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Tethys Petroleum Limited Press Release: 2015 Annual Results


/EINPresswire.com/ -- GRAND CAYMAN, CAYMAN ISLANDS -- (Marketwired) -- 03/29/16 -- Tethys Petroleum Limited (TSX: TPL)(LSE: TPL) today announced its Annual Results for the year ended December 31, 2015.

Corporate Highlights - 2015


--  Extension of the Akkulka Exploration Contract for another four years,
    from March 10, 2015 to March 10, 2019;


--  Extension of the Kyzyloi Gas Production Contract confirmed for another
    15 years, from June 14, 2014 to December 31, 2029;


--  MOU signed with PetroChina regarding future exports of hydrocarbons to
    China;


--  Doubling of gas production in January 2015 vs. end 2014;


--  Reduction in interests and current funding obligations in Georgia of
    approximately USD4 million to USD1 million;


--  Completion of six separate loan financings amounting to gross proceeds
    of USD28.1million, of which USD5million has been repaid;


--  Notice received to withdraw from the Joint Operating Agreement and
    Shareholders Agreement dated June 18, 2013 in Tajikistan (the "JOA") and
    the underlying Bokhtar PSC from CNPC Central Asia B.V. ("CNPC") and
    Total E&P Tajikistan B.V. ("Total"). Discussions have been initiated
    with CNPC and Total and management continue to evaluate options to
    maximise value for this asset;


--  Extension of the Kul-Bas Exploration and Production Contract (the "Kul-
    Bas Contract") in Kazakhstan for additional two years up to November
    2017 (subject to certain routine project and work programme approvals
    with amendments to the Kul-Bas Contract);


--  USD15 million convertible debt facility (the "Interim Facility") entered
    into with Olisol Investments Limited and its wholly owned subsidiary,
    Olisol Petroleum Limited ("OPL", together "Oilsol").


Corporate Highlights - Q1 2016


--  Signed a legally binding amendment (the "Facility Agreement Amendment")
    to the USD15 million convertible debt facility entered into on November
    19, 2015 with Olisol setting out amended terms to the Interim Facility,
    the Investment Agreement announced on December 8, 2015 and consequential
    changes to the transaction documentation between the companies;


--  Conversion notice received from Olisol to convert USD6.3million of
    outstanding debt to TPL shares at USD0.10 per share. USD3.7million
    already converted with the remainder pending TSX approval;


--  New gas sales contracts signed for 2016 volumes of up to 150 million
    cubic metres.


Financial Highlights - 2015


--  Administrative and business development expenses reduced by 51% to
    USD9.5m from USD19.5m;


--  Headcount has been reduced by 24% since Q4 2014 contributing to a staff
    costs reduction of 50% to USD4.5m from USD8.9m;


--  Office costs reduced by 53% to USD0.9m from USD2.0m;


--  Travel costs reduced by 64% to USD0.8m from USD2.3m;


--  Production expenses reduced by 24% to USD10.2m from USD13.5m;


--  Gas revenue increased by 98% to USD16.2m from USD8.2 following
    completion of a shallow gas development programme in late 2014 and
    significantly improved pricing from January 2015, however the increase
    was more than offset by a reduction in oil revenue to USD5.9m from
    USD18.9m due to lower production and a more than halving of realised
    prices;


--  The loss for the year of USD74.6m (2014: USD16.4m) was due to increased
    Depreciation, Depletion and Amortisation (DD&A) which was USD27.5m
    higher than the prior year. The Kazakh oil and assets were not
    depreciated in the prior period whilst held for sale to SinoHan. Due to
    the inability to fulfil the conditions precedent to this legacy
    transaction by the extended May 1, 2015 longstop date a catch up DD&A
    charge for 26 months was required to be made in the current year. In
    addition, the Tajikistan asset was impaired by USD25.9m reflecting the
    difficult economic market for frontier territory exploration assets and
    the devaluation of the Kazakhstan Tenge in Q4 2015 resulted in a
    deferred tax charge of USD6.4m. All of the aforementioned are non-cash
    items;


--  EBITDA - adjusted for share-based payments improved to negative USD10.6m
    from negative USD12.3m, despite significantly lower oil revenues, as a
    result of higher gas revenues and significantly lower production and
    administrative expenses following management's cost reduction
    initiatives.


--  Cash and cash equivalents at December 31, 2015 were USD3.3m (2014:
    USD3.9m, including cash of USD0.8m in a disposal group).


Reserve Highlights


--  Total Gross (i.e. before the application of Kazakh Mineral Extraction
    Tax) Oil and Gas Reserves consisting of "Proved" 1P reserves of 13.18
    million boe (2014: 16.62 million boe) and "Proved plus Probable" 2P
    reserves of 23.97 million boe (2014: 27.08 million boe);


--  The NPV10 value after tax of the Company's Kazakh reserves (Proved plus
    Probable) as at December 31, 2015 was USD 183.6 million (2014: USD 185.9
    million);


--  The reserves in this press release are estimated with an effective date
    of December 31, 2015.

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 2015 Annual Information Form dated March 29, 2016 includes more detailed disclosure and reports relating to petroleum and natural gas activities for 2015. 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.

Chairman's Message

John Bell, co-Chairman, said: "2015 saw unprecedented challenges in the oil and gas industry worldwide. Kazakhstan saw its own unique challenges with declining prices and a massive depreciation in the Kazakh Tenge starting the year at 180 Tenge to the USD and ending up around 350 Tenge to the USD. This put pressure on revenues and a severe strain on the Kazakh banking industry. Despite this the Company adjusted to the new paradigm and in 2015 we have halved the Company's G&A and Business Development expenses, whilst increasing gas production by 98% at a higher gas price. These costs are forecast to reduce further to $6 million on an annualised basis. Furthermore, we secured a new in-country strategic partner in Olisol Petroleum Limited and progressed on reaching a binding agreement which will lead to a recapitalisation of the business, ensure the Company's continued operations and will see Olisol becoming a major shareholder. I believe we are now better placed to realise value from the assets and have the right in-country partner to achieve success in Kazakhstan."

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 2015 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 and completion of the Olisol deal. 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 the private placement with Olisol will be delayed or not finalised. See our Annual Information Form for the year ended December 31, 2015 for a description of risks and uncertainties relevant to our business, including our exploration activities.

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)
                                                         2015           2014
----------------------------------------------------------------------------

Non-current assets
Intangible assets                                      64,202         47,630
Property, plant and equipment                         113,397         13,804
Restricted cash                                         2,233            623
Investment in joint arrangements                            4              4
Trade and other receivables                             2,457              -
Deferred tax                                              226            258
----------------------------------------------------------------------------
                                                      182,519         62,319
Current assets
Cash and cash equivalents                               3,272          3,112
Trade and other receivables                             3,710            634
Inventories                                               879              -
Restricted cash                                           215            116
Assets of a disposal group classified as held
 for sale                                                   -        172,514
----------------------------------------------------------------------------
                                                        8,076        176,376
----------------------------------------------------------------------------
Total assets                                          190,595        238,695
----------------------------------------------------------------------------
Non-current liabilities
Trade and other payables                                  133              -
Financial liabilities - borrowings                     22,873          5,489
Deferred tax                                           10,792              -
Provisions                                                846              -
----------------------------------------------------------------------------
                                                       34,644          5,489
Current liabilities
Financial liabilities - borrowings                      9,159          5,139
Derivative financial instruments                          275              -
Current taxation                                          398            364
Trade and other payables                               14,189          4,102
Provisions                                                360          1,759
Liabilities of a disposal group classified as
 held for sale                                              -         16,092
----------------------------------------------------------------------------
                                                       24,381         27,456
----------------------------------------------------------------------------
Total liabilities                                      59,025         32,945
Equity
Share capital                                          33,696         33,645
Share premium                                         321,803        321,724
Other reserves                                         43,166         42,845
Accumulated deficit                                 (273,189)      (198,560)
Non-controlling interest                                6,094          6,096
----------------------------------------------------------------------------
Total equity                                          131,570        205,750
Total equity and liabilities                          190,595        238,695
----------------------------------------------------------------------------

Tethys Petroleum Limited
Consolidated Statements of Comprehensive Income (Loss)
(in thousands of US dollars except per share information)
                                                         2015           2014
----------------------------------------------------------------------------

Sales and other revenues                              22,135         27,389
----------------------------------------------------------------------------

Sales expenses                                        (4,210)        (2,287)
Production expenses                                  (10,232)       (13,476)
Depreciation, depletion and amortisation             (28,731)        (1,270)
Exploration and evaluation expenditure written
 off                                                 (25,918)             -
Business development expenses                              -         (1,881)
Administrative expenses                               (9,492)       (17,647)
Restructuring costs                                   (3,247)        (2,585)
Transaction costs of assets held for sale             (1,065)          (243)
Share based payments                                    (450)          (224)
Profit on sale of fixed assets                            53              -
Foreign exchange loss                                 (1,715)          (200)
Fair value gain on derivative financial
 instrument                                              824             17
Loss from jointly controlled entity                   (2,796)        (1,356)
Finance costs                                         (3,329)        (1,247)
----------------------------------------------------------------------------
                                                     (90,308)       (42,399)

----------------------------------------------------------------------------
Loss before tax from continuing operations           (68,173)       (15,010)

Taxation                                              (6,430)          (463)

----------------------------------------------------------------------------
Loss for the year from continuing operations         (74,603)       (15,473)

Loss for the year from discontinued operations
 net of tax                                              (28)          (912)

----------------------------------------------------------------------------
Loss and total comprehensive income for the
 year                                                (74,631)       (16,385)

Loss and total comprehensive income
 attributable to:
Shareholders                                         (74,629)       (16,027)
Non-controlling interest                                  (2)          (358)

----------------------------------------------------------------------------
Loss and total comprehensive income for the
 year                                                (74,631)       (16,385)
----------------------------------------------------------------------------

Loss per share attributable to shareholders:
Basic and diluted - from continuing operations
 (USD)                                                 (0.22)         (0.05)
Basic and diluted - from discontinued
 operations (USD)                                          -              -
----------------------------------------------------------------------------

Tethys Petroleum Limited
Consolidated Statements of Cash Flows
(in thousands of US dollars)
                                                         2015           2014
----------------------------------------------------------------------------
Cash flow from operating activities
Loss before tax from continuing operations           (68,173)       (15,010)
Loss before tax from discontinued operations             (28)          (912)
----------------------------------------------------------------------------
                                                     (68,201)       (15,922)
Adjustments for:
Share based payments                                     450            224
Net finance cost                                       3,329          1,247
Depreciation, depletion and amortisation              28,731          1,270
Unsuccessful exploration and evaluation
 expenditures                                         25,918              -
Profit on sale of fixed assets                           (53)             -
Fair value gain on derivative financial
 instruments                                            (824)           (17)
Net unrealised foreign exchange gain                    (114)          (192)
Loss from jointly controlled entity                    2,796          1,356
Movement in provisions                                (4,646)         1,239
Net change in working capital                            752           (389)
----------------------------------------------------------------------------
Cash used in operating activities                    (11,862)       (11,184)
Corporation tax paid                                    (136)          (320)
----------------------------------------------------------------------------
Net cash used in operating activities                (11,998)       (11,504)
Cash flow from investing activities
Interest received                                        183            198
Expenditure on exploration and evaluation
 assets                                               (5,798)        (8,683)
Expenditure on property, plant and equipment          (2,495)       (17,386)
Proceeds from sale of fixed assets                       121              -
Movement in restricted cash                              214            137
Movement in advances to construction
 contractors                                             416            782
Movement in value added tax receivable                 1,284            (90)
Net change in working capital                         (1,275)           285
----------------------------------------------------------------------------
Net cash generated used in investing
 activities                                           (7,350)       (24,757)

Cash flow from financing activities
Proceeds from issuance of borrowings, net of
 issue costs                                          28,107         11,604
Repayment of borrowings                              (10,269)        (8,803)
Interest paid on borrowings                           (1,448)        (1,721)
Proceeds from issuance of equity                           -         14,947
Share issue costs                                          -         (1,379)
Movement in other non-current liabilities               (313)          (153)
----------------------------------------------------------------------------
Net cash generated from financing activities          16,077         14,495
Effects of exchange rate changes on cash and
 cash equivalents                                      2,675            (97)
Net decrease in cash and cash equivalents               (596)       (21,863)
Cash and cash equivalents at beginning of the
 year                                                  3,868         25,731
----------------------------------------------------------------------------
Cash and cash equivalents at end of the year           3,272          3,868
----------------------------------------------------------------------------
Cash and cash equivalents at end of the year
 comprises:
Cash in assets of a disposal group held for
 sale                                                      -            756
Cash and cash equivalents                              3,272          3,112
----------------------------------------------------------------------------
                                                       3,272          3,868
----------------------------------------------------------------------------

Contacts:
Tethys Petroleum
info@tethyspetroleum.com
www.tethyspetroleum.com

CAMARCO (Financial PR)
Billy Clegg / Georgia Mann
+44 (0) 203 757 4983