Operations and Corporate Update
GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - Sept. 16, 2014) - Tethys Petroleum Limited ("Tethys" or "the Company" (TSX:TPL) (LSE:TPL)) today provided an Operational and Corporate update.
This Press Release is aimed at bringing stakeholders up to speed with current developments in the Company's business, including its operations and corporate developments.
In Kazakhstan, work continues on the gas project with the dehydration equipment having now been successfully tested in China and being shipped to Kazakhstan. Work is proceeding well on the installation of additional field pipelines, etc., and we are on track for meeting our production target of three times current gas production by the Q1, 2015. This work is fully funded from the proceeds of the recent financing. Negotiations on possible sales contracts continue (following the usual Central Asian summer break) and we hope to reach a conclusion on these negotiations before the end of the year to enable considerably increased volumes of gas to be supplied to buyers at higher prices for 2015 and beyond.
In terms of other operations, these are currently waiting on closure of the HanHong deal although planning is being carried out for horizontal and high angle drilling on the Doris oil field in order to increase short-term production as well as plans to meet work commitments on both the Akkulka and Kul-Bas contracts. Obligations are being addressed to extend the Akkulka exploration contract beyond March 2015 and we are waiting on the HanHong funding to move ahead with the necessary gas utilisation equipment and indeed to complete the appraisal of the area such that we can apply for a production contract thereby enabling us to achieve higher oil prices. The need to preserve flexibility with respect to the area under contract is clearly important as there are a number of other potential oil deposits (including the recently identified Akkulka Central prospect) which need to be included in any production contract following their appraisal. We are receiving good support from the Kazakh authorities on this work. The presence of Total SA in the blocks around us, where they are planning to drill a number of wells, reinforces the view that our assets have considerable potential.
The planned Klymene exploration well on the large Klymene prospect has been engineered and will be committed to once the HanHong monies are received. This is a large, relatively low risk exploration prospect with independent resource estimates in excess of 400 million barrels of oil.
To date, we have not received the Article 36 consent (pre-emptive right waiver) from the Kazakh government for the deal signed with HanHong last November. The recent restructuring of the Kazakh Government Ministries relating to the energy sector has in our view, led to further additional time being required by the Kazakh government to make a decision on waiving their pre-emption rights. HanHong have released early the USD 3.88 million escrowed deposit on the deal and further discussions will be held with a view to extending the agreement's one year longstop date should this be necessary.
In Tajikistan, our Bokhtar joint venture with Total SA and CNPC is operating effectively although there have been considerable delays in the commencement of the seismic work which is being carried out by the Chinese company, BGP. The work on the first well (which is currently programmed to be drilled at the end of next year) is being led by Tethys on behalf of the group (which is undoubtedly a significant endorsement of the ability of our corporate drilling team) and this work is progressing well although, with the depths, pressures and potential drilling challenges being highlighted by the partners, a considerable amount of long lead items will be required in order to drill what will be a demanding and technically challenging well. Work on the Tajikistan-China gas pipeline commenced on September 13, with a planned completion in 2016, this being a potential export route for Bokhtar gas to the growing Chinese market. Tethys regards Tajikistan and in particular the Bokhtar area as having huge upside potential for the future.
In Georgia, no additional significant capital expenditure has been incurred this year and only further limited expenditure is needed to meet our commitments on this attractive acreage with high potential. The work carried out to date indicates a number of very attractive areas both conventional and unconventional oil plays, close to existing fields, and we are working closely with our partners on the best way to optimise costs and move forward. However, we are examining our strategic options with our projects in Georgia despite their high short to medium term potential and the relative political stability as well as the ability to receive world oil prices at the field. As such, the Company is currently looking at the potential to bring in partners or divest some of its interest in the Georgian projects in order to reduce further the already small amount of planned capital expenditure on these projects.
In response to the issues raised by the Company's major shareholders after the AGM, we have been carrying out a comprehensive review of costs, efficiencies and strategy as well as corporate governance issues.
The stated objectives of the Company have always been to explore for large upside potential whilst producing and generating cash flow from more immediate projects in a portfolio, which balances political and fiscal risk across the Company's operating area.
This remains the Company's objective and this is the unanimous view of the Board of Directors. We do, however, appreciate that we need to make certain changes in order to optimize the Company's business model and address the issues referred to above.
We recently announced the retirement of Russ Hammond on his 73rd birthday in October of this year. Russ has served the Company very well and his advice has been extremely important in the development of the corporation.
We intend to bring to the Board a replacement for Russ - a new independent Non Executive Director, new to the Company, who will work closely with the Chairman to implement a Change Agenda in order to better focus the Company on its objectives, streamline management structures and overall costs and address the concerns of some of its major shareholders. This process will begin soon with the target of completing the initial review before the end of the year and implementation in the first quarter of next year. In addition we are working on ensuring that the Board has a majority of directors who both are, and are seen to be, independent.
This review will be broad and comprehensive in order to refresh the Company, review and bear down on costs and re-focus it on its objectives in an effective and efficient manner.
The Company's stakeholders will be kept abreast of the progress of this review once the initial phase is complete and the Board anticipates that this will address both the concerns of the shareholders and help the business move forward in a more effective manner.
The Chairman of Tethys Petroleum, Dr. David Robson, commented: "I firmly believe that Tethys has excellent assets in areas that we know well and can operate effectively through our long-term relationships and ability to do business in the states of the former Soviet Union. The Company is unique given its geographic spread and, indeed, the potential which it has across the area with its ability to grow and develop its current assets using its technically skilled and capable workforce. This workforce is extremely committed, professional and focused on the Company's success and continues to work extremely hard in often remote and difficult parts of the world.
However, all things need to be able to evolve with time and the Company has grown from a small, single, stranded gas field in Kazakhstan to having the assets it has today following exploration success (the first oil discovery in the West Aral area of Kazakhstan and the first oil discovery in Tajikistan since independence), forming partnerships with oil majors and operating in environmentally challenging conditions, remote from any infrastructure, whilst following the rule of law and establishing itself as one of the most respected operators in the region.
We are firmly of the opinion that the potential of the Company's assets, geopolitical presence and operating team, is not reflected in the current share price. We are confident that the proposed Change Agenda combined with the continued implementation of the Company's commercial and operational strategy will help to address this and allow the Company to build a bright future in the interests of its shareholders, employees and the host governments of the countries in which it works."
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.
The references in this press release to "Prospective Recoverable Resources" means those quantities of petroleum estimated to be potentially recoverable from undiscovered accumulations by application of future exploration and development projects. Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of these resources. The product types that may reasonably be expected from potential production consist of oil, condensate, natural gas and associated gas.
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 any 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.
This press release contains "forward-looking information" which may include, but is not limited to, achieving three times current Kazakh gas production by Q1 2015, conclusion of gas sales contract negotiations in Kazakhstan before the end of the year to enable considerably increased volumes of gas to be supplied to buyers at higher prices for 2015 and beyond, closure of the HanHong deal, the possible extension of the Akkulka Exploration Contract, commencement of drilling the "Klymene" prospect, receipt of the Article 36 consent (pre-emptive right waiver) from the Kazakh government for the deal signed with HanHong last November, commencement of seismic work in Tajikistan, the potential to bring in partners or divest some interest in the Georgian projects, a comprehensive review of costs, efficiencies and strategy as well as corporate governance issues, the replacement of Russ Hammond with a new independent Non Executive Director who would be new to the Company, prospective resource estimates, the potential for successful discoveries and their commercialisation, and our exploration targets. Such forward-looking statements reflect our current views with respect to future events and are subject to certain assumptions, the fact that the Company will be successful in confirming the existence of the accumulations of petroleum in respect of its exploration targets, and subject to certain risks and uncertainties, the risk that limited discoveries will result from exploration wells and as a result the risk that any or all of the prospective resources will not become recoverable. 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 activities. The Company is currently unsure as to any effect the recently imposed sanctions on the Russian Federation may have on its business and is currently attempting to assess any effects. 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Tethys Petroleum Limited
Vice President Investor Relations
Media / IR Enquiries
Ben Brewerton / Adam Cubbage / James Styles
+44 207 831 3113
+852 2217 2999
Source: Tethys Petroleum Limited