ALMATY, KAZAKHSTAN, Sep 16, 2010 (MARKETWIRE via COMTEX) —
Tethys Petroleum Limited (“Tethys” or the “Company”) (TSX: TPL) today announced that it had signed a gas sales contract which will move the Company into a position of positive operating cash flow. This contract is for the initial sales of gas from the Akkulka gas field in Kazakhstan and will double current gas production and more than double current gas revenue. First deliveries under this contract are expected before the end of this month.
Bernard Murphy, Chief Financial Officer of Tethys, said, ” This is an important milestone for our company as with Akkulka gas on production combined with our existing revenue streams we will have a positive operating cash flow for the Company as a whole. This provides a strong base to grow from with our planned step up of oil production in Kazakhstan from 750 barrels of oil per day (“bopd”) currently to 3-4,000 bopd in Q2 2011, and also planned oil production increases in Uzbekistan from our radial drilling program and new horizontal well. It is important to us to generate cash whilst we are appraising our exciting Doris oil discovery in Kazakhstan and exploring for more oil in the immediate area with the goal to become self-funding in the long-term.”
Brief Operations Update
Tethys also gave a brief update on current operations activities in Kazakhstan.
On the G6RE (Dodone) well operations are underway to secure the deeper part of the hole prior to commencing a testing programme. Different formation pressures in permeable, potentially oil bearing reservoir intervals in the deeper part of this well have resulted in operations taking more time than originally expected and it is unlikely that the testing programme will commence until sometime next month.
The AKD03 (Dione) exploration well is currently at a depth of 2,823 metres (in what is interpreted to be the middle Jurassic sequence) and casing has been run. In order to obtain early additional data for planning of the Doris area development a limited testing programme was attempted on one of the identified potential oil bearing zones in the well but mechanical issues prevented this test programme working satisfactorily and the results were inconclusive. Having had technical discussions with the Kazakhstan technical regulatory authorities and so as not to compromise the well on reaching the primary target of the Triassic it has been decided to drill to the current planned total depth of approximately 4,300 metres whereupon a comprehensive and efficient testing programme can be carried out on all the identified prospective zones, some of which had live oil shows, and including any zones that are found at deeper levels. Drilling of this well should be completed sometime in October after which the testing programme will commence.
Background Information on the Akkulka Gas Contract:
Gas flows from the Kyzyloi and Akkulka fields along a company-built 56 kilometre pipeline to Tethys’ booster compressor station adjacent to the tie-in point to the major Bukhara-Urals export trunkline system where gas fired compressors compress the gas into the trunkline. Kyzyloi field (Phase 1) gas production is already being sold under the long-term take-or-pay contract with Asia Gas NG LLP at a price of US$36 per thousand cubic metres (Mcm) including value added tax (“VAT”) which can be recovered by the Company.
The Akkulka (Phase 2) contract is also with Asia Gas NG LLP and is priced at US$38 per Mcm (including VAT). Gas sold under this contract is for domestic sales and as such subject to a small (0.05%) royalty payment to the Kazakh State. The new Akkulka contract runs for a period of 2 years with the parties agreeing to assess the price after one year. The average daily contract quantity for Phase 2 is expected to be approximately 500 Mcm, which gives a total production for both phases together of approximately 1,000 Mcm per day.
Tethys is focused on oil and gas exploration and production activities in Central Asia with activities currently in the Republics of Kazakhstan, Tajikistan and Uzbekistan. 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” which may include, but is not limited to, statements with respect to our operations. Such forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including the risks relating to regulatory approvals and of sufficiency of the proceeds for the purposes contemplated. Operating Cash Flow Positive assumes that all revenue is now realised at the current forecast production levels.
See the description of risks and uncertainties and underlying factors and assumptions relevant to the offering and “forward looking information” contained herein and to the Company’s business, including its exploration and development activities, contained in the Annual Information Form dated March 31, 2010 and other corporate filings (which are incorporated herein by reference). 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.
Contacts: Tethys Petroleum Limited Sabin Rossi Vice President Investor Relations +1 416 572 2065 +1 416 572 2201 (FAX) email@example.com www.tethyspetroleum.com In Asia-Pacific Quam IR Anita Wan Associate Director Office phone/fax + (852) 2217-2999 firstname.lastname@example.org
SOURCE: Tethys Petroleum Limited