TIDMTPL
March 31, 2017
Tethys Petroleum Press Release
(TSX: TPL, LSE:TPL)
2016 Annual Results
GRAND CAYMAN, CAYMAN ISLANDS- Tethys Petroleum Limited today announced
its Annual Results for the year ended December 31, 2016.
Corporate Highlights - 2016
-- Conversion of USD6.3m of loans by Olisol Petroleum Limited (together with
Olisol Investments Limited "Olisol") into ordinary shares of Tethys at
USD0.10 per share;
-- Binding Amended and Restated Investment Agreement entered into with
Olisol for a private placement of 181m shares for proceeds of CAD9.8m and
underwriting of a further equity fundraising of 50m shares for proceeds
of CAD2.7m for a total of CAD12.5m.Olisol failed to provide Tethys with
any of the purchase price by the extended closing date of October 27,
2016 and has sought to terminate the Amended and Restated Investment
Agreement and to demand repayment of working capital funding provided;
-- Olisol affiliated company, Eurasia Gas Group ("EGG"), makes claims
against the company in the Kazakhstan courts leading to restrictions over
the Company's Kazakhstan bank accounts which, despite several court
rulings in Tethys favour and a temporary lifting of the restrictions,
remain in place to this day;
-- Gas supply contract agreed with Intergas Central Asia ("ICA") for the
period January 1, 2016 to December 31, 2016. There was a temporary
stoppage of gas supplies in mid-October although gas supplies to ICA
resumed in early December;
-- The Company's partners in Tajikistan filed for arbitration following the
Company's cash call defaults from September 2015 onwards seeking the
Company's withdrawal from the project and assignment of its interest, as
well as payment of unpaid cash calls;
-- Reduction in par value of the Company's ordinary shares from USD0.10 to
USD0.01 approved by shareholders and the Grand Court in the Cayman
Islands;
-- In connection with the transactions with Olisol, John Bell moved from
Executive Chairman to co-Non-Executive Chairman along with Alexander
Abramov, who also became co-Non-Executive Chairman. John Bell, David
Henderson, David Roberts and James Rawls all informed the Company that
they would not stand for re-election at the Company's May 31, 2016 Annual
General Meeting. Alexander Abramov was removed from the Board and was
replaced as Chairman of the Board by William Wells. Following the
appointment of Mattias Sjoborg and Medgat Kumar the Board of Directors of
the Company now comprises William Wells (Chairman), Adeola Ogunsemi,
Mattias Sjoborg and Medgat Kumar.In other board and management changes
Kenneth May was appointed as interim Chief Executive Officer replacing
Julian Hammond and subsequently confirmed as permanent CEO.
-- The Company announced a new cost optimisation programme that once fully
implemented should save the Company an estimated USD2.5m a year. The
programme followed an extensive review into costs and operations that was
started after the Company's Annual General Meeting in May;
-- The Company successfully defended legal proceedings brought against it in
Kazakhstan in relation to the USD7.5m debenture originally issued to AGR
Energy Limited No.1.;
-- Private placements with two individual investors raised USD1.4m for the
issuance to each investor of 43,951,698 ordinary shares at USD0.01593 per
share and 96,150,000 warrants exercisable at USD0.031 per share for three
years from the date of grant. The investors each have the right to be
appointed to the Board, have entered into a Relationship Agreement with
the Company and provide strong in-country partners for the Company in
Kazakhstan and internationally;
-- Allegations were made against employees of the Company's Kazakhstan
subsidiary, Tethys Aral Gas LLP, by the former Chairman of Tethys and
owner of Olisol, Alexander Abramov and resulted in searches and seizures
at the Company's offices in Almaty. The allegations were dismissed by the
authorities but have since been appealed by Alexander Abramov and
investigations are ongoing;
-- Loan restructuring, including three year extension of maturity dates and
no interest or principal payments until the maturity dates agreed with
Annuity and Life Reassurance Ltd in relation to two loan agreements
comprising USD5.3m of borrowings.
Corporate Highlights - Q1 2017
-- Georgian exploration commitments modified so that Tethys will not be
required to complete the previously agreed 50 km of 2D seismic
acquisition in Block XIN by June 30, 2017. This avoids potential
penalties of up to USD2.0m which may have been imposed if the commitments
had not been met;
-- Transfer of the registered legal addresses of the Company's three
Kazakhstan subsidiaries, Tethys Aral Gas, Kul-bas and Tethys Services
Kazakhstan from Almaty to Aktobe City completed and plans announced to
relocate Tethys main administrative office from Almaty to Aktobe City
during the first half of 2017;
-- Tethys and each of its Kazakhstan subsidiaries commenced legal action
against Olisol, EGG and certain of their respective principals and in the
Court of Queen's Bench of Alberta. The legal action was to seek, among
other things, damages arising from failure to meet contractual
obligations under the Amended and Restated Investment Agreement on
October 27, 2016 and damages arising from unlawful interference with
Tethys' business activities, including issuing erroneous press release
information about Tethys as alleged. Tethys intends to enforce its rights
and legitimate interests to the fullest extent permitted by law, to
protect its investors, assets, investments, management and employees;
-- Amendments agreed to the Company's rig loan including extending the
maturity date by 18 months;
-- The Company applied to the United Kingdom Listing Authority ("UKLA") to
cancel the standard listing of the Company's ordinary shares from the
Official List of the UKLA and the cancellation of trading in the Shares
on the Main Market of the London Stock Exchange with effect from May 2,
2017 to reduce the costs of maintaining dual listings. The shares will
continue to trade on the Toronto Stock Exchange and the Company will
combine its UK share register with the Canadian register to further
reduce costs;
-- The Company announced a ten well shallow gas well drilling program which
is expected to cost approximately USD6 million. The Company will have
until the end of 2018 fiscal year to pay these costs and expects to be
able to pay from increased production. Following mobilization, the
Company hopes to begin drilling on or about May 1, 2017. Additionally,
the Company will work over three existing wells and tie in two wells
drilled but not tied into production. This program is designed to add
twelve or more new wells to existing production;
-- The Company also announced the signing of a lease contract with MSI to
build and install a mini-compressor in Bozoi. Installation is expected
during the July 2017 time period. This is new technology for Central Asia
and is intended to enhance gas production prior to the new wells being
tied in. After new production is tied in, then the mini-compressor will
be used on older wells to extend the life of wells.
Financial Highlights - 2016
-- Oil and gas sales and other revenues decreased by 47% to USD11.7m from
USD22.1m due to a natural decline in production volumes and a price
reduction for oil in USD terms as a result of the Tenge devaluation from
August 2015;
-- The loss for the current year of USD46.9m is lower than the loss of
USD74.6m in 2015 due to additional depletion in the prior period
following the reclassification of assets previously shown as held for
sale and a large deferred tax charge due to the significant devaluation
of the Kazakhstan Tenge. In addition to this, there was a significant
reduction in production expenses and administrative costs as a result of
cost optimisation efforts;
-- The current year was impacted by a USD25.6m write-off of Tajikistan
exploration and evaluation expenditure (2015: USD25.9m) and a USD1.2m
impairment charge against Kazakhstan oil properties. Finance costs were
higher due to an increase in net debt and higher interest rates. The
prior year had a large foreign exchange loss following the devaluation of
the Tenge and a write down of the Company's interest in the Aral Oil
Terminal joint venture, neither of which recurred in 2016;
-- Adjusted EBITDA at negative USD3.3m decreased by 69% from negative
USD10.6m for the prior year as a result of reduced costs which more than
offset the reduction in revenue;
-- Net debt increased to USD32.8m from USD28.8m as a result of interim
finance obtained as part of larger strategic transactions which did not
complete. A number of the group's loans were restructured and maturity
dates extended subsequent to the end of the year as described above;
-- Total non-current liabilities reduced significantly from USD34.6m to
USD12.9m due to loans becoming due in less than one year and being
reclassified to current liabilities;
-- The number of ordinary shares outstanding increased to 508m from 337m as
a result of:
-- 37m shares issues to Olisol in March and a further 26m in April on
conversion of USD6.3m of debt at USD0.10 per share;
-- 44m shares issued to each of Prax Pte Ltd, and Jin Guang Ltd in
November 29, 2016 at USD0.01593 per share in cash;
-- 20m shares issued to Annuity and Life Reassurance Limited in
December on prepayment of USD0.3m of debt at USD0.01593 per share;
-- Cash and cash equivalents at December 31, 2016 were USD0.4m (2015:
USD3.3m) although there was an additional USD2.6m of restricted cash
which became available to the Company in January 2017.
Reserve Highlights
-- Total Gross (i.e. before the application of Kazakh Mineral Extraction
Tax) Oil and Gas Reserves consisting of "Proved" 1P reserves of 12.17m
boe (2015: 13.18m boe) and "Proved plus Probable" 2P reserves of 22.90m
boe (2015: 23.97m boe);
-- The NPV10 value after tax of the Company's Kazakh reserves (Proved plus
Probable) as at December 31, 2016 was USD157.6m (2015: USD183.6m);
-- The reserves in this press release are estimated with an effective date
of December 31, 2016.
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 2016 Annual Information Form
dated March 31, 2017 includes more detailed disclosure and reports
relating to petroleum and natural gas activities for 2016. 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.
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.
Outlook
The Company's objective is to become a leading oil and gas exploration
and production 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. The
Company produces both oil and natural gas in order to balance its
product portfolio and currently operates in three separate jurisdictions
in Central Asia and the Caspian Region, though the Board is considering
farming down or selling the Tajikistan and Georgian assets to focus on
the assets in Kazakhstan. The Company was served with a withdrawal
notice from its partners in Tajikistan during 2015 although is
contesting this in arbitration proceedings.
The Company's long-term ambition is to achieve a significant role in the
production and delivery of hydrocarbons from the Central Asian region to
local and global markets, especially to the Chinese market. In common
with many oil and gas companies, in implementing its strategies, the
Company regularly considers farm-out/farm-in and joint venture
opportunities and new projects which provide synergy with the Company's
activities. Meanwhile, the specific focus of management in the short
term is to:
-- resolve the Company's current issues in Kazakhstan, including disputes
with EGG and Olisol;
-- work with the Company's new partner in Kazakhstan to market the Company's
oil and gas for better pricing and obtain funding from a Kazakh bank to
restructure loans and fund operations;
-- complete the process of restructuring the Company's loans which are
falling due in 2017;
-- seek drilling company partners, or other investors, to fund drilling in
the Company's licence areas in Kazakhstan on a deferred payment or
contingent production sharing basis. This would include shallow and deep
gas targets, Akkulka enhanced oil recovery and the Klymene exploration
well on the Kul-bas licence;
-- continue to evaluate farm-out or other value realisation opportunities
with respect to Tajikistan and Georgia;
-- continue to review and implement further restructuring and cost
optimisation across the business; and
-- maintain and increase shallow gas production in the near-term and drill
for deep gas in the medium-term with the objective to supply gas to China
through the newly built pipeline, once operational and additional funding
is secured.
Full Annual Results and other documents
The full Annual Results together with Management's Discussion and
Analysis and Annual Information Form will be 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 2016 Consolidated Financial Statements are prepared under
International Financial Reporting Standards ("IFRS").
We draw attention to the section entitled "Going concern" in note 1 to
the Consolidated Financial Statements which describes the material
uncertainties relating to the Company's adoption of the going concern
basis in preparing the Financial Statements for the year ended December
31, 2016 that may cast significant doubt about Tethys Petroleum
Limited's ability to continue as a going concern.
About Tethys
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.
Disclaimer
Some of the statements in this document are forward-looking.
Forward-looking statements include statements regarding the intent,
belief and current expectations of the Company or its officers with
respect to the potential that exists in both exploration and in
discovered deposits in Central Asia and the Caspian Region, the savings
to be achieved under the cost optimisation programme, the outcome of the
appeal regarding allegations made against employees of Tethys Aral Gas
LLP, the Company's plans to relocate its main administrative office in
Kazakhstan from Almaty to Aktobe City, the outcome of legal action
against Olisol, EGG and certain of their respective principals, the
Company's plans to cancel its listing in the United Kingdom and combine
its United Kingdom share register with its Canadian register, the cost,
timing and success of the proposed shallow gas drilling programme in
adding 12 new wells to production, the timing of installation and
success of the mini compressor in enhancing gas production, the
availability of sufficient funding to allow development of the known
accumulations described above under "Reserve Highlights" and the
Company's objectives, ambitions and short-term focus areas described
above under "Outlook". When used in this document, the words "expects,"
"believes," "anticipates," "plans," "may," "will," "should" and similar
expressions, and the negatives thereof, are intended to identify
forward-looking statements. Such statements are not promises or
guarantees, and are subject to risks and uncertainties that could cause
actual outcomes to differ materially from those suggested by any such
statements including risks and uncertainties with respect to the
potential that exists in both exploration and in discovered deposits in
Central Asia and the Caspian Region, the savings to be achieved under
the cost optimisation programme, the outcome of the appeal regarding
allegations made against employees of Tethys Aral Gas LLP, the Company's
plans to relocate its main administrative office in Kazakhstan from
Almaty to Aktobe City, the outcome of legal action against Olisol, EGG
and certain of their respective principals, the Company's plans to
cancel its listing in the United Kingdom and combine its United Kingdom
share register with its Canadian register, the cost, timing and success
of the proposed shallow gas drilling programme in adding 12 new wells to
production, the timing of installation and success of the mini
compressor in enhancing gas production, the availability of sufficient
funding to allow development of the known accumulations described above
under "Reserve Highlights" and the Company's objectives, ambitions and
short-term focus areas described above under "Outlook".
No part of this announcement constitutes, or shall be taken to
constitute, an invitation or inducement to invest in the Company or any
other entity, and shareholders of the Company are cautioned not to place
undue reliance on the forward-looking statements. Save as required by
the Listing Rules and applicable law, the Company does not undertake to
update or change any forward-looking statements to reflect events
occurring after the date of this announcement.
See our Annual Information Form for the year ended December 31, 2016 for
a description of risks and uncertainties relevant to our business,
including our exploration activities.
FOR FURTHER INFORMATION PLEASE CONTACT:
Tethys Petroleum
info@tethyspetroleum.com
Web: http://www.tethyspetroleum.com
Tethys Petroleum Limited
Consolidated Statement of Financial Position
(in thousands of US dollars)
2016 2015
Non-current assets
Intangible assets 42,732 64,202
Property, plant and equipment 103,115 113,397
Restricted cash 2,238 2,233
Investment in joint arrangements 4 4
Trade and other receivables 1,237 2,457
Deferred tax 208 226
149,534 182,519
Current assets
Cash and cash equivalents 449 3,272
Trade and other receivables 6,532 3,710
Inventories 676 879
Restricted cash 2,713 215
10,370 8,076
Total assets 159,904 190,595
Non-current liabilities
Trade and other payables 44 133
Financial liabilities - borrowings - 22,873
Deferred tax 11,913 10,792
Provisions 910 846
12,867 34,644
Current liabilities
Financial liabilities - borrowings 33,249 9,159
Derivative financial instruments - 275
Current taxation 522 398
Trade and other payables 19,838 14,189
Provisions 200 360
53,809 24,381
Total liabilities 66,676 59,025
Equity
Share capital 5,081 33,696
Share premium 358,444 321,803
Other reserves 43,648 43,166
Accumulated deficit (320,041) (273,189)
Non-controlling interest 6,096 6,094
Total equity 93,228 131,570
Total equity and liabilities 159,904 190,595
Tethys Petroleum Limited
Consolidated Statements of Comprehensive Income (Loss)
(in thousands of US dollars except per share information)
2016 2015
Sales and other revenues 11,734 22,135
Sales expenses (2,443) (4,210)
Production expenses (5,285) (10,232)
Depreciation, depletion and amortisation (9,971) (28,731)
Exploration and evaluation expenditure written off (25,627) (25,918)
Impairment charges (1,176) -
Administrative expenses (5,461) (9,492)
Restructuring costs (1,915) (3,247)
Transaction costs of assets held for sale - (1,065)
Share based payments (482) (450)
Profit on sale of fixed assets - 53
Foreign exchange gain/(loss) 117 (1,715)
Fair value gain on derivative financial instrument 275 824
Loss from jointly controlled entity - (2,796)
Finance costs (5,313) (3,329)
(57,281) (90,308)
Loss before tax from continuing operations (45,547) (68,173)
Taxation (1,303) (6,430)
Loss for the year from continuing operations (46,850) (74,603)
Loss for the year from discontinued operations net
of tax - (28)
Loss and total comprehensive income for the year (46,850) (74,631)
Loss and total comprehensive income attributable to:
Shareholders (46,852) (74,629)
Non-controlling interest 2 (2)
Loss and total comprehensive income for the year (46,850) (74,631)
Loss per share attributable to shareholders:
Basic and diluted - from continuing operations (USD) (0.12) (0.22)
Basic and diluted - from discontinued operations (USD) - -
Tethys Petroleum Limited
Consolidated Statements of Cash Flows
(in thousands of US dollars)
2016 2015
Cash flow from operating activities
Loss before tax from continuing operations (45,547) (68,173)
Loss before tax from discontinued operations - (28)
(45,547) (68,201)
Adjustments for:
Share based payments 482 450
Net finance cost 5,313 3,329
Depreciation, depletion and amortisation 9,971 28,731
Unsuccessful exploration and evaluation expenditures 25,627 25,918
Impairment charges 1,176 -
Profit on sale of fixed assets - (53)
Fair value gain on derivative financial instruments (275) (824)
Net unrealised foreign exchange gain (318) (114)
Loss from jointly controlled entity - 2,796
Movement in provisions (1,901) (4,646)
Net change in working capital 1,249 752
Cash used in operating activities (4,223) (11,862)
Corporation tax paid (33) (136)
Net cash used in operating activities (4,256) (11,998)
Cash flow from investing activities
Interest received - 183
Expenditure on exploration and evaluation assets (619) (5,798)
Expenditure on property, plant and equipment (789) (2,495)
Proceeds from sale of fixed assets 23 121
Movement in restricted cash (2,503) 214
Movement in advances to construction contractors (47) 416
Movement in value added tax receivable 650 1,284
Net change in working capital 225 (1,275)
Net cash generated used in investing activities (3,060) (7,350)
Cash flow from financing activities
Proceeds from issuance of borrowings, net of issue
costs 7,930 28,107
Repayment of borrowings (1,395) (10,269)
Interest paid on borrowings (3,369) (1,448)
Proceeds from issuance of equity 1,400 -
Movement in other non-current liabilities (114) (313)
Net cash generated from financing activities 4,452 16,077
Effects of exchange rate changes on cash and cash
equivalents 41 2,675
Net decrease in cash and cash equivalents (2,823) (596)
Cash and cash equivalents at beginning of the year 3,272 3,868
Cash and cash equivalents at end of the year 449 3,272
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Tethys Petroleum Limited via Globenewswire
http://www.tethyspetroleum.com/
(END) Dow Jones Newswires
April 03, 2017 02:01 ET (06:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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