Kazakhstan - 2015 Gas Sales Contract Signed
GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - Dec. 31, 2014) - Tethys Petroleum Limited (TSX:TPL) (LSE:TPL) ("Tethys" or the "Company") is pleased to announce that TethysAralGas LLP, its 100% owned Kazakhstan subsidiary, has signed a gas sales contract for 2015 gas production.
-- New gas contract signed -- 42% increase over current price of US$53/MCM to US$75/MCM -- 100 million cubic metres under contract -- Option to sell additional 110 million cubic metres at potentially higher prices
A one-year gas supply contract has been signed at a price of US$75/mcm (US$2.12 per 1,000 cubic feet) net of marketing and distribution costs effective January 1, 2015 representing a 42% increase over the current realised gas price. This price has been realised despite falling oil and gas prices in Central Asia due to the impact of the fall in worldwide prices (Henry Hub spot price has fallen 30% to $108/mcm since December 1st, 2014). The achievement of the higher gas prices reflects the Company's view that despite these recent influences, the general direction of gas prices is on an upward trend due to the increasing demand from China as it moves from a coal based economy to utilising more gas. The Company believes that once gas shipments commence to China through the already built gas pipeline, it may achieve further increases in pricing some time in 2015.
The gas supply contract has been signed between TethysAralGas LLP and KazTransGas JSC "KTG"), for the Kyzyloi and Akkulka natural gas fields. KTG is the national State appointed gas operator under Kazakhstan gas law and any domestic sales of gas are effectively made through this state body. TAG will have the ability to export gas to China and other export markets once this option becomes available.
The gas supply contract is for annual volumes up to 100 million cubic meters at the increased net price of US$75 per 1,000 cubic metres (US$2.12 per 1,000 cubic feet) net of marketing and distribution costs, and runs through to December 31, 2015. KTG has agreed that it will take any additional gas produced up to a total annual volume of 210 million cubic metres, but the structure of the contract also allows TAG to sell this additional gas outside of the contract should higher prices be achieved at a later date. This additional flexibility provides a significant advantage over the current contract under which all gas was committed for the whole year.
It should be noted that the prices have been agreed in Kazakh Tenge as all sales contracts in Kazakhstan are signed with the prices set in National Currency. Due to concerns of a possible devaluation in the Tenge in 2015 it was agreed that in the case of a devaluation by more than 10%, the Parties shall agree to meet within 10 working days and try to renegotiate the price of gas. This is the first time the Company has managed to include this type of clause which is a significant improvement on the current gas contract whereby there was no potential resolution when the Tenge devalued in 2014 resulting in a lower realized USD price for the Company at that time.
John Bell, Executive Chairman, commented, "I am pleased we have delivered on one of our major initiatives announced in early December; to sign a new gas sales contract by month end at a materially higher price than the current contract. This has been achieved despite a dramatic worldwide fall in oil and gas prices, including in the areas we operate in. As well as the higher price we have also introduced other protections and improvements on the contract that are very significant. We previously announced in early December that it was our plan to double the current gas production by Q1 2015, and I look forward to updating shareholders on progress on this in the very near future."
Tethys is focused on oil and gas exploration and production activities in Central Asia and the Caspian Region. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.
This press release contains "forward-looking information". Such forward-looking statements reflect our current views with respect to future events, our expectation with respect to increases in gas production, achieving higher gas prices and the significant potential of exploration and discovered deposits. The forward-looking statements are based on the following assumptions, that the Company will be successful in increasing gas production and/or the price at which it sells its gas. These forward looking statements are subject to a number of risks and uncertainties, including the risk that that the Company will not be successful in increasing its gas production to the extent anticipated or achieving any further increases in the prices at which it sells it gas. See our Annual Information Form for the year ended December 31, 2013 for a description of risks and uncertainties relevant to our business, including our exploration activities. The "forward looking statements" contained herein speak only as of the date of this press release and, unless required by applicable law, the Company undertakes no obligation to publicly update or revise such information, whether as a result of new information, future events or otherwise.
FOR FURTHER INFORMATION PLEASE CONTACT:
Tethys Petroleum Limited
Vice President Investor Relations
Source: Tethys Petroleum Limited