DUSHANBE, July 18, 2013, Asia-Plus — Tethys Petroleum Limited (“Tethys”), the oil and gas exploration and production company focused on Central Asia/Caspian Region, has announced the conditional acquisition of interests in a number of production sharing contracts (“PSCs”) in Georgia.
According to press released issued by Tethys, it through its subsidiary companies, will acquire a 56% interest in PSC’s covering Blocks XIA, XIM and XIN in eastern Georgia close to the capital city Tbilisi, and in a separate transaction will acquire a 100% interest in PSC’s covering Block VIII and Block XIG located near Tbilisi and in the Kartli area further west. In total, these blocks cover an area of over 6,400 square kilometers. Tethys will be the Operator of all these PSC’s and the transactions are subject to the approval of the appropriate Georgian authorities as well as other conditions precedent including rescheduling of the work programs on Blocks VIII and XIG.
In the Block XIA, XIM and XIN transaction (Project “Iberia”) Tethys will gain a 56% interest in these three PSCs for a payment of USD 9.6 million, which will be paid to the current owners by issuing 12,000,000 ordinary shares in Tethys (based on a price of CDN 0.84 per share) and funding a USD 4.4 million carry on the next USD 10 million work program. The shares will be restricted from trading for 4 months and their issuance is subject to TSX approval.
In the Block VIII and XIG transaction (Project “Tamar”) Tethys will gain a 100% interest in these PSC’s for a payment of USD 6.4 million, which will be paid to the current owners by issuing 8,000,000 ordinary shares in Tethys (based on a price of CDN 0.84 per share). These shares will be restricted from trading for 4 months and their issuance is subject to TSX approval.
The key results (all figures Gross to the PSCs) are as follows: Unrisked Mean Prospective Oil in Place – 34.8 billion barrels; and Unrisked Mean Prospective Recoverable crude oil – 2.913 billion barrels.
The PSCs provide good commercial terms and international oil pricing in proximity to two large oil pipelines, a trunk gas pipeline and a railway. The PSCs are located in Central Georgia near the capital city and hub of Tbilisi and on the main transport routes from Azerbaijan and Central Asia. The operating environment in Georgia is straightforward with several service companies available and with an efficient procedure for obtaining the limited governmental consents which are not already given as part of the PSCs.
The commercial terms of the PSCs are reportedly very attractive. On the Project Iberia Blocks,100% of costs can be recovered from up to 50% of production and the investor takes 50% of the remaining production, this falling to 40% after cumulative revenues exceed cumulative costs. All taxes, levies and duties are included in the State’s share of production with the only other tax being a stabilized royalty of 24.19 Georgian Lari per ton (c. USD 1.95 per barrel). The commercial terms are similar on the Project Tamar Blocks but with the investor share of Profit Oil being 40% before and 35% after payback. The PSCs will be operated by a 100% owned Tethys subsidiary. Current realized oil prices are based on international oil benchmarks with a small discount – currently oil is selling at approximately USD 100 per barrel at the rail head.
