Update on Possible Offer from Nostrum Oil & Gas PLC

September 23, 2015

GRAND CAYMAN, CAYMAN ISLANDS – Tethys Petroleum Limited (“Tethys” or the “Company”) announces that Tethys and Nostrum Oil & Gas PLC (“Nostrum”) have entered into a non-binding and indicative letter of intent (the “LOI”) setting out proposed terms upon which Nostrum would acquire the entire issued and to be issued share capital of Tethys (the “Proposed Offer”). The Company has agreed to grant Nostrum a limited period of exclusivity until 11:59 p.m. London time on October 6, 2015 (unless such date is mutually agreed to be extended by the parties) in connection with the Proposed Offer and any potential resulting formal offer.

In connection with the Proposed Offer, Nostrum has also proposed the terms of a potential interim financing facility of up to US$20 million (the “Interim Financing”) to fund the Company’s cash requirements from the date of the execution of key transaction documents through until the date of completion of any formal offer.

Possible Offer from Nostrum
The Proposed Offer provides for a price of C$0.147 per Tethys share, which would be settled in fully paid ordinary shares of Nostrum. This price represents a premium of 63% to the closing market price of an ordinary share of Tethys on the TSX on 22 September 2015. The exchange ratio of Nostrum to Tethys shares would be 1 Nostrum share for every 69.4333 Tethys shares, representing the closing price of GBP 5.005 of a Nostrum share on the London Stock Exchange on 22 September 2015 and the CAD/GBP closing exchange rate on 22 September 2015 of 2.0393 CAD to 1.00 GBP.

Conditions of the Proposed Offer, amongst others, include the following:
• receipt of all necessary and relevant governmental and joint venture partner consents in Kazakhstan, Tajikistan and Georgia;
• certain additional customary conditions as to the status of the business and financial condition of Tethys up until completion of the Proposed Offer;
• the receipt of irrevocable undertakings from each director of Tethys to accept a formal offer (on the terms above) in respect of each of the Tethys shares in which they are beneficially interested;
• receipt of support for the Proposed Offer from the three major shareholders of Tethys in form and substance satisfactory to Nostrum;
• the receipt of acceptances in respect of 75% of the Tethys shares to which the Proposed Offer relates, or such lower threshold above 50% as Nostrum may determine; and
• other customary conditions.

The LOI provides that the parties shall both use all commercially reasonable endeavours to execute an implementation agreement setting out details of, inter alia, the cooperation and assistance to be provided by Tethys and the role and responsibilities of Nostrum in connection with any formal offer (the “Implementation Agreement”) on or before the end of the Exclusivity Period (unless such date is mutually agreed to be extended by the parties). A breach of the terms of exclusivity by Tethys during this period would result in a US$1 million break fee becoming payable by Tethys. The parties anticipate, based on a number of assumptions, some of which may be out of the control of the parties, that it would take approximately two months from the date of executing the Implementation Agreement for Nostrum to prepare and mail a formal offer document to Tethys shareholders, which offer would be open for a minimum of 35 days as required by applicable Canadian securities laws.

As Tethys is a company registered in the Cayman Islands, with its primary listing on the Toronto Stock Exchange, any formal offer that is made for Tethys would not be subject to the provisions of the UK City Code on Takeovers and Mergers, but would however be made in accordance with laws of the Cayman Islands and applicable Canadian and UK securities laws, including Canadian regulations governing takeovers.

Interim Financing
The LOI provides that Nostrum would make available an interim financing facility of up to US$20 million (the “Interim Financing”) to Tethys’ wholly owned subsidiary, Tethys Kazakhstan SA, subject to, among other things, due diligence and satisfactory documentation. Draw-downs of the Interim Financing Facility would be in accordance with a liquidity budget, to be agreed between Tethys and Nostrum during the Exclusivity Period, which may include funding for Tajikistan work obligations, interim capex programmes in Kazakhstan, exploration in the Kul-bas licence and other general working capital purposes. Covenants governing the use of proceeds, and the monitoring and control of expenditure of the proceeds will be included as part of the Interim Financing.

Key terms of the potential Interim Financing are as follows:

• an additional US$20 million in further interim funding to Tethys’ subsidiary, Tethys Kazakhstan SA, in addition to the US$5 million loan financing provided to Tethys Petroleum Limited on 10 August 2015 (the “Existing Nostrum Funding”);
• a maturity of the end of August 2016 (to match the Existing Nostrum Funding);
• an interest rate equal to 2% per annum above the current yield on Nostrum’s 2019 bonds;
• the Interim Financing and the Existing Nostrum Funding to be guaranteed by Tethys Petroleum Limited in respect of the Interim Funding, Tethys Kazakhstan SA in respect of the Existing Nostrum Funding, and the following entities in respect of both the Interim Funding and the Existing Nostrum Funding: Transcontinental Oil Transportation SPRL, Tethys Tajikistan Limited, Tethys Services Kazakhstan LLP, TethysAralGas LLP, Kul-Bas LLP, Tethyda Limited, South Caucasus Petroleum Corporation and Tethys Services Georgia Limited;
• the Interim Financing and the Existing Nostrum Funding to be secured by pledges given by:
o Tethys Services Kazakhstan LLP, Kul-Bas LLP and TethysAralGas LLP over the subsoil use contracts and related licences held by such entities in Kazakhstan (but that Kazakh Ministry of Energy approval of the granting of the pledges shall not be a prerequisite for drawdown of the funding); and
o Tethys Kazakhstan SA over the participatory interests of Tethys Services Kazakhstan LLP, TethysAralGas LLP and Kul-Bas LLP;
• Nostrum would be granted the right for an observer to attend board and committee meetings of Tethys and its group companies and an officer of Nostrum would be appointed as Tethys’ representative on the Operating Committee constituted pursuant to the Joint Operating Agreement in respect of the Company’s Tajik asset;
• No farm down of the Company’s Georgian or Tajik assets may be agreed without Nostrum’s consent, and any funds realised pursuant to any such farm down would first be used to repay the Interim Financing together with accrued interest and a make-whole amount;
• the Interim Financing and the Existing Nostrum Funding to become repayable, together with accrued interest, an interest make-whole to maturity, an amount equal to Nostrum’s third party fees for the Proposed Transaction, and a repayment premium of US$750,000 upon:
o the board of Tethys withdrawing support for the Proposed Offer after execution of a definitive implementation agreement for the Proposed Offer, other than as a result of Nostrum itself withdrawing the Proposed Offer, or Nostrum committing a material breach of the definitive implementation agreement for the Proposed Offer; or
o the termination or cancellation of any of the Tethys group’s Kazakh exploration and production licences/contracts (other than the Kul-Bas Exploration and Production Contract);
• Nostrum may also require early pre-payment of the Interim Financing:
o in full with a pre-payment fee equal to six month’s interest plus an amount equal to the documented fees of Nostrum’s advisers in the event of a change of control of TPL or Tethys Kazakhstan SA (as the borrower); or
o in part in the event of a successful farm down of Tethys’ Georgian or Tajik assets, without the aforementioned pre-payment fee;
• upon early prepayment or acceleration of the Interim Financing, or if fewer than 75% of shares are tendered in connection with any formal offer (meaning that such offer does not become unconditional as to acceptances) by the offer closing date, then, at the option of Nostrum, a proportion of the Interim Financing to be agreed may be exchanged for 100% of the voting and economic interests of Tethys Tajikistan Limited, subject to Tethys Kazakhstan SA’s prior ability to repay such amount within ten business days of Nostrum’s election and all applicable laws, regulations and necessary regulatory consents and approvals.

Conditions of the potential Interim Financing, amongst others, include the following:
• the negotiation and execution of the Implementation Agreement prior to the end of the Exclusivity Period;
• the pledge agreements and ancillary security documents being agreed and executed during the Exclusivity Period;
• the negotiation and execution of a definitive Interim Financing agreement, prior to the end of the Exclusivity Period;
• the unanimous recommendation of the Proposed Offer by the Board of Tethys; and
• the receipt of various third party consents.

Should Nostrum and Tethys reach agreement and enter into binding documentation in respect of the Interim Financing including in respect of the above-mentioned security arrangements, and funds are drawn down pursuant to such Interim Financing, it is noted that if the board of Tethys changes its recommendation in respect of the Proposed Offer, this would trigger acceleration of the Interim Financing, which may result in Nostrum being able to seek to exercise its security taken in connection with the Interim Financing.

Current Financial Position
There can be no certainty that any Formal Offer will be made by Nostrum or that the Interim Financing will be finalised, or as to the terms on which any Formal Offer might be made or any Interim Financing may be finalised. The Company currently does not have sufficient funding to meet its funding obligations in the next twelve months and therefore, without this transaction including the Interim Financing, there is significant doubt about the Company’s ability to continue as a going concern. If this transaction including the Interim Financing 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.

The Company has also currently not paid the most recent cash call issued by the Bokhtar Operating Company in connection with Tethys’ Tajik asset. A payment is required to be made by October 9, 2015 in order to remedy this non-payment and avoid the Tethys’ contractor party being subject to various potentially very onerous remedies that other contracting parties may seek to enforce under the Joint Operating Agreement relating to Tethys’ Tajik assets, which may result in a significant impairment of the value of these asset. If binding documentation has not been entered into in connection with the Interim Financing by the end of the Exclusivity Period, it is very likely that the Company will not be able to make the payment within the prescribed timeframe that would prevent the aforementioned scenario arising.

** John Bell, Executive Chairman of Tethys, commented:**
“Following further negotiations, Tethys and Nostrum have agreed headline commercial terms on a Proposed Offer and an all important potential interim financing facility. As a result, Tethys is working hard to finalise the implementation agreement for the Proposed Offer and the agreements for the Interim Financing until completion. The Board aims to deliver this transaction and conclude the strategic review with a binding offer from Nostrum. The Board will update the market in due course.”

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 Nostrum
Nostrum is an independent oil and gas company currently engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin. Its shares are listed on the London Stock Exchange (ticker symbol: NOG). The principal producing asset of Nostrum is the Chinarevskoye field, in which it holds a 100% interest and is the operator through its wholly-owned subsidiary Zhaikmunai LLP. In addition, Nostrum holds a 100% interest in and is the operator of the Rostoshinskoye, Darinskoye and Yuzhno-Gremyachenskoye oil and gas fields through the same subsidiary. Located in the pre-Caspian basin to the north-west of Uralsk, these exploration and development fields are situated approximately 60 and 120 kilometres respectively from the Chinarevskoye field.

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 a possible offer or agreement and further financing. 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 the fact that there is significant uncertainty that discussions between Tethys and Nostrum will lead to an agreement or offer to shareholders or to any further financing being provided by Nostrum to Tethys. Moreover, even if Nostrum were to make an offer to shareholders, there is no certainty that such offer would be at a price in excess to current market prices or that the conditions to any such offer could be satisfied.

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.

For more information please contact:

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