Agrees to acquire a 2% stake in Block 53 onshore Oman

Transaction subject to waiver of pre-emption rights

USD 32m deal to be funded by cash at hand

Agrees to acquire a 2% stake in Block 53
On 23 December Tethys Oil announced it has agreed to acquire a 2% participating interest in Block 53 onshore Oman from Total. The Occidental operated heavy oil field had production of 123kb/d in 2017.The transaction should add some ~2kb/d to Tethys Oil on a net before government take basis. On a post-government take basis we expect the transaction to add 0.6-1.2kb/d of volumes to Tethys Oil, depending on the costs incurred in producing the oil.

Limited information before pre-emptions has been waived
The transaction is subject to government approval and waiver of pre-emption rights. Before such rights has been waived, Tethys will disclose limited data on reserves, costs and tax position on the field. Rystad estimate 11.28mill bbl net 2P reserves to the 2% interest, which implies USD 2.84/bbl 2P reserves, which compares favorably to a current USD 7.6/bbl for Tethys. However, given the maturity of the field, and it having produced such significant volumes there is likely limited historical cost oil (i.e. a lower net take to Tethys of the 2P reserves), and further, the Block 53 is likely to realize lower prices due to the oil being heavier.

Significant oil price movements lately
There has been significant oil price movements (in both negative and positive directions) over the holidays. As a reminder, before implementing the transaction to our estimates, we find a sensitivity towards the oil price of 0.6-0.7x, i.e. 5% change in oil price implies a 3-4% reduction in our NAV. Following the transaction, this sensitivity is expected to increase due to expected lower relative net cash position.

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