Fourth quarter and year-end report – 31 December 2018
Fourth quarter 2018 (third quarter 2018)
- Production from Blocks 3&4, Oman, amounted to 11,898 bopd (11,857 bopd)
- Revenue and other income of MUSD 44.4 (MUSD 42.3)
- EBITDA of MUSD 30.8 (MUSD 30.1)
- Net result of MUSD 19.9 (MUSD 18.2)
- Earnings per share amounted to USD 0.58 (USD 0.53)
- Blocks 3&4: Appraisal programme of 2017 discoveries continued with three wells drilled
- Block 49: 253 km2 of 3D and 299 km of 2D seismic acquired
Reserves and Contingent Resources
- 2P internal reserve replacement ratio of 177 percent
- Year-end 2018 2P Reserves of 25,357 mbo and 2C Contingent Resources of 12,533 mbo
- The board of directors proposes an ordinary dividend of SEK 2.00 per share (2018: SEK 2.00), to be paid in two instalments of SEK 1.00 per share each in May and November 2019
- The board of directors proposes an extraordinary distribution of SEK 6.00 by way of a mandatory share redemption programme following the 2019 AGM (2018: SEK 4.00)
|MUSD (unless specifically stated)||Fourth quarter 2018||Third quarter 2018||Fourth quarter 2017||Full
|Net daily production from Oman, Blocks 3&4 before government take (bbl)||11,898||11,857||11,726||11,767||12,261|
|Net barrels produced, after government take (bbl)||569,177||567,258||556,729||2,233,323||2,308,342|
|Net barrels sold, after government take (bbl)||542,596||579,360||617,577||2,163,148||2,316,404|
|Average selling price per barrel, USD||77.9||74.3||53.9||70.5||51.8|
|Revenue and other income||44.4||42.3||30.1||157.3||119.3|
|Result for the period||19.9||18.2||11.0||62.2||33.1|
|Earnings per share (after dilution), USD||0.58||0.53||0.32||1.82||0.97|
|Investments in oil and gas properties||16.2||12.6||8.2||55.8||40.4|
Letter to shareholders
Dear Friends and Investors,
We are delighted to report record financial numbers for both the fourth quarter and the full year 2018. Our revenues and other income increased 32 percent to MUSD 157.3 and our EBITDA increased 36 percent and amounted to MUSD 106.6. We are equally delighted to report a 2P reserve replacement ratio of 177 percent for 2018 – the highest for three years and the 7thconsecutive year of increasing our 2P reserves. So our main asset, Blocks 3&4 onshore Oman certainly continues to confirm its growth potential!
Production has been very stable both for the quarter and for the year, although delays in the development of the discoveries from 2017 has pushed our expected production increase into the first quarter of 2019.
The fourth quarter saw intense activity on Block 49 where several hundred kilometres of seismic was collected on time. Processing is ongoing and over the next couple of months, processed data will be ready for interpretation and mapping.
In December 2018, we attempted to increase our presence in Oman further by entering into an agreement to acquire two percent of the Mukhaizna field. Unfortunately, Tethys Oil was informed by the seller that partner pre-emption rights had been exercised, preventing us from completing the transaction. This slight setback does not, however, diminish our ambition to grow in Oman and elsewhere.
Year end 2018 reserves and the appraisal/development programme
The discoveries we made in 2017 continue to have a great impact on our reserves, contingent resources and our reserve replacement. In 2018, we produced 4.3 million barrels and we added 7.6 million barrels of 2P reserves. The additions and revisions include maturation of Contingent Resources to reserves and upside revisions of the Farha South, Shahd and Erfan fields.
The appraisal of the Ulfa and Samah discoveries has been one of the central components of the work programme during 2018. Appraisal and development of the Ulfa, Samah and Erfan fields will continue in 2019, now with the Ulfa production facilities fully up and running. With the continued appraisal programme, and a remaining resource base of 2C Contingent Resources of 12.5 million barrels, we are in a good position to continue to replace and increase our reserves in 2019.
A significant amount of new seismic data was acquired in 2018 – 2,750 km23D seismic on Blocks 3&4 and 253 km2of 3D and 299 km of 2D on Block 49. But with so much focus on the appraisal of our 2017 discoveries we did not see much exploration drilling for most of 2018, apart from the Tibyan discovery in the first quarter 2018. The exploration programme did not get under way until late in the year and currently two wells that spudded in the fourth quarter are in progress. In 2019 we will see the results from these wells as well as additional seismic and the drilling of at least three new exploration wells. All new seismic data will guide our exploration drilling on our blocks in the years to come. So 2019 looks like it could be quite an active year from the exploration perspective.
Oil price environment
We started the year with an average selling price of USD 63.7 per barrel for the first quarter, which increased quarter by quarter during the year. We achieved an average selling price per barrel of USD 77.9 for the fourth quarter of 2018, which is the highest oil price we have achieved since 2014. Towards the end of the year, international prices fell about 40 percent down to about USD 50 per barrel. As Tethys Oil’s oil sales price is calculated with an effective two-month lag to spot prices, we will see the lower prices in our sales during the first quarter 2019. In January 2019 the prices have rebounded somewhat. However, what we have shown in previous years is that Tethys Oil is profitable even at lower oil prices.
Fourth quarter in focus
We produced 1.1 million barrels of oil in the fourth quarter of 2018, corresponding to 11,898 barrels of oil per day, which was slightly higher than the annual average. Our average selling price in the fourth quarter amounted to USD 77.9 per barrel, an increase of five percent compared to the third quarter 2018. Following the higher oil price combined with a stable production, our quarterly results are again on par with our best quarters in 2014. For the quarter, we report revenues and other income of MUSD 44.4, up five percent compared with the third quarter. Our EBITDA amounted to MUSD 30.8, up two percent compared with the third quarter. During the fourth quarter 2018, cash flow from operations amounted to MUSD 29.3 and investments in oil and gas amounted to MUSD 16.2. Our net cash position increased from MUSD 63.7 to MUSD 73.1. The result for the period amounted to MUSD 19.9, up nine percent compared with MUSD 18.2 in the third quarter.
The annual average net production from the company’s existing operations on Blocks 3&4 in Oman during 2019 is expected to amount to between 12,000-13,000 barrels of oil per day.
Reflecting the strong operational and financial position of Tethys Oil, the board of directors is proposing an ordinary dividend of SEK 2.00 per share. Further, in line with Tethys Oil’s long-term capital structure target, the board of directors is proposing an extraordinary distribution of SEK 6.00 per share.
Under current market conditions and production assumptions, Tethys Oil expects its 2019 investments for the company’s existing operations on Blocks 3&4 and Block 49 in Oman to amount to MUSD 50-55. Focus of the work programme in Blocks 3&4 is continued development and appraisal drilling, upgrading of production facilities and other infrastructure, new seismic acquisition and drilling of exploration wells. Focus on Block 49 is to continue the exploration programme. The new seismic data acquired in 2018 will be processed and interpreted in order to further define possible oil traps and to enhance the understanding of the deeper parts of the block in general. Preparations for exploration drilling will be carried out.
So, to sum up our plans for 2019: we still have over 12 million barrels of Contingent Resources to mature to Reserves; we expect the results of three to five exploration wells on Blocks 3&4; and on Block 49 prospect maturation will get seriously under way. Not to mention anything else that may come our way. So stay with us – it will be an exciting year!
Stockholm in February 2019
For further information, please contact:
Magnus Nordin, managing director, phone: +46 8 505 947 00
Jesper Alm, CFO, phone: +46 8 505 947 00
Date: 12 February 2019
Time: 10.00 CET
To participate in the conference call, you may choose one of the following options:
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This information is information that Tethys Oil AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 7:30 CET on 12 February 2019.