Tethys Petroleum raising US$15mln to safeguard Kazakh expansion plans
May 14. Proactive Investors USA & Canada
By Jamie Ashcroft
Tethys Petroleum (LON:TPL) (TSE:TPL) is to raise US$15mln to safeguard plans to expand production capabilities in Kazakhstan, ahead of gas sales into China.
A deal with SinoHan Oil and Gas Investment, to unlock an initial US$75mln, was agreed in November and is currently awaiting government clearance.
The company has, therefore, decided to raise money via equity now so it can continue the development of its shallow gas resources in Kazakhstan and invest in the infrastructure required to tie-in seven successful wells.
This work should result in an increase gas in production by the beginning of 2015, at which time the company expects to start gas sales to China at higher prices, Tethys said.
Specifically, the proceeds will be used for the installation of a gas dehydrator, drilling of new shallow gas wells and the purchase and installation of tie-in pipelines and associated infrastructure. The company said the program must be implemented now to meet its target of producing additional gas by year-end.
To raise the money, it is issuing 36.89mln new shares to new and existing investors. The placing shares are priced at 24p per share, which is a discount of around 10% to Tuesday’s close in London.
In relation to the SinoHan deal, which sees the Chinese investor take a 50% in the Kazakhstan assets, Tethys says it is confident that the necessary government approvals will be received at some point this year.
There is still the possibility that the Kazakh government could ‘pre-empt’ the transaction, and instead take SinoHan’s place in the venture on the same agreed terms. However, Tethys believes this outcome is “extremely unlikely”.
The company said that several of its large existing shareholders participated in the financing, which will be completed in two tranches.
Tethys Petroleum Limited’s strategy is to create shareholder value by building an oil and gas exploration and production company focused on Central Asia in areas with substantial oil and gas potential, building on the strengths of its management team and with a mix of short-term cash flow and upside potential. Currently Tethys has projects in Kazakhstan, Tajikistan and most recently Uzbekistan. Tethys is listed on the Toronto Stock Exchange in Canada and on the Kazakhstan Stock Exchange (KASE: GG_TPL_).