Kistos Holdings Investment thesis
Investment decisions

Kistos Holdings Analysis – December 2023

Kistos was one of our largest positions last year, second only to Golar LNG. It rose by more than 60% until the arrival of Windfall Taxes in Europe and the UK, causing the company to decline by more than 70% from its peak in August 2022.

Last year, we wrote an investment thesis on Kistos that surpassed all our records and has garnered over 12,000 views to date. Today’s objective is to analyse the company’s assets and its current situation, providing a detailed valuation of Kistos (model included) and our thoughts about the current situation.

Before delving into the detailed analysis of assets and valuation, here’s a brief reminder of what the company does.

Introduction to Kistos PLC

Kistos is an investment company focused on opportunities in the transition energy market. It conducted its IPO in November 2020, raising £31.75 million. The company’s strategy involves capitalizing on opportunities where businesses are seeking to sell valuable assets for various reasons such as ESG pressure, non-core assets, new regulations, etc. Kistos aims to acquire these assets at low prices and extend their useful lives through techniques like infill drilling.

In April 2021, Kistos secured additional capital to fund the acquisition of Tulip Oil for €223 million, comprising €140 million plus an €87 million bond refinancing and other adjustments. Tulip Oil was a privately held exploration and production operator in the oil and gas sector with assets in the North Sea and Germany.

Subsequently, in January 2022, Kistos acquired a 20% interest in the Greater Laggan Area in the UK for $125 million. The acquisition was self-paid within a year, thanks to high natural gas prices and the deal structure. Total, the seller, retains a 40% stake in the Greater Laggan Area and operates it.

In April 2023, Kistos acquired Mime Petroleum, a Norwegian-based oil company under financial stress due to delays in its main project (Balder Future project) and delayed production from Ringhorne wells. The main equity holder, Bluewater (a Private Equity firm), decided to divest from certain oil and gas assets, including Mime, due to the delays and the need for additional equity injection.

These three acquisitions collectively contribute approximately 9.5kboepd net to Kistos, and there are no hedging in place.

An important point to understand Kistos is its CEO, Andrew Austin, and RockRose, Kistos’ previous company led by Mr. Austin and much of Kistos’ management. RockRose Energy, where Mr. Austin was the CEO, operated in the North Sea and delivered a 42x return for Rockrose shareholders, pursuing a strategy similar to what he is implementing in Kistos, again in the North Sea.

What makes this company special, and what things have gone wrong in the last 12 months?


As a summary, the key points we discussed in the thesis last year were as follows:

  • The structural deficit of natural gas in Europe, heightened by sanctions on Russia, will keep natural gas prices high in Europe for the foreseeable future. The main reason is that Europe took the wrong approach to the green transition, and the consequences are expected to persist for years.

  • A superlative management team with experience in the North Sea, an outstanding M&A track record, and strong shareholder alignment, holding around a 20% stake in the company.

However, the situation is radically different now due to several reason, some of them:

  • The performance of the assets has fallen significantly short of the planned outcomes in recent months, even considering that they were acquired in an advanced state of their useful life.

  • Similarly, there have been unforeseen issues with the assets (currently GLA is idle), and there have been cost overruns in the Mime project (Balder).

  • Another important point is that the announcement of the WTI (Well Test Incident) scared away investors from the industry, and most companies in the sector are experiencing a similar fate.

As we have mentioned, the goal for today is to analyze each of the assets, model them in the current scenario, and share our conclusions and management of the situation (which we have been discussing for several months) as of today.

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