• Block 56 Field Development Plan submitted to the Ministry of Energy and Minerals in early June.
• Drilling operations on the exploration well Kunooz-1 in the Fahd area, Block 58, will begin in the second week of August.
• Strategic review of the Group’s portfolio of Oil and Gas assets is ongoing with significant alternatives for the Board to review.
• First operations of the Gas-to-Power-project on Blocks 3&4 successful, with emission reductions and cost savings as the result going forward.
• Production from Blocks 3&4 in the second quarter was severely impacted by extreme weather conditions and amounted to 7,688 barrels of oil per day (8,032). Net entitlement was 52% (52%) and the achieved oil price was USD 84.3 per barrel (79.5).
• Revenue and other income was MUSD 30.8 (30.1) and EBITDA MUSD 15.7 (13.0).
• Cash flow from operations was MUSD 19.9 (6.2) and Free cash flow MUSD 3.1 (-10.8).

Events after the end of the quarter

• Entered into a MUSD 60 amortising term loan facility agreement with Abu Dhabi Commercial Bank.
• Initial exploration phase of the EPSA for Block 58 has been granted a one-year extension until July 2025.
• Production guidance for the full year 2024 of 8,000 ± 200, previously 8,200 ± 400 barrels of oil per day.
• Capital expenditure for the full year 2024 is now expected to be MUSD 77 (previously MUSD 90-94) following updates to the work programmes.

Letter to shareholders

Dear Friends and Investors,

Where shall I begin, when I tell the story of the second quarter 2024?

With the imminent spud of the long-awaited Kunooz-1 well on Block 58, targeting more than a hundred million barrels of oil?

With the Field Development Plan for Block 56, which was presented to the Ministry for Oil and Gas in early June?

With discussing the stabilisation of production on Blocks 3&4 or maybe with the MUSD 60 loan credit facility from Abu Dhabi Commercial Bank?

No! None of the above will do. Let us go straight for the Elephant in the Room: The STRATEGIC REVIEW!

What is happening? Will there be a restructuring of Tethys Oil’s asset portfolio? Will Blocks 3&4 be divested or farmed down? Will Block 58 find a partner? Will there even be an uncovered need for financing? Or additional partners in Block 56? When will cash distribution return? The questions are many and manifold and so are the answers.

First financing. Tethys is fully financed and fully able to meet all commitments. Cash flow from operations has increased with stabilising production from Blocks 3&4 and buoyant oil prices.

Any potential shortfall will be met with the newly signed and announced MUSD 60 credit arrangement with Abu Dhabi Commercial Bank. A facility and arrangement Tethys’ is very happy about as we look forward to long-term cooperation with ADCB.

The Strategic Review was never primarily about financing but about optimising the asset portfolio and make visible the values in the balance sheet. As part of the review the Investment Bank Jefferies was retained to assist. That process has attracted a lot of interest. We first anticipated to announce specific conclusions on the review in May, which was then prolonged until the end of June. But it is hardly for a lack of interest that this has been postponed, rather quite the opposite! Discussions on divestments, investments, farm-outs and farm-downs are ongoing. Exactly what the conclusion will be or when it will be reached is not possible to comment on today, but the alternatives are numerous, interesting and exciting.

So, the Strategic Review leads its own life while we continue with business as usual.

Kunooz-1 is finally about to start with spud scheduled for later this week. It remains the highest profile well in Oman this year, offering an excellent risk/reward. As with most high-profile explorations wells the chance of success is not much more than 20 percent but if it comes in the structure may hold more than 100 million barrels of oil. A result which would boost Tethys’ resource base by an order of magnitude!

Closer to commercialisation we find Block 56 where the first comments from the Ministry on the FDP has been received and are in the process of being answered. Initially the plan will focus on the Al Jumd, Sarha and Menna discoveries along the area of the block which covers the Eastern flank of the Oman Salt Basin. First production is expected from the Al Jumd discovery, which produced more than 60,000 barrels of oil during an Extended Well Test last year. We are hopeful of FDP approval within the next couple of months and in time to allow Al Jumd and the others to be included in Tethys’ year-end reserve report with aim to make us reach at least a 100 percent reserve replacement ratio, irrespective of results from Blocks 3&4, for 2024.

Financially the quarter marked a significant improvement from the first quarter this year. With all the options on our table, and a strong operational as well as financial performance, we remain confident of an interesting continuation of 2024. If all goes well, we could hopefully be back with distributions again, maybe already next year.

So stay with us!

Stockholm, August 2024
Magnus Nordin
Managing Director

CONFERENCE CALL

Date: 6 August 2024
Time: 10.00 CEST

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