Fourth quarter and year end report 2014

* As per 31 December 2014 audited reserves Block 3&4 Oman net to
* 1P reserves 11,794 thousand barrels (10,800)
* 2P reserves 17,779 thousand barrels (15,201)
* 3P reserves 25,080 thousand barrels (19,968)
* The increase in 2P reserves represents an internal reserve replacement
ratio of 193 per cent
* Fourth quarter 2014 net sales of MSEK 310 compared to MSEK 296 in the
third quarter 2014, an increase with 5 per cent quarter on quarter.
The net sales development is primarily based on moving from an
underlift position to an overlift position
* Net cash position of MSEK 347 as per 31 December 2014 compared to MSEK
161 as per 30 September 2014. The currency exchange effect on cash and
cash equivalents amounted during the fourth quarter 2014 to MSEK 40,
which has positively affected net result
* Fourth quarter production was in line with third quarter 2014. Total
production amounted to 768,226 barrels corresponding to 8,350 barrels
per day
* Net result after tax during fourth quarter 2014 amounted to MSEK 18
and was negatively affected by a MSEK 127 write down related to
Lithuanian producing asset Gargzdai. The result is down 89 per cent
compared to MSEK 167 during third quarter 2014
* Fourth quarter 2014 earnings per share before and after dilution of
SEK 0.51 compared to SEK 4.71 during third quarter 2014
| MSEK (unless specifically stated) | Fourth quarter 2014 | Third quarter 2014
| % Q4 2014 to Q3 2014 | Fourth quarter 2013 |
| Production, before government take (bbl) | 768,226 | 772,722 | -1% | 499,028 |
| Average daily production, before government take (bbl) | 8,350 | 8,399 | -1%
| 5,424 |
| Net sales, after government take (bbl) | 434,035 | 399,352 | 9% | 271,175 |
| Average selling price per barrel, USD | 97.09 | 107.57 | -10% | 108.47 |
| Net sales of oil and gas | 310 | 296 | 5% | 193 |
| Operating result | 14 | 173 | -92% | 52 |
| EBITDA | 200 | 232 | -14% | 148 |
| Result for the period | 18 | 167 | -89% | 45 |
| Earnings per share before and after dilution, SEK | 0.51 | 4.71 | -89% | 1.26
| Net debt/(net cash) | (347) | (161) | 116% | 127 |
| Investments | 101 | 45 | 124% | 80 |
| MSEK (unless specifically stated) | Full year 2014 | Full year 2013 | % FY
2014 to FY 2013 |
| Production, before government take (bbl) | 2,804,240 | 1,709,706 | 64% |
| Average daily production, before government take (bbl) | 7,692 | 4,684 | 64% |
| Net sales, after government take (bbl) | 1,464,228 | 850,926 | 72% |
| Average selling price per barrel, USD | 103.87 | 106.63 | -3% |
| Net sales of oil and gas | 1,046 | 592 | 77% |
| Operating result | 404 | 285 | 42% |
| EBITDA | 753 | 479 | 57% |
| Result for the period | 350 | 240 | 46% |
| Earnings per share before and after dilution, SEK | 9.86 | 6.76 | 46% |
| Net debt/(net cash) | (347) | 127 | -373% |
| Investments | 259 | 290 | -11% |
Dear Friends and Investors
Let us stand back for a second and ask our self a question:
What can we realistically expect of a year if we are an oil company?
Rising production is nice and increase in reserves even nicer. Record
cash flow for each consecutive quarter, and of course for the full year,
is pretty basic. A strong balance sheet, an untapped up to MUSD 100
credit facility and more than a third of a billion SEK in net cash
position is very nice to have. All that did Tethys deliver and, to top
it off, we also added record production for almost all 12 months of the
The story would have been perfect, if it wasn’t for the dramatic last
quarter of the year – the collapse of the oil price. We have experienced
the largest nominal drop in oil prices ever and the largest percentage
drop in more than 30 years (with the exception for the financial anomaly
in 2008 and 2009). Unless there is a sharp rebound quickly, this new
level is going to have a profound impact on our industry. Expensive
future projects are going to be shelved, high cost production (read
primarily unconventional) will be shut in and weaker players will seek
to merge with stronger players (or if you wish, strong players will prey
on weaker players).
Fortunately, Tethys is today one of the strongest players in our peer
group. We are proud to report yet another quarter with record high
sales. In the fourth quarter, our sales amounted to MSEK 310. Our EBITDA
for the quarter amounted to MSEK 200, representing a slight decrease
compared to the third quarter 2014. Following a write down of MSEK 127
related to our producing Lithuanian assets, our net result for the
quarter fell to MSEK 18. The non-cash write down is a consequence of the
significantly lower oil prices, but if the oil prices are to recover,
the asset could start generating value for us again.
We end the year with yet another strong reserve report. In 2014, we had
an internal reserve replacement ratio of 193 per cent and our 2P
reserves now stand at 17.8 million barrels of oil. Our oil production
remained stable in the fourth quarter, and we end the year with a new
record high monthly production in December of 8,438 barrels of oil per
day. Let me also emphasize that our project remains robust even at an
oil price of USD 50 per barrel. We would, with the present production
volumes and everything else equal, generate an annual operating cash
flow of MUSD 40-50 even at an oil price of USD 50 per barrel.
Let us turn to the future and look at Tethys in 2015. Following the oil
price development, our investment plans for the year are currently being
revised. But we know our direction, and expect a large part of the
upcoming year’s operating cash flow to be reinvested in Blocks 3 and 4
onshore Oman. This gives us every reason to expect that our reserves and
our production will continue to increase also during 2015.
The Lower Buah area on Block 4, that delivered most of the growth in
2014, will continue to be in focus in 2015. The strong growth in
reserves and production during the first six months resulted in an
upgrade and revision of the geological model for the Lower Buah area,
and focus during the second half of the year was on interpretation of
data. Important insights were reached, which are to be implemented
during 2015. Among these insights, water injection is expected to have a
very strong impact on the production from Lower Buah, and an injection
programme has been launched early in 2015.
New leads in the Lower Buah area continue to be identified as seismic
interpretation goes on and the geological understanding of the area
increases. We expect to employ at least one rig full time during all of
2015 in this area of Block 4. Seismic studies in other parts of the
Blocks will continue and we also expect drilling activity in and around
the producing Farha area and in some of the areas where seismic studies
have recently been completed.
As noted above, our balance sheet is extremely strong, which presents us
with a number of pleasant choices. The fall in oil prices has opened up,
and continues to open up, a number of interesting opportunities and we
are actively sourcing and evaluating potential new projects.
We are also monitoring our capital needs for investments in our current
portfolio. We may very well have seen the end of falling oil prices, but
for the time being we believe that a general cash reserve should be kept
to offer protection if oil prices were to fall further. And last, but
not least, we are aware that we are currently over-capitalized, which
calls for close monitoring of ways to distribute cash to our
shareholders. We launched a share buy-back programme in 2014, but other
means of distribution to our shareholders are also being evaluated. How
these choices play out is to a large part dependent on how the oil price
evolves, since that is one of the most important parameters when
evaluating our investment needs and opportunities.
So stay with us – the drama is back in the oil business, and we intend
to rise to the challenge!
Stockholm in February 2015
Managing director
For further information, please contact:
Magnus Nordin. Managing director. phone: +46 8 505 947 02. e-mail:
Morgan Sadarangani. CFO. phone +46 8 505 947 01. e-mail:
This report has not been subject to review by the auditors of the
Tethys Oil is a Swedish energy company focused on exploration and
production of oil and natural gas. Tethys Oil’s core area is Oman, where
the company is one of the largest onshore oil and gas concession
holders. Tethys Oil also has exploration and production assets onshore
Lithuania and France.
The shares are listed on Nasdaq Stockholm (TETY).