Dear Friends and Investors,

The drilling of the Thameen-1 exploration well stands out as quite a transformational event for Tethys Oil and certainly as the most significant event during the first quarter 2021. The well was drilled to a depth of more than 4,000 metres and logging, sidewall coring and well testing was carried out. No flows were recorded at surface, but down hole fluid samples were collected and the logs indicated a gross hydrocarbon column of close to 40 metres in the main target – the Hasirah sandstone. All this data is now being analysed.

So the jury is still out on the Thameen-1 well, but irrespective of what the data analysis will tell us over the coming weeks and months, the well is a solid operational success. Thameen -1 has firmly re-established Tethys Oil as an upstream operator and the results to date have significantly upgraded the prospectivity of Block 49. Through the farmout to EOG Resources, completed during the quarter, Tethys Oil’s cost for the well was negligible and EOG adds a wealth of expertise and experience to the joint venture which will come in handy in unlocking the hydrocarbon potential of Block 49 that Thameen-1 suggests is there.

And the operating responsibilities do not end with the drilling of the Thameen-1 well. During the quarter Tethys Oil also assumed operatorship of the very promising Block 56, after closing the farmin transaction with Medco for an additional 45 percent interest in the license, bringing Tethys Oil’s interest to 65 percent. Block 56 holds the Al Jumd discovery, an area which will be the object of an appraisal program of up to three wells later in the year, and a string of leads in the central part of the Block. A seismic campaign to further evaluate these is currently being designed.

While on the subject of designing seismic surveys it is well worth mentioning that we are in the same process on our third operated Block, Block 58. That Block holds several very interesting leads that we are eager to upgrade to prospects with the help of additional seismic.

So Tethys is indeed at a transformational stage as the day-to-day focus of our efforts more and more is directed towards delivering growth from our operated Blocks. We have showed that we are a fully-fledged operator, and now for three Blocks.

But of course, our non-operated licence, Blocks 3&4, will continue to be of great importance to us. We will continue to be an active partner in the licence that is the source of our current production and cash flow. It receives the bulk of our capital expenditure and provides the cash flow that funds our exploration activities in our operated Blocks as well as the cash that underpins our distribution to shareholders. And Blocks 3&4 continues to have material exploration potential, which is currently being put to the test by the drilling of Safi-1 and additional exploration wells to be drilled later this year.

We have had a very active 2021 so far but we remain aware that the pandemic is not over and while vaccines are being rolled out, we must remain careful and vigilant for some time to come. An element of optimism seems however to prevail in the financial markets. The oil market has returned to more balanced conditions, and prices have come back. Our production levels have also increased and amounted in the first quarter to 11,585 barrels of oil per day – five percent higher than the previous quarter. Together with higher prices our revenues and other income increased with 14 percent to MUSD 25.4. Likewise, our EBITDA increased 21 percent and amounted to MUSD 12.3. During the quarter, free cash flow was MUSD 2.3 and we ended the quarter with a healthy net cash of MUSD 57.

And do not forget that the pricing of our sales lag the market with two months so we have not yet seen the impact of the current USD 60+ per barrel in our reported revenues, but will see the impact in the coming quarters.

In April we announced a changed dividend policy. For those of you who have followed us in recent years it should come as no surprise that we aim to balance growth investments with a long-term sustainable and growing distribution to shareholders funded by cash flow from producing assets. For 2021, the board has recommended to the AGM in May 2021 to distribute SEK 4 per share to our shareholders through dividend and redemption shares.

In 2021 we have seen an increasing focus on ESG: Environment, Social and Government. Tethys Oil of course welcomes this increased focus. Environmental awareness and social responsibility have always been an integral part of our way of doing business. To update you further on Tethys Oil and ESG I invite you to read our newly published Sustainability Report for 2020, available on our website. Our ESG think emanates from our Scandinavian roots, and we intend to remain a sustainable oil company in the modern world!

So stay with us! 2020 was a year of perseverance and resilience. We look at 2021 to be a year of transformation.

Stockholm, May 2021

Magnus Nordin,
Managing Director