Tethys Petroleum Limited: Third Quarter 2012 Financial Results

Production Revenues Increase 46%

Marketwired

GRAND CAYMAN, CAYMAN ISLANDS--(Marketwire - Nov 14, 2012) - Tethys Petroleum today announced its third quarter 2012 financial results. The results are highlighted by a 46% increase in production revenues over the third quarter of last year.

RECENT FINANCIAL HIGHLIGHTS

Q3 2012 vs Q3 2011

  • Total Oil and Gas Revenue up 46% at USD10.0 million
  • Average oil production from the Doris field, Kazakhstan up 74% at 2,732 bopd
  • Administrative costs down 8% at USD4.5 million
  • Total Assets USD252.1 million

9 months 2012 vs 9 months 2011

  • Total Oil and Gas Revenue up 72% at USD26.7 million
  • Average oil production from the Doris field, Kazakhstan up 145% at 2,234 bopd
  • Administrative costs down 2% at USD15.5 million

The 9 months period in 2012 has seen a substantial increase in oil production and revenue from the Doris oil field in Kazakhstan with a small drop in corporate administrative costs over the same period. It is forecast that both these trends will continue into 4Q 2012. On the revenue side both October''s and November''s average oil production figures have so far contributed toward the best quarter of oil production in Kazakhstan to date. October oil production averaged approximately 3,700 bopd and it is forecast that Novembers'' production figures will exceed this number. These figures demonstrate the optimisation of the trucking operation in Kazakhstan is coming to fruition which has been the main restriction on maximum production to date, not the production capability of the wells.

On the costs side in Q3 the Company has initiated a review of all costs with a particular focus on administrative expenses. The objective of this exercise is first and foremost to review all areas with a view to reducing costs but particularly administrative costs, and secondly to review the categorization of costs to ensure that the Company is reporting consistently with other similar oil and gas companies, which will facilitate appropriate comparison within its peer group.

Some of these measures can be seen in a 22% reduction in the Q3 2012 costs over the Q2 2012 costs and in the 8% reduction against Q3 2011, but it is expected most of the effect will be realised in the quarters to come as this assessment and resulting action takes some time to implement. This cost reduction exercise does not in anyway reflect the growth prospects of the Company which, as can be seen from the higher production and revenue growth in Kazakhstan and the recent signing of the MOU for a Tajikistan farm-in partner, are very good.

The Company reports financial results in accordance with International Financial Reporting Standards ("IFRS").

These highlights along with other operational and financial details will be further discussed in a scheduled conference call. Details of the conference call can be found below:

Conference Call:

A conference call will be held at 10:30 AM EST US and Canada and 15:30 PM GMT European time on Thursday, November 15, 2012. The North American conference call number is [(866) 202-3048] and the outside North America conference call number is [+1 (617) 213-8843]. The conference call code to use is [32537707]. Please call in about 10 minutes before the starting time in order to be patched into the call.

Webcast:

The call is being webcast and can be accessed at:
http://phoenix.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=213714&eventID=4869022.

The following disclosure is provided to comply with regulatory requirements:

During the fourth quarter of 2011 and the first quarter of 2012, the Company borrowed from various lenders an aggregate principal amount of USD10 million for the purpose of re-financing the purchase price of drilling rigs. The loans are evidenced by loan notes having a maturity of one year or two years. The lenders also received warrants to purchase ordinary shares of the Company having a term of one year or two years, corresponding to the term of the loan notes. In October 2012, the Company received approval from a number of lenders to a one-year extension of the maturity date of loans notes in the principal amount of USD2,165,240 maturing in December 2012. In connection with the approval of the extension of the maturity date, the Company agreed, subject to definitive lender approval, to extend by six months the expiry date of 1,575,000 warrants issued in December 2011 (having an exercise price of CAD0.58 to CAD0.65) and 3,017,380 warrants issued in February, March and April 2012 (having an exercise price of CAD0.84 to CAD1.18), excluding warrants issued to insiders of the Company. The number of ordinary shares into which these warrants may be exercised represents, in aggregate, 1.6% of the number of ordinary shares outstanding on the date hereof. The exercise prices of these warrants represent a premium of 14% to 27% in the case of the warrants issued in December 2011 and 64% to 131% in the case of the warrants issued in February, March and April 2012 of the volume weighted average trading price of the ordinary shares of the Company on the TSX for the five days to October 19, 2012, being the date of the agreement with the lenders. The change to the expiry dates of these warrants will be effective on November 29, 2012. The Company will also issue, subject to definitive lender approval, 1,082,620 warrants having an exercise price of $0.64 to lenders who agreed to extend the maturity date of their one year loan notes by 12 months. These warrants will expire on certain dates in December 2013 or, in the case of 307,620 warrants issued to two officers of the Company, June 2014. The number of ordinary shares into which these new warrants may be exercised represents, in aggregate, 0.4% of the number of ordinary shares outstanding on the date hereof (0.1% in respect of the warrants to be issued to the two officers of the Company). The exercise price of the new warrants represents a premium of 25% of the volume weighted average trading price of the ordinary shares of the Company for the five days to October 19, 2012.

Tethys is focused on oil and gas exploration and production activities in Central Asia with activities currently in the Republics of Kazakhstan, Tajikistan and Uzbekistan. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.

This press release contains "forward-looking information" which may include, but is not limited to, statements with respect to our operations. Such forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. See our Annual Information Form for the year ended December 31, 2011 for a description of risks and uncertainties relevant to our business, including our exploration activities. A barrel of oil equivalent ("boe") conversion ratio of 6,000 cubic feet (169.9 cubic metres) of natural gas = 1 barrel of oil has been used and is based on the standard energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Tethys Petroleum Limited
Condensed Consolidated Statement of Financial Position
(Unaudited)
(in US Dollars)
 As at 
 September 30,
2012
 December 31,
2011
 
 $''000 $''000 
Non-current assets    
Property, plant and equipment121,894 128,918 
Intangible assets104,165 99,959 
Restricted cash1,406 1,407 
Prepayments and other receivables10,629 10,217 
Investment in jointly controlled entity1,118 1,113 
 239,212 241,614 
     
Current assets    
Inventories1,934 2,025 
Trade and other receivables7,449 5,478 
Loan receivable from jointly controlled entity1,868 2,013 
Cash and cash equivalents1,146 10,746 
Restricted cash474 885 
Derivative financial instruments - interest rate swap- 630 
 12,871 21,777 
     
Total assets252,083 263,391 
     
Equity attributable to shareholders    
Share capital28,671 28,669 
Share premium306,725 306,725 
Other reserves41,200 38,530 
Accumulated deficit(161,527)(144,962)
Non-controlling interest8,648 8,918 
Total equity223,717 237,880 
     
Non-current liabilities    
Financial liabilities - borrowings5,874 1,632 
Deferred taxation2,913 2,111 
Trade and other payables402 547 
Asset retirement obligations248 386 
 9,437 4,676 
Current liabilities    
Financial liabilities - borrowings7,411 8,396 
Derivative financial instruments - warrants688 264 
Derivative financial instruments - foreign currency hedge- 157 
Deferred revenue1,238 1,839 
Trade and other payables9,294 10,179 
Current tax298 - 
 18,929 20,835 
Total liabilities    
 28,366 25,511 
Total shareholders'' equity and liabilities    
 252,083 263,391 


Tethys Petroleum Limited
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
For the three and nine months ended September 30, 2012
(in US Dollars)
 For the 3 months ended For the 9 months ended 
 September 30, September 30, 
 2012 2011 2012 2011 
 $''000 $''000 $''000 $''000 
         
Sales and other revenues9,990 6,849 26,681 15,506 
Other operating income- 922 - 6,628 
Total revenue and other income9,990 7,771 26,681 22,134 
         
Production expenses(3,562)(3,393)(9,401)(6,918)
Depreciation, depletion and amortisation(4,766)(3,857)(12,557)(9,684)
Exploration and evaluation expenditure written off(138)(1,807)(138)(1,807)
Listing expenses- (273)- (606)
Business development expenses(42)(697)(621)(1,926)
Administrative expenses(4,490)(4,859)(15,248)(15,520)
Share based payments(582)(1,054)(2,459)(3,111)
Foreign exchange (loss) / gain - net(158)(183)(334)33 
Fair value loss on derivative financial instrument(149)(231)(216)(554)
Loss from jointly controlled entity(395)(291)(294)(802)
Net finance (costs) / income(296)194 (1,148)912 
         
Loss before taxation(4,588)(8,680)(15,735)(17,849)
         
Taxation(529)105 (1,100)283 
         
Loss for the period(5,117)(8,575)(16,835)(17,566)
         
Loss attributable to:        
Shareholders(4,906)(8,575)(16,565)(17,566)
Non-controlling interest(211)- (270)- 
Loss for the period(5,117)(8,575)(16,835)(17,566)
         
Loss per share attributable to shareholders        
         
Basic and diluted(0.02)(0.03)(0.06)(0.07)


Tethys Petroleum Limited
Condensed Consolidated Statement of Cash Flows
(Unaudited)
For the three and nine months ended September 30, 2012
(in US dollars)
 For the 3 months ended For the 9 months ended 
 September 30, September 30, 
 2012 2011 2012 2011 
 $''000 $''000 $''000 $''000 
Cash flow from operating activities        
Loss before taxation for the period(4,588)(8,680)(15,735)(17,849)
Adjustments for        
 Share based payments582 1,054 2,459 3,111 
 Net finance cost / (income)296 (194)1,148 (910)
 Unsuccessful exploration and evaluation expenditure written off- 1,807 - 1,807 
 Depreciation, depletion and amortization4,766 3,857 12,557 9,684 
 (Gain)/loss on disposal of assets- (16)- 120 
 Fair value loss on derivative financial instrument149 231 216 554 
 Net unrealised foreign exchange (gain) / loss228 (70)216 (22)
 Loss from jointly controlled entity395 291 294 802 
 Deferred revenue(157)1,721 (601)(55)
 Other operating income- (922)- (6,628)
 Net change in non-cash working capital84 (1,252)(1,903)(483)
Net cash generated / (used) in operating activities1,755 (2,173)(1,349)(9,869)
Cash flow from investing activities        
Interest received- 36 5 112 
Expenditure on exploration and evaluation assets(2,412)(3,335)(4,014)(9,624)
Expenditures on property, plant and equipment(3,609)(7,813)(5,317)(27,210)
Movement in restricted cash1 2,100 412 (1,451)
Investment in jointly controlled entity- - (5)- 
Payments made on behalf of jointly controlled entity- (5,071)  (12,435)
Movement in advances to construction contractors(643)1,304 (1,677)1,187 
Movement in value added tax receivable251 (980)1,098 (3,133)
Net change in non-cash working capital1,476 726 (924)1,080 
Net cash used in investing activities(4,936)(13,033)(10,422)(51,474)
Cash flow from financing activities        
Proceeds from issuance of borrowings, net of issue costs999 - 10,334 - 
Repayment of borrowings(246)(93)(7,112)(269)
Interest paid on borrowings(283)(69)(804)(266)
Movement in other non-current liabilities(71)(76)(213)(227)
Net cash generated / (used) in financing activities399 (238)2,205 (762)
Effects of exchange rate changes on cash and cash equivalents(44)114 (34)(14)
Net decrease in cash and cash equivalents(2,826)(15,330)(9,600)(62,119)
Cash and cash equivalents at beginning of the period3,972 32,346 10,746 79,135 
Cash and cash equivalents at end of the period1,146 17,016 1,146 17,016 
Contact:
North America
Tethys Petroleum Limited
Sabin Rossi, Vice President Investor Relations
Office: +1 416-941-1257
+1 416-947-0167
Europe
Tethys Petroleum Limited
Veronica Zhuvaghena, Vice President Corporate Communications
Office: +44 1481 725911
+44 1481 725922
Corporate Brokers:
FirstEnergy
Hugh Sanderson/David Van Erp
Office: + 44 207 448 0200
Seymour Pierce
Richard Redmayne/Jonathan Wright/Stewart Dickson
Office: +44 207 107 8000
Asia Pacific:
Quam IR
Anita Wan
Office phone/fax: +852 2217 2999
FTI Consulting
Ben Brewerton/Edward Westropp
Office: +44 207 831 3113
Tethys Petroleum Limited
info@tethyspetroleum.com
www.tethyspetroleum.com
http://m.tethyspetroleum.com

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