Tethys Petroleum Limited
TSX : TPL
LSE : TPL

Tethys Petroleum Limited

March 10, 2015 03:00 ET

Tethys Petroleum Limited: US$3.5 Million Loan Agreement

GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - March 10, 2015) -

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Tethys Petroleum Limited ("Tethys" or the "Company") (TSX:TPL) (LSE:TPL) announces that it has entered into a US$3.5 million loan agreement with Annuity and Life Reassurance Ltd ("ALR"), an insurance company, the assets of which are managed by Pope Asset Management, LLC ("PAM"). PAM currently controls the voting rights over approximately 19% of the shares in the Company. Having considered a variety of funding alternatives, commercial terms, certainty and execution risk and, ultimately, the relative cost of capital to shareholders, the Board of Directors of the Company has decided that it is in the best interests of the Company to proceed with this financing.

In a challenging oil price environment globally, and especially in Kazakhstan (where in January and February 2015, the selling price at the well head of oil fell to US$13/barrel), these new funds, combined with the loan for US$6 million on similar terms announced in January 2015, increased revenue from higher gas prices and volumes, and reduced G&A expenditure, will help to ensure the Company has sufficient financial flexibility and stability through to the expected completion of the Sinohan transaction which, as previously communicated to the market, has taken longer than originally expected to complete.

Financing details

The key terms of the loan agreement are:

Financing: Unsecured loan facility
Principal: US$3.5 million
Term: 2 years
Interest rate: 8% p.a.
Warrants: 23,333,333
Warrant price: C$0.19, a 15% premium to yesterday's closing market price of C$0.165
Warrant term: 2 years from date of issue
Lender: ALR

The principal of the loan is due to be re-paid at the end of two years from the date of issue with interest payments being made every six months. The loan agreement contains event of default and change of control provisions. The funds are due to the Company as soon as practicable upon the fulfillment of customary conditions, including receipt of TSX approval for the transaction.

Shareholder approval

Pursuant to the terms of the warrants to be issued in connection with the loan, in the event that the exercise of the warrants would result in ALR and its affiliates together with PAM exercising control or direction over 20% or more of the issued and outstanding ordinary shares of the Company, such exercise will be subject to approval of the shareholders of the Company excluding votes attached to the shares over which ALR or its affiliates or PAM exercises control or direction. The warrants do not contain a warrant surrender mechanism.

Sinohan transaction update

Tethys continues to await a decision by the Ministry of Energy of the Republic of Kazakhstan (the "MOE") to either pre-empt the transaction or to waive its right to do so. A decision from the MOE is expected shortly and should a waiver of the pre-emption right be granted it is anticipated that the MOE will then grant permission for the Sinohan farm-out transaction to proceed.

In the meantime, the Company continues to work towards obtaining certain other ancillary approvals required to satisfy conditions precedent to completion of the transaction. Should a waiver of the pre-emption right be received promptly from the MOE, the Company believes that it can obtain these approvals and satisfy the remaining conditions precedent to completion of the transaction prior to the 1 May 2015 extended longstop date. Further details of the conditions precedent to completion of the Sinohan transaction are contained in the share purchase agreement relating to the transaction, a copy of which has been filed on SEDAR.

John Bell, Executive Chairman, commented:

"The Company is very pleased to announce this loan financing which shows the on-going support from our largest investor while we continue to work hard towards the anticipated completion of the Sinohan transaction. We are expecting a prompt resolution of the pre-emption right waiver request submitted to the Ministry of Energy. This remains a key hurdle to completion of a farm-out transaction which will bring US$75 million of Chinese capital, and all the associated benefits of a large capital investment, to Kazakhstan."

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.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws and may not be offered or sold within the United States or to United States Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

This press release contains "forward-looking information" which may include, but is not limited to, statements with respect to fulfillment of customary conditions precedent and receipt of TSX approval for the financing, and the expected completion of the Sinohan transaction. Such forward-looking statements reflect our current views with respect to future events, including the fulfillment of customary conditions precedent and receipt of TSX approval for the financing, and the expected completion of the Sinohan transaction. The forward-looking statements are based on the following assumptions: that the fulfillment of customary conditions precedent and receipt of TSX approval for the financing will take place and that the Sinohan transaction will complete as expected. These forward-looking statements are subject to a number of risks and uncertainties, including the risk that the financing or the Sinohan transaction will not complete as expected. See our Annual Information Form for the year ended December 31, 2013 for a description of risks and uncertainties relevant to our business, including our exploration and development activities.

The "forward looking statements" contained herein speak only as of the date of this press release and, unless required by applicable law, the Company undertakes no obligation to publicly update or revise such information, whether as a result of new information, future events or otherwise.

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