Letter of Intent for a US$15 Million Interim Financing and C$25.5 Million Private Placement Signed With Olisol Investments Limited

November 09, 2015

Tethys Petroleum Limited (“Tethys” or the “Company”) (TSX:TPL)(LSE:TPL) announces that is has entered into a non-binding and indicative letter of intent (the “LOI”) with Olisol Investments Limited (“Olisol”) setting out proposed terms upon which Olisol Petroleum Limited, a wholly-owned subsidiary of Olisol (“OPL”), will provide Tethys with a US$15 million interim debt facility (the “Interim Financing”), subscribe to a C$25.5 million private placement of 150 million new ordinary shares at a price of C$0.17 per ordinary share (the “Placing”) and commit to backstop a further equity fundraising of 50 million shares at C$0.17 per share (the “Further Financing”).

The Company has agreed to grant OPL a limited period of exclusivity the (“Exclusivity Period”) until 11:59 p.m. Calgary time on November 23, 2015 (unless such date is extended by request of one of the parties) in connection with the Placing and Further Financing and Interim Financing (together the “Transaction”).

In the event that OPL does not provide Tethys with certain confirmation of funds by November 23, 2015, Olisol will pay Tethys a US$1.25 million break fee. The Company and Olisol have substantially progressed the binding documentation for the Transaction. The Company expects to provide an update on these agreements prior to the expiration of the Exclusivity Period.

John Bell, Executive Chairman commented:

“We are pleased to have reached conditional agreement with Olisol on a potentially transformational refinancing and will work as hard as we possibly can to drive the process to a swift conclusion.”


Interim Debt Financing

  • Concurrent with the execution of the LOI, OPL and Tethys have largely agreed the documentation for a US$15 million convertible facility pursuant to which OPL will advance to Tethys up to US$15 million to be used to repay the US$5 million term loan from Nostrum Oil and Gas PLC and the US$7.5 million convertible loan from AGR Energy Limited No. 1 (the “AGR Convertible”), in each case plus any accrued but unpaid interest and fees arising thereunder. In the event that AGR Energy exercises its conversion rights under the AGR Debenture prior to redemption, the interim loan facility will be reduced by US$7.5 million with the Placing, at the option of OPL, being increased by US$7.5 million in exchange for 75 million further shares. US$12.5 million will be available immediately to repay and discharge the above-noted facilities. The balance of the interim loan facility will be used for general and administrative expenses and will be available thirty days after first draw down or, where requested by Tethys to meet its working capital requirements, such earlier date as the parties may agree. The loan shall be convertible at C$0.17 per share.
  • Olisol is required to provide to Tethys confirmation that the US$15 million is ready to be drawn down, within 14 days, or will be required to pay a break fee to Tethys of US$1.25 million. In this event, the Exclusivity Period will also come to an end.
  • It will be a condition to the first draw down under the Interim Financing that Alexander Abramov, a designee of Olisol, and William Wells of Pope Asset Management, LLC, a 19.1% shareholder of the Company, be appointed to the Board of Directors of Tethys (the “Board”). In the event the Placing is not completed, the Olisol designee will resign once the Interim Financing is repaid in full.
  • Olisol has agreed to assist in the extension of the Kul-Bas licence in Kazakhstan. If Tethys and Olisol are not able to secure an extension of the Kul-Bas licence, Olisol will increase its obligation in connection with the Interim Financing by C$1.0 million.
  • Assuming the Interim Financing is issued, the Interim Financing will become due and payable after 30 days if both parties do not enter an investment agreement for the Placing (the “Investment Agreement”) within the Exclusivity Period. The Interim Financing will become due and payable after 30 days should closing of the Placing not have occurred within 90 days of signing an Investment Agreement (or such longer period provided for by the Investment Agreement).
  • Pursuant to the terms of the Interim Financing, the Company will be subject to certain restrictions including on undertaking any material corporate activity, creating new indebtedness (subject to certain permitted exemptions) or repaying indebtedness in advance of its maturity date; creating any security or giving guarantees or indemnities and entering into further financings or issuing further equity.
  • The Interim Financing facility will also contain events of default and change of control provisions. In circumstances where an event of default has occurred and OPL agrees to waive such event of default, the Company is required to take such actions as OPL may specify for the exercise of any rights, powers and remedies of OPL under the agreement or by law, and/or confer on OPL security over any property and assets of the Company’s group to the fullest extent permitted under the terms of any existing third party security arrangements.

A copy of the interim financing facility agreement will be filed on SEDAR in Canada once executed.

Placing and Further Financing

  • Tethys and Olisol will negotiate a definitive Investment Agreement providing for the Placing and commitment to backstop the Further Financing over the next 14 days.
  • An additional injection of C$25.5 million of new capital into Tethys by OPL by way of a subscription for 150 million Shares at C$0.17 per share, subject to AGR Energy exercising its conversion rights prior to repayment of the AGR Convertible, in which case the Placing, at the option of OPL, being increased by US$7.5 million in exchange for 75 million further shares.
  • Conversion of all outstanding amounts under the Interim Financing into shares of Tethys at C$0.17 per share.
  • Following completion of the Placing, the Company proposes to undertake the Further Financing to be backstopped by OPL to ensure that a minimum of C$8.5 million is raised.
  • Upon completion of the transaction, the Board will be comprised of five directors as follows:
    • Williams Wells, non-executive director;
    • One non-executive director designated by OPL;
    • One non-executive and independent director designated by OPL;
    • One executive director designated by Tethys; and
    • One non-executive and independent director designated by Tethys.
  • The ongoing composition of the Board shall be determined by a relationship agreement containing reasonable provisions intended to address conflicts of interest and related party matters and compliance with applicable laws and listing requirements (the “Relationship Agreement”). The Relationship agreement will only apply in the event that OPL acquires shares to which are attached more than 30 percent of the outstanding voting rights over the entire issued shares capital of Tethys. Entering into the definitive form of such an agreement will be a mutual condition precedent to completing the transactions contemplated by the Investment Agreement.
  • In addition to customary closing conditions for transactions of this nature, OPL’s obligation to complete the Placing shall be subject to satisfaction or waiver of the following:
    • receipt of all required approvals from the Government of Kazakhstan;
    • receipt of all required shareholder, regulatory, exchange and other third party approvals; and
    • aggregate debt of Tethys, net of cash, being not greater than US$40 million (excluding the Interim Financing). This will also need to be true at the date of signing the Investment Agreement.
  • The proposed Interim Financing, Placing and Further Financing are not subject to either a financing condition or a due diligence condition.
  • Olisol has advised Tethys that it has access to a US$51 million credit facility from a leading Kazakh bank (all of which is undrawn) in support of the Transaction. Certain supporting information has been provided and the provision of further confirmatory documents is provided for under the LOI.
  • Once the Investment Agreement has been entered into, the Company anticipates that an additional eight weeks would be required to complete the Placing. The Placing and Further Financing are subject to regulatory approvals, including approval of the Toronto Stock Exchange, and shareholder approval as required by the rules of the Toronto Stock Exchange.

Tajikistan Asset

As previously disclosed to the market on October 12, 2015, defaults have been declared under the Tajikistan licence and Tethys’ subsidiary Kulob Petroleum Limited (“KPL”) has been served with a notice to withdraw from the project by CNPC Central Asia B.V. and Total E&P Tajikistan B.V. (the “Bokhtar PSC partners”). The parties will work together in good faith and using all commercially reasonable efforts to cure those defaults and the notice of withdrawal or have them set aside.

Current Financial Position

There can be no certainty that the Interim Financing, the Placing or the Further Financing will be completed or that the Investment Agreement will be entered into. The Company currently does not have sufficient funding to meet its funding obligations in the next twelve months and therefore, without the Transaction, there is significant doubt about the Company’s ability to continue as a going concern. If this Transaction does not proceed, there can be no assurance that management will be successful in securing alternative funding or that management would have sufficient time to implement any alternative transaction, which would be required to enable the Company to continue as a going concern.

About Tethys

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.

About Olisol

Olisol has advised that it will pursue the transaction through its wholly-owned subsidiary Olisol Petroleum Limited. Olisol and its subsidiaries and affiliates have investments in energy and oil & gas operations in the Russian Federation and Kazakhstan. Olisol is incorporated under the laws of Cyprus and is headquartered in Almaty, Kazakhstan.


Some of the statements in this document are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of the Company or its officers with respect to the Interim Financing, the Placing and the Further Financing, and curing defaults under the Bokhtar PSC. When used in this document, the words “expects,” “believes,” “anticipates,” “plans,” “may,” “will,” “should” and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements including with respect to completion of the Placing, the Interim Financing and Further Financing and receipt of proceeds, required shareholder approval and required regulatory approvals, use of proceeds, and receipt of funds pursuant to the Interim Financing within anticipated timeframes, effective implementation of the agreed form Relationship Agreement. In addition, there is significant uncertainty whether CNPC and Total will agree to any alternative remedy in respect of the default under the JOA by Tethys, if no such agreement is reached whether Tethys will be able to retain any interest in the Tajik asset or if as an alternative Tethys is forced to assign or sell its interest in the Tajik asset whether it will realize any proceeds from such assignment or sale.

The forward-looking statements are based on the following assumptions: that the Investment Agreement will be entered into, that the Placing and Further Financing will be completed and all shareholder required approvals will be obtained, that conditions will be fulfilled and funds received under the Interim Financing within anticipated timeframes the fact that the Bokhtar PSC Partners will allow the Company to negotiate a cure to the default under the JOA.

No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity, and shareholders of the Company are cautioned not to place undue reliance on the forward-looking statements. Save as required by the Listing Rules and applicable law, the Company does not undertake to update or change any forward-looking statements to reflect events occurring after the date of this announcement.

CAMARCO (Financial PR)
Ginny Pulbrook/ Billy Clegg / Georgia Mann
+44(0)203 757 4983


Tethys Petroleum Limited