Second quarter and half year report 2014


  • New third party reserve report relating only to Lower Buah reservoir on
    Block 4,  Oman as at 30 June 2014
      □ 1P reserves 2.3 mmbo (1.2 mmbo 31 Dec 2013)
      □ 2P reserves 5.0 mmbo (2.2 mmbo 31 Dec 2013)
      □ 3P reserves 7.4 mmbo (3.7 mmbo 31 Dec 2013)
  • Second quarter 2014 net sales of MSEK 245 compared to MSEK 195 in the first
    quarter 2014, an increase with 26 per cent. The strong net sales
    development is based on the production increase during the quarters as well
    as change in underlift position
  • Net result after tax during second quarter 2014 amounted to MSEK 107, and
    is up 86 per cent compared to MSEK 58 during first quarter 2014. Strong
    sales development and lower operating expenditures per barrel mainly
    explain the increase in net result and net margin
  • Second quarter 2014 earnings per share before and after dilution of SEK
    3.02 compared to SEK 1.62 during first quarter 2014
  • New production record achieved from Oman each month during first six months
    2014
  • New production record in July with 8,239 barrels per day from Oman
  • Second quarter production increased 8 per cent compared with first quarter
    2014. Total production amounted to 658,123 barrels corresponding to 7,232
    barrels per day. The increase is mainly due to continued successful
    appraisal in the Lower Buah (including B4EW4) area and continued
    implementation of the water injection programme in the Farha South area
  • Early redemption of MSEK 400 bond loan completed after MUSD 100 reserve
    based credit facility obtained
  • After the reporting period, Tethys increased its indirect interest in the
    Rietavas licence onshore Lithuania


┌──────────────────────────────┬──────────┬──────────┬──────────┬───────────┬─┐
│MSEK (unless specifically     │Second    │First     │Second    │% Q2 2014  │ │
│stated)                       │quarter   │quarter   │quarter   │to Q1 2014 │ │
│                              │2014      │2014      │2013      │           │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Production, before government │658,123   │608,582   │399,839   │8%         │ │
│take (bbl)                    │          │          │          │           │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Average daily production,     │7,232     │6,762     │4,394     │7%         │ │
│before government take (bbl)  │          │          │          │           │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Net sales, after government   │350,059   │280,782   │156,816   │25%        │ │
│take (bbl)                    │          │          │          │           │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Average selling price per     │105.89    │106.56    │107.26    │-1%        │ │
│barrel, USD                   │          │          │          │           │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Net sales of oil and gas      │245       │195       │110       │26%        │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Operating result              │134       │83        │49        │61%        │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│EBITDA                        │192       │130       │83        │48%        │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Result for the period         │107       │58        │39        │86%        │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Earnings per share before and │3.02      │1.62      │1.10      │86%        │ │
│after dilution, SEK           │          │          │          │           │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Net debt                      │-3        │60        │182       │-105%      │ │
├──────────────────────────────┼──────────┼──────────┼──────────┼───────────┼─┤
│Investments                   │69        │45        │114       │53%        │ │
└──────────────────────────────┴──────────┴──────────┴──────────┴───────────┴─┘

 

┌──────────────────────────────────────┬───────────┬───────────┬──────────────┐
│MSEK (unless specifically stated)     │First half │First half │% H1 2014 to  │
│                                      │2014       │2013       │H1 2013       │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Production, before government take    │1,266,705  │768,321    │65%           │
│(bbl)                                 │           │           │              │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Average daily production, before      │6,998      │4,245      │65%           │
│government take (bbl)                 │           │           │              │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Net sales, after government take (bbl)│630,841    │366,354    │72%           │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Average selling price per barrel, USD │106.19     │107.68     │-1%           │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Net sales of oil and gas              │440        │256        │72%           │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Operating result                      │216        │173        │25%           │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│EBITDA                                │322        │235        │37%           │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Result for the period                 │165        │144        │15%           │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Earnings per share before and after   │4.64       │4.04       │15%           │
│dilution, SEK                         │           │           │              │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Net debt                              │-3         │182        │-102%         │
├──────────────────────────────────────┼───────────┼───────────┼──────────────┤
│Investments                           │114        │149        │-23%          │
└──────────────────────────────────────┴───────────┴───────────┴──────────────┘

 

Dear Friends and Investors

Once upon a time, actually not too long ago, Tethys was an event driven
fringe-company. An exploration company offering lots of optimism and hope, but
with a poor income statement and a weak balance sheet. Today, when we present
this report filled with record numbers, that time seems a distant past. Gone
are the zero sales lines and discussions on future capital needs. The revenues
of MSEK 245 this quarter was a record high. EBITDA for the quarter was a
healthy MSEK 192 and our net result for the quarter amounted to MSEK 107
(incidentally both also record numbers). In brief, we are now an oil company
with substantial assets and strong finances. Future exploratory and appraisal
work can now be funded from cash flow, or bank borrowing secured by reserves.

Now, analysts can have opinions about our upcoming reports and investors can
speculate in share buy backs or even future dividends. It is great, at least in
some respects, to be part of ‘quarterly capitalism’. But this marvelous
transition does not mean that we have lost our soul. We made it here, not
through mergers or acquisitions, but through success with the drill bit.
Through persistent and systematic efforts of appraisal and exploration along
our strategic lines.

The main driver behind our record high production of 7,232 barrels of oil per
day in the second quarter (superseded in July by a new record production number
of 8,239 barrels of oil per day) was the continued successful appraisal of the
Lower Buah reservoir on Block 4. We have drilled four new appraisal/exploration
wells in the Lower Buah reservoir and one in the Khufai reservoir on Block 4.
All have been successful and put in production.

As a consequence, we commissioned an interim reserve report from our reserve
auditors, DeGolyer and MacNaughton, to estimate Lower Buah reserves as at 30
June 2014. But before we look at the numbers, let us just bear in mind that our
appraisal strategy remains focused on production and cash flow, and only
thereafter on reserve estimates. However, also with this conservative strategy,
our reserve increase in Lower Buah for the first six months of 2014 has been
quite satisfactory. When we compare the Lower Buah numbers to the reserve
report as per 31 December 2013, our June 2P is larger than our December 3P
number and the Lower Buah continues to show promise as one of our most
important reservoirs. The 3P number for June stands at no less than 7.4 million
barrels. But let us not forget that we have also made additional discoveries in
the Khufai and that most of our production still comes from the Barik reservoir
in the Farha South field. Exploration and appraisal work will continue
throughout 2014 and we look forward to a new year-end reserve audit.

Onshore Oman is not our only project area. Lithuania should offer exploration
wells later this year, our assets in France are quiet but not dead and new
areas and other projects may loom in the future. As our growth continues, we
are staffing up with new senior colleagues. In Muscat, on 1 September Mr
Hussain Al Lawati, a former Director General of Exploration of the Ministry of
Oil and Gas, will join Tethys, most recently from a senior position with Oman
Oil Company Exploration and Production.  And in Stockholm, former investment
banker Mr. Jesper Alm, has recently joined us.

So stay with us - the journey continues, albeit at a higher level!

 

Stockholm in August 2014

 

Magnus Nordin                                                              

Managing Director

 

 

For further information, please contact:

Magnus Nordin. Managing Director. phone: +46 8 505 947 02. e-mail:
magnus@tethysoil.com

or

Morgan Sadarangani. CFO. phone +46 8 505 947 01. e-mail: morgan@tethysoil.com

 

 

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 have
exploration and production assets onshore Lithuania and France.

The shares are listed on NASDAQ OMX Stockholm (TETY).

 

About Tethys Oil

Tethys Oil is a Swedish oil company with focus on onshore areas with known oil discoveries. Tethys Oil's core area is Oman, where the company holds 2P Reserves of 25 mmbo and 2C Contingent Resources of 13 mmbo and had an average oil production of 11,767 barrels per day from Blocks 3&4 during 2018. Tethys Oil also has onshore exploration licences in Lithuania and France and some production in Lithuania. The shares are listed on Nasdaq Stockholm (TETY).