Tethys Petroleum Limited
TSX : TPL
LSE : TPL

Tethys Petroleum Limited

March 31, 2015 17:00 ET

Tethys Petroleum Limited: 2014 Annual Results

GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - March 31, 2015) - Tethys Petroleum Limited (TSX:TPL) (LSE:TPL) today announced its Annual Results for the year ended December 31, 2014.

Corporate Highlights - 2014

  • Updated Oil Resource Report for the "Klymene" prospect in Kazakhstan with total Unrisked Mean Recoverable Oil Resources being estimated independently at over 400 million barrels;
  • Drilling of a further 4 successful shallow gas exploration wells;
  • Renewal of the 2013 gas sale contracts for 2014 volumes up to 150 million cubic metres;
  • USD15 million financing completed;
  • Release of the USD3.88m deposit placed into Escrow with respect to the conditional sale of a 50% (plus one share) interest in the Company's Kazakhstan business;
  • Extension of the Longstop Date to the Sale and Purchase Agreement with SinoHan Oil and Gas Investment Number 6 B.V. ("SinoHan") through to May 1, 2015;
  • New Executive Chairman and Board changes
  • A new contract was signed with respect to 2015 gas production for a minimum 100 million cubic metres at a net price of $75/Mcm (at a fixed Tenge price)

Corporate Highlights - Q1 2015

  • Extension of the Akkulka Exploration Contract for another four years, from March 10, 2015 to March 10, 2019 (subject to certain routine amendments to the Contract);
  • Completion of two loan financings amounting to gross proceeds of USD9.5 million;
  • Reduction in interests and current funding obligations in Georgia of approximately US$4 million;
  • Extension of the Kyzyloi Gas Production Contract for another 15 years, from June 14, 2014 to December 31, 2029.

Financial Highlights - 2014

  • Oil and gas revenue from continuing operations of USD27.39 million (2013: USD36.95 million);
  • Loss for the year from continuing operations of USD15.47 million (2013: USD10.54 million(1));
  • Basic & diluted loss per share of USD0.05 from continuing operations (2013: USD0.03)
  • Capital Expenditure of USD26.07 million (2013: USD23.81 million)
  • Cash and cash equivalents of USD3.11 (2013: USD25.11 million)

(1) The 2013 reported loss of USD10.54 million includes a gain of USD8.2 million realized on the Tajik farm-out

Reserve Highlights

  • Total Gross (i.e. before the application of Kazakh Mineral Extraction Tax) Oil and Gas Reserves consisting of "Proved" 1P reserves of 16.62 million BOE (2013: 14.14 million BOE) and "Proved and Probable" 2P reserves of 27.08 million BOE (2013: 25.37 million BOE). With the addition of 2014 production these figures represent an increase on the 2013 year end volumes in both categories;
  • The NPV10 value after tax of the Company's Kazakh reserves (proven and probable) as at December 31, 2014 was USD185.86 million (2013: USD257.2 million);
  • The reserves in this press release are estimated with an effective date of December 31, 2014 and do not reflect the pending sale of 50% of the Kazakhstan assets, which remains subject to Kazakh State waiver.

The reserve report was prepared by Gustavson Associates in full accordance with the requirements of National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. The Company's 2014 Annual Information Form dated March 31, 2015 includes more detailed disclosure and reports relating to petroleum and natural gas activities for 2014. Both oil and gas reserves are based on availability of sufficient funding to allow development of the known accumulations. The estimated value (NPV10) of the reserves does not represent fair market value.

Executive Chairman's Message

John Bell, Executive Chairman said: "Since I became Executive Chairman at the end of November last year, we have made significant progress across all aspects of the business, to better manage the business in the challenging oil price environment. We have outlined a new strategy focused on delivering cash flows and value from our existing discovered reserves and material upside from within our portfolio, whilst exercising capital discipline. We have announced a halving of the Company's G&A, cost cuttings which are on track, and we have doubled gas production and increased prices for the quarter. Based on this we believe Tethys is well placed to respond and adapt to the changing market environment."

Filing Details

The full Annual Results together with Management's Discussion and Analysis and Annual Information Form have been filed with the Canadian securities regulatory authorities. Copies of the filed documents may be obtained via SEDAR at www.sedar.com or on Tethys' website at www.tethyspetroleum.com. The summary financial statements are attached to this press release.

The Company's 2014 financial statements are prepared under International Financial Reporting Standards (IFRS).

Tethys is focused on oil and gas exploration and production activities in Central Asia and the Caspian Region. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.

Cautionary Statements

This press release contains "forward-looking information" which may include, but is not limited to, statements with respect to our operations, completion of the sale of an interest to SinoHan and prospective resource estimates. Such forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including the risk that approvals for the sale to SinoHan will be delayed and the risk that any or all of the prospective will not become recoverable. See our Annual Information Form for the year ended December 31, 2014 for a description of risks and uncertainties relevant to our business, including our exploration activities.

The resource estimates contained or referred to are estimates only and are not meant to provide a determination as to the volume or value of hydrocarbons attributable to the Klymene prospect. There are numerous uncertainties inherent in estimating quantities of resources and cash flows that may be derived, including many factors that are beyond the control of the Company. The following is a non-exhaustive list of factors which may have a significant impact on the above estimates of prospective resources: despite the classification that they are as yet undiscovered but may be potentially recoverable the Company may be unable to carry out the development or their potential recovery; the activity may not be economically viable; the Company may not have sufficient capital or time to develop them; there may be no market or transportation routes for the potential production; legal, contractual, environmental and governmental concerns might not allow for the recovery being undertaken; reservoir characteristics might prevent recovery. The recovery of the resources is subject to the following risks and uncertainties: market fluctuations, the proximity and capacity of oil and gas pipelines and processing equipment, government regulation, political issues, export issues, competing suppliers, operational issues (exploration, production, pricing, marketing and transportation), extensive controls and regulations imposed by various levels of government, lack of capital or income, the ability to drill productive wells at acceptable costs, the uncertainty of drilling operations, factors such as delays, accidents, adverse weather conditions, and the availability of drilling rigs and the delivery of equipment. See our 2014 Annual Information Form dated March 31, 2015 of a description of significant positive and negative factors relevant to the resource estimates in the press release and of the contingencies which prevent the classification of the resources as reserves.

A barrel of oil equivalent ("boe") conversion ratio of 6,000 cubic feet (169.9 cubic metres) of natural gas = 1 barrel of oil has been used and is based on the standard energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

About Tethys Petroleum

Tethys Petroleum's aim is to become the leading independent E&P Company in Central Asia, by exercising capital discipline, by generating cash flow from existing discoveries and by maturing large exploration prospects within our highly attractive frontier acreage.

Tethys Petroleum Limited
Consolidated Statement of Financial Position
(in thousands of US dollars)
As at December 31
2014 2013
Non-current assets
Intangible assets47,630 31,074
Property, plant and equipment13,804 15,291
Restricted cash623 660
Investment in joint arrangements4 4
Deferred tax258 322
62,319 47,351
Current assets
Cash and cash equivalents3,112 25,109
Trade and other receivables634 1,358
Advances- 4,000
Restricted cash116 475
Assets of a disposal group classified as held for sale172,514 156,325
176,376 187,267
Total assets238,695 234,618
Equity
Share capital33,645 28,756
Share premium321,724 307,295
Other reserves42,845 42,621
Accumulated deficit(198,560)(182,533)
Non-controlling interest6,096 6,454
Total equity205,750 202,593
Non-current liabilities
Financial liabilities - borrowings5,489 -
5,489 -
Current liabilities
Financial liabilities - borrowings5,139 4,965
Derivative financial instruments - warrants- 17
Current taxation364 144
Trade and other payables4,102 4,946
Provisions1,759 520
Liabilities of a disposal group classified as held for sale16,092 21,433
27,456 32,025
Total liabilities32,945 32,025
Total equity and liabilities238,695 234,618
Tethys Petroleum Limited
Consolidated Statements of Comprehensive Income (Loss)
(in thousands of US dollars except per share information)
Year ended December 31,
2014 2013
Sales and other revenues27,389 36,945
Sales expenses(2,287)(3,036)
Production expenses(13,476)(13,640)
Depreciation, depletion and amortization(1,270)(12,619)
Business development expenses(1,881)(2,695)
Administrative expenses(17,647)(18,703)
Restructuring costs(2,585)-
Transaction costs of assets held for sale(243)(611)
Share based payments(224)(862)
Gain on Tajik farm-out- 8,214
Foreign exchange loss - net(200)(113)
Fair value gain on derivative financial instrument - net17 830
(Loss)/profit from jointly controlled entity(1,356)298
Finance costs - net(1,247)(1,460)
Loss before taxation from continuing operations(15,010)(7,452)
Taxation(463)(3,083)
Loss for the year from continuing operations(15,473)(10,535)
Loss for the year from discontinued operations net of tax(912)(7,096)
Loss and total comprehensive loss for the year
(16,385
)
(17,631
)
Loss and total comprehensive loss attributable to:
Shareholders(16,027)(17,148)
Non-controlling interest(358)(483)
Loss and total comprehensive loss for the year
(16,385
)
(17,631
)
Loss per share attributable to shareholders:
Basic and diluted - from continuing operations(0.05)(0.03)
Basic and diluted - from discontinued operations- (0.02)
Tethys Petroleum Limited
Consolidated Statements of Cash Flows
(in thousands of US dollars)
Year ended December 31,
2014 2013
Cash flow from operating activities
Loss before taxation from continuing operations(15,010)(7,452)
Loss before tax from discontinued operations*(912)(8,150)
(15,922)(15,602)
Adjustments for
Impairment charge in loss from discontinued operations- 7,010
Share based payments224 862
Net finance cost1,247 1,460
Depreciation, depletion and amortization1,270 13,534
Fair value gain on derivative financial instruments(17)(830)
Net unrealised foreign exchange gain(192)(43)
Gain on Tajik farm-out- (8,214)
Loss/(profit) from jointly controlled entity1,356 (298)
Movement in deferred revenue- (1,191)
Movement in provisions1,239 -
Net change in working capital(389)2,807
Cash used in operating activities(11,184)(505)
Corporation tax paid(320)(276)
Net cash used in operating activities(11,504)(781)
Cash flow from investing activities
Interest received198 216
Expenditure on exploration and evaluation assets(8,683)(4,529)
Expenditures on property, plant and equipment(17,386)(19,280)
Movement in restricted cash137 (778)
Investment in jointly controlled entity- (4)
Repayment of loan receivable from jointly controlled entity- 200
Proceeds of Tajik farm-out (net of costs)- 62,959
Movement in advances to construction contractors782 (1,081)
Other advances- (4,000)
Movement in value added tax receivable(90)(3,113)
Net change in working capital285 170
Movement in asset retirement obligation- (253)
Net cash (used in)/from investing activities(24,757)30,507
Cash flow from financing activities
Proceeds from issuance of borrowings, net of issue costs11,604 4,714
Repayment of borrowings(8,803)(8,389)
Interest paid on borrowings(1,721)(2,360)
Proceeds from issuance of equity, net of issue costs13,568 523
Movement in other non-current liabilities(153)(283)
Net cash from/(used in) financing activities14,495 (5,795)
Effects of exchange rate changes on cash and cash equivalents(97)50
Net (decrease)/increase in cash and cash equivalents(21,863)23,981
Cash and cash equivalents at beginning of the year25,731 1,750
Cash and cash equivalents at end of the year3,868 25,731
Cash and cash equivalents at end of the year comprises:
Cash reclassified as assets of a disposal group held for sale756 622
Cash and cash equivalents3,112 25,109
3,868 25,731

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