Fourth quarter and year-end report 1 January – 31 December 2022

Fourth quarter 2022 (third quarter 2022)

• Production in the fourth quarter amounted to 9,441 barrels of oil per day, a decrease of 4 percent when compared to the third quarter. As a result, production for the full year 2022 was 9,940 barrels of oil per day.
• Revenue and other income increased to MUSD 43.2 (40.9) and EBITDA to MUSD 27.8 (27.0) with higher net entitlement offsetting a lower Achieved price in the quarter.
• During the fourth quarter 2022 prospect maturation of the Fahd area on Block 58 was completed and three prospects have been identified holding an estimated combined unrisked prospective resource potential of 184 mmbo. One of the identified prospects will be selected for exploration drilling during 2023.
• The extended well test of the Al Jumd field on Block 56 has yet to gain the necessary approvals to commence. Following significant progress during the start of 2023 the test and export of production is now expected to start at the end of February or in early March.

Reserves and Resources

• 2P internal reserve replacement ratio of 37 percent (2021: 82 percent).
• Year-end 2022 2P Reserves of 23,901 mbo and 2C Contingent Resources of 14,623 mbo.

Dividend and Distribution

• The board of directors proposes an ordinary dividend of SEK 2.00 per share
  (2021: SEK 2.00) payable in November and an extraordinary distribution of SEK 3.00 by way of a mandatory share redemption programme following the 2023 AGM (2022: SEK 5.00).

2023 Outlook and Guidance

• Full year average production is expected to be between 9,000-10,000 barrels of oil per day.
• Operating expenditure is expected to be USD 14.5 (+/- 1.0) per barrel of oil.
• Investments in oil and gas properties are expected to be in the range of MUSD 85-95.

Letter to shareholders

Dear Friends and Investors,

As usual, I am inclined to say, another strong quarter with good revenue and profit. However, looking more closely it is apparent that Tethys Oil is in a transition phase. Our operated interests in Blocks 58, 56 and 49 are moving to the forefront and our non-operated 30 percent interest in Blocks 3&4 is, at least temporarily, receding a bit.

On Block 58 we have reached the important milestone of establishing drillable prospects with estimates of prospective resources that could be unlocked by the exploration drilling scheduled for the second half of 2023. And the numbers are impressive. If drilling is successful, the time, effort and money spent on Block 58 could be a transformative event for Tethys and a new source for future oil reserves.

On Block 56 the 2,000 km2 of state-of-the-art 3D seismic acquired in early 2022 over the Central Area of the Block, at a cost of some MUSD 15, is now readied for interpretation. Over the next months, work on this Block should reach the same milestone of maturity, definition of drillable prospects with estimates of prospective resources, as we have reached on Block 58. While in parallel we continue to wait for the long-term test results from the Al Jumd discovery in Block 56. The rather delayed process of finalising the approval of the metering system reached a crucial milestone this week when basic acceptance of the flow computer was obtained.

Coming steps include the moving of the metering skid from the construction yard in Abu Dhabi to the oil delivery point near Nimr in Oman. With all other preparations completed, the final installation of the metering system and its commissioning is now eagerly awaited and expected around March first.

On Block 49 the Thameen-1 well will undergo re-testing in the first half of the year. Rock studies completed during 2022 suggests that the reservoir rock is very tight. To attempt to establish flows during the re-test, the reservoir sandstones will be fractured to create increased permeability to allow the reservoir fluids to flow to surface.

2022 saw heavy investment and a lot of time and effort put into our three operated Blocks. 2023 will see less investments and a little less effort but more excitement as we move into the phase of drilling exploration wells to unlock future reserves.

Blocks 3&4 is a slightly different matter. The operating cash flow continues to be strong, but production has been disappointing throughout the year. In the fourth quarter we saw a mild stabilization but also increased costs. The reserve replacement ratio was below 100 percent and the picture emerging is of mature fields that have reached their peak. And in part, this is true. Some of the wells on Block 3&4 have been in production for over ten years. And cumulative production from the Blocks stands at more than 130 million barrels. A sizeable amount of oil.

So, is slow decline all we can expect from Blocks 3&4? There are several reasons why this scenario, which by the way would continue to generate good if not great cash, may not be true.

First, a large part of the exploration potential remains untapped. With drilling rigs scarce during the pandemic and through most of 2022 the operator has focused on seismic acquisition rather than drilling exploration wells. In 2022 only two wells were drilled. This will be rectified in 2023 with at least four exploration wells planned.

Second, production limitations and subsequent underinvestment during 2020-2022, exacerbated by delays in getting needed equipment, has continued to have an impact for longer than we had anticipated. The investment program for 2023 reflects several efforts to catch up with these investments. We guide for a stable to slightly lower production during 2023 compared with 2022 while remaining optimistic that increased exploration drilling and remedial surface efforts could change this outlook during the course of the year.

So stay with us. The proposed dividend will, if approved by the AGM, keep all shareholders with a cash cushion while awaiting the exploration drilling results and keeping fingers crossed for increasing production from Blocks 3&4.

Stockholm, February 2023
Magnus Nordin,
Managing Director

CONFERENCE CALL
Date: 7 February 2023
Time: 10.00 CET

To participate in the conference call, you may choose one of the following options:

Link to webcast: https://edge.media-server.com/mmc/p/reqwewat

To participate via phone, please register here to receive dial-in information.

FOR FURTHER INFORMATION, PLEASE CONTACT:
Magnus Nordin, Managing Director, phone: +46 8 505 947 00
Petter Hjertstedt, CFO, phone: +46 8 505 947 10

For investor relations inquiries: ir@tethysoil.com