Tethys Petroleum: Financial Results – First Cash Profit

Tethys Petroleum Limited today announced its Annual Results for the period ended December 31, 2012. The financials are highlighted by a 66% increase in annual oil and gas revenue and the first year in which the Company has generated a cash profit.(1)

Financial Highlights

• Oil and gas sales of USD38.11 million, an increase of 66% on 2011
• A cash profit¹ for the year of USD3.42 million compared to a cash loss¹ of USD3.93 million in 2011
• Increase in oil and gas revenues from USD6.49 million (Q1) to USD11.43 million (Q4) and from a cash loss¹ of USD1.65 million (Q1) to a cash profit¹ of USD2.34 million (Q4)
• USD1.36 million net cash generated from operating activities compared to USD12.56 million used in operating activities in 2011
• Net cash used in investing activities of USD15.73 million compared to USD52.20 million in 2011
• Accounting Loss for the year of USD20.90 million, a decrease of 23% on 2011

Production and Reserves Highlights

• Oil production (before the deduction of local governments’ share or taxation) increased from 2,148 bopd (2011) to 3,371 bopd (2012), an increase of 57% and has increased over the year to reach a rate of 4,381 bopd in Q4. Similarly boe production has increased to 6,313 boepd in 2012 compared to 5,656 boepd in 2011
• In the reserve audit report produced by Gustavson Associates, and effective date December 31, 2012, the following gross figures are(2):
  • 1P – 14.8 MMboe
  • 2P – 26.1 MMboe
  • 3P – 41.0 MMboe
  • With 1P oil reserves more than replaced due to strong Doris field performance (Reserve Replacement Ratio of 126%)
• NPV10 of the Company’s 2P Kazakh reserves (from Gustavson) is USD310 million

Operational Highlights

Kazakhstan

• Updated Kazakh independent Resource Report estimates the gross unrisked recoverable mean prospective oil resources to be 1.23 billion barrels of oil plus 634 Bcf of natural gas
• Aral Oil Terminal commenced operations, Phase 2 completed and awaiting final State approval
• Two new gas supply contracts signed effectively doubling the price for 2013
  to USD65 (USD72.8 including VAT) per 1,000 cubic metres (previously USD32.5 including VAT for the Kyzyloi and Akkulka Fields)
• Akkulka Exploration Contract term extended to March 2015
• Kul-Bas Exploration and Production Contract term extended to November 2015 (subject to usual contract amendments)

Tajikistan

• Signed Farm Out Agreement (“FOA”) for the Bokhtar Production Sharing Contract (“PSC”) with subsidiaries of Total S.A. (“Total”) and the China National Oil and Gas Exploration and Development Corporation (“CNODC”)
• Updated Tajik independent Resource Report estimates gross unrisked mean recoverable resources to be 27.5 billion boe
• Completed acquisition of 501 km of new seismic data

Uzbekistan

• Signed Production Enhancement Contract for a new oil field, the Chegara Group of Fields, in Uzbekistan
• Signed MOU to provide the framework for a Joint Study and the negotiation process for an Exploration Agreement relating to certain exploration blocks in the North Ustyurt Basin of Uzbekistan – the same basin which contains the Doris oil discovery

Operational Update

Tajikistan

It is expected that the FOA for the Company’s Tajik assets will be completed in Q2 2013. The Tajik Government has approved the participation of subsidiaries of Total and CNPC in the Bokhtar Production Sharing Contract and remaining points are now being finalized. All three parties are working hard jointly to achieve closing as soon as possible.

As part of the transaction, the new Joint Operating Company will present a comprehensive work programme upon completion of the FOA for the remainder of 2013.

Kazakhstan

In Kazakhstan in 2013, the Company plans to drill up to three wells targeting oil on the Akkulka Exploration Contract area.

The first well is firm and is expected to commence drilling in June 2013 and will target the Doto prospect nearby to the Doris oil discovery. This well has a relatively low risk in the exploration portfolio and is targeting mean unrisked prospective recoverable resources of 21.6 MMbbls (Gustavson Associates) in the Cretaceous and Upper Jurassic.

Following the increase in gas price in early 2013, further work will be carried out to increase production including workovers on the AKK05 and AKK14 wells in Q2 which will be tied in to the gas pipeline thereafter. A further programme will follow to include tie-in of additional wells and the drilling of further shallow gas exploration prospects in the area which are clearly defined on the seismic data as strong amplitude anomalies.

It is planned to test (including acidisation) the previously drilled KBD01 (“Kalypso”) well, which contains a 100 metre (328 feet) gross section in Permo-Carboniferous limestones which is interpreted to contain moveable hydrocarbons based on wireline logs and mud log data. It is also planned to acquire additional seismic this year on the Kul-Bas and Akkulka Contract Areas.

The activities planned in Kazakhstan as described above are contingent on availability of funding, and the Company will provide a more detailed capital programme breakdown on closing of the Tajikistan farm-out, which is expected in Q2.

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