First quarter 2018 (fourth quarter 2017)
· Production amounted to 11,664 bopd (11,726 bopd)
· Revenue and other income of MUSD 34.2 (MUSD 30.1)
· EBITDA of MUSD 21.5 (MUSD 19.7)
· Net result of MUSD 9.0 (MUSD 11.0)
· Earnings per share amounted to USD 0.26 (USD 0.32)
· Exploration well Tibyan-1, located about 9 km southwest of the Erfan-1 discovery, resulted in a smaller oil discovery
· Exploration well Luja-1, drilled in the southern part of Block 4, is undergoing extensive evaluation until the latter part of the second quarter 2018
· One new producing fault block on Farha South
|MUSD (unless specifically stated)||First quarter 2018||Fourth quarter 2017||First quarter 2017|| Full
|Net daily production before government take (bbl)||11,664||11,726||12,495||12,261|
|Net barrels produced, after government take (bbl)||541,686||556,729||579,642||2,308,342|
|Net barrels sold, after government take (bbl)||511,998||617,577||564,700||2,316,404|
|Average selling price per barrel, USD||63.7||53.9||50.7||51.8|
|Revenue and other income||34.2||30.1||29.3||119.3|
|Result for the period||9.0||11.0||6.7||33.1|
|Earnings per share (after dilution), USD||0.26||0.32||0.19||0.96|
|Investments in oil and gas properties||13.8||8.2||13.0||40.4|
Dear Friends and Investors,
It is with some satisfaction that we note that the oil price is back in the news as Dated Brent has reached over USD 70 per barrel; levels not seen since 2014. This is of course good for Tethys Oil but it is by no means the only positive development we have going for us. Our revenue and other income and EBITDA increased at the same time as our average daily production was in line with previous quarter and within the production guidance for the year. The appraisal programme on the contingent resources on Blocks 3&4 continue, with a view to converting them to 2P reserves by the end of 2018. Exploration drilling has continued, with one new discovery during the quarter and our footprint in Oman increases as work gears up on our new Block 49 in the South Western part of Oman.
Ongoing appraisal of discoveries made in 2017
But first thing first. An obvious highlight in the operations for the first quarter is the ongoing appraisal programme of last year’s discoveries. The Ulfa, Erfan and Samah discoveries have so far given us 3.4 million barrels of 2P-reserves and, actually more importantly, over 17 million barrels of 2C contingent resources. These resources are contingent on the successful completion of the on-going appraisal programme and a work programme and budget to develop these resources. So a very important part of the work programme for 2018 is to properly appraise these discoveries. It is our aim during 2018 to move as much of the contingent resources into the 2P reserves category by the end of the year thus increasing the reserve numbers and production.
The appraisal drilling started in the first quarter. One drilling rig is dedicated to the appraisal programme and five appraisal wells are planned for the first nine months. Construction of an Early Production Facility and the construction of pipelines are ongoing. The appraisal programme is proceeding according to plan with the first appraisal well having encountered the oil where expected. We will naturally follow the programme carefully and report on further progress in future reports.
I would like to turn to another highlight for the quarter – continued exploration success! The exploration well Tibyan-1 was drilled near the Shahd field and resulted in a discovery. Tibyan is a small discovery and as such will very quickly be appraised and brought in production. We expect reserve contribution to be rather modest but more importantly we show that the exploration of the Buah and Khufai reservoirs holds upside. In addition, we have also increased the number of producing fault blocks on the Farha South field with one new, previously undrilled, fault block.
It is on this note that our ongoing extended 2,000 km2 3D seismic study should be viewed. 1,200km2 of 3D seismic has been shot to the east of the Ulfa and Samah discoveries where over ten leads have been identified based on older 2D seismic. These leads, potential geological structures, could, if confirmed and found oil bearing when drilled, turn into new producing oil fields. If at least some of these leads are confirmed by the ongoing 3D seismic study, we will greatly enhance the prospectivity of this part of Blocks 3&4 and can go on to drill for more oil in this area for years to come.
Oil production in line with previous quarter
Our oil production in the quarter amounted to 11,664 bopd, in line with the 11,726 bopd we produced in the fourth quarter 2017. The production was well within the production guidance for 2018 of between 11,000-13,000 bopd.
Oil price increase
Tethys Oil’s operations were supported by the stronger oil market environment in the first quarter 2018. Our achieved oil prices increased from USD 53.9 per barrel in the fourth quarter 2017 to USD 63.7 per barrel in the first quarter 2018, corresponding to over 18 percent increase. As Tethys Oil’s sales price is calculated two months in advance, we are yet to see the benefit of the current higher Dated Brent price.
Further financial strengthening
We are happy to report revenue and other income of MUSD 34.2, an increase of 14 percent. Our EBITDA was up 9 percent and amounted to MUSD 21.5. Our investments in oil and gas operations amounted to MUSD 13.8, up from MUSD 8.2 in the fourth quarter 2017. Our net cash increased from MUSD 42.0 to MUSD 52.4 over the quarter.
Evaluation of exploration well Luja-1
Before I let you go I just wish to bring out one more potential highlight – the Luja-1 exploration well in the Southern part of Block 4. The well has been drilled to its total depth and so far logs suggest the presence of oil in some rock layers. Since this is a completely different part of Block 4 where little activity has been carried out in recent years, the Luja-1 well is being very thoroughly evaluated in order to better understand the geology of this part of the block. Several different kinds of logs have been run and core samples have been taken and are being analysed. A well drilled in the 1980’s reasonably nearby is reported to have had oil shows, something Luja-1 confirms. The evaluation will continue for some time and it is too early to have an opinion if this will be a discovery or not as it is still unclear if the oil encountered will flow. But any encouragement will be important to assess the exploration potential of the Southern part of Block 4.
So stay with us, as you have just read we have a lot more to do in Blocks 3&4 – and that is without saying a word about our new Block 49 where we are just getting started and hope to operate our first seismic survey towards the end of the year.
Stockholm in May 2018
This report has not been subject to review by the auditors of the Company.
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: 8 May 2018
Time: 10.00 CET
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