Tethys Petroleum Limited Press Release: 2016 Q3 Results

Tethys Petroleum Completes Installation Of ESP In Kazakhstan

GRAND CAYMAN, CAYMAN ISLANDS–(Marketwired – Nov. 15, 2016) – Tethys Petroleum Limited (TSX:TPL)(LSE:TPL) today announced its Results for the quarter ended September 30, 2016.

Q3 Financial Highlights (all figures reported in USD unless stated otherwise. 2015 amounts are for the quarter ended September 30, 2015).

--  Revenues decreased by 46% to USD3.1m from USD5.7m due to a natural
    decline in production volumes and price reductions in USD terms as a
    result of the devaluation of the Kazakh currency, the Tenge, in August
    2015; 
--  The loss of USD4.0m was higher than loss of USD3.7m in 2015 due to the
    significantly lower revenue in the current quarter and provision of
    USD0.8m made for non-fulfilment of Kazakh work programmes penalties. The
    Company is working to have these withdrawn or reduced; 
--  EBITDA - adjusted for share based payments increased from negative
    USD0.6m to negative USD0.8m as a result of significantly lower revenue
    in the current quarter. This was offset by lower costs; 
--  Capital expenditure at USD0.3m (Q3 2015: USD1.9m) was lower due to lack
    of funds to develop the Company's assets with expenditure in the prior
    period relating to Kazakhstan exploration and development and Tajikistan
    exploration. 


Q3 Operational Highlights

Oil


--  Average oil production for the quarter decreased to 742 bopd (Q3 2015:
    1,702 bopd) reflecting a natural decline in overall production; 
--  Oil production cost per barrel in Q3 2016 increased to USD8.84 compared
    with USD6.26 in Q3 2015. This was mainly due to the decrease in oil
    production and non-variable costs of production. There was a decrease in
    cost per barrel to USD8.27 in YTD Q3 2016 compared with USD8.73 in YTD
    Q3 2015 as a result of cost reduction initiatives and the Tenge
    devalution; 
--  Oil prices averaged USD7.81 in the quarter compared with USD12.24 bbl in
    Q3 2015, a reduction of 36%, reflecting the fall in World oil price
    which impacted the domestic Kazakh price and the devaluation of the
    Tenge. 


Gas


--  Current quarter gas production averaged 2,106 boe/d compared with 3,121
    boe/d in Q3 2015 reflecting a natural decline in overall production; 
--  Gas production cost per Mcm in the current quarter reduced to USD14.76
    compared with USD15.70 in Q3 2015 despite lower production volume as a
    result of cost reduction initiatives as well as the Tenge devaluation; 
--  An increase in gas price in local currency of over 50 percent was
    obtained from January 1, 2016, however, this was negatively affected in
    USD terms due to the Tenge devaluation. 
    
    Note: 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. 


Q3 Significant Events 


--  Kenneth J. May was appointed as interim Chief Executive Officer and his
    permanent appointment has since been confirmed; 
--  The Grand Court in the Cayman Islands approved a reduction in the par
    value of the Company's ordinary shares from USD0.10 per share to USD0.01
    which was done to facilitate the Investment Agreement between Tethys and
    Olisol; 
--  A new cost optimisation programme, that once fully implemented, should
    save the company an estimated USD2.5 million a year commenced. The
    programme followed an extensive review into costs and operations
    following the Company's AGM; 
--  Claims brought against the Company in Kazakhstan in relation to the USD
    7.5 million debenture due June 30, 2017 originally issued to AGR and
    which resulted in a seizure order over the Company's assets and freezing
    of the Company's bank accounts were successfully defended and dismissed
    by the Courts; 
--  The Company worked to complete the private placement with Olisol,
    however Olisol failed to meet its funding commitments and breached the
    terms of the Investment Agreement. The Company announced it would
    continue to work with Olisol to complete the private placement; 


Significant Events Subsequent to September 30, 2016


--  The private placement with Olisol did not close by the outside date
    under the Investment Agreement. Tethys took all steps required to close
    the private placement and was ready, willing and able to do so, however,
    Olisol failed to provide Tethys with any of the CAD9.8 million purchase
    price. Olisol claims that it is entitled to terminate the Investment
    Agreement and has also demanded immediate repayment of its working
    capital loan. Tethys disagrees with Olisol that it has the right to
    terminate the Investment Agreement and disagrees that the loan is
    repayable. 
--  Eurasia Gas Group LLP ("EGG") the sole customer for oil produced by the
    Company's subsidiary Tethys Aral Gas LLP ("TAG"), and a related party of
    Olisol, lodged a court claim seeking an award equivalent to USD2.6
    million for the alleged failure by TAG to deliver certain minimum
    volumes of crude oil to EGG. The Company's view is that the claim is
    without merit or substance. As a consequence of EGG's Court claim the
    bank accounts of TAG have been blocked. 
--  Alexander Abramov, a principal of Olisol, was removed from the Board of
    Directors of the Company by a majority vote of the Board and in
    accordance with the Company's Articles of Association. Alexander Abramov
    was replaced as Chairman of the Board by William P. Wells. 
--  Allegations of improper conduct were made against certain employees of
    TAG in an action initiated by Mr. Abramov and searches and seizures at
    TAG's offices in Kazakhstan took place by law enforcement agencies.
    These claims have since been dismissed. Tethys wishes to acknowledge the
    assistance of the Office of the Almaty City Prosecutor in quickly
    reviewing the claims and dismissing the case. Property taken during the
    investigation has been returned to the Company and we work to have the
    Court imposed freezing order over TAG's bank accounts lifted and restore
    normal business operations as soon as possible. 
--  Proposals from two private investors have been received which would
    result in each investor acquiring approximately 9.9% (when measured
    individually against the current number of shares outstanding) of the
    enlarged share capital of the Company. The price for the ordinary shares
    would be USD0.01593 per share and the total proceeds would amount to
    approximately USD1.4m. The investors would also be granted warrants
    giving them the right to acquire additional ordinary shares of Tethys
    with an exercise price of USD0.031 per share. Each of the investors
    would be appointed to the Board of the Company on closing of the
    placings which the parties are working to complete as soon as possible.
    If completed, the placements will bring much needed funding to the
    Company as well as provide it with strong in-country partners in
    Kazakhstan and internationally. 
--  The full Q3 Results together with Management's Discussion & Analysis
    have been filed with the Canadian securities regulatory authorities.
    Copies of the filed documents may be obtained via SEDAR at www.sedar.com
    or on the Tethys website at www.tethyspetroleum.com. The summary
    financial statements are attached to this press release. 


Cautionary Statements

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. 
These forward-looking statements are subject to certain risks and uncertainties. See our Annual Information Form for 
the year ended December 31, 2015 for a description of risks and uncertainties relevant to our business, including our 
exploration activities.

About Tethys Petroleum

Tethys Petroleum's aim is to become the leading independent E&P Company in Central Asia, by exercising capital 
discipline, by generating cash flow from existing discoveries and by maturing large exploration prospects within our 
highly attractive frontier acreage.


Tethys Petroleum Limited                                                    
Consolidated Statement of Financial Position                                
(in thousands of US dollars)                                                
                                                                            
                                                    As at                   
                                    September 30, 2016    December 31, 2015 
----------------------------------------------------------------------------
                                                                            
Non-current assets                                                          
Intangible assets                               67,227               64,202 
Property, plant and equipment                  105,699              113,397 
Restricted cash                                  2,237                2,233 
Investment in joint arrangements                     4                    4 
Trade and other receivables                      1,910                2,457 
Deferred tax                                       211                  226 
----------------------------------------------------------------------------
                                               177,288              182,519 
                                                                            
Current assets                                                              
Cash and cash equivalents                        1,800                3,272 
Trade and other receivables                      7,349                3,710 
Inventories                                        821                  879 
Restricted cash                                     65                  215 
----------------------------------------------------------------------------
                                                10,035                8,076 
                                                                            
----------------------------------------------------------------------------
Total assets                                   187,323              190,595 
----------------------------------------------------------------------------
                                                                            
Non-current liabilities                                                     
Trade and other payables                            70                  133 
Financial liabilities - borrowings               1,811               22,873 
Deferred tax                                    10,133               10,792 
Provisions                                         894                  846 
----------------------------------------------------------------------------
                                                12,908               34,644 
Current liabilities                                                         
Financial liabilities - borrowings              32,356                9,159 
Derivative financial instruments                     -                  275 
Current taxation                                   491                  398 
Trade and other payables                        18,133               14,189 
Provisions                                          25                  360 
----------------------------------------------------------------------------
                                                51,005               24,381 
                                                                            
----------------------------------------------------------------------------
Total liabilities                               63,913               59,025 
                                                                            
Equity                                                                      
Share capital                                    4,000               33,696 
Share premium                                  357,803              321,803 
Other reserves                                  43,349               43,166 
Accumulated deficit                           (287,838)            (273,189)
Non-controlling interest                         6,096                6,094 
----------------------------------------------------------------------------
Total equity                                   123,410              131,570 
                                                                            
----------------------------------------------------------------------------
Total equity and liabilities                   187,323              190,595 
----------------------------------------------------------------------------
                                                                            
Tethys Petroleum Limited                                                    
Consolidated Statements of Comprehensive Income (Loss)                      
(in thousands of US dollars except per share information)                   
                                                                            
                                  Three months ended    Nine months ended   
                                     September 30          September 30     
----------------------------------------------------------------------------
                                      2016       2015       2016       2015 
                                                                            
Sales and other revenues             3,119      5,736     10,103     18,528 
                                                                            
Sales expenses                        (665)    (1,182)    (2,132)    (3,563)
Production expenses                 (1,979)    (1,811)    (4,503)    (8,578)
Depreciation, depletion and                                                 
 amortisation                       (2,473)    (3,716)    (8,256)   (25,004)
Administrative expenses             (1,354)    (2,073)    (4,379)    (7,608)
Restructuring costs                     23       (586)    (1,400)    (2,907)
Transaction costs of assets held                                            
 for sale                                -          -          -     (1,065)
Share based payments                   (20)       (93)      (183)      (358)
Profit on sale of fixed assets           -         10         10         53 
Foreign exchange gain/(loss)            18       (716)       141       (931)
Fair value gain/(loss) on                                                   
 derivative financial instrument         6        236        275       (233)
Loss from jointly controlled                                                
 entity                                  -        (15)         -       (250)
Finance costs                         (893)      (321)    (4,835)    (2,848)
----------------------------------------------------------------------------
                                    (7,337)   (10,267)   (25,262)   (53,292)
                                                                            
----------------------------------------------------------------------------
Loss before tax from continuing                                             
 operations                         (4,218)    (4,531)   (15,159)   (34,764)
                                                                            
Taxation                               182        833        512      3,754 
                                                                            
----------------------------------------------------------------------------
Loss from continuing operations     (4,036)    (3,698)   (14,647)   (31,010)
                                                                            
Loss from discontinued                                                      
 operations net of tax                   -        (11)         -        (88)
                                                                            
----------------------------------------------------------------------------
Loss and total comprehensive                                                
 income                             (4,036)    (3,709)   (14,647)   (31,098)
                                                                            
Loss and total comprehensive                                                
 income attributable to:                                                    
Shareholders                        (4,196)    (3,711)   (14,649)   (31,097)
Non-controlling interest               160          2          2         (1)
                                                                            
----------------------------------------------------------------------------
Loss and total comprehensive                                                
 income                             (4,036)    (3,709)   (14,647)   (31,098)
----------------------------------------------------------------------------
                                                                            
Loss per share attributable to                                              
 shareholders:                                                              
Basic and diluted - from                                                    
 continuing operations (USD)         (0.01)     (0.01)     (0.04)     (0.09)
Basic and diluted - from                                                    
 discontinued operations (USD)           -          -          -          - 
----------------------------------------------------------------------------
                                                                            
Tethys Petroleum Limited                                                    
Consolidated Statements of Cash Flows                                       
(in thousands of US dollars)                                                
                                                                            
                                  Three months ended    Nine months ended   
                                     September 30          September 30     
----------------------------------------------------------------------------
Cash flow from operating                                                    
 activities                                                                 
Loss before tax from continuing                                             
 operations                         (4,218)    (4,531)   (15,159)   (34,764)
Loss before tax from                                                        
 discontinued operations                 -        (11)         -        (88)
----------------------------------------------------------------------------
                                                                            
Adjustments for:                                                            
Share based payments                    20         93        183        358 
Net finance cost                       893        321      4,835      2,848 
Depreciation, depletion and                                                 
 amortisation                        2,473      3,716      8,256     25,004 
Profit on sale of fixed assets           -        (10)       (10)       (53)
Fair value gain on derivative                                               
 financial instruments                  (4)      (236)      (274)       233 
Net unrealised foreign exchange                                             
 loss/(gain)                           109        (87)      (246)       (61)
Loss from jointly controlled                                                
 entity                                  -         15          -        250 
Movement in provisions                (100)    (1,308)    (1,736)    (3,298)
Net change in working capital         (883)    (3,085)    (1,099)      (970)
----------------------------------------------------------------------------
Cash used in operating                                                      
 activities                         (1,710)    (5,123)    (5,250)   (10,541)
Corporation tax paid                    (7)         -        (28)      (134)
----------------------------------------------------------------------------
Net cash used in operating                                                  
 activities                         (1,717)    (5,123)    (5,278)   (10,675)
                                                                            
Cash flow from investing                                                    
 activities:                                                                
Interest received                        -         46          -        137 
Expenditure on exploration and                                              
 evaluation assets                     (90)    (1,588)      (545)    (5,530)
Expenditure on property, plant                                              
 and equipment                        (228)      (350)      (509)    (2,389)
Proceeds from sale of fixed                                                 
 assets                                  -          8         33        121 
Movement in restricted cash             (2)       (87)       146       (238)
Movement in advances to                                                     
 construction contractors              193        (11)        (6)       179 
Movement in value added tax                                                 
 receivable                            131        339        559      1,058 
Net change in working capital          200        598        239       (924)
----------------------------------------------------------------------------
Net cash generated/(used) in                                                
 investing activities                  204     (1,045)       (83)    (7,586)
                                                                            
Cash flow from financing                                                    
 activities:                                                                
Proceeds from issuance of                                                   
 borrowings, net of issue costs      4,430      5,000      7,930     23,235 
Repayment of borrowings               (715)      (288)    (1,289)    (4,953)
Interest paid on borrowings           (903)      (311)    (2,616)    (1,219)
Movement in other non-current                                               
 liabilities                           (22)       (27)       (90)       (83)
----------------------------------------------------------------------------
Net cash generated from                                                     
 financing activities                2,790      4,374      3,935     16,980 
Effects of exchange rate changes                                            
 on cash and cash equivalents         (177)     1,138        (46)     1,699 
----------------------------------------------------------------------------
Net increase/(decrease) in cash                                             
 and cash equivalents                1,100       (656)    (1,472)       418 
Cash and cash equivalents at                                                
 beginning of the period               700      4,942      3,272      3,868 
----------------------------------------------------------------------------
Cash and cash equivalents at end                                            
 of the period                       1,800      4,286      1,800      4,286 
----------------------------------------------------------------------------


FOR FURTHER INFORMATION PLEASE CONTACT:

Tethys Petroleum
Web: http://www.tethyspetroleum.com
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