval to issue additional Ordinary Shares to finance any further acquisition and/or may need consent from the holders of its debt instruments;

· the Company may be unable to raise bank finance or other sources of finance on terms the Directors consider reasonable; or

· the Company may need to raise further capital to make investments and/or fund the assets or businesses invested in, which may not be achieved.

To secure any acquisition, working capital is required for general expenses and also for due diligence on any such acquisition in addition to the working capital requirements of the Enlarged group as it stands. These sums can be considerable depending on the nature and location of an acquisition target.

Material facts or circumstances may not be revealed in the due diligence process

The Company intends to conduct such due diligence as it deems reasonably practicable and appropriate based on the facts and circumstances applicable to any potential future acquisition. The objective of the due diligence process will be to identify material issues which might affect the decision to proceed with any particular acquisition target or the consideration payable for an acquisition. The Company also intends to use information revealed during the due diligence process to formulate its business and operational planning for, and its valuation of, any target company or business. Whilst conducting due diligence and assessing a potential acquisition, the Company will rely on publicly available information, if any, information provided by the relevant target company to the extent such company is willing or able to provide such information and, in some circumstances, third-party investigations.

There can be no assurance that the due diligence undertaken with respect to a potential future acquisition will reveal all relevant facts that may be necessary to evaluate such acquisition, including the determination of the price the Company may pay for an acquisition target, or to formulate a business strategy. Furthermore, the information provided during due diligence may be incomplete, inadequate or inaccurate. As part of the due diligence process, the Company will also make subjective judgments regarding the results of operations, financial condition and prospects of a potential opportunity. If the due diligence investigation fails to correctly identify material issues, including current and future liabilities that may be present in a target company or business, or if the Company considers such material risks to be commercially acceptable relative to the opportunity, and the Company proceeds with an acquisition, the Company may subsequently incur substantial impairment charges or other losses. In addition, following an acquisition, the Company may be subject to significant, previously undisclosed liabilities of the acquired business that were not identified during due diligence and which could contribute to poor operational performance, undermine any attempt to restructure the acquired company or business in line with the Company's business plan and have a material adverse effect on the Company's financial condition and results of operations.

Valuation error

In assessing the consideration to be paid for an acquisition, the Directors, inter alia, expect to rely on market data, industry statistics and industry forecasts consisting of estimates compiled by industry professionals, organisations, analysts or publicly available information. Industry publications generally state that their information is obtained from sources they believe to be reliable but that the accuracy and completeness of such information is not guaranteed and that the forecasts or projections they contain are based on a number of significant assumptions. Although the Company intends to use sources that are believed to be reliable, it may not always have access to the underlying information, methodology and other bases for such information and may not have independently verified the underlying information and, therefore, cannot guarantee its accuracy and completeness. Accordingly, errors in any of the assumptions or methodology employed by a third-party in preparing a report on which the Company may place reliance may materially adversely affect the Company's valuation and therefore returns on any acquisition, business, results of operations, financial condition and prospects.

Future investments may have an adverse effect on the Company's ability to manage its business

If the Company is presented with appropriate opportunities, it may acquire complementary companies in the energy sector. Future acquisitions would expose the Company to potential risks, including risks associated with the assimilation of new personnel, unforeseen or hidden liabilities, the diversion of management attention and resources from the Company's existing business and the inability to generate sufficient revenues to offset the costs and expenses of acquisitions. Any difficulties encountered in the acquisition and integration process may have an adverse effect on the Company's ability to manage its business.

Acquisitions of private companies are subject to a number of risks

The Company may acquire privately held companies or assets that may:

· be highly leveraged and subject to significant debt service obligations, stringent operational and financial covenants and risks of default under financing and contractual arrangements, which may adversely affect their financial condition;

· have limited operating histories and smaller market shares than publicly held businesses making them more vulnerable to changes in market conditions or the activities of competitors;

· be more dependent on a limited number of management and operational personnel, increasing the impact of the loss of any one or more individuals; and/or

· require additional capital.

All or any of these factors may have a material adverse effect on the business, financial condition, results of operations and prospects of the Company.

The Company may not acquire total voting control of any target company or business

The Company's intention is to acquire controlling interests in target businesses however it may be that opportunities to acquire controlling interests may not be possible either initially or at all. The Company does not intend to acquire portfolios of non-controlling interests but may invest where participation in targets may result in enhancing Shareholder value and where the participation of the Company in such targets is active rather than passive. Where non-controlling interests are secured this may limit the Company's operational strategies and reduce its ability to enhance Shareholder value albeit the terms of such participation will be negotiated in such a manner as to entrench the Company's participative interest and value enhancement. In the event that the Company cannot acquire a controlling interest in the target business, this could result in an impairment to the Company's objective and acquisition, financing and business strategies which could have a material adverse effect on the continued development or growth of the acquired company or business.

In the event the Company acquires less than a 100% interest in a particular asset or entity, the remaining ownership interest will be held by third parties and the subsequent management and control of such an asset or entity may entail risks associated with multiple owners and decision-makers. Any such investment also involves the risk that third-party owners might become insolvent or fail to fund their share of any capital contribution which might be required, which may then fall to the Company to fund. In addition, such third parties may have economic or other interests which are inconsistent with the Company's interests, or they may obstruct the Company's plans, or they may propose alternative plans. If such third parties are able to take or influence actions contrary to the Company's interests and plans, this may affect the ability of the Company to implement its strategies.

In addition, there is a risk of disputes between the Company and third parties who have an interest in the asset or entity in question. Any litigation or arbitration resulting from any such disputes may increase the Company's expenses and distract the Board from focusing its time to fulfil the strategy of the Company. The Company may also, in certain circumstances, be liable for the actions of such third parties.

The Company may face significant competition for acquisition targets

There may be significant competition in some or all of the Acquisition targets that the Company may explore. Such competition may, for example, come from strategic buyers, market competitors, special purpose acquisition companies and public and private investment funds, many of which are well established and have extensive experience in identifying and completing acquisitions. A number of these competitors may possess greater technical, financial, human and other resources than the Company. The Company cannot assure investors that it will be successful against such competition. Such competition may cause the Company to be unsuccessful in executing an Acquisition or may result in a successful Acquisition being made at a significantly higher price than would otherwise have been the case which could materially adversely impact the business, financial condition, result of operations and prospects of the Company.

Need for additional funding

Except for the Acquisition, the Company currently has no plans, arrangements or understandings with any prospective target company or business regarding an acquisition and the Company cannot currently predict the amount of additional capital that may be required, once a further acquisition has been made, if the target is not sufficiently cash generative, further funds may need to be raised.

Although the Company intends to finance further acquisitions primarily through the issue of Ordinary Shares, if, following a further acquisition, the Company's cash reserves are insufficient; the Company may be required to seek additional equity financing, which may be dilutive to Shareholders. It may also be the case that Ordinary Shares might not be an acceptable form of consideration to a prospective vendor of an asset or business. The Company may not receive sufficient support from its existing Shareholders to raise additional equity, and new equity investors may be unwilling to invest on terms that are favourable to the Company, or at all.

Should the Company pursues debt financing as a means to obtain additional financing, it may be the case that lenders may be unwilling to extend debt financing to the Company on attractive terms, or at all. Unattractive terms may comprise restrictions on operating activities, future financing, acquisitions and disposals. To the extent that additional equity or debt financing is necessary to complete a further acquisition and remains unavailable or only available on terms that are unacceptable to the Company, the Company may be compelled either to restructure or abandon such acquisition, or proceed with such acquisition on less favourable terms, which may reduce the Company's return on the investment.

Even if additional financing is unnecessary to complete a further acquisition, the Company may subsequently require equity or debt financing to implement operational improvements in an acquired business. The failure to secure additional financing or to secure such additional financing on terms acceptable to the Company could have a material adverse effect on the continued development or growth of the acquired business.

Implementation risk

Pending completion of the Acquisition, the Company has no assets producing positive cash flow and its ultimate success will depend on the Directors' ability to implement the strategy outlined in this Announcement, generate cash flow from the Company's investments, and access equity and debt financing markets as the Company grows and develops. Whilst the Directors' are optimistic about the Company's prospects, there is no certainty that anticipated outcomes and sustainable revenue streams will be achieved.

The Company could incur costs for transactions that may ultimately be unsuccessful

There is a risk that the Company may incur substantial legal, financial and advisory expenses arising from unsuccessful transactions which may include public offer and transaction documentation, legal, accounting and other due diligence which could have a material adverse effect on the business, financial condition, results of operations and prospects of the Company.

No assurance that any operating improvements will be successful or that they will be effective in increasing the valuation of any business acquired

Following an acquisition, there can be no assurance that the Company will be able to propose and implement effective operational improvements for any company or business which the Company acquires. In addition, even if the Company completes an Acquisition, general economic and market conditions or other factors outside the Company's control could make the Company's operating strategies difficult or impossible to implement. Any failure to implement these operational improvements successfully and/or the failure of these operational improvements to deliver the anticipated benefits could have a material adverse effect on the Company's results of operations and financial condition.

Restrictions on offering Ordinary Shares as consideration for a future acquisition or requirement to provide alternative consideration

The Company may offer its Ordinary Shares or other securities as part of the consideration to fund, or in connection with, a future acquisition. However, certain jurisdictions may restrict the Company's use of its Ordinary Shares or other securities for this purpose, which could result in the Company needing to use alternative sources of consideration. Such restrictions may limit the Company's available acquisition opportunities or make certain acquisitions more costly which may have an adverse effect on its operations.

Foreign investment and exchange risks

As at the date of this Announcement, the Company's functional and presentational currency is pounds sterling. Following completion of the Acquisition, which has an effective date of 1 January 2021, the Company's functional and presentational currency will become EUR. Accordingly, the Company's future consolidated financial statements will carry the Enlarged Group's assets in EUR, however certain Directors, and key management may incur costs to the Company in currencies other than EUR.

In addition, any business the Company invests in may denominate its financial information, conduct operations or make sales in currencies other than pounds sterling. When acquiring a business that has functional currencies other than pounds sterling, the Company will be required to translate, inter alia, the balance sheet and operational results of such business into pounds sterling. As a result, changes in exchange rates between pounds sterling and other currencies could lead to significant changes in the Company's reported financial results from period to period.

Among the factors that may affect currency values are trade balances, levels of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political or regulatory developments. Although the Company may seek to manage its foreign exchange exposure, including by active use of hedging and derivative instruments, there is no assurance that such arrangements will be entered into or available at reasonable cost at all times when the Company wishes to use them or that they will be sufficient to cover the risk and this may have a negative impact on the profitability and value of the Company.

Interest rates

Changes in interest rates can affect the Company's profitability by affecting the spread between, inter alia, the income on its assets and the expense of any interest-bearing liabilities it has, the value of any interest earning assets and its ability to make an Acquisition. In the event of a rising interest rate environment and/or economic downturn, loan defaults may increase and result in credit losses that may be expected to affect the Company's operating results adversely. Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, fiscal deficits, trade surpluses or deficits, regulatory requirements and other factors beyond the control of the Company.

Internal controls may be insufficient to enable effective management as the Company grows

Future growth and prospects for the Company will depend on its management's ability to manage the business of the Company and to continue to improve internal operational and financial management information and control systems on a timely basis, whilst at the same time maintaining effective cost controls. Any failure to improve such information and control systems in line with the Company's growth could adversely impact the business, development, financial condition, results of operations and prospects of the Company.

Dependence upon Directors to identify potential acquisition opportunities and to execute acquisitions

The Company is dependent upon the Directors to identify potential acquisition opportunities and to execute acquisitions. The unexpected loss of the services of the Directors (or any of them) could have a material adverse effect on the Company's ability to identify potential acquisition opportunities and to execute on any acquisition.

Retention of personnel required to support the Company after the completion of any further acquisitions

Following completion of any further acquisition, the Company will evaluate the personnel of the acquired business and may determine that it requires increased support to operate and manage the acquired business in accordance with the Company's overall business strategy. There can be no assurance that existing personnel of the acquired business will be adequate or qualified to carry out the Company's strategy or that the Company will be able to hire or retain experienced, qualified employees to carry out the Company's strategy.

Costs associated with potential acquisitions

The Company expects to incur certain third-party costs associated with the sourcing of suitable assets. The Company can give no assurance as to the level of such costs, and given that there can be no guarantee that negotiations to acquire any given assets will be successful (for example, the Company may fail to complete a proposed acquisition because it has been outbid by a competitor or does not meet the Vendors' internal hold value), it may be left with substantial unrecovered transaction costs, including legal, financial, advisory or other expenses, including general and administration costs, which could have a material adverse effect on the financial condition and prospects of the Company. The greater the number of deals that do not reach completion, the greater the likely impact of such costs on the Company's performance, share price, financial condition and business prospects.

Long-term nature of acquisitions

While an acquisition target may be sold by the Company at any time, it is not generally expected that this will occur for a number of years after such an acquisition is made. Investments in oil, gas and energy assets and companies are best suited for long-term investors.

Illiquid nature of the Company's investments

Return of capital to Shareholders and the realisation of gains, if any, generally will occur only upon the partial or complete disposal of an investment, or ultimately the Company itself, which may be several years after first investment.

RISKS RELATING TO THE ORDINARY SHARES AND THEIR TRADING ON AIM

There may be a limited market for the Ordinary Shares. A market for the Ordinary Shares may not develop, which would adversely affect the liquidity and price of the Ordinary Shares

The price of the Ordinary Shares after Admission might vary due to a number of factors, including but not limited to, general economic conditions and forecasts, the Enlarged Group's general business condition and the release of its financial reports.

Although the Company's current intention is that its Ordinary Shares should continue to trade on AIM, it cannot assure investors that it will always do so. In addition, an active trading market for the Ordinary Shares may not develop or, if developed, may not be maintained. Investors may be unable to sell their Ordinary Shares unless a market can be established and maintained, and if the Company subsequently obtains a listing on an exchange in addition to, or in lieu of, the London Stock Exchange, the level of liquidity of the Ordinary Shares may decline.

Trading on AIM

The Ordinary Shares will be admitted to trading on AIM. An investment in shares quoted on AIM may be less liquid and may carry a higher risk than an investment in shares quoted on the Official List. The AIM Rules for Companies are less demanding than those which apply to companies admitted to listing on the premium segment of the Official List of the FCA and to trading on the main market for listed securities of the London Stock Exchange. Further, the FCA has not itself examined or approved the contents of this Announcement. A prospective investor should be aware of the risks of investing in such shares and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser authorised under FSMA.

Value and liquidity of the Ordinary Shares

It may be difficult for an investor to realise his, her or its investment. The shares of publicly traded companies can have limited liquidity and their share prices can be highly volatile.

The price at which the Ordinary Shares will be traded and the price at which investors may realise their investment will be influenced by a large number of factors, some specific to the Company and its operations and others which may affect companies operating within a particular sector or quoted companies generally. A relatively small movement in the value of an investment or the amount of income derived from it may result in a disproportionately large movement, unfavourable as well as favourable, in the value of the Ordinary Shares or the amount of income received in respect thereof.

Prospective investors should be aware that the value of the Ordinary Shares could go down as well as up, and investors may therefore not recover their original investment. Furthermore, the market price of the Ordinary Shares may not reflect the underlying value of the Company's net assets. The investment opportunity offered in this Announcement may not be suitable for all recipients of this Announcement. Potential investors are therefore strongly recommended to consult an independent financial adviser authorised under FSMA who specialises in advising on investments of this nature before making an investment decision.

Reverse Takeovers

A further substantial acquisition may trigger a Reverse Takeover under AIM Rule 14, which will make that additional acquisition subject to prior Shareholder approval and re-admission to AIM or another listing venue for the enlarged entity.

Shareholders should note that where a transaction is considered to be a Reverse Takeover for the purposes of the AIM Rules for Companies and the Shareholders approve any such transaction, trading on AIM in the Ordinary Shares will be cancelled and re-admission to AIM or another listing venue will be required to be sought in the same manner as any other applicant applying for admission of its securities for the first time. Trading in the Ordinary Shares will normally be suspended following the announcement of any such transaction until the Company has published a re-admission document in respect of the Company.

Dilution of Shareholders' interest as a result of additional equity financing

Although the Company will receive the net proceeds of the Placing, the Directors anticipate that the Company may issue a substantial number of additional Ordinary Shares, or incur substantial additional indebtedness to complete any further acquisitions.

Shareholders do not have the benefit of pre-emption rights in respect of the issues of future shares which are issued for non-cash consideration pursuant to any acquisitions. In addition, the Company may issue shares or convertible debt securities in exchange for cash to complete a further acquisition, pursuant to disapplications of the pre-emption rights that exist under the Articles and the Companies Act 2006 which may dilute the interests of Shareholders.

Any issue of Ordinary Shares, preferred shares or convertible debt securities may:

· significantly dilute the value of the Ordinary Shares held by existing Shareholders;

· cause a change of control if a substantial number of Ordinary Shares are issued, which may, inter alia result in the resignation or removal of one or more of the Directors;

· in certain circumstances, have the effect of delaying or preventing a change of control;

· subordinate the rights of holders of Ordinary Shares if preferred shares are issued with rights senior to those of Ordinary Shares; or

· adversely affect the market prices of the Company's Ordinary Shares.

If Ordinary Shares, preferred shares or convertible debt securities are issued as consideration for an acquisition, existing Shareholders will have no pre-emptive rights with regard to the securities that are issued. The issue of such Ordinary Shares, preferred shares or convertible debt securities is likely to materially dilute the value of the Ordinary Shares held by existing Shareholders. Where a target company has an existing large shareholder, an issue of Ordinary Shares, preferred shares or convertible debt securities as consideration may result in such shareholder subsequently holding a significant or majority stake in the Company, which may, in turn, enable it to exert significant influence over the Company (to a greater or lesser extent depending on the size of its holding) and could lead to a change of control.

If the Company were to incur substantial indebtedness in relation to an acquisition, this could result in:

· default and foreclosure on the Company's assets, if its cash flow from operations were insufficient to pay its debt obligations as they become due;

· acceleration of its obligation to repay indebtedness, even if it has made all payments when due, if it breaches, without a waiver, covenants that require the maintenance of financial ratios or reserves or impose operating restrictions;

· a demand for immediate payment of all principal and accrued interest, if any, if the indebtedness is payable on demand; or

· an inability to obtain additional financing, if any indebtedness incurred contains covenants restricting its ability to incur additional indebtedness.

The occurrence of any or a combination of these factors could decrease an investor's ownership interests in the Company or have a material adverse effect on its financial condition and results of operations.

No guarantee that the Ordinary Shares will continue to be traded on AIM

The Company cannot assure investors that the Ordinary Shares will always continue to be traded on AIM or on any other exchange. If such trading were to cease, certain investors may decide to sell their shares, which could have an adverse impact on the price of the Ordinary Shares. Additionally, if in the future the Company decides to obtain a listing on another exchange in addition or as an alternative to AIM, the level of liquidity of the Ordinary Shares traded on AIM could decline.

Dividend payments on the Ordinary Shares are not guaranteed

To the extent the Company intends to pay dividends on the Ordinary Shares, it will pay such dividends at such times (if any) and in such amounts (if any) as the Board determines appropriate and in accordance with applicable law, regulation and applicable contractual obligations, but expects to be principally reliant upon dividends received on shares held by it in any operating subsidiaries in order to do so. Payments of such dividends will be dependent on the availability of any dividends or other distributions from such subsidiaries. The Company can therefore give no assurance that it will be able to pay dividends going forward or as to the amount of such dividends, if any.

GENERAL RISKS

The Enlarged Group is subject to risks arising from economic conditions in the UK and from risks arising from the continuing global economic weakness, such as those associated with the UK having left the European Union

The exact impact of market risks faced by the Enlarged Group is uncertain and difficult to predict and respond to, in particular, in view of: (i) the continuing unpredictable consequences of the UK leaving the European Union (commonly referred to as "Brexit") and the terms of the Trade and Cooperation Agreement, signed on 30 December 2020 which includes an agreement on free trade between the UK and EU; (ii) difficulties in predicting the rate at which any economic disruption may occur, and over what duration; and (iii) the fact that some of the related risks to the business are totally, or partially, outside the control of the Enlarged Group.

Force majeure

The Enlarged Group's operations now or in the future may be adversely affected by risks outside the control or anticipation of the Enlarged Group, including labour unrest, civil disorder, war, subversive activities or sabotage, fires, earthquakes, floods, explosions or other catastrophes, epidemics or quarantine restrictions, which may have a material adverse effect on the Enlarged Group's future financial condition and results.

The general economic climate may be adverse for the Enlarged Group

The Enlarged Group may make acquisitions of companies and businesses that are susceptible to economic recessions or downturns. During periods of adverse economic conditions, the markets in which the Enlarged Group operates may decline, thereby potentially decreasing revenues and causing financial losses, difficulties in obtaining access to, and fulfilling commitments in respect of, financing, and increased funding costs. In addition, during periods of adverse economic conditions, the Enlarged Group may have difficulty accessing financial markets, which could make it more difficult or impossible for the Enlarged Group to obtain funding for additional acquisitions and negatively affect the Enlarged Group 's operating results. Accordingly, adverse economic conditions could adversely impact the business, development, financial condition, results of operations and prospects of the Enlarged Group.

Taxation of returns from assets located outside of the UK may reduce any net return to investors

To the extent that the assets, company or business which the Enlarged Group acquires is or are established outside the UK, it is possible that any return the Enlarged Group receives from it may be reduced by irrecoverable foreign withholding or other local taxes and this may reduce any net return derived by investors from a shareholding in the Company.

Changes in tax law and practice may reduce any net returns for investors

The tax treatment of Shareholders of the Company, any special purpose vehicle that the Company may establish and any company which the Company may acquire are all subject to changes in tax laws or practices in England and Wales or any other relevant jurisdiction. Any change may reduce any net return derived by investors from a shareholding in the Company.

Investors should not rely on the general guide to taxation set out in this Announcement and should seek their own specialist advice. The tax rates referred to in this Announcement are those currently applicable and they are subject to change.

There can be no assurance that the Company will be able to make returns for Shareholders in a tax-efficient manner

It is intended that the Company will structure the group, including any company or business acquired, to maximise returns for Shareholders in as fiscally efficient a manner as is practicable. The Company has made certain assumptions regarding taxation. However, if these assumptions are not correct, taxes may be imposed with respect to the Company's assets, or the Company may be subject to tax on its income, profits, gains or distributions (either on a liquidation and dissolution or otherwise) in a particular jurisdiction or jurisdictions in excess of taxes that were anticipated. This could alter the post-tax returns for Shareholders (or Shareholders in certain jurisdictions). The level of return for Shareholders may also be adversely affected. Any change in laws or tax authority practices could also adversely affect any post-tax returns of capital to Shareholders or payments of dividends (if any, which the Company does not envisage the payment of, at least in the short to medium term). In addition, the Company may incur costs in taking steps to mitigate any such adverse effect on the post-tax returns for Shareholders

Foreign exchange movements

The Company may continue to acquire foreign companies, hence some contracts may be priced in foreign currencies and also have employees based overseas paid in foreign currencies. It is therefore exposed to the risk that adverse exchange rate movements could cause its costs to increase (relative to its reporting currency) resulting in reduced profitability. The Company, where deemed relevant, takes steps to mitigate this risk by putting in place hedging arrangements to reduce exposure to currency risk, however these may not always be entirely effective, and residual currency risk may exist.

Appendix IV

Unaudited pro forma statement of net assets of the Enlarged Group

The following unaudited pro forma statement of net assets for the Enlarged Group has been prepared to illustrate the effect on the net assets for the Enlarged Group as if the Equity Financing, the Debt Financing and the Acquisition had taken place on 14 October 2020.

The unaudited pro forma statement of net assets for the Enlarged Group has been prepared for illustrative purposes only and illustrates the impact of the Equity Financing, the Debt Financing and the Acquisition as if they had been undertaken at an earlier date. As a result, the hypothetical financial position included in the unaudited pro forma statement of net assets for the Enlarged Group may differ from the Company's actual financial position.

The unaudited pro forma statement of net assets for the Enlarged Group is based on the net assets of the Company as at 14 October 2020, the date of its incorporation.

The unaudited pro forma statement of net assets for the Enlarged Group has been prepared in a manner consistent with the accounting policies to be adopted by the Company in preparing its financial statements for the year ending 31 December 2021, in accordance with Schedule 2 para (b)(i) of the AIM Rules for Companies and on the basis set out in the notes below.

The unaudited pro forma information statement of net assets for the Enlarged Group does not constitute financial statements within the meaning of section 434 of the Companies Act 2006.

Unaudited pro forma statement of net assets as at 14 October 2020:

Notes:

1. The net assets of the Company are as at 14 October 2020, the date of its incorporation.

Adjustments:

2. This adjustment reflects the net funds raised by the Company prior to, and on, admission to AIM. The pounds sterling amounts have been converted to Euros at the rate prevailing at 14 October 2020.

3. The net assets of Tulip have been extracted without adjustment from the audited financial statements of TON and TONO for the year ended 31 December 2020, referenced in Appendix V of this Announcement with an unaudited pro forma consolidation as follows.

4. An adjustment has been made to reflect the estimated intangible assets arising on the Acquisition of Tulip.

For the purposes of this unaudited pro forma statement of net assets for the Enlarged Group, no adjustment has been made to the separate assets and liabilities of Tulip to reflect their fair value. The difference between the net assets of Tulip as stated at their book value at 31 December 2020 and the estimated consideration has therefore been presented as a single value in "Intangible assets". The net assets of the Tulip will be subject to a fair value restatement as at the effective date of the Acquisition. Actual intangible assets included in the Company's next published financial statements may therefore be materially different from that included in the unaudited pro forma statement of net assets for the Enlarged Group.

The estimated initial consideration for the Tulip is approximately €222.75 million:

In addition to the initial consideration, contingent consideration of up to €163 million is payable based on the achievement of certain development milestones. This has been assigned a fair value of €nil in calculating the estimated intangible assets for the purposes of the unaudited pro forma statement of net assets.

On completion, €9.729 million of the balances due to the Vendor will be repaid in cash and the balance will be capitalised into shares in TON.

5. The increase in cash and cash equivalents represents the net proceeds of the Equity Financing which is estimated to raise net proceeds of €58.1 million (€61.0 million gross proceeds less estimated expenses of €2.9 million). The adjustment to long term bonds represents the Debt Financing.

6. No account has been taken of the financial performance of the Company since 14 October 2020, the financial performance of Tulip since 31 December 2020, nor of any other event save as disclosed above.

Appendix V

Historical financial information on TON and TONO

https://d1ssu070pg2v9i.cloudfront.net/pex/kistos/2021/04/20014740/Kistos-placing-launch-announcement-1.pdf 

Appendix VI

A competent person's report on the TON assets

https://d1ssu070pg2v9i.cloudfront.net/pex/kistos/2021/04/20014740/Kistos-placing-launch-announcement-1.pdf  

Appendix VII

TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR INVITED PLACEES ONLY REGARDING THE PLACING SHARES.

This Announcement (including this Appendix) does not constitute an offer or invitation to acquire, underwrite or dispose of, or any solicitation of any offer or invitation to acquire, underwrite or dispose of, any Ordinary Shares or other securities of the Company to any person in any jurisdiction to whom it is unlawful to make such offer, invitation or solicitation in such jurisdiction. Persons who seek to participate in the Placing must inform themselves about and observe any such restrictions and must be persons who are able to lawfully receive this Announcement in their jurisdiction. In particular, this Announcement (including this Appendix) does not constitute an offer or invitation (or a solicitation of any offer or invitation) to acquire, underwrite or dispose of or otherwise deal in any Ordinary Shares or other securities of the Company in any Restricted Jurisdiction.

Members of the public are not eligible to take part in the Placing. Prospective investors must inform themselves as to: (a) the legal requirements within their own countries for the purchase, holding, transfer, redemption or other disposal of the Ordinary Shares; (b) any foreign exchange restrictions applicable to the purchase, holding, transfer, redemption or other disposal of the Ordinary Shares which they might encounter; and (c) the income and other tax consequences which may apply in their own countries as a result of the purchase, holding, transfer, redemption or other disposal of the Ordinary Shares. This Announcement (including this Appendix) does not constitute an offer to sell, or the solicitation of an offer to acquire or subscribe for, Ordinary Shares in any jurisdiction where such offer or solicitation is unlawful or would impose any unfulfilled registration, qualification, publication or approval requirements on the Company or Panmure Gordon. The offer and sale of Ordinary Shares has not been and will not be registered under the applicable securities laws of any Restricted Jurisdiction. Subject to certain exemptions, the Ordinary Shares may not be offered to or sold within any Restricted Jurisdiction or to any national, resident or citizen of any Restricted Jurisdiction.

The Ordinary Shares have not been, and will not be, registered with the US Securities and Exchange Commission under the Securities Act, or the securities laws of any other jurisdiction of the United States. The Ordinary Shares may not be offered or sold, directly or indirectly, in or into the United States (except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act). No public offering of the Ordinary Shares is being made in the United States. The Ordinary Shares are being offered and sold only outside the United States in "offshore transactions" within the meaning of, and in reliance on, Regulation S of the Securities Act. The Ordinary Shares have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission in the United States or any other regulatory authority in the United States, nor have any of the foregoing authorities passed on or endorsed the merits of the Placing or the accuracy or adequacy of the information contained in this Announcement (including this Appendix). Any representation to the contrary is a criminal offence in the United States. No money, securities or other consideration from any person inside the United States is being solicited and, if sent in response to the information contained in the Announcement, or any announcement made by the Company, will not be accepted.

This Announcement (including this Appendix) is directed only at, and may be only be relied and acted upon by, and any investment or investment activity to which it related is available only to: (i) persons resident or located in member states of the EEA who are Qualified Investors; and (ii) persons resident or located in the United Kingdom that are "qualified investors" within the meaning of the UK Prospectus Regulation and are persons: (a) who have professional experience in matters relating to investments falling within Article 19(5) of the Order; (b) who are high net worth persons or entities falling within Article 49(2)(a) to (d) of the Order; or (c) to whom it may otherwise be lawfully distributed (all such persons in (a), (b) and (c) together being referred to as "Relevant Persons"). It is not directed at and may not be acted or relied on by anyone other than a Relevant Person. Persons who do not fall within the definition of "Relevant Persons" above should not rely on this Announcement, nor take any action upon it.

The Placing does not constitute a public offer of transferable securities in the United Kingdom pursuant to Section 85 of FSMA and, accordingly, no prospectus or prospectus exempted document will be published in connection with the Placing in accordance with the UK Prospectus Regulation. This Announcement has not been approved by the FCA or the London Stock Exchange, nor is it intended that it will be so examined or approved.

This Announcement has been prepared and issued by the Company. To the fullest extent permitted by applicable law or regulation, no undertaking, representation or warranty or other assurance, express or implied, is made or given by or on behalf of the Panmure Gordon or any of its parent or subsidiary undertakings or the subsidiary undertakings of any such parent undertakings or any of their respective representatives or any other person as to the accuracy, sufficiency, completeness or fairness of the information, opinions or beliefs contained in this Announcement. Save in the case of fraud, no responsibility or liability is accepted by any person for any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred, howsoever arising, directly or indirectly, from any use of, as a result of the reliance on, or otherwise in connection with, this Announcement. In addition, no duty of care or otherwise is owed by any such person to recipients of the Announcement or to any other person.

This Announcement contains certain statements that are, or may be, forward-looking statements with respect to the financial condition, results of operations, business achievements and/or investment strategy of the Company. Such forward-looking statements involve unknown risks, uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of the Company or the success of its investment strategy to be materially different from any future results, performance or achievements expressed or implied by such statements.

UK Product Governance Requirements

Solely for the purposes of the UK Product Governance Rules, and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any 'manufacturer' (for the purposes of the UK Product Governance Rules) may otherwise have with respect thereto, the Placing Shares have been subject to a UK Target Market Assessment. Notwithstanding the UK Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The UK Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the UK Target Market Assessment, Panmure Gordon will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the UK Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of COBS 9A and COBS 10A, respectively; or (b) a recommendation to any investor or group of investors to invest in, or purchase or take any other action whatsoever with respect to the Placing Shares. Each distributor is responsible for undertaking its own UK Target Market Assessment in respect of the Placing Shares and determining appropriate distribution channels.

EU Product Governance Requirements

Solely for the purposes of the MiFID II Product Governance Requirements, and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to an EU Target Market Assessment. Notwithstanding the EU Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The EU Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the EU Target Market Assessment, Panmure Gordon will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the EU Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

Data protection

Personal data will be held and processed by the Company (and any third-party to whom it may delegate certain administrative functions in relation to the Company) in compliance with the relevant data protection legislation and regulatory requirements of the UK. Such information will be held and processed by the Company (or any third-party, functionary or agent appointed by the Company) for the following purposes:

· verifying the identity of the prospective investor to comply with statutory and regulatory requirements in relation to anti-money laundering procedures;

· contacting the prospective investor with information about products and services, or its affiliates, which may be of interest to the prospective investor;

· carrying out the business of the Company and the administering of interests in the Company;

· meeting the legal, regulatory, reporting and/or financial obligations of the Company in England and Wales and elsewhere (as required); and

· disclosing personal data to other functionaries of, or advisers to, the Company to operate and/or administer the Company's business.

Where appropriate it may be necessary for the Company (or any third-party, functionary or agent appointed by the Company) to:

· disclose personal data to third-party service providers, agents or functionaries appointed by the Company to provide services to prospective investors; and

· transfer personal data outside of the UK to countries or territories which do not offer the same level of protection for the rights and freedoms of prospective investors as the UK.

If the Company (or any third-party, functionary or agent appointed by a member of the Company) discloses personal data to such a third-party, agent or functionary and/or makes such a transfer of personal data it will use reasonable endeavours to ensure that any third-party, agent or functionary to whom the relevant personal data are disclosed or transferred is contractually bound to provide an adequate level of protection in respect of such personal data.

In providing such personal data, investors will be deemed to have agreed to the processing of such personal data in the manner described above. Prospective investors are responsible for informing any third-party individual to whom the personal data relates of the disclosure and use of such data in accordance with these provisions.

Introduction

This Appendix gives details of the terms and conditions of, and the mechanics of participation in, the Placing. Each Placee which confirms its agreement to Panmure Gordon (whether orally or in writing) to subscribe for Placing Shares under the Placing, hereby agrees with Panmure Gordon and the Company that it will be bound by the terms and conditions of this Appendix and will be deemed to have accepted them.

The Company and Panmure Gordon may require any Placee to agree to such further terms and/or conditions and/or give such additional warranties and/or representations as it (in its absolute discretion) sees fit and/or may require any such Placee to execute a separate placing letter.

Application for admission to trading

Application has been made to the London Stock Exchange for the admission of the Placing Shares to be issued pursuant to the Placing to trading on AIM. Except as otherwise set forth herein, it is anticipated that dealings in the Placing Shares will commence on AIM at 8.00 a.m. on 17 May 2021 for normal account settlement and that Admission will become effective on that date. The Placing Shares will not be admitted to trading on any stock exchange other than AIM.

Agreement to purchase Placing Shares

Conditional on (i) Admission occurring and becoming effective on or prior to 8.00 a.m. on 17 May 2021 (or such later time and/or date, being not later than 31 May 2021, as the Company and Panmure Gordon may agree), (ii) the Placing Agreement becoming otherwise unconditional in all respects and not having been terminated in accordance with its terms on or before Admission, and (iii) Panmure Gordon confirming to the relevant Placees their allocation of Placing Shares in the Placing at the Issue Price, a Placee agrees to become a member of the Company and agrees to subscribe for those Placing Shares allocated to it by Panmure Gordon at the Issue Price. To the fullest extent permitted by law, each Placee acknowledges and agrees that it will not be entitled to exercise any rights to rescind or terminate or otherwise withdraw from such commitment at any time. This does not affect any other rights the Placee may have.

If (i) any of the conditions in the Placing Agreement are not satisfied (or, where relevant, waived by Panmure Gordon) or (ii) the Placing Agreement is terminated or (iii) the Placing Agreement does not otherwise become unconditional in all respects, the Placing will not proceed and all funds delivered by Placees to Panmure Gordon will be returned to them at their risk without interest, and their rights and obligations hereunder shall cease and determine at such time and no claim shall be made by them in respect thereof.

None of the Company, the Directors or Panmure Gordon owes any fiduciary duty to any Placee in respect of the warranties, undertakings or indemnities in the Placing Agreement.

Right to terminate under the Placing Agreement

Panmure Gordon is entitled in its absolute discretion, at any time before Admission and after such consultation with the Company as the circumstances allow, to terminate the Placing Agreement by giving notice to the Company in certain circumstances, including, inter alia:

1. in the opinion of Panmure Gordon (acting in good faith), the warranties are not true and accurate or have become misleading (or would not be true and accurate or would be misleading if they were to be repeated at any time before Admission) by reference to the facts subsisting at the time when the notice referred to above is given, in each case in a way that is material in the context of the Placing and/or Admission; or

2. in the opinion of Panmure Gordon (acting in good faith), the Company fails to comply with any of its obligations under the agreement and that failure is material in the context of the Placing and/ or Admission; or

3. in the opinion of Panmure Gordon (acting in good faith), there has been a development or event (or any development or event involving a prospective change of which the Company is, or might reasonably be expected to be, aware) which will or is likely to have a material adverse effect on the operations, condition (financial, operational, legal or otherwise), prospects, management, results of operations, financial position, business or general affairs of the Company or of the Enlarged Group respectively, whether or not foreseeable and whether or not arising in the ordinary course of business; or

4. there has been a change in national or international financial, political, economic or stock market conditions (primary or secondary), an incident of terrorism, outbreak or escalation of hostilities, war, declaration of martial law or any other calamity or crisis; a suspension or material limitation in trading of securities generally on any stock exchange; any change in currency exchange rates or exchange controls or a disruption of settlement systems or a material disruption in commercial banking, in each case as would be likely in the opinion of Panmure Gordon (acting in good faith) to materially prejudice the success of the Placing.

The rights and obligations of the Placees shall terminate only in the circumstances described in this Appendix and in the Placing Agreement and will not be subject to termination by the Placee or any prospective Placee at any time or in any circumstances. By participating in the Placing, Placees agree that the exercise by Panmure Gordon of any right of termination or other discretion under the Placing Agreement shall be within the absolute discretion of Panmure Gordon, and that it need not make any reference to Placees and that it shall have no liability to Placees whatsoever in connection with any such exercise or decision not to exercise. Placees will have no rights against Panmure Gordon, the Company, nor any of their respective affiliates, directors or employees under the Placing Agreement pursuant to the Contracts (Rights of Third Parties) Act 1999 (as amended).

Payment for Placing Shares

Each Placee undertakes to pay the Issue Price for the Placing Shares issued to the Placee in the manner and by the time directed by Panmure Gordon. In the event of any failure by any Placee to pay as so directed and/or by the time required, the relevant Placee shall be deemed hereby to have appointed Panmure Gordon or any nominee of Panmure Gordon as its agent to use its reasonable endeavours to sell (in one or more transactions) any or all of the Placing Shares in respect of which payment shall not have been made as directed, and to indemnify Panmure Gordon and its respective affiliates on demand in respect of any liability for stamp duty and/or stamp duty reserve tax or any other liability whatsoever arising in respect of any such sale or sales. A sale of all or any of such Placing Shares shall not release the relevant Placee from the obligation to make such payment for relevant Placing Shares to the extent that Panmure Gordon or its nominees (as applicable) have failed to sell such Placing Shares at a consideration which, after deduction of the expenses of such sale and payment of stamp duty and/or stamp duty reserve tax as aforementioned, exceeds the Issue Price per Ordinary Share.

Terms and conditions of, and the mechanics of participation in, the Placing

This Appendix gives details of the terms and conditions of, and the mechanics of participation in, the Placing. By participating in the Placing, each Placee will be deemed to have read and understood this Appendix in its entirety, to be participating in, making an offer for and acquiring Placing Shares on the terms and conditions contained herein and to be providing the representations, warranties, indemnities, acknowledgements and undertakings contained in this Appendix of this Announcement.

No commission will be paid to Placees or by Placees in respect of any Placing Shares.

Details of the Placing Shares

The Placing Shares will, when issued, be subject to the Articles and credited as fully paid and will rank pari passu in all respects with the existing issued Ordinary Shares in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid in respect of such Ordinary Shares after the date of issue of the Placing Shares.

Principal terms of the Placing

Each Placee's allocation of Placing Shares will be communicated orally by Panmure Gordon to the relevant Placee. That oral confirmation will give rise to an irrevocable, legally binding commitment by such Placee, in favour of Panmure Gordon and the Company, under which it agrees to acquire the number of Placing Shares allocated to it at the Issue Price and otherwise on the terms and subject to the conditions set out in this Appendix and in accordance with the Articles. Except with Panmure Gordon's consent, such commitment will not be capable of variation, revocation, termination or rescission at either the time of such oral confirmation or any time thereafter.

Registration and settlement

Each Placee will be deemed to agree that it will do all things necessary to ensure that delivery and payment is completed as directed by Panmure Gordon in accordance with either the standing CREST or certificated settlement instructions which they have in place with Panmure Gordon.

Settlement of transactions in the Placing Shares (ISIN: GB00BLF7NX68) will take place within the CREST system, subject to certain exceptions. Settlement through CREST will be with respect to the Placing Shares on a T+2 basis unless otherwise notified by Panmure Gordon and is expected to occur at 8.00 a.m. on 17 May 2021.

In accordance with the contract note, settlement will be on a delivery versus payment basis.

In the event of any difficulties or delays in the admission of the Placing Shares to CREST or the use of CREST in relation to the Placing, the Company and Panmure Gordon may agree that the Placing Shares should be issued in certificated form.

Panmure Gordon reserves the right to require settlement for the Placing Shares, and to deliver the Placing Shares to Placees, by such other means as it deems necessary if delivery or settlement to Placees is not practicable within the CREST system or would not be consistent with regulatory requirements in a Placee's jurisdiction.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above, in respect of either CREST or certificated deliveries, at the rate of two percentage points above prevailing LIBOR as determined by Panmure Gordon.

Each Placee is deemed to agree that if it does not comply with these obligations, Panmure Gordon may sell any or all of their Placing Shares on their behalf and retain from the proceeds, for the Company's account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and for any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of their Placing Shares on their behalf.

Representations and warranties

By participating in the Placing, each Placee and/or any person acting on such Placee's behalf acknowledges, agrees, represents, undertakes, and warrants to each of the Company and Panmure Gordon that:

1. it has read and understood this Announcement (including this Appendix) in its entirety and it agrees and acknowledges that the issue and acquisition of the Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, indemnities, acknowledgements, agreements, undertakings and other information contained in this Appendix;

2. it acknowledges and agrees that its acceptance of its participation in the Placing on the terms set out in this Announcement and this Appendix is legally binding, irrevocable and is not capable of termination or rescission by it in any circumstances;

3. it has not relied on, received nor requested nor does it have any need to receive, any prospectus, offering memorandum, listing particulars or any other document, other than the admission document describing the business and affairs of the Company which has been prepared for delivery to prospective investors in order to assist them in making an investment decision in respect of the Placing Shares, any information given or any representations, warranties agreements or undertakings (express or implied), written or oral, or statements made at any time by the Company or Panmure Gordon or by any subsidiary, holding company, branch or associate of the Company, Panmure Gordon, or any of their respective officers, directors, agents, employees or advisers, or any other person in connection with the Placing and that in making its application under the Placing it will be relying solely on the information contained in this Announcement and the admission document and it will not be relying on any agreements by the Company and its subsidiaries or Panmure Gordon or any director, employee or agent of the Company or Panmure Gordon other than as expressly set out in this Announcement and the admission document for which none of Panmure Gordon or any of its directors and/or employees and/or person(s) acting on behalf of any of them shall to the maximum extent permitted under law have any liability except in the case of fraud. Each Placee further confirms, represents and warrants that it has reviewed this Announcement, including the discussion of the conditions of the Placing Agreement, commissions to Panmure Gordon, and risks related to the Company, its operations and the Ordinary Shares;

4. it is a Relevant Person and undertakes that it will acquire, hold, manage and (if applicable) dispose of any Placing Shares that are allocated to it for the purposes of its business;

5. in the case of an investor in a Relevant State who acquires any Placing Shares pursuant to the Placing:

(a) it is a Qualified Investor; and

(b) in the case of any Placing Shares acquired by it as a financial intermediary, as that term is used in Regulation 5(1) of the Prospectus Regulation:

(i) the Placing Shares acquired by it in the Placing have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale in circumstances where the Prospectus Regulation applies or to, persons in any Relevant State other than Qualified Investors or in circumstances in which the prior consent of Panmure Gordon has not been given to the offer or resale; or

(ii) where Placing Shares have been acquired by it on behalf of persons in any Relevant State other than Qualified Investors, the offer of those Placing Shares to it is not treated under the Prospectus Regulation as having been made to such persons;

6. it is not, and any person who it is acting on behalf of is not, and at the time the Placing Shares are acquired will not be, a resident of, or with an address in, or subject to the laws of any Restricted Jurisdiction, and it acknowledges and agrees that the Placing Shares have not been and will not be registered or otherwise qualified under the securities legislation of any Restricted Jurisdiction and may not be offered, sold or acquired, directly or indirectly, within those jurisdictions;

7. it agrees that the exercise by Panmure Gordon of any right of termination or any right of waiver exercisable by Panmure Gordon contained in the Placing Agreement or the exercise of any discretion thereunder is within the absolute discretion of Panmure Gordon and Panmure Gordon will not have any liability to it whatsoever in connection with any decision to exercise or not exercise any such rights. Each Placee acknowledges that if (i) any of the conditions in the Placing Agreement are not satisfied (or, where relevant, waived) or (ii) the Placing Agreement is terminated or (iii) the Placing Agreement does not otherwise become unconditional in all respects, the Placing will lapse and its rights and obligations hereunder shall cease and determine at such time and no claim shall be made by it in respect thereof;

8. it acknowledges that no action has been or will be taken by any of the Company, Panmure Gordon or any person acting on their behalf that would, or is intended to, permit a public offer of the Placing Shares in the United States or in any country or jurisdiction where any such action for that purpose is required. In addition, the Placing Shares have not been registered or otherwise qualified, and will not be registered or otherwise qualified, for offer and sale nor will a prospectus be cleared or approved in respect of any of the Placing Shares under the securities laws of any Restricted Jurisdiction and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, within any Restricted Jurisdiction or in any country or jurisdiction where any such action for that purpose is required;

9. it will not distribute, forward, transfer or otherwise transmit this Announcement or any part of it, or any other presentational or other materials concerning the Placing in or into or from the United States (including electronic copies thereof) to any person, and it has not distributed, forwarded, transferred or otherwise transmitted any such materials to any person;

10. it and/or each person on whose behalf it is participating (i) is entitled to acquire Placing Shares pursuant to the Placing under the laws and regulations of all relevant jurisdictions; (ii) has fully observed such laws and regulations; (iii) has the capacity and has obtained all requisite authorities and consents (including, without limitation, in the case of a person acting on behalf of a Placee, all requisite authorities and consents to agree to the terms set out or referred to in this Appendix) under those laws or otherwise and has complied with all necessary formalities to enable it to enter into the transactions and make the acknowledgements, agreements, indemnities, representations, undertakings and warranties contemplated hereby and to perform and honour its obligations in relation thereto on its own behalf (and in the case of a person acting on behalf of a Placee on behalf of that Placee); (iv) does so agree to the terms set out in this Appendix and does so make the acknowledgements, agreements, indemnities, representations, undertakings and warranties contained in this Appendix on its own behalf (and in the case of a person acting on behalf of a Placee, on behalf of that Placee); and (v) is and will remain liable to the Company and Panmure Gordon for the performance of all its obligations as a Placee of the Placing (whether or not it is acting on behalf of another person);

11. it is acquiring the Placing Shares for its own account or if it is acquiring the Placing Shares on behalf of another person it confirms that it exercises sole investment discretion in relation to such other person's affairs and, in particular, if it is a pension fund or investment company it is aware of and acknowledges it is required to comply with all applicable laws and regulations with respect to its acquisition of Placing Shares;

12. it understands (or if acting on behalf of another person, such person has confirmed that such person understands) the resale and transfer restrictions set out in this Appendix;

13. it has not received a prospectus or other offering document in connection with the Placing and acknowledges that no prospectus or other offering document: (i) is required under the Prospectus Regulation or the UK Prospectus Regulation; and (ii) has been or will be prepared in connection with the Placing;

14. it has made its own assessment of the Company, the Placing Shares and the terms of the Placing and has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. It has not relied on (i) any investigation that Panmure Gordon or any person acting on Panmure Gordon's behalf may have conducted with respect to the Company, the Placing or the Placing Shares; or (ii) any other information given or any other representations, statements or warranties made at any time by any person in connection with Admission, the Company, the Placing, the Placing Shares or otherwise;

15. neither Panmure Gordon, the Company nor any of their respective affiliates, agents, consultants, directors, employees, officers or any person acting on behalf of any of them has provided, nor will provide, it with any material regarding the Placing Shares or the Company or any other person in addition to the information in this Announcement; nor has it requested either of Panmure Gordon or the Company, nor any of their respective affiliates, agents, consultants, employees, directors or officers or any person acting on behalf of any of them to provide it with any such information;

16. the content of this Announcement has been prepared by and is exclusively the responsibility of the Company. Neither Panmure Gordon nor any persons acting on behalf of it is responsible for or has or shall have any liability for any information, representation, warranty or statement, written or oral relating to the Company and either contained in this Announcement or previously or concurrently published by or on behalf of the Company. Panmure Gordon will not be liable for any Placee's decision to participate in the Placing based on any information, representation, warranty or statement contained in this Announcement, or otherwise. None of Panmure Gordon, the Company, nor any of their respective affiliates, agents, consultants, directors, employees or officers has made any representation or warranty to the Placee, express or implied, with respect to the Company, the Placing or the Placing Shares or the accuracy, completeness or adequacy of the information in this Announcement. Nothing in this Appendix shall exclude any liability of any person for fraudulent misrepresentation;

17. the only information on which it is entitled to rely and on which it has relied in committing to subscribe for the Placing Shares is contained in this Announcement and the admission document to be issued by the Company. It has satisfied itself that such information is still current and is all that it deems necessary to make an investment decision in respect of the Placing Shares;

18. it has the funds available to pay for the Placing Shares which it has agreed to acquire and acknowledges, agrees and undertakes that it will make payment to Panmure Gordon for the Placing Shares allocated to it in accordance with this Appendix on the due times and dates set out in this Announcement or as otherwise directed by Panmure Gordon, failing which the relevant Placing Shares may be placed with others on such terms as Panmure Gordon may, in its absolute discretion determine without liability to the Placee and it will remain liable for any shortfall below the Issue Price of the net proceeds of such sale and the placing proceeds of such Placing Shares and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to the terms and conditions set out or referred to in this Appendix) which may arise upon the sale of such Placee's Placing Shares on its behalf;

19. the allocation, allotment, issue and delivery to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to a stamp duty or stamp duty reserve tax liability under (or at a rate determined under) any of Sections 67, 70, 93 or 96 of the Finance Act 1986 (depository receipts and clearance services) and that no instrument under which it subscribes for Placing Shares (whether as principal, agent or nominee) would be subject to stamp duty or stamp duty reserve tax at the increased rates referred to in those Sections and that it, or the person specified by it for registration as holder of the Placing Shares, is not participating in the Placing as nominee or agent for any person or persons to whom the allocation, allotment, issue or delivery of Placing Shares would give rise to such a liability;

20. it, or the person specified by it for registration as a holder of the Placing Shares will be responsible for any liability to stamp duty or stamp duty reserve tax that is payable on the acquisition of any of the Placing Shares or the agreement to subscribe for the Placing Shares and shall indemnify the Company and Panmure Gordon in respect of the same on the basis that the Placing Shares will be allotted to a CREST stock account of Panmure Gordon who will hold them as nominee on behalf of such Placee (or the person specified by it for registration as holder of the Placing Shares) until settlement with it in accordance with its standing settlement instructions;

21. it has only communicated or caused to be communicated and it will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) relating to Placing Shares in circumstances in which Section 21(1) of FSMA does not require approval of the communication by an authorised person;

22. it has complied and it will comply with all applicable laws with respect to anything done by it or on its behalf in relation to the Placing Shares (including all relevant provisions of FSMA in respect of anything done in, from or otherwise involving the United Kingdom);

23. none of Panmure Gordon, the Company, any of their respective Representatives or any other person acting on behalf of any of them are making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing nor providing advice in relation to the Placing nor in respect of any acknowledgements, agreements, indemnities, representations, undertakings or warranties contained in the Placing Agreement nor the exercise or performance of Panmure Gordon's rights and obligations thereunder, including any rights to waive or vary any conditions or exercise any termination right. Its participation in the Placing is on the basis that it is not and will not be a client of Panmure Gordon and Panmure Gordon has no duties or responsibilities to it for providing the protections afforded to its clients or customers under the rules of the FCA, and any payment by it will not be treated as client money governed by the rules of the FCA;

24. Panmure Gordon and each of its affiliates, each acting as an investor for its or their own account(s), may, in accordance with applicable legal and regulatory provisions, bid or subscribe for and/or purchase Placing Shares and, in that capacity, may retain, purchase, offer to sell or otherwise deal for its or their own account(s) in the Placing Shares, any other securities of the Company or other related investments in connection with the Placing or otherwise. Accordingly, references in this Announcement to the Placing Shares being offered, subscribed, acquired or otherwise dealt with should be read as including any offer to, or subscription, acquisition or dealing by, Panmure Gordon and/or any of its affiliates, acting as an investor for its or their own account(s). Neither Panmure Gordon nor the Company intend to disclose the extent of any such investment or transaction otherwise than in accordance with any legal or regulatory obligation to do so;

25. it will not make any offer to the public of the Placing Shares and it has not offered or sold and will not offer or sell any Placing Shares to persons in the United Kingdom or in the EEA prior to Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom for the purposes of Section 85 of FSMA or an offer to the public in any other Relevant State within the meaning of the Prospectus Regulation;

26. it has complied with its obligations in connection with money laundering and terrorist financing under the Regulations and, if making payment on behalf of a third-party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third-party as required by the Regulations;

27. it is aware of the obligations regarding insider dealing in the Criminal Justice Act 1993, market abuse under UK MAR and the Proceeds of Crime Act 2002 and confirms that it has and will continue to comply with those obligations;

28. it has neither received nor relied on any confidential or price-sensitive information concerning the Company in accepting this invitation to participate in the Placing;

29. if it has received any 'inside information' (for the purposes of UK MAR and Section 56 of the Criminal Justice Act 1993) in relation to the Company and its securities, it confirms that it has received such information within the market soundings regime provided for in article 11 of UK MAR and associated delegated regulations and it has not: (i) dealt (or attempted to deal) in the securities of the Company; (ii) encouraged, recommended or induced another person to deal in the securities of the Company; or (iii) unlawfully disclosed inside information to any person, prior to the information being made publicly available;

30. in order to ensure compliance with the Regulations, Panmure Gordon (for itself and as agent on behalf of the Company) or the Company's Registrar may, in their absolute discretion, require verification of its identity. Pending the provision to Panmure Gordon or the Company's Registrar, as applicable, of evidence of identity, definitive certificates in respect of the Placing Shares may be retained at Panmure Gordon's absolute discretion or, where appropriate, delivery of the Placing Shares to it in uncertificated form may be delayed at Panmure Gordon's or the Company's Registrar's, as the case may be, absolute discretion. If within a reasonable time after a request for verification of identity Panmure Gordon (for itself and as agent on behalf of the Company) or the Company's Registrar have not received evidence satisfactory to them, Panmure Gordon and/or the Company may, at their absolute discretion, terminate their commitment in respect of the Placing, in which event the monies payable on acceptance of allotment will, if already paid, be returned without interest to the account of the drawee's bank from which they were originally debited;

31. it acknowledges that its commitment to acquire Placing Shares on the terms set out in this Appendix will continue notwithstanding any amendment that may in future be made to the terms and conditions of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's or Panmure Gordon's conduct of the Placing;

32. it acknowledges and agrees that its commitment to subscribe for Placing Shares on the terms set out herein and in the trade confirmation or contract note will continue notwithstanding any amendment that may in future be made to the terms of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's conduct of the Placing;

33. it acknowledges and agrees that the Placing Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States, and are being offered and sold only outside the United States in "offshore transactions" (as defined in Regulation S). Accordingly, the Placing Shares may not be offered, sold, transferred or delivered directly or indirectly in or into the United States, except pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, and, in connection with any such transfer, the Company will have the right to obtain, as a condition to transfer, a legal opinion of counsel, in a form and by counsel reasonably satisfactory to the Company, that no such Securities Act registration is or will be required along with appropriate certifications by the transferee as to appropriate matters. No representation has been made as to the availability of any exemption under the Securities Act for the reoffer, resale, transfer or delivery of the Placing Shares;

34. it agrees, represents and warrants as follows:

(a) it is acquiring the Placing Shares in an "offshore transaction" (as defined in Regulation S);

(b) it will not offer or sell the Placing Shares in the United States absent registration or an exemption from registration under the Securities Act;

(c) it is not acquiring the Placing Shares as a result of any form of "directed selling efforts" (as defined in Rule 902 under the Securities Act); and

(d) if it is in the United Kingdom, it is a person falling within the exemption contained in Section 86(1)(a) of FSMA or falling within one or more of the categories of persons set out in Article 19 (Investment Professionals) or Article 49 (High net worth companies, unincorporated associations etc.) of the Order;

35. it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for the Placing Shares. It further acknowledges that it is experienced in investing in securities of this nature and is aware that it may be required to bear, and is able to bear, the economic risk of, and is able to sustain, a complete loss in connection with the Placing. It has relied upon its own examination and due diligence of the Company and its affiliates taken as a whole, and the terms of the Placing, including the merits and risks involved;

36. it irrevocably appoints any duly authorised officer of Panmure Gordon as its agent for the purpose of executing and delivering to the Company and/or its Registrar any documents on its behalf necessary to enable it to be registered as the holder of any of the Placing Shares for which it agrees to subscribe or purchase upon the terms of this Appendix;

37. the Company, Panmure Gordon and others (including each of their respective affiliates, agents, directors, officers or employees) will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements, which are given to Panmure Gordon on its own behalf and on behalf of the Company and are irrevocable, and agree that if any of the representations and agreements deemed to have been made by it by its subscription for, or purchase of, Placing Shares, are no longer accurate, it shall promptly notify the Company and Panmure Gordon;

38. time is of the essence as regards its obligations under this Appendix;

39. any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to Panmure Gordon; and

40. the terms and conditions in this Appendix and all documents into which this Appendix is incorporated by reference or otherwise validly forms a part and/or any agreements entered into pursuant to these terms and conditions and all agreements to acquire Placing Shares pursuant to the Placing will be governed by and construed in accordance with English law and it submits to the exclusive jurisdiction of the English courts in relation to any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Company or Panmure Gordon in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange.

Each Placee agrees to indemnify on an after-tax basis and hold harmless the Indemnified Persons from and against any and all costs, claims losses, damages, liabilities or expenses, including legal fees and expenses (including any VAT thereon), which an Indemnified Person may incur by reason of, or in connection with, any representation, warranty, acknowledgement, agreement or undertaking made herein not having been true when made, any breach thereof or any misrepresentation.

Appendix VIII

Definitions and glossary

DEFINITIONS

The following definitions apply throughout this Announcement, unless the context requires otherwise:

References to a "company" in this Announcement shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

For the purpose of this Announcement, "subsidiary" and "subsidiary undertaking" have the meanings given by the Companies Act 2006.

In this Announcement any reference to any EU directive, EU regulation, EU decision, EU tertiary legislation or provision of the EEA agreement (an "EU Matter") which forms part of domestic law by application of the EUWA shall be read as a reference to that EU Matter as it forms (by virtue of the EUWA) part of retained EU law and as modified by domestic law from time to time. For the purposes of this paragraph, (i) "domestic law" shall have the meaning given in the EUWA; and (ii) any other words and expressions shall, unless the context otherwise provides, have the meanings given in the EUWA.

GLOSSARY

The following table provides an explanation of certain technical terms and abbreviations used in this Announcement. The terms and their assigned meanings may not correspond to standard industry meaning or usage of these terms.

Appendix IX

Expected timetable of principal events

Each of the times and dates set out above and mentioned elsewhere in the document may be subject to change at the absolute discretion of the Company and Panmure Gordon.

Any changes to the expected timetable will be notified by the Company through an RIS.