2012-11-14

Third Quarter 2012 Financial Results

GRAND CAYMAN, CAYMAN ISLANDS--(Marketwire - Nov. 14, 2012) - Tethys Petroleum today announced its third quarter 2012 financial results. The results are highlighted by a 46% increase in production revenues over the third quarter of last year.

RECENT FINANCIAL HIGHLIGHTS

Q3 2012 vs Q3 2011

Total Oil and Gas Revenue up 46% at USD10.0 million
Average oil production from the Doris field, Kazakhstan up 74% at 2,732 bopd
Administrative costs down 8% at USD4.5 million
Total Assets USD252.1 million

9 months 2012 vs 9 months 2011

Total Oil and Gas Revenue up 72% at USD26.7 million
Average oil production from the Doris field, Kazakhstan up 145% at 2,234 bopd
Administrative costs down 2% at USD15.5 million

The 9 months period in 2012 has seen a substantial increase in oil production and revenue from the Doris oil field in Kazakhstan with a small drop in corporate administrative costs over the same period. It is forecast that both these trends will continue into 4Q 2012. On the revenue side both October's and November's average oil production figures have so far contributed toward the best quarter of oil production in Kazakhstan to date. October oil production averaged approximately 3,700 bopd and it is forecast that Novembers' production figures will exceed this number. These figures demonstrate the optimisation of the trucking operation in Kazakhstan is coming to fruition which has been the main restriction on maximum production to date, not the production capability of the wells.

On the costs side in Q3 the Company has initiated a review of all costs with a particular focus on administrative expenses. The objective of this exercise is first and foremost to review all areas with a view to reducing costs but particularly administrative costs, and secondly to review the categorization of costs to ensure that the Company is reporting consistently with other similar oil and gas companies, which will facilitate appropriate comparison within its peer group.

Some of these measures can be seen in a 22% reduction in the Q3 2012 costs over the Q2 2012 costs and in the 8% reduction against Q3 2011, but it is expected most of the effect will be realised in the quarters to come as this assessment and resulting action takes some time to implement. This cost reduction exercise does not in anyway reflect the growth prospects of the Company which, as can be seen from the higher production and revenue growth in Kazakhstan and the recent signing of the MOU for a Tajikistan farm-in partner, are very good.

The Company reports financial results in accordance with International Financial Reporting Standards ("IFRS").

These highlights along with other operational and financial details will be further discussed in a scheduled conference call. Details of the conference call can be found below:

Conference Call:

A conference call will be held at 10:30 AM EST US and Canada and 15:30 PM GMT European time on Thursday, November 15, 2012. The North American conference call number is (866) 202-3048 and the outside North America conference call number is +1 (617) 213-8843. The conference call code to use is [32537707]. Please call in about 10 minutes before the starting time in order to be patched into the call.

Webcast:

The call is being webcast and can be accessed at: http://phoenix.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=213714&eventID=4869022.

The following disclosure is provided to comply with regulatory requirements:

During the fourth quarter of 2011 and the first quarter of 2012, the Company borrowed from various lenders an aggregate principal amount of USD10 million for the purpose of re-financing the purchase price of drilling rigs. The loans are evidenced by loan notes having a maturity of one year or two years. The lenders also received warrants to purchase ordinary shares of the Company having a term of one year or two years, corresponding to the term of the loan notes. In October 2012, the Company received approval from a number of lenders to a one-year extension of the maturity date of loans notes in the principal amount of USD2,165,240 maturing in December 2012. In connection with the approval of the extension of the maturity date, the Company agreed, subject to definitive lender approval, to extend by six months the expiry date of 1,575,000 warrants issued in December 2011 (having an exercise price of CAD0.58 to CAD0.65) and 3,017,380 warrants issued in February, March and April 2012 (having an exercise price of CAD0.84 to CAD1.18), excluding warrants issued to insiders of the Company. The number of ordinary shares into which these warrants may be exercised represents, in aggregate, 1.6% of the number of ordinary shares outstanding on the date hereof. The exercise prices of these warrants represent a premium of 14% to 27% in the case of the warrants issued in December 2011 and 64% to 131% in the case of the warrants issued in February, March and April 2012 of the volume weighted average trading price of the ordinary shares of the Company on the TSX for the five days to October 19, 2012, being the date of the agreement with the lenders. The change to the expiry dates of these warrants will be effective on November 29, 2012. The Company will also issue, subject to definitive lender approval, 1,082,620 warrants having an exercise price of $0.64 to lenders who agreed to extend the maturity date of their one year loan notes by 12 months. These warrants will expire on certain dates in December 2013 or, in the case of 307,620 warrants issued to two officers of the Company, June 2014. The number of ordinary shares into which these new warrants may be exercised represents, in aggregate, 0.4% of the number of ordinary shares outstanding on the date hereof (0.1% in respect of the warrants to be issued to the two officers of the Company). The exercise price of the new warrants represents a premium of 25% of the volume weighted average trading price of the ordinary shares of the Company for the five days to October 19, 2012.

Tethys is focused on oil and gas exploration and production activities in Central Asia with activities currently in the Republics of Kazakhstan, Tajikistan and Uzbekistan. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.

This press release contains "forward-looking information" which may include, but is not limited to, statements with respect to our operations. Such forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. See our Annual Information Form for the year ended December 31, 2011 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.

Tethys Petroleum Limited
Condensed Consolidated Statement of Financial Position
(Unaudited)
(in US Dollars)
As at   
September 30,
2012        December 31,
2011    
$'000       $'000   
Non-current assets              
Property, plant and equipment   121,894     128,918 
Intangible assets   104,165     99,959  
Restricted cash 1,406       1,407   
Prepayments and other receivables   10,629      10,217  
Investment in jointly controlled entity 1,118       1,113   
239,212     241,614 
Current assets              
Inventories 1,934       2,025   
Trade and other receivables 7,449       5,478   
Loan receivable from jointly controlled entity  1,868       2,013   
Cash and cash equivalents   1,146       10,746  
Restricted cash 474     885 
Derivative financial instruments - interest rate swap   -       630 
12,871      21,777  
Total assets    252,083     263,391 
Equity attributable to shareholders             
Share capital   28,671      28,669  
Share premium   306,725     306,725 
Other reserves  41,200      38,530  
Accumulated deficit (161,527    )   (144,962    )
Non-controlling interest    8,648       8,918   
Total equity    223,717     237,880 
Non-current liabilities             
Financial liabilities - borrowings  5,874       1,632   
Deferred taxation   2,913       2,111   
Trade and other payables    402     547 
Asset retirement obligations    248     386 
9,437       4,676   
Current liabilities             
Financial liabilities - borrowings  7,411       8,396   
Derivative financial instruments - warrants 688     264 
Derivative financial instruments - foreign currency hedge   -       157 
Deferred revenue    1,238       1,839   
Trade and other payables    9,294       10,179  
Current tax 298     -   
18,929      20,835  
Total liabilities               
28,366      25,511  
Total shareholders' equity and liabilities              
252,083     263,391 


Tethys Petroleum Limited
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
For the three and nine months ended September 30, 2012
(in US Dollars)
For the 3 months ended      For the 9 months ended  
September 30,       September 30,   
2012        2011        2012        2011    
$'000       $'000       $'000       $'000   
Sales and other revenues    9,990       6,849       26,681      15,506  
Other operating income  -       922     -       6,628   
Total revenue and other income  9,990       7,771       26,681      22,134  
Production expenses (3,562  )   (3,393  )   (9,401  )   (6,918  )
Depreciation, depletion and amortisation    (4,766  )   (3,857  )   (12,557 )   (9,684  )
Exploration and evaluation expenditure written off  (138    )   (1,807  )   (138    )   (1,807  )
Listing expenses    -       (273    )   -       (606    )
Business development expenses   (42 )   (697    )   (621    )   (1,926  )
Administrative expenses (4,490  )   (4,859  )   (15,248 )   (15,520 )
Share based payments    (582    )   (1,054  )   (2,459  )   (3,111  )
Foreign exchange (loss) / gain - net    (158    )   (183    )   (334    )   33  
Fair value loss on derivative financial instrument  (149    )   (231    )   (216    )   (554    )
Loss from jointly controlled entity (395    )   (291    )   (294    )   (802    )
Net finance (costs) / income    (296    )   194     (1,148  )   912 
Loss before taxation    (4,588  )   (8,680  )   (15,735 )   (17,849 )
Taxation    (529    )   105     (1,100  )   283 
Loss for the period (5,117  )   (8,575  )   (16,835 )   (17,566 )
Loss attributable to:                               
Shareholders    (4,906  )   (8,575  )   (16,565 )   (17,566 )
Non-controlling interest    (211    )   -       (270    )   -   
Loss for the period (5,117  )   (8,575  )   (16,835 )   (17,566 )
Loss per share attributable to shareholders                             
Basic and diluted   (0.02   )   (0.03   )   (0.06   )   (0.07   )


Tethys Petroleum Limited
Condensed Consolidated Statement of Cash Flows
(Unaudited)
For the three and nine months ended September 30, 2012
(in US dollars)
For the 3 months ended      For the 9 months ended  
September 30,       September 30,   
2012        2011        2012        2011    
$'000       $'000       $'000       $'000   
Cash flow from operating activities                             
Loss before taxation for the period (4,588  )   (8,680  )   (15,735 )   (17,849 )
Adjustments for                             
Share based payments    582     1,054       2,459       3,111   
Net finance cost / (income) 296     (194    )   1,148       (910    )
Unsuccessful exploration and evaluation expenditure written off -       1,807       -       1,807   
Depreciation, depletion and amortization    4,766       3,857       12,557      9,684   
(Gain)/loss on disposal of assets   -       (16 )   -       120 
Fair value loss on derivative financial instrument  149     231     216     554 
Net unrealised foreign exchange (gain) / loss   228     (70 )   216     (22 )
Loss from jointly controlled entity 395     291     294     802 
Deferred revenue    (157    )   1,721       (601    )   (55 )
Other operating income  -       (922    )   -       (6,628  )
Net change in non-cash working capital  84      (1,252  )   (1,903  )   (483    )
Net cash generated / (used) in operating activities 1,755       (2,173  )   (1,349  )   (9,869  )
Cash flow from investing activities                             
Interest received   -       36      5       112 
Expenditure on exploration and evaluation assets    (2,412  )   (3,335  )   (4,014  )   (9,624  )
Expenditures on property, plant and equipment   (3,609  )   (7,813  )   (5,317  )   (27,210 )
Movement in restricted cash 1       2,100       412     (1,451  )
Investment in jointly controlled entity -       -       (5  )   -   
Payments made on behalf of jointly controlled entity    -       (5,071  )           (12,435 )
Movement in advances to construction contractors    (643    )   1,304       (1,677  )   1,187   
Movement in value added tax receivable  251     (980    )   1,098       (3,133  )
Net change in non-cash working capital  1,476       726     (924    )   1,080   
Net cash used in investing activities   (4,936  )   (13,033 )   (10,422 )   (51,474 )
Cash flow from financing activities                             
Proceeds from issuance of borrowings, net of issue costs    999     -       10,334      -   
Repayment of borrowings (246    )   (93 )   (7,112  )   (269    )
Interest paid on borrowings (283    )   (69 )   (804    )   (266    )
Movement in other non-current liabilities   (71 )   (76 )   (213    )   (227    )
Net cash generated / (used) in financing activities 399     (238    )   2,205       (762    )
Effects of exchange rate changes on cash and cash equivalents   (44 )   114     (34 )   (14 )
Net decrease in cash and cash equivalents   (2,826  )   (15,330 )   (9,600  )   (62,119 )
Cash and cash equivalents at beginning of the period    3,972       32,346      10,746      79,135  
Cash and cash equivalents at end of the period  1,146       17,016      1,146       17,016  

CONTACT INFORMATION

North America
Tethys Petroleum Limited
Sabin Rossi, Vice President Investor Relations
Office: +1 416-941-1257
+1 416-947-0167(FAX)

Europe
Tethys Petroleum Limited
Veronica Zhuvaghena, Vice President Corporate Communications
Office: +44 1481 725911
+44 1481 725922(FAX)

Corporate Brokers:
FirstEnergy
Hugh Sanderson/David Van Erp
Office: + 44 207 448 0200

Seymour Pierce Richard Redmayne/Jonathan Wright/Stewart Dickson
Office: +44 207 107 8000

Asia Pacific:
Quam IR
Anita Wan
Office phone/fax: +852 2217 2999

FTI Consulting
Ben Brewerton/Edward Westropp
Office: +44 207 831 3113

Tethys Petroleum Limited
info@tethyspetroleum.com
www.tethyspetroleum.com
http://m.tethyspetroleum.com

Production Revenues Increase 46%