DUSHANBE, October 13, 2015, Asia-Plus — In a statement released on October 12, Tethys Petroleum Limited (Tethys or the Company) announces that it has not made the payment for the September cash call issued by the Bokhtar Operating Company (the September Cash Call) in connection with Tethys” interest in the Bokhtar PSC in Tajikistan (the Tajik Asset).
As a result, Tethys remains in default of its obligations under the Joint Operating Agreement and Shareholders Agreement dated June 18, 2013 relating to the Tajik Asset (the JOA).
On September 23, 2015 the Company announced that it had not paid the September Cash Call. The Company also noted that a payment would need to be made by October 9, 2015 in order to remedy this non-payment and avoid the Tethys” contractor party being subject to various, potentially very onerous remedies that other contracting parties may seek to enforce under the JOA, which may result in a significant impairment of the value of Tethys” interest in the Tajik Asset.
Furthermore, the Company announced at that time, that if binding documentation had not been entered into in connection with the interim financing proposed by Nostrum Oil & Gas PLC (Nostrum) by the end of the exclusivity period with Nostrum, which expired at 11.59 p.m. on October 6, 2015, it was very likely that the Company would not be able to make the payment within the prescribed timeframe that would prevent the aforementioned scenario arising.
Due to the fact that Nostrum withdrew its proposed offer having not obtained support from Tethys” largest shareholder, Pope Asset Management, the interim financing was not provided. While the Company is currently exploring alternative potential financing proposals, which may result in funds shortly becoming available to remedy the non-payment of the aforementioned cash calls and provide funding to meet future cash calls issued by the Bokhtar Operating Company, at this time there can be no certainty that any such alternative financing will be secured. In the event that additional funding is secured there can be no assurance that it will be sufficient to remedy the outstanding cash calls and fund future cash calls. Accordingly, the Company has decided at this time not to make this payment for the September Cash Call (approximately US$1.28 million) or the October 2015 cash call (approximately US$0.78 million). Due to its current financial situation, the Company concluded it was not prudent to make these payments without sufficient funding certainty for further payments going forward.
As part of its strategic review, Tethys explored extensively the possibility of farming down its interest in the Tajik Asset. Although Tethys received interest from a number of leading global oil and gas companies in what has been a difficult market, at this time no agreement has been reached with any party in connection with a farm down of the Company”s interest in its Tajik Asset. As the Tethys contracting company is currently in default of its obligations under the JOA, it is subject to various restrictions, which, among other things, prevent the Tethys contractor party from receiving data from the Bokhtar Operating Company on the project and prevent Tethys from assigning all or part of its participating interest in the project to any third party, in each case until all defaults have been remedied.
Tethys has initiated discussions with CNPC Central Asia B.V. (CNPC) and Total E&P Tajikistan B.V. (Total) in regards to finding a mutually acceptable solution, including to propose a reduction in Tethys” participation in the Tajik Asset, however at this stage no agreement has been reached and no assurance can be given that any such agreement will be reached. If no such agreement is reached, CNPC and Total (each being a non-defaulting party) could seek to enforce one of the onerous remedies set out under the terms of the JOA on or after October 11, 2015. Such remedies include: 1) any non-defaulting party having the option, exercisable in its discretion at any time to require that the defaulting party offer to completely withdraw from the JOA and assign all of its participating interest in the Tajik Asset to the non-defaulting party or parties; or 2) any non-defaulting party having the option, exercisable in its discretion at any time to require that the defaulting party offer to sell and assign all of its participating interest to any non-defaulting contracting companies wishing to purchase such participating interest, in each case, in accordance with the provisions of the JOA. In the event of a non-defaulting party seeking to enforce one of the aforementioned onerous remedies under the JOA, Tethys would use all commercially reasonable efforts to protect its interest in the Tajik Asset.
We will recall that Tethys and Nostrum last month entered into a non-binding and indicative letter of intent (LOI) setting out proposed terms upon which Nostrum would acquire the entire issued and to be issued share capital of Tethys (the Proposed Offer).
In connection with the Proposed Offer, Nostrum also proposed the terms of a potential interim financing facility of up to US$20 million (the Interim Financing) to fund the Company’s cash requirements from the date of the execution of key transaction documents through until the date of completion of any formal offer.
Conditions of the Proposed Offer, amongst others, included the following: receipt of all necessary and relevant governmental and joint venture partner consents in Kazakhstan, Tajikistan and Georgia; certain additional customary conditions as to the status of the business and financial condition of Tethys up until completion of the Proposed Offer; the receipt of irrevocable undertakings from each director of Tethys to accept a formal offer (on the terms above) in respect of each of the Tethys shares in which they are beneficially interested; receipt of support for the Proposed Offer from the three major shareholders of Tethys in form and substance satisfactory to Nostrum; the receipt of acceptances in respect of 75% of the Tethys shares to which the Proposed Offer relates, or such lower threshold above 50% as Nostrum may determine; and other customary conditions.
Tethys Petroleum Limited is an oil and gas exploration and production company currently focused on Central Asia and the Caspian Region with projects in Kazakhstan, Tajikistan and Georgia. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.
Kulob Petroleum Limited, a Tajikistan-based wholly-owned subsidiary of Tethys, in July 2013 signed a farm-out agreement (FOA) for the Bokhtar PSC in Tajikistan with subsidiaries of Total S.A. (Total) and the China National Oil and Gas Exploration and Development Corporation (CNODC).
Singed in 2008, the 25-year Bokhtar PSC reportedly covers a total area of approximately 35,000 square kilometers in the Afghan Tajik portion of the prolific Amu Darya basin west of the Pamir mountains. The area included in the PSC is in the south-western part of Tajikistan and is a large, highly prospective region which has existing oil and gas discoveries but which has seen limited exploration to date.
