Tethys Sees Light at End of the Tunnel

Caspian-focused explorer Tethys Petroleum saw its losses more than quadruple in 2015, from $16.385mn in 2014 to $74.631mn, but despite low oil prices it is expecting its prospects to improve with higher gas production and prices and a new equity partner Olisol Petroleum. The new in-country partner will recapitalise the business and become a major shareholder.

Most of the losses came from non-cash items. Failure to sell its Kazakh assets to SinoHan last year led to a depreciation, devaluation and amortisation charge for 26 months being made in 2015. That was $27.5mn, and the Tajikistan asset was impaired by $25.9mn, "reflecting the difficult economic market for frontier territory exploration assets." And the devaluation of the Kazakhstan tenge in Q4 2015 resulted in a deferred tax charge of $6.4mn. 

Co-chairman John Bell said that the country saw "challenges with declining prices and a massive depreciation in the Kazakh tenge starting the year at 180/$ and ending up around 350/$. This put pressure on revenues and a severe strain on the Kazakh banking industry."

On the credit side, Tethys halved the company's general and administration and business development expenses, while gas output rose by 98% and was sold at a higher price. These costs are forecast to reduce further to $6mn on an annualised basis, Bell said, adding: "Furthermore, we secured a new in-country strategic partner in Olisol Petroleum Limited... I believe we are now better placed to realise value from the assets and have the right in-country partner to achieve success in Kazakhstan."

William Powell