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|MUSD (unless specifically stated)||Fourth quarter 2016||Third quarter 2016||Fourth quarter 2015||Full year 2016||Full year 2015|
|Net daily production before government take (bbl)||12,268||12,297||10,956||12,235||9,804|
|Net barrels sold, after government take (bbl)||583,772||501,167||366,746||2,357,701||1,805,056|
|Average selling price per barrel, USD||46.0||45.8||47.9||40.5||58.1|
|Result for the period||1.5||6.4||3.1||2.7||23.4|
|Investments in oil and gas properties||15.0||9.3||7.0||48.5||40.8|
|Earnings per share (after dilution), USD||0.04||0.19||0.09||0.08||0.66|
*Starting 1 January 2016, the Tethys Oil group presents the financial reports in USD. Please note that all comparative financials have been restated. For further information, please see Accounting principles on page 18.
Letter to shareholders
Dear Friends and Investors
What a year 2016 turned out to be. The oil business went on quite a rollercoaster ride, but Tethys Oil held on and in the end 2016 did not turn out badly at all. Our revenues and EBITDA came in 19 and 25 percent respectively lower than last year and amounted to MUSD 87.1 and 44.1 respectively after a one off adjustment for an export reporting error that Tethys Oil has estimated to MUSD 5.9. We remained cash flow positive the entire year, even in the dark days of January when oil prices briefly dropped below USD 30 per barrel and we end the year with a net cash position of MUSD 39 after having distributed MUSD 15 to our shareholders during the year (SEK 4 per share).
We produced 4.4 million barrels of oil, up 25 percent compared to 2015 and the highest so far for any year. We believe that our production will continue to grow, but still with monthly fluctuations. The slight shortfall we saw in December was due to temporary factors and the fact that the Shahd water injection took and for that matter takes, longer to kick in than we had hoped. The important thing in this regard is that Shahd water injection works, which will impact both reserves and production positively going forward. So for 2017 we continue to believe in increasing production compared to 2016. We should of course bear in mind that Oman has signed up to the OPEC initiated production limitations, which gives us a monthly target production of 12,300 BOPD for the first six months. Actual production is however likely to continue to fluctuate depending both on our production capacity but now also on how the maximum monthly production allowed by Oman is filled. So now let us turn to something which ended the year tremendously well - Reserves.
We are delighted to report a reserve replacement ratio of 171 percent. Despite increasing our production by 25 percent, we increased our reserves by more and at the end of the year 2016 the 2P reserves amounted to 21.4 million barrels. The increased reserves are attributable to our ongoing appraisal and optimization program. Drilling of appraisal and production wells and implementation of water injection has resulted in reserves having moved from the 3P to the 2P category. The 3P number has further increased as the appraisal wells have pushed the limits of the areas of our fields that are in production. Exploration, that is the drilling of previously undrilled structures that could turn into future oil fields, did not start until late in the year and consequently no results were known at year-end, the year-end reserve numbers contain practically no new discoveries. Instead we reached it by showing the robustness of our existing fields, and for that matter - our business model. We believe that our existing fields have further scope for development and we are hopeful that the exploration wells currently in progress and those planned for later in 2017, will have a significant impact on our ability to further increase reserves.
Strengthened oil price environment
In the final quarter of 2016, the oil price strengthened even further following the agreement between OPEC and non-OPEC members to cut oil output and reached above USD 55 per barrel at year end. With our two months lag in our selling price, we will see the benefit of the price increase in the first quarter 2017. The average achieved price during the fourth quarter was USD 46.0 per barrel, in line with the third quarter 2016.
Fourth quarter in focus
In the fourth quarter, we report revenues of MUSD 20.7. Our EBITDA for the quarter amounted to MUSD 9.6. The numbers were negatively affected by a one off adjustment for an export reporting error. Our cash flow from operations amounted to MUSD 16.2, and our net result amounted to MUSD 1.5. Even following our distribution of MUSD 12 to our shareholders in the fourth quarter, our net cash is continued solid with MUSD 39.0 as per 31 December 2016.
The partner group for Blocks 3&4, Oman, have now agreed upon the work programme for 2017. The budget will be in line with 2016, but more attention will be given exploration activities. We are targeting to drill a number of explorations wells.
We are also actively pursuing new acreage and acquisition opportunities and remain cautiously optimistic about our prospects. A number of new projects have been and continue to be evaluated.
We continue to be a cash dividend company, and propose a dividend of SEK 1.00 per share. Depending on how events will unfold during the year, we will continually evaluate the possibility of distributing more cash to shareholders in accordance with our long term financial goals, as we have done over the past years.
So stay with us, we have every reason to be optimistic about the future. Our main assets show strong promise to deliver outstanding growth and with the money we have, we pursue growth even further and faster while at the same time continue to distribute significant amounts of cash to our shareholders!
Stockholm in February 2017
Link to webcast: http://edge.media-server.com/m/p/ia3aob5o
For further information, please contact:
Magnus Nordin, managing director, phone: +46 8 505 947 00
Jesper Alm, CFO, phone: +46 8 505 947 00
This information is information that Tethys Oil AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 07.30 CET on 14 February 2017.