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|MUSD (unless specifically stated)||Third quarter 2017||Second quarter 2017||Third quarter 2016|
|Net daily production before government take (bbl)||12,354||12,477||12,297|
|Net barrels sold, after government take (bbl)||568,796||565,331||501,167|
|Average selling price per barrel, USD||48.6||53.7||45.8|
|Result for the period||4.8||10.6||6.4|
|Investments in oil and gas properties||4.1||15.1||9.3|
|Earnings per share (after dilution), USD||0.14||0.31||0.19|
|MUSD (unless specifically stated)||Nine months 2017|| Nine months |
| Full |
|Net daily production before government take (bbl)||12,441||12,224||12,235|
|Net barrels sold, after government take (bbl)||1,698,827||1,773,929||2,357,701|
|Average selling price per barrel, USD||51.0||38.6||40.5|
|Result for the period||22.1||1.1||2.7|
|Investments in oil and gas properties||32.2||33.5||48.5|
|Earnings per share (after dilution), USD||0.64||0.03||0.08|
Letter to shareholders
Dear Friends and Investors,
Tethys Oil continues to deliver solid results from its Omani operations in the third quarter 2017. And this despite that the period was impacted by the low oil prices over the summer. So clearly, the Omani onshore Blocks 3&4 continues to show that it remains a very robust and resilient asset. Operationally we continue to focus on optimizing the current production output while at the same time investing in exploration for future growth. The success we have enjoyed so far with our 2017 exploration drilling programme suggests that we have every reason to remain optimistic on the growth prospects within the Blocks. After two successful exploration wells in the first half of the year, a third well is currently being drilled on a structure located 5 kilometres south of last quarter's Ulfa discovery. Two additional exploration wells are planned to be spudded in the fourth quarter 2017. In addition, the final preparations are being made to launch a new 3D seismic campaign, targeting an area east of the Ulfa discovery.
During the quarter the expansion of the Farha South field continued adding two new, previously undrilled, fault blocks that were drilled and found to be oil bearing. So far in 2017 we have added five, previously undrilled, fault blocks to the operations at the Farha field. A total of nine wells were drilled on Blocks 3&4 in the third quarter, including appraisal and production wells and wells for water injection.
We produced 1,136,559 barrels of oil in the quarter, which was in line with the second quarter 2017. The quarter included the highest monthly production ever on Blocks 3&4, 12,719 bopd in July, but also a weaker September with 11,894 bopd, when production was below production recommendation. Remedial work is being carried out on Blocks 3&4 including changing flowlines and improving water handling, which have impacted the production negatively in the short term but aiming at improving overall performance in the long term.
Following the extended OPEC agreement with certain production quotas, we expect that Tethys Oil's average daily production until the end of the first quarter 2018 will be in line with the average daily production achieved so far in 2017, albeit with continued and possibly increasing month to month fluctuations.
Oil price environment
After a substantial drop in June, the oil prices bottomed out at about USD 44 per barrel at the end of the second quarter 2017. During the third quarter, the oil price has gradually strengthened to about USD 60 by the end of the quarter. Given our two months lag in achieved selling price, we will be able to benefit from these new levels in the fourth quarter. In the third quarter though, our average selling price decreased almost 10 percent from USD 53.7 in the second quarter to USD 48.6 per barrel.
Third quarter in focus
Although the lower oil price affected our revenues and EBITDA negatively compared to the second quarter, our financial performance continued to be solid. For the quarter, we report revenues of MUSD 28.5, down 9 percent compared with the second quarter. Our EBITDA amounted to MUSD 18.2, down 13 percent compared with the second quarter. Following a cash flow from operations after investments in oil and gas of MUSD 15.8, our net cash position increased from MUSD 32.3 to MUSD 47.5. Tethys Oil paid the operator cash call for July 2017 during the second quarter 2017, hence one cash call less was paid during the third quarter which affected the cash flow positively. Our operating expenses per barrel amounted to USD 8.1, in line with the range from the last five quarters of USD 7.3 to 8.2 per barrel. The result for the period amounted to MUSD 4.8, down from USD 10.6 in the second quarter 2017. The net result was negatively affected by non-cash items following the depreciation of the USD against SEK during the quarter.
Tethys Oil continue to produce oil at high levels. But we are also planning for our future production, in 2018 and beyond. Reserve growth will become increasingly important in order to both maintain current production levels and to build production capacity. Our work programme in 2017 has been very successful, with five new, previously undrilled, fault blocks on Farha South found oil bearing and two (out of two so far) exploration wells resulting in new discoveries, Erfan and Ulfa. Both wells continue to deliver good rates. An appraisal program is on-going in Erfan and the appraisal of Ulfa will start in 2018. And hopefully the year will continue with further discoveries. The exploration well Samah-1 is currently being drilled south of the Ulfa discovery. And we are planning to spud two additional exploration wells in the fourth quarter, one near and one far field well. And to guide our future exploration programmes, we also launch a new 3D seismic acquisition in an area east of Ulfa discovery. As we have stated in the past, we have a large inventory of undrilled leads and prospects and we hope the 3D seismic acquisition will result in even more.
Regarding capital structure, we are targeting a balanced approach between growth and shareholder distributions. Since we generate more money than we spend, we have initiated a share repurchase programme in the third quarter.
So, stay with us. We have many exciting years of growth in Blocks 3&4 and who knows, maybe somewhere else also!
Stockholm in November 2017
For further information, please contact:
Magnus Nordin, managing director, phone: +46 8 505 947 00
Jesper Alm, CFO, phone: +46 8 505 947 00
Link to webcast: https://edge.media-server.com/m6/p/k2za9mnw
To participate via phone, please call:
Sweden: +46 8 505 564 74
Switzerland: +41 225 675 541
UK: +44 203 364 5374
North America: +1 855 753 2230
Tethys Oil AB - Hovslagargatan 5B, SE-111 48 Stockholm, Sweden - Tel. +46 8 505 947 00 -
Fax +46 8 505 947 99 - E-mail: firstname.lastname@example.org - Website: www.tethysoil.com