Interim report Second quarter 1 January – 30 June 2022

Second quarter 2022 (first quarter 2022)

• The appraisal programme of the Al Jumd discovery on Block 56 was expanded by the drilling of two additional horizontal wells following promising results from the Al Jumd-2 well. In parallel, testing operations of the exploration/appraisal wells Sarha-3 and Sahab-1 are ongoing.
• A long-term production test of the three appraisal wells on the Al Jumd discovery will begin in the third quarter with all three wells to be hooked up to the production system during October.
• Interpretation of 3D seismic over the central area of Block 56 is ongoing, mapping leads with potential unrisked prospective resources of close to 50 mmbo, gross.
• Tethys Oil has been granted an 18-month extension of the initial exploration phase on Block 49, which will now last until December 2023.
• Production was 10,068 barrels of oil per day, 4 percent lower than in the first quarter.
• Production during the last six months and full year 2022 is expected to be in line with the production level during the first six months of 2022 of 10,271 barrels per day (previous guidance 10,500-11,000 barrels per day for the full year 2022). Third quarter production is expected to be below 10,000 barrels per day due to maintenance and upgrades on the Saiwan processing facility.
• High oil prices continue to bolster earnings in the quarter. Revenue and other income increased to MUSD 37.8 (34.6), EBITDA to MUSD 24.1 (20.2) and Free cash flow to MUSD 7.1 (-13.1).
• During the quarter a total of MUSD 22.8 was distributed to shareholders, MUSD 6.6 by ordinary dividend and MUSD 16.2 by a share redemption programme.

Letter to shareholders

Dear Friends and Investors,

Despite all the turmoil in the world and the impact it has on our industry the focus of our attention has been firmly set to the excitement unfolding in our operations on Block 56. The Block has now been operated by Tethys for just over a year and during that time, we have drilled five wells and acquired 2,000 km2 of high density, state of the art 3D seismic. We expect first oil from the long-term production test on Al Jumd in September. In the ‘Central Area’ of the Block, where we shot the seismic, we are targeting close to 50 million barrels of gross unrisked prospective resources that we expect to begin drilling in 2023. By all accounts I think it is fair to say we have been off to a flying start on Block 56.

But this is still reasonably early days. The first target, the Al Jumd discovery, is on its way to become the Al Jumd oil field but it is not quite there yet. The appraisal results achieved from the first horizontal well, which had initial flows of 700 barrels per day when tested earlier this year, need to be confirmed by the long-term testing of the well, as will the production potential of the recently completed Al Jumd-3 and Al Jumd-4 wells which have also delineated the structure. All three wells should be hooked up to the Early Production Testing system before the end of October. Testing is expected to last for up to six months. Depending on results, additional wells may be drilled early next year when resource estimates will also be carried out. If all goes well, we may see the birth of the Al Jumd Oil Field during 2023.

Sustained production from Block 56 would be a welcome second production stream for Tethys in Oman.

Exploration activities on Block 56 are set to gear up continually during the coming months and quarters. Testing of the Sarha-3 and Sahab-1 wells drilled during the quarter are ongoing and the results from these wells will give important information for the understanding of the greater Al Jumd area. But the big prize in Block 56 is the Central Area where the seismic acquired during the first quarter this year is now undergoing processing before interpretation will commence in earnest during the latter part of the fourth quarter. Older 2D seismic together with well data from earlier operators suggest the presence of several potential oil fields, which is for the 3D data to confirm or reject. If confirmed the drill bit will be deployed to make the final verdict. We expect to have completed the interpretation in the early part of the second quarter 2023.

Block 56 remains a smorgasbord of opportunity and continues to remind us of where Blocks 3&4 where some ten years ago.

And speaking of which, Blocks 3&4 has since 2011 produced more than 120 million barrels of oil and provided Tethys with more than one Billion dollars’ worth of revenue! And it is still going, if not quite as strongly as we would have wished. We now believe production for the second half of 2022 will come in close to what we have seen so far this year meaning an average for the year of around 10,200 barrels per day. And with the oil price hovering above USD 100 per barrel those ten thousand barrels per day means solid cash flows for us to invest in further growth and to enable continued distribution to shareholders.

Again, a reminder: During the quarter, after decisions at the AGM in May, Tethys distributed over
22 million dollars to our owners.

So do continue to follow us. Markets fluctuate but as long as there is demand for our product, we will continue to supply it, as best we can. We believe Blocks 3& 4 will provide solid cash flows for many more years to come and we are hopeful Block 56 will confirm its vast growth potential within the coming year. And I haven’t even mentioned Block 49 where the Thameen-1 will be retested in 2023 nor Block 58 where the ongoing seismic interpretation could very well be a topic for this letter in the third quarter.

Enjoy the rest of your northern hemisphere summer!

Stockholm, August 2022
Magnus Nordin,
Managing Director

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