Tethys Oil Annual Report 2014

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FY2014 Annual Report · Tethys Oil

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Annual Report 2014

Farha South oil field

9,000

6,000

3,000

2010

2011

2012

2013

2014

2015

Annual General Meeting
The Annual General Meeting will be held on 13 May 2015, 3 p.m. at Spegelsalen, Grand Hôtel, Södra Blasieholms-
hamnen 8, in Stockholm. To attend the AGM, please see Tethys Oils website, www.tethysoil.com, for more information.

Operational and financial summaryMSEK (unless specifically stated)20142013201220112010Production, before government take, bbl2,804,2401,709,7061,399,518423,46941,764Average daily production, before government take, bbl7,6924,6843,8241,160114Net sales, after government take, bbl1,464,228850,926776,248147,22818,898Average selling price per barrel, USD103.87106.63110.35107.3780.56Net sales of oil and gas1,04659258410411Operating result40428533683101EBITDA75347950984101Net result for the period3502403146980Earnings per share, SEK9.866.769.112.122.60Cash and cash equivalents37229524893191Shareholders’ equity1,6751,100860456380Non-current liabilities 254224172–Investments25929087520829Number of shares at the end of the year35,543,75035,543,75035,543,75032,543,75032,504,489Of which repurchased shares at year end298,160––––Market capitalization at the end of the year2,1682,3991,8931,4321,845Share price at the end of the year, SEK61.0067.5053.2544.0056.752P-reserves in Oman (million barrels of oil)17.815.214.3––Production development, August 2010 to March 2015, BOPD net to Tethys Oil before government takeLetter to the shareholders

Dear Friends and Investors
In 2014, our sales increased with 77 per
cent and amounted to MSEK 1,046. Our
EBITDA increased with 57 per cent and
amounted to MSEK 753. Our net result
for the year increased with 46 per cent to
the new record level of MSEK 350. We
entered 2014 with net debt of MSEK 127
(SEK -3.60 per share) and exited with a
net cash position of MSEK 347 (SEK 9.80
per share).

In 12 months our main asset, Blocks 3 and
4 onshore Oman, threw off enough cash
to make this transition possible. In total
we produced 2.8 million barrels of oil in
2014, which is 64 per cent more than in
2013. And the strong performance con-
tinues. Also in the lower oil price environ-
ment of 2015 we expect Blocks 3 and 4
to continue to generate free cash, also after
taking into account a substantial invest-
ment budget on the Blocks.

So at the time of writing in April 2015,
Tethys stands stronger than ever:

• We are strong enough to pay a dividend
and distribute a total of MSEK 106
(SEK 3.00 per share) back to shareholders.
• We are strong enough to pursue new
projects, both in Oman and elsewhere.
Post distribution to shareholders we still
have ample liquidity and add to that an
untapped credit line of up to MUSD
100, should opportunities arise.

• And we are strong enough to continue
investing in Blocks 3 and 4 to enable
continued grow. Our March production
from onshore Oman was a new record:
For the first time we produced on aver-
age during one month more than 9,000
barrels of oil per day. So far this year
average daily production is up by 14 per
cent compared to average daily produc-
tion 2014.

But of course, today’s strength follow from
the remarkable development we saw dur-
ing 2014.

2014 was the year Blocks 3 and 4 onshore
Oman really showed their true potential.
The Farha South oil field on Block 3 con-
tinued its strong performance driven by
continued development and implemen-
tation of the water injection programme.
The field expanded with new production
wells in producing fault blocks and previ-
ously undrilled fault blocks along the Farha
trend were successfully drilled and put into
production. The production enhancing
water injection programme was further
increased with new water injector wells.

The Saiwan East field was stable and a new
oil field was borne. The successful explo-
ration and appraisal work on the B4EW4
structure and nearby structures in the
Lower Buah area has resulted in the formal
designation of this area to the status of a
new oil field – Shahd.

The Shahd oil field is Tethys’ third field on
Blocks 3 and 4 in Oman, but most likely
not the last. Exploration efforts continue in
several parts of the over 30 000 square kilo-
metres large Blocks, both adjacent to cur-
rent production and in other areas. In 2014
some 1,200 square kilometres of new 3D
seismic was shot, which will be continually
evaluated. In 2014 we invested a total of
MSEK 263 in capital expenditure such as
wells, seismic studies and infrastructure.
Given the large remaining potential, we
expect investments to continue at a fairly
high level fully funded from production
cash flow.

Due to the lower oil prices, we made a write
down in 2014 related to our producing Lith-
uanian assets. Production continues however,
and at the time of writing the project is cash
flow positive. On the Lithuania exploration
side, we look forward to the upcoming drill-
ing programme on the Raseiniai licence.

But enough said here. Please enjoy this
annual report covering our most remark-
able year 2014.

And stay with us, we are in a strong posi-
tion and we intend to strengthen it further!

Stockholm in April 2015

Magnus Nordin
Managing Director

Milestones2001Tethys Oil was founded2004IPO and listing on First North, Stockholm2006First Company-operated well drilled in Denmark2007Acquisition of interests in Blocks 3 & 4 in Oman201020 per cent of Block 3 & 4 farmed out to MitsuiEarly production from Block 3 & 4 commences2012Oil producing assets onshore Lithuania acquiredThree year MSEK 400 bond loan issuedFDP for Block 3 & 4 approved, licence terms extented until 20402013Listing on NASDAQ Stockholm2014A four-year, up to USDm 100, Senior Revolving Reserve-Based Lending FacilityMSEK 400 bond redeemedAverage daily production exceeds 7,000 bopdLithuania

Area

Interest

Phase

Gargzdai

884 km²

25 %*

Production

Rietavas

1,594 km²

30 %*

Exploration

Raseiniai

1,535 km²

30 %*

Exploration

* The interest in the Lithuanian licences are held indirectly

France

Area

Interest

Phase

Attila

1,986 km²

40 %

Exploration (dormant)

Alès

215 km²

37.5 %

Exploration (dormant)

Tethys Oil

Tethys Oil is a Swedish upstream energy company focused
on oil and gas exploration and production in onshore areas
with known discoveries. Tethys Oil’s core area is Oman,
where the company holds onshore licence interests, the
most significant being Block 3 & 4. In Oman, Tethys
Oil has proved and probable oil reserves of approximately
18 mmbo and the oil production amounted to over 2.8
mmbo in 2014. Tethys Oil also has production in Lithu-
ania and exploration licences in Lithuania and France. The
head office is located in Stockholm and the company’s
shares are listed on NASDAQ Stockholm (TETY).

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Oman

Area

Interest

Phase

Blocks 3 & 4

34,610 km²

30 %

Production

Block 15

1,389 km²

Under
discussion

Exploration

Blocks 3 & 4
18 mmbo 2P reserves as per 31 December 2014
2.8 mmbo production in 2014

Vision and strategy

License
acquisition

Production

Exploration

Development

Exploratory
drilling

Appraisal

Tethys Oil aims to have a well-balanced
and self-financed portfolio of oil and
natural gas assets. The company also aims
to conduct business in an economical,
socially and environmentally responsible
way, to the benefit of all stakeholders.

The company’s strategy is:
• Organic growth in existing assets by
taking a proactive role and by building
strategic partnerships and focusing on
production and cash flow and thereafter
on increasing reserves

• Seek new growth platforms, primarily
onshore appraisal projects with material
impact and low entry cost

In the company’s existing assets, a proac-
tive role with strategic partners is key to
maximizing the potential of the projects.
Growth will primarily come from appraisal
projects where oil has previously been dis-
covered, but was deemed sub-commercial
for various reasons.

Operational targets
• Focus on increasing production and

reserves in Oman

• Evaluation of assets in Lithuania
• Actively evaluate new projects

Reserves

Oman
Tethys Oil’s net working interest reserves in
the Sultanate of Oman as per 31 Decem-
ber 2014, amounted to 11,794 thousand
barrels of oil (“mbo”) of proven reserves
(1P), 17,779 mbo of proven and probable
reserves (2P) and 25,080 mbo of proven,
probable and possible reserves (3P).

Development of reserves
(Audited by DeGolyer and MacNaughton)

mbo

Total 31 Dec 2013

10,800 15,201 19,968

Production 2014

-2,759

Revisions

2,116

2,858

4,136

Discoveries

1,637

2,479

3,735

Total 31 Dec 2014

11,794 17,779 25,080

In 2014 Tethys Oil added 1P reserves of
3,753 mbo, representing an increase of 35
per cent. The company added 2P reserves
5,337 mbo, representing an increase of 35
per cent. The 3P reserves increased with
7,871 mbo, representing an increase of 39
per cent. The increase in 2P reserves repre-
sents an internal reserve replacement ratio
of 193 per cent.

Reserves, 31 December 2014
(Audited by DeGolyer and MacNaughton)

mbo

Farha South Field,
Oman

Saiwan East Field,
Oman

Shahd Field (Lower
Buah area), Oman

8,303 11,186 13,285

499

1,266

2,940

2,992

5,327

8,855

Total*

11,794 17,779 25,080

* Numbers may not add up due to rounding.

The reserves in the Farha South field are
from the Barik reservoir section only. The
reserves in the Saiwan East field are in the
Khufai reservoir and the reserves in the
Shahd field are in the Lower Buah, Khufai
and Lower as Bashir reservoirs.

As a consequence of the oil price, the Lith-
uanian reserves are deemed sub-economic
and are not included as reserves as per
31 December 2014.

Production

Tethys Oil produces oil in two coun-
tries, Blocks 3 & 4 onshore Oman and
the Gargz dai licence onshore Lithuania.
Tethys Oil has 30 per cent interest in
Blocks 3 & 4 Oman and an indirect inter-
est of 25 per cent of Gargzdai Lithuania.

Production from Blocks 3 & 4 onshore
Oman derives from three fields – the
Farha South, the Shahd and the Saiwan
East oil fields. The production develop-
ment has mainly been driven by contin-
ued implementation of the water injection

programme on Farha South and from the
successful exploration and appraisal results
from the Shahd oil field. Production from
Oman accounts for 99 per cent of total
production.

Tethys Oil’s average daily production in Oman (barrels per day), before government take

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

Oct

Nov
Q4, 2013

Dec

Jan

Feb
Q1, 2014

Mar

Apr

May
Q2, 2014

Jun

Jul

Aug
Q3, 2014

Sep

Oct

Nov
Q4, 2014

Dec

Jan

Feb
Q1, 2015

Mar

1010

Farha South oil field

1111

The Said bin Taimur mosque in Muscat
Photo by Krishnakumar Omanakuttan

Oman
Part of the oil fairway

Tethys Oil’s core area is Oman. Oman is
strategically located on the tip of the east-
ern Arabian Peninsula, neighbouring the
United Arab Emirates in the northwest,
Saudi Arabia in the west and Yemen in the
southwest. Oman overlooks the Arabian
Sea, the Sea of Oman and the Arabian
Gulf. It also controls the Strait of Hormuz,
which is one of the most important areas in
the region, linking the Sea of Oman with
the Arabian Gulf. The coastline amounts
to 3,165 kilometres. Oman covers an area
of 309,500 square kilometres. The capital
is Muscat and the population amounts to
3.3 million.

Oman’s first commercial oil discovery came
in the early 1960’s. In 2013, Oman had
162 active oil fields and 32 active gas field.
Oman’s neighbouring countries on the
Arabian Peninsula, including Iran and Iraq,
is producing over 30 per cent of the world’s
total oil production and holds about 50
per cent of the world’s oil reserves. Oman’s
annual production in 2013 amounted to
about 940,000 barrels per day (BP Statisti-
cal Review of World Energy June 2014),
equivalent to approximately half of the
Norwegian oil production.

Licence terms
Licenses are held through Exploration &
Production Sharing Agreements (EPSA).
The Omani government fiscal terms are
attractive and typically allow the holder of
a licence to recover their costs up to 40 per
cent of the value of total oil production. This
is referred to as cost oil. After deducting any
allowance for cost oil, the remaining oil pro-
duction is typically split 80/20 between the
government and the partners. If there is no
cost oil to be recovered, the partners receive
their share of 20 per cent of the oil produced.
The terms of the agreement thus result in the
joint partnership’s share of production in the
interval 20–52 per cent, depending on avail-
able recoverable cost.

Block 15

Muscat

Block 3

Block 4

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Tethys Oil in Oman

Tethys Oil’s most significant asset in Oman
is Blocks 3 & 4. The blocks are located in
the eastern part of Oman and cover an area
of 34,610 square kilometres, correspond-
ing to an area the size of Belgium. Tethys
Oil acquired the company’s interest in the
blocks in 2007. In 2010, an early produc-
tion system was launched. In 2012, the
Field Development Plan was approved
and the exploration and production terms
for the licence were extended until 2040.
The oil production amounted to over
2.8 mmbo in 2014. The production from
the blocks derives from three fields: Farha
South, Saiwan East and Shahd oil fields.
Tethys Oil, through its wholly owned sub-
sidiary Tethys Oil Block 3 and 4 Ltd, has a
30 per cent interest in the blocks. Partners
are Mitsui (20 per cent) and the operator
CC Energy Development S.A.L (Oman
branch) (50 per cent).

Tethys Oil has also interest in Block 15 in
the north western part of central Oman.
The licence terms for Block 15 expired in
2014. Discussions regarding the future of
the block are ongoing.

Muscat Office
Tethys Oil
is employing the company’s
specialists close to the operations. Tethys
Oil’s office in Muscat is staffed up with senior
geologists, geophysicists and engineers.
Preference
to Omani
is always given
Nationals.

Västerås

Stockholm

Nyköping

Göteborg

Size comparison of license area with central Sweden

The Farha South Oil Field

The oil from the Barik layer is of high qual-
ity, more than 40 degrees API and does not
contain any sulphur. The low content of
gas combined with the absence of a water
drive in the Barik layer, make pumps and
water injections necessary to reach a sat-
isfactory production and extraction rate.
The work programme over the last years
has largely been focused on expanding the
water injection programme on the Farha
South field with some 35 injector wells
drilled on the field.

The fields continue to be expanded when
previously undrilled fault blocks are suc-
cessfully drilled. A large 3D seismic study
has been conducted in the area covering
510 square kilometres south of the cur-
rent production area. If the wells drilled

The Farha South oil field has pro-
duced the majority of the company’s
total oil production to date. The field
also holds the main part of Tethys
Oil’s oil reserves. The production has
grown steadily since the field came on
stream in 2010. The oil is extracted
from the Barik sandstone in some 20
different fault blocks at an average
depths of 1,600 metres.

The first well on the Farha South area, with
Tethys Oil as partner, was Farha South-3
which was drilled in early 2009. The pro-
ducing layer in the field is the Barik sand-
stone. The Barik sandstone is fine grained
and porous sandstone in several layers, sep-
arated by tight layers. The Barik layer in the
Farha South oil field is not one large con-
tinuous reservoir. The oil is instead trapped
in smaller, usually adjacent fault blocks.
These faults are relatively small and 3D seis-
mic has been essential in the mapping of
drillable fault blocks. Some 20 fault blocks
have been so far put into production.

in the South Farha South area, as this area
is called, are successful, it may be a strong
indication that the Farha trend extends
into the south outside the currently pro-
ducing area. In addition to a potential
expansion of the field to the south, the
Lower Al Bashir reservoir also holds fur-
ther potential. Oil has been discovered in
the Lower Al Bashir reservoir, but it is a
tricky reservoir. It however has the poten-
tial to turn into a major asset.

M AK

V G

I K

Fault blocks at Farha South field

Oil producing fault blocks

Drilled fault blocks

Prospective fault blocks

Faults

4 km

The Shahd Oil Field

The Shahd oil field, previously called
“Lower Buah exploration area”, has
since oil in the Shahd oil field was
first discovered in early 2013 quickly
turned into a major producing area.
The field has delivered the majority
of the increase in the company’s total
reserves the last two years. The oil is
extracted from the Lower Buah car-
bonates at average depths of 2,000
metres. Like the Farha field, this area
is also highly faulted.

The oil discovery in the Lower Buah layer
at the Shahd oil field was made in March
2013. The first discovery was made approx-
imately 20 kilometres west of the Saiwan
East oil field. The oil from the Lower Buah
layer holds a quality of approximately 38
degrees API. The Lower Buah layer in the
field is not one large continuous reservoir.
The oil is instead trapped in separate reser-
voirs. So far, several Lower Buah reservoirs
have been put into production.

year was on interpretation of data. A pat-
tern has emerged, suggesting that fractures
may play an important role in understand-
ing this highly faulted area. Important
insights that have been reached are to be
implemented during 2015. Among these
insights, water injection is expected to
have a significant impact on the produc-
tion from the Lower Buah reservoire, and
an injection programme has been launched
early in 2015.

The strong growth in reserves and pro-
duction during the first six months 2014
resulted in an upgrade and revision of the
geological model for the Shahd oil field,
and focus during the second half of the

New leads in the Shahd oil field continue
to be identified as seismic interpretation
goes on and the geological understanding
of the area increases. One rig is expected to
be employed full time during all of 2015
in this area.

Gharif

Ghudun

Barik
Al Bashir
Miqrat

Amin

Buah

Shuram

Khufai
Masirah Bay

Formations
Geological formations is natural formations
and structures in the rock and ground which
have occurred as a result of usually very slow
geological processes of different kind and ages.

A formation is a rock unit that is distinctive
enough in appearance that a geologic mapper
can tell it apart from the surrounding rock layers.
The thickness of formations may range from
less than a meter to several thousand metres.

The term “formation” is often used informally
to refer to a specific grouping of rocks, such as
those encountered within a certain depth range
in an oil well.

On Blocks 3 & 4 in Oman, reservoirs in
formations like Khufai, Barik, Lower Al Bashir,
Buah and Masirah Bay have been explored.
Tethys Oil has reserves and production in the
reservoirs Khufai, Barik, Lower Al Bashir and
Lower Buah.

The Shahd oil field

Producing areas

Prospects / Prospective areas

Faults

The Saiwan East Oil field

The first commercial oil at the Sai-
wan East oil field was discovered in
2009. The oil is extracted from the
Khufai carbonates at depths ranging
from 1,700 to 2,400 metres. The field
is today the smallest of Block 3 and
4’s fields, both regarding reserves and
production.

Previous operators had found heavy oil
at the Saiwan East oil field, but with the
drilling of Saiwan East-2 a new discovery
of light oil was made in the Khufai layer.
This layer is today in production on the
field, producing oil with a density of 32
degrees API and some sulphur content. At
this field, Tethys Oil has had the highest
test flows from a new well, when Saiwan
East-3 tested over 10,000 bopd. The Khu-
fai carbonates at about 1,600 metres depth

has however turned out to be more com-
plex than first anticipated and the natural
decline of the Saiwan East oil field has
been substantial.

Unexpectedly large quantities of oil with
different gravities and viscosities have also
been found in the field. However, the find-
ings suggest that any potential production
from the heavy oil in Saiwan East will
require enhanced oil recovery techniques.

Alam Station
pipeline

1818

Seismic mapping Blocks 3 & 4, Oman

BLOCK 3

Alam Station &
Pipeline System

Farha South Field

Saiwan East Field

Shahd ﬁeld

BLOCK 4

2D areas

2013

3D areas

2009–2013

2014

2015

1919

Vibrator truck

Receiver truck

Geophones (receivers)

GAS

OIL

WATER

Seismic studies
The most common exploration activity
is
geophysical seismic. The principle behind
seismic is that sound waves travel at different
speeds in different materials and that the
sound waves, at
transition between
the
different materials, partly bend and reflect
back to the surface. Since rocks have different
compositions, it is possible based on variations
in the speed of the sound wave and angle, to
estimate the location of structures that could
hold oil and/or natural gas reserves in an
exploration area.

Single linear lines of seismic provide information
about the subsurface rocks directly beneath the
seismic equipment. This type of seismic data is
referred to as two-dimensional or 2D seismic,
because it provides data along two axes,
length and depth. If seismic acquisition is done
across multiple lines simultaneously, the third
dimension of width is gained, hence referred to
as three-dimensional seismic, or 3D seismic.
3D seismic offers much greater density of
information about the subsurface but is much
more costly and covers a smaller area. Since
the oil at both the Farha South oil field and the
Shahd oil field is trapped in smaller structures,
3D seismic has been essential in the mapping
of possible oil bearing structures.

Vibration trucks in operation at Blocks 3 and 4

Geophones in operation at Blocks 3 and 4

2121

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Lithuania

Lithuania is located by the Baltic Sea in the
eastern part of Europe and covers an area of
65,300 square kilometres. The neighbours
include Latvia in the north, Belarus in the
east and Poland and Russia (Kaliningrad)
in the south. The capital is Vilnius and the
population amounts to 3.5 million.

Oil was discovered in Lithuania some 60
years ago. Oil shows were first encountered
in Lithuania in sedimentary rocks from
Ordovician to early Silurian age in the well
Vilnius-1 drilled in 1949, and extensive oil
exploration began in 1958. The first com-
mercial oil accumulation in Silurian car-
bonate reservoirs, Kudirka, was discovered
in 1983. The oil is located quite deep and
the production comes from a number of
small fields.

The reservoirs were found to vary in quality
and the reservoirs in central and southern
Lithuania are showing the most favourable
characteristics. These reservoir units are
considered to be the most prospective for
oil exploration. Lithuanian crude oil is of
rather high quality and almost without sul-
phuric impurity and the expenses incurred
during the refining process are lower than
the norm.

Lithuanian oil production had its peak at
the turn of the millennium, when the pro-
duction amounted to close to 10,000 bar-
rels of crude oil per day. In 2012 the pro-
duction was 2,000 barrels per day (EIA).
The production is located in the western
part of the country. Lithuania imports
about 200,000 barrels of crude oil per day.

The Lithuanian tax regime is however very
attractive and an oil company is subject to
corporate tax and royalty.

Tethys Oil in Lithuania
Tethys Oil holds indirect interests in
three Lithuanian licences. All licences are
onshore and cover some 4,000 square kilo-
metres of the Baltic Sedimentary Basin.
Tethys Oil has an indirect ownership of 25
per cent in the producing Gargzdai licence,
and 30 per cent in both the Rietavas and
Raseiniai exploration licences. Tethys Oil
acquired the company’s first interest in
Lithuania early in 2012.

Gargzdai licence
The Gargzdai licence is located in the west-
ern part of Lithuania on the Baltic coast

LATVIA

GARGZDAI

RIETAVAS

Baltic Sea

RASEINIAI

Vilnius

LITHUANIA

BELARUS

KALININGRAD
(RUSSIA)

POLAND

and covers an area of 884 square kilome-
tres. Tethys Oil’s indirect ownership in
the licence is 25 per cent. The licence is
producing about 110 barrels of oil per day
net to Tethys Oil. The production has been
somewhat declining the last years. The
oil produced at the Gargzdai licence has
a density of about 42 degrees API and is
normally sold on weekly basis to a nearby
refinery. The price is based on and set close
to the daily Brent price. After the sharp
decline in oil price in 2014 and 2015,
the production at the Gargzdai licence
has been deemed sub-commercial. If the
oil prices are to recover, these asset could
start generating value again, and potential
enhanced recovery methods continue to be
evaluated.

Rietavas licence
The Rietavas licence is located east of
Gargzdai and covers an area of 1,594
square kilometres. The exploration licence
is valid until 2017. The Rietavas licence
has oil discoveries in the Cambrian sand-
stones and is yet quite unexplored.

The work programme on the license is
focused on evaluation of the licence area for
conventional and unconventional hydro-
carbon potential. The work programme is
fully funded from available funds within
the associated company LL Investicos. So
far a couple of exploration wells have been
drilled and seismic studies been conducted.
A new 30 square kilometres 3D seismic
study has been launched in the Silale area
in the western part of the licence.

Raseiniai licence
The Raseiniai licence is the most eastern
of Tethys Oil’s licence interests in Lithu-
ania. The licence covers an area of 1,535
square kilometres. The licence is valid until
2017. The Raseiniai licence covers a so far
unexplored trend of Silurian reefs similar
to, but expected to be of larger size, than
the Ordovician reefs found on Gotland.
The Silurian/ Ordovician shale section is
present also in the Rietavas licence.

In 2013, reefal prospects were mapped by
a 3D seismic study. These prospects have
been further investigated and in 2015,
three wells are planned to be drilled back
to back.

France

Tethys Oil has interests in two French
licence Permis du Bas-
licences. The
sin d’Alès, an exploration and produc-
tion licence in the Alès basin in southern
France. The Attila licence is located in the
oil and gas producing Paris basin, some
250 kilometres east of Paris.

Currently there are no on-going activities
on the French licences. Due to political
reasons, it is uncertain if or when any oil
and gas exploration can be conducted in
France.

BELGIUM

GERMANY

Paris

ATTILA

FRANCE

SWITZERLAND

Atlantic Ocean

BASSIN D’ALES

ITALY

SPAIN

Mediterranean Sea

2525

Sustainability

An oil company having business in differ-
ent parts of the world will sooner or later
meet issues about corporate social respon-
sibility (“CSR”), where environment of
course is the most obvious. Tethys Oil
always strives to conduct business in an
economically, socially, and environmen-
tally responsible way. The ethical require-
ments are the same regardless of where in
the world the business takes place. The
company will always follow good oilfield
practice and act as good citizens and will
under all circumstances aim to follow the
best available practices, even if this will go
beyond local laws.

In an oil project the operator is mainly
responsible for the day to day work and
the business on the site. Tethys Oil is cur-
rently not acting as operator in any of its
active assets. The activities in Tethys Oil’s
different projects are therefore decided in
cooperation with partners and primarily
the operator. Assets not operated by Tethys
Oil are independently reviewed by Tethys
Oil out of a HSES (health, safety, environ-

mental and social) perspective and Tethys
Oil will closely monitor any contractor or
operator. Wherever changes can be favour-
ably employed, such will be recommended.
Most countries today have strong environ-
mental laws and standards which of course
are a great help to an oil company in assur-
ing correct practises are followed. Tethys
Oil’s guidelines for CSR and how the
company and its employees shall behave
are described in the company’s CSR policy
which permeates the total business and is a
part of the corporate culture.

The company’s fundamental
values are:
• To act in a fair, honest and equitable

way.

• To observe local laws and regulations.
• To respect local customs and traditions.
• To observe applicable international laws

and standards.

• To uphold the ten principles of the
United Nations Global Compact on
human rights, labour standards, envi-
ronment and anti-corruption.

The agreements that Tethys Oil has with
the host nation and its partners prescribes
that the licence owner commits to be care-
ful with the environment, surroundings
and the people in the neighbourhood who
will be affected and all the work in the area
will be done by “good oil practice”. All
subcontractors that are used are subject to
the same conditions. In Oman, preference
shall be given to Omani contractors and
Omani Nationals. The company shall also
establish a fund for the Ministry of Oil and
Gas. This fund will be used for internal
and external training courses, participation
in international seminars, contribution to
scholarships etc, which can support the oil
industry.

According to the Joint Operating Agree-
ments, the operator must implement a
HSE plan that follows both international
and local standards for the oil industry. A
programme for follow up and evaluation
of the HSE plan has to be included.

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The global oil market

Europe and Eurasia

Middle East

North America

South and
Central America

Asia Pacific

Africa

Global oil production
Source: BP Statistical Review of World Energy June 2014

Production
As reported by BP Statistical Review of
World Energy dated June 2014, the global
oil production increased in 2013 by 0.6
per cent. The key drivers of long-run oil
supply include oil prices, exploration and
development of new and existing reserves,
behaviour of key OPEC member coun-
tries, technological
in the
petroleum supply chain, and geopolitical
events.

innovation

Technological innovation in the petro-
leum and other liquids supply chain is the
key component of the shift to diversified
supply sources. Increases in supply come
inter alia from new ways of appraising
wells, such as 3D seismic imaging, from
new drilling and completion techniques,
such as horizontal drilling and multi-stage
hydraulic fracturing.

Advances in technology make production
in previously inaccessible regions more fea-

sible, while higher oil prices make produc-
tion in those regions economically viable.

At the same time, the rising complexity
of the energy sector increases the costs of
oil extraction. Annual capital spending for
the industry has more than tripled in the
past 10 years, to USD 550 billion in 2011,
while the amount of oil produced per dol-
lar of investment has declined.

Regardless of other supply developments
that have recently gained considerable
market attention, including tight oil in the
United States and bitumen from oil sands
and tar sands in Canada, OPEC petroleum
liquids production continues to be critical
for world oil markets.

Saudi Arabia, Iran, and Iraq combined
have a large share of the world’s oil reserves
and resources that are relatively easy to
produce. Saudi Arabia, for many decades

the only holder of substantial spare oil pro-
duction capacity, has played a critical role
as the major swing supplier in response
to disruptions in other supply sources
and to economic fluctuations affecting
oil demand. Both Iraq and Iran have the
reserves and other resources needed to
raise their capacity and production well
above current levels if they can successfully
address some of the internal and external
“above-ground” challenges that have kept
their respective oil sectors from realizing
their potential for more than 30 years.

Consumption
The global oil consumption increased in
2013 by 1.6 per cent. The primary driver
of oil consumption growth is the economy,
but global demand in the next few years
will also be affected by the broader eco-
nomic impacts of the North American
supply revolution. In much of the OECD,
relatively slow economic growth and static

Global consumption (million barrels daily)

100

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Asia Pacific
North America
Europe and Eurasia

Middle East
South and Central America
Africa

Source: BP Statistical Review of World Energy June 2014

Europe Brent Spot Price FOB (dollars per barrel)

140

120

100

2010

2011

2012

2013

2014

2015

Source: U.S. Energy Information Administration

2828

1993
2003
2013

Global oil reserves (thousand million barrels)

Europe and
Eurasia

Middle
East

Africa

Asia
Pacific

South and
Central
America

North
America

200

400

600

800

1000

Source: BP Statistical Review of World Energy June 2014

or declining population levels contribute
to declines in liquids consumption. In
addition, many OECD governments have
adopted policies that mandate improve-
ments in the efficiency of motor vehicles.
The United States is the largest liquid fuels
consuming nation in the OECD, and it
will probably remain so in the foreseeable
future.

Virtually all global liquids demand growth
comes from non-OECD countries, par-
ticularly China and India, as strong eco-
nomic growth increases consumption in
the transportation and industrial sectors.
As China’s economy moves from depend-
ence on energy-intensive industrial manu-
facturing to a more service-oriented econ-
omy, the transportation sector becomes the
most important source of growth in liquid
fuels use. This trend will likely continue in
the future, with producers in Russia and
Central Asia also increasing production in
the eastern regions of the two countries to
meet new Asian demand.

Rising prices for liquids increase the cost
competitiveness of other fuels, leading
many users of liquids outside the transpor-
tation and industrial sectors to switch to
other sources of energy when possible.

Oil price
After experiencing exceptional volatility
during the 2008 financial crisis, oil prices
entered a period of relative stability until
the middle of 2014. During 2014 Brent oil
traded between a high of USD 115.19 per

barrel at the end of June and a low of USD
55.27 per barrel at the end of the year giv-
ing an increase in volatility and market
uncertainty not seen for years. The aver-
age oil price for Brent in 2014 was USD
98.97 per barrel which is lower compared
to 2013 (USD 108.55).

The high price levels in recent years have
enabled production of oil from discoveries
previously not commercially recoverable.
Examples of such high cost categories are
unconventional reservoirs such as shale oil,
oil sands and deep water reservoirs. The
new oil price environment puts pressure
on high cost producers while at the same
time boosting the global economy. Low
cost producers such as Tethys Oil, oper-
ating in conventional reservoirs at lower
OPEX levels are less affected by the low
prices having break even points substan-
tially lower than unconventional players.

Oil and gas investments and rig count, pri-
marily in North America, is closely moni-
tored by the market and the availability of
financing has been impacted by the sharp
decline of oil prices. OPEC has so far not
taken any action to adjust production lev-
els to counter the falling oil prices. The
actions of OPEC continue to be of signifi-
cant interest to the markets.

Different types of oil
Liquid petroleum pumped from a well
is called crude oil. Crude oil consists of
mostly hydrocarbons, but to different
extent also of oxygen, nitrogen and helium.

The oil industry normally names the oil
from its geographical origin, for example
West Texas Intermediate (WTI), Brent and
Omani Blend. Crude oil is also classified
after its chemical composition, primarily
density and sulphur. Crude oil with low
sulphur content is classified as sweet and
crude oil with low density as light. The
density of crude oil is measured in relation-
ship to the density of water according to
American Petroleum Institute (API); if the
oil’s API is higher than 10 it is light and
would float on water. If the density is lower
than 10, it’s heavy and would sink. Sweet
and light oil is considered more attractive
since it requires less refining than sour and
heavy oil.

Global oil reserves
Around one-half of the world’s proved oil
reserves are located in the Middle East, and
80 per cent are concentrated in eight coun-
tries, of which only Canada and Russia are
not OPEC members. At the end of 2013,
proved world oil reserves, as reported
by BP statistical review, were estimated
at 1,688 billion barrels – slightly higher
than the estimate for 2012. Most increases
in proved reserves since 2000 have come
from revisions to reserves in discovered
fields rather than new discoveries. Proved
reserves of crude oil are the estimated
quantities that geological and engineering
data indicate can be recovered in future
years from known reservoirs, assuming
existing technology and current economic
and operating conditions.

Corporate governance report

systems

Corporate governance practices refer to
through
the decision-making
which owners, directly or indirectly, con-
trol a company. Tethys Oil AB (publ) is a
publicly traded company listed on NAS-
DAQ Stockholm, mid cap. Tethys Oil
adheres to the Swedish code of corporate
governance (“the code”). The code is pub-
lished on www.bolagstyrning.se, where a
description of the Swedish corporate gov-
ernance model can be found. This corpo-
rate governance report 2014 is submitted
in accordance with the Swedish annual
accounts act and the code. It explains how
Tethys Oil has conducted its corporate
governance activities during 2014. Tethys
Oil does not report any deviations from
the code. The report has been reviewed by
the company’s auditors, please see page 35.

External and internal framework
for governance in Tethys Oil
External:
• Swedish companies act
• Accounting

(eg Swed-
legislation
ish accounting act, Swedish annual
accounts act and IFRS)

• NASDAQ Stockholm’s rule book for

issuers

• Swedish code of corporate governance

Internal:
• Articles of association
• Board instructions, rules of procedures
• Polices such as Administration policy,
Hedging policy, Information policy,
CSR policy etc

Shareholders
Tethys Oil’s shares are traded on the
NASDAQ Stockholm exchange. At year
end 2014 the share capital amounted to
MSEK 5.925, represented by 35,543,750
shares, each with a par value of SEK 0.17.
All shares represent one vote each. At 31
December 2014, the number of sharehold-
ers was 5,410 (3,958). Of the total number
of shares, foreign shareholders accounted
for approximately 64 per cent. 52 per cent
of the Swedish shareholding was held by
legal entities. For further information
on share, share capital development and
shareholders, see page 37 and Tethys Oil’s
website, www.tethysoil.com.

Annual general meeting
The annual general meeting (AGM) must
be held within six months of the close of
the fiscal year. All shareholders who are
listed in the share registry on the record
date, and who have notified the company
of their participation in due time, are enti-
tled to participate in the AGM. The AGM
was held in Stockholm on 14 May 2014.
The AGM was attended by about 102
shareholders, representing about 23.9 per
cent of the votes and share capital in the
company. The resolutions passed by the
meeting included the following;

• Adoption of the income statements and
balance sheets for 2013 and discharge of
liability for the board of directors and
the managing director.

• Re-election of Per Brilioth, Staffan
Knafve, Magnus Nordin, Jan Risberg
and Katherine Støvring. Staffan Knafve
was elected chairman of the board.

• The chairman will be paid a fee of
SEK 450,000 and each AGM elected
member not employed by the company
will be paid SEK 175,000. The chair-
man of the audit committee will be paid
SEK 50,000 and each of the commit-
tee’s members will be paid SEK 25,000.
The members of the remuneration com-
mittee will be paid SEK 25,000. The
total fees for committee work, includ-
ing committee chairmen fees shall not
exceed SEK 225,000.

• Auditors will be paid as invoices are

approved.

• Principles of remuneration to senior

executives.

• Rules for the appointment and work of

the nomination committee.

• Authorization for the board to resolve to
issue new shares with consideration in
cash and/or with consideration in kind
or by set-off, to enable the company
to make business acquisitions and to
raise capital for the company’s business
operations.

• Authorization for the board to resolve to
purchase own shares in Tethys Oil AB

The minutes recorded at the annual gen-
eral meeting can be found at Tethys Oil’s
website, www.tethysoil.com.

Nomination process
In accordance with the nomination com-
mittee process approved by the AGM
2014, the nomination committee for the
AGM 2015 consists of members appointed
by three of the largest shareholders of the
company based on shareholdings as per 30
September 2014. The names of the mem-
bers of the nomination committee were
announced and posted on the company’s
website on 13 November 2014, i.e. within
the time frame of six months before the
AGM as prescribed by the code.

The nomination committee for the 2015
AGM has held 4 meetings during its man-
date and informal contacts have taken
place between such meetings. The nomina-
tion committee report, including the final
proposals to the 2015 AGM, is published
on the company’s website together with
the notice of the AGM.

The nomination committee’s assignment
is to produce proposals for the following
matters, which will be presented to the
AGM for resolution:
• AGM chairman,
• Board members,
• Chairman of the board,
• Board fees and remuneration for com-
mittee work allocated to each member,

• Auditor’s fee,
• Proposal regarding procedures and prin-
ciples for establishing a nomination
committee and issues pertaining thereto
for the 2016 AGM.

The work of the nomination committee
has during 2014 included evaluation of
the board’s work, competence and compo-
sition, as well as the independence of the
members. The nomination committee also
considered other criteria such as the back-
ground and experience and also taken part
of the board evaluation.

The nomination committee for the AGM
2015 consisted of the following members:
• Jan Risberg, chairman of the nomina-
tion committee, representing himself,
• Mikael Petersson, representing Lans-
downe Investment Company Limited,
• Göran Källebo, representing himself

and

• Staffan Knafve, chairman in Tethys Oil

The board and its work
Board composition
The articles of association stipulate that the
board of directors of Tethys Oil shall con-
sist of no less than three and no more than
ten board members with no more than tree
deputy board members. Board members
are elected for a maximum of one year at
a time. The board of directors of Tethys
Oil has consisted since the AGM 2014
of five directors and no deputies. Staffan
Knafve has been chairman of the board.
Four board members are independent from
the company, the company’s management
and the company’s larger shareholders, and
five board members are independent from
larger shareholders/interested parties.

Rules of procedure
The board of directors’ work is governed
by annually adopted rules of procedure.
The board of directors supervise the work
of the managing director by continually
following up the company’s operations.
The board of directors also ensures that the
company’s organisation, administration
and control are properly managed. The
board of directors adopts strategies and
goals and resolves on larger investments,
acquisitions and disposals of business
activities or assets. The board of directors
also appoints the managing director and
determines the managing director’s salary
and other compensation.

The chairman of the board of directors
supervises the work and is responsible for
it being well organised and efficient. This
entails, among other things, continually
following the company’s operations in
contact with the managing director and
being responsible for other board mem-
bers receiving the information and docu-
mentation needed to ensure high quality
discussions and well-founded decisions
by the board of directors. The chairman is
responsible for the evaluation of the board
of directors’ and the managing director’s
work and represents the board of directors
in ownership matters.

According to the current rules of proce-
dure the board of directors shall, after

the constituent board meeting following
the AGM, hold a minimum of 6 planned
meetings during the financial year.

The board’s work in 2014
During 2014 the board held 6 scheduled
meetings and 8 extraordinary meetings.

Board of directors attendance

Name

Independence

Board meetings

Audit
committee

Remuneration
committee

Staffan Knafve

Magnus Nordin

Katherine Stövring

Jan Risberg

Per Brilioth

Yes

14/14

4/4

–

4/4

5/5

–

5/5

Meetings and items 2014

February

Year-end report 2013, Loan facility

April

May

June

August

October

Annual report 2013 notice to AGM

First quarter report 2014; Constituent meeting and adoption of manuals and policies

Liquidation of foreign subsidiary

Second quarter report 2014

Strategy, notice to EGM

November

Third quarter report 2014, repurchase of shares

December

Budget 2015

Assignments of the board’s work
The chairman of the board is responsible
for assessing the board’s work including
the performance of individual board mem-
bers. This is done on an annual basis. The
assessment focuses on such factors as the
board’s way of working, number of mee-
tings and effectiveness, time for prepara-
tion, available competence and individual
board members influence of the board’s
work. The nomination committee takes
part of the results, and it is a component in
the nomination committee’s work to sub-
mit proposals concerning board members.

Remuneration committee
The board has established a remunera-
tion committee for the period up to and
including the AGM 2015, consisting of all
board members with the exception of the
managing director Magnus Nordin. Staf-
fan Knafve is the chairman of the commit-
tee. The remuneration committee conve-
ned 5 times in 2014. The work has mainly
focused on establishing principles for
remuneration to management, to moni-

tor and evaluate variable remuneration
and construct and propose an incentive
programme to an extra general meeting
(EGM) which was subsequently cancelled.
The remuneration committee reports to
the board, normally in conjunction with
the following board meeting.

Audit committee
The board has established an audit com-
mittee for the period up to and including
the AGM 2015, consisting of all board
members with the exception of the mana-
ging director Magnus Nordin. Jan Ris-
berg is the chairman of the committee.
The audit committee convened 4 times
in 2014. The work has mainly focused
on supervising the company’s financial
reporting and assessing the efficiency of the
company’s financial internal controls, with
the primary objective of providing support
to the board in the decision making pro-
cesses regarding such matters. The audit
committee also regularly liaises with the
group’s statutory auditor as part of the
annual audit process and reviews the audit

fees and the auditor’s independence and
impartiality. The audit committee reports
to the board, normally in conjunction with
the following board meeting.

Auditors
Pursuant to its articles of association, Tet-
hys Oil must have one or two auditors,
and no more than two deputies. A regis-
tered firm of auditors may be appointed as
the company’s auditor. Tethys Oil’s auditor
is PricewaterhouseCoopers AB with Klas
Brand as lead partner and Ulrika Ramsvik
as co-signing. PricewaterhouseCoopers AB
was elected as the company’s auditor at the
AGM 2014.

Tethys Oil AB’s auditor: Pricewater-
houseCoopers AB

Klas Brand

Ulrika
Ramsvik

Lead partner

Co-signing

1956

1973

Role

Born

Company auditor
since

2012

2014

The auditing firm has, besides the audit,
conducted a limited number of other
assignments on behalf of Tethys Oil. These
assignments mainly consisted of services
associated with auditing. Remuneration to
the auditors of Tethys Oil is paid in accord-
ance with approved current accounts. In
2014, remuneration to Pricewaterhouse-
Coopers AB amounted to MSEK 1. For
details on remuneration to auditors, see
note 12, auditor’s fees.

Managing director and
management
The executive management in Tethys Oil
consists of the managing director, the chief
financial officer and the executive vice
president (EVP) corporate development.

for

The board of directors has adopted an
instruction
the managing direc-
tor which clarifies the responsibilities
and authority of the managing director.
According to the instruction, the man-
aging director shall provide the board of
directors with decision data in order to
enable the board to make well-founded

decisions and with documents to enable
it to continually monitor the activities for
the year. The managing director shall take
the decisions needed for developing the
business, within the legal framework, the
business plan, the budget and the instruc-
tion for the managing director adopted by
the board of directors as well as in accord-
ance with other guidelines and instructions
communicated by the board of directors.

Remuneration to executive
management
Remuneration to the executive manage-
ment includes four main components:

• Base salary
• Pension arrangements
• Yearly variable salary
• Other benefits

Base salary
The base salary shall be in line with market
conditions, be competitive, and shall take
into account the scope and responsibilities
associated with the position, as well as the
skills, experience and performance of the
executive. The base salary shall be reviewed
annually to ensure that it remains competi-
tive. In order to assess the competitiveness
of the salary and benefit packages offered
by the Group, comparisons may be made
to those offered by similar companies.
Executives
include managing director
(CEO), chief financial officer (CFO) and
executive vice president (EVP) corporate
development.

Variable salary
Variable salary to employees will be based
upon their individual contribution to the
company’s performance. The yearly vari-
able salary for executives shall normally
be within the range of 1–4 monthly sala-
ries. At the end of each year, the manag-
ing director will make a recommendation
to the remuneration committee regarding
the payment of the yearly variable salary
to other employees. The remuneration
committee will recommend to the board
of directors for approval the level of the
yearly variable salary of the executive man-
agement. For other employees, the remu-
neration committee will only be involved
if the variable salary exceeds USD 10,000
per employee.

Pension arrangements
The pension benefits comprise a defined
contribution scheme with premiums cal-
culated on the full base salary. The pension
contributions shall be in relation to the
base salary and is set on an individual basis.

Severance arrangements
A termination period of twelve months
applies between the company and manag-
ing director and nine months between the
company and other members of executive
management. All members of executive
management are entitled to twelve months
payments if the company terminates their
contracts.

The board is entitled to deviate from the
proposed guidelines if special reasons exist.

Remuneration to management, TSEK

Executive

Magnus Nordin

Base
salary

1,652

Morgan Sadarangani

1,102

Jesper Alm

Total

566

3,320

Variable
salary

Other
benefits

540

360

–

900

Pension
arrange-
ments

375

217

129

721

Total
2014

2,579

1,689

701

2013

2,199

1,485

–

4,969

3,684

The increase in remuneration to management relate to partly an increase of base salaries,
but mainly to variable salaries and implementation of pension arrangements. For further
information, please see note 19.

Remuneration to the board 2014
Remuneration to the board of directors during 2014 amounted to a total of TSEK 464, allo-
cated among the board members in the way shown in the below table. The annual general
meeting 2014 resolved that remuneration of the chairman of the board of directors shall be
TSEK 450 per annum and of the other members TSEK 175 per member per annum.

Remuneration to board, TSEK

Total approved remuneration

Chairman

Director

Chairman audit committee

Member audit committee

Chairman remuneration committee

Member remuneration committee

2014

2013

1,375

450

175

450

175

Remuneration is not paid for service of the
boards or directors of subsidiaries. Magnus
Nordin, who is employed by Tethys Oil,
does not receive any remuneration for his
service on the board of directors.

Financial reporting and control
The board of directors has the ultimate
responsibility of the internal control for
the financial reporting. Tethys Oil’s system
of internal control, with regard to financial
reporting, is designed to minimize risks
involved in financial reporting process
and ensure a high level of reliability in the
financial reporting. Furthermore, the sys-
tem of internal control ensures compliance
with applicable accounting requirements
and other requirements that Tethys Oil
must meet as a listed company.

Tethys Oil’s main assets are owned in part-
nership and furthermore, Tethys Oil only

holds non-operated interest. The focus of
internal control is therefore to ensure reli-
ability and accuracy of the operator’s finan-
cial information. The control is conducted
by monthly and quarterly cost controls,
quarterly budget reviews and interviews
with operator to understand and explain
deviations.

Internal control
Tethys Oil continually works on improv-
ing the financial reporting through evalu-
ating the risk of errors in the financial
reporting and related control activities.
Control activities include following up
on instructions and the application of
accounting principles. The board of direc-
tors is responsible for and monitors the
control activities, which involve all levels
of the organisation. The activities limit
the identified risks and ensure correct and
reliable financial reporting. The Group’s

central financial department analyses and
follows up on budget deviations, draws up
forecasts, follows up on significant varia-
tions between periods and reports to the
board of directors, which minimizes the
risks for errors in the financial reporting.
The control activities also include fol-
lowing up on the authorization manual
and accounting principles. These control
activities also include the operators in part-
nerships. The board of directors further
decides on specific control activities and
auditing of operators in partnerships. The
financial department regularly follows up
on deviations and irregularities and report
to the audit committee. This structure is
considered sufficient and suitable given the
size and nature of the company’s business.

Information and communication
The board has adopted an information
policy for the purpose of ensuring that the
external information is correct and com-
plete. There are also instructions regarding
information security and how to commu-
nicate financial information.

Monitoring
Both the board and the management fol-
low up on the compliance and effective-
ness of the company’s internal controls to
ensure the quality of internal processes. The
board receives detailed monthly reports on
the financial situation and development of
the business to this end. The audit com-
mittee ensures and monitors that control
activities are in place for important areas of
risk related to financial reporting.

3333

Board of directors

Function

Elected

Born

Education

Experience

Staffan Knafve

Magnus Nordin

Jan Risberg

Katherine H. Stövring

Per Brilioth

Chairman of the board
(since Oct 2013),
chairman of the
remuneration committee

Managing director,
director

Director, chairman of the
audit committee

Director

2012

1958

2001

1956

2004

1964

2012

1965

Director

2013

1969

Bachelor of Law,
University of Stockholm.

Bachelor of Arts,
University of Lund
and Master of Arts,
University of California
Los Angeles.

Bachelor of Science
in Economics and
business, University of
Stockholm.

Master of Law, University
of Oslo and MSc in
Business Management,
London Business
School.

Bachelor of Science in
Business Administration,
University of Stockholm,
Master of Finance, London
Business School.

Several senior positions
in different Nordic
investment banks

Several executive
positions in different oil
companies

Several senior position
in Corporate Finance

Several executive
positions in the energy
and shipping industry

Executive positions in
companies investing in the
Russian oil and gas sector

Other board duties

Member of finance
committee at Royal
Swedish Automobile Club.

Board member of
Minotaurus AB and
Minotaurus Energi AS.

Chairman Ovation
Sports SA.

Shares in Tethys Oil as
of 31 December 2014

70,000*

1,464,127

843,419

–

Board attendance

14/14

Board member of Vostok
Nafta AB, member of the
board of RusForest AB,
Avito Holdings AB, X5
Group AB and Svenska
Fotografiska museet AB.

5,000

14/14

4/4

5/5

4/4

5/5

4/4

5/5

250,000

225,000

Yes

–

Yes

Audit committee
attendance

Remuneration
committee attendance

4/4

5/5

Remuneration for board
and committee work

500,000

Independent of
the company and
management

Independent of the
company's major
shareholders

Yes

* Shares held through insurance policy.

Executive management

Magnus Nordin

Morgan Sadarangani

Jesper Alm

Function

Managing director

Chief financial officer

EVP corporate development

With Tethys Oil since

2004

1956

2004

1975

2014

1975

Bachelor of Arts, University of Lund and Master
of Arts, University of California Los Angeles.

Master of Economics in Business
Administration, University of Uppsala.

Master of Economics in Business
Administration, University of Lund.

Several executive positions in different oil
companies.

Different positions within SEB and
Enskilda Securities, Corporate Finance.

Partner, Pareto Securities Corporate
Finance (Natural resources).

Born

Education

Experience

Board duties

Board member of Minotaurus AB and
Minotaurus Energi AS.

Shares in Tethys Oil as
of 31 December 2014

1,464,127

* Including shares held through insurance policy.

None

5,750*

None

144,200

Auditor’s report on the Corporate Governance Statement
To the annual meeting of the shareholders of Tethys Oil AB (publ), corporate identity number 556615-8266

It is the board of directors who is responsible for the Corporate
Governance Statement for the year 2014 on pages 30–34 and that
it has been prepared in accordance with the Annual Accounts Act.
We have read the corporate governance statement and based on
that reading and our knowledge of the company and the group
we believe that we have a sufficient basis for our opinions. This
means that our statutory examination of the Corporate Govern-

ance Statement is different and substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing and generally accepted auditing standards in Sweden.

In our opinion, the Corporate Governance Statement has been
prepared and its statutory content is consistent with the annual
accounts and the consolidated accounts.

Stockholm, 17 April 2015
PricewaterhouseCoopers AB

Klas Brand
Authorized Public Accountant
Lead Partner

Ulrika Ramsvik
Authorized Public Accountant
Co-signing

3535

Board of directors,

Management,

Magnus Nordin,
born in 1956. Managing direc-
tor. Employed since 2004.

Morgan Sadarangani,
born in 1975. Chief financial
officer and corporate secretary.
Employed since 2004.

Jesper Alm,
born in 1975. EVP corporate
development. Employed since
2014.

Staffan Knafve,
born in 1958. Member of the
board since 2012 and chairman
of the board since October 2013.
Chairman of the remuneration
committee and member of the
audit committee.

Magnus Nordin,
born in 1956. Managing director
and member of the board since
2001.

Jan Risberg,
born in 1964. Member of the
board since 2004 and chair-
man of the audit committee and
member of the remuneration
committee.

Katherine H. Støvring,
born in 1965. Member of the
board since 2012 and member
of the audit committee and the
remuneration committee.

Auditors

Per Brilioth,
born in 1969. Member of the
board since 2013 and member
of the audit committee and the
remuneration committee.

Klas Brand,
born in 1956. Authorized public accountant, Lead partner.
Company’s auditor since 2012. PricewaterhouseCoopers AB,
Gothenburg.

Ulrika Ramsvik,
born in 1973. Authorized public accountant. Company’s auditor
since 2014. PricewaterhouseCoopers AB, Gothenburg

The Tethys Oil share

Tethys Oil’s shares are traded on the
NASDAQ Stockholm exchange. With
the purpose of improving liquidity and
reducing the spread between buyers and
sellers of Tethys Oil shares, the company
has assigned Pareto Securities AB to act as
a liquidity provider for the shares of the
company.

Shares outstanding
Tethys Oil’s
capi-
registered
tal at 31 December 2014 amounts to
SEK 5,923,958 represented by 35,543,750
shares with a quota value of SEK 0.17. All

shares in Tethys Oil represent one vote
each. All outstanding shares are common
shares and carry equal rights to participa-
tion in Tethys Oil’s assets and earnings.
Tethys Oil does not have an incentive pro-
gram for employees. As per 31 December
2014 the board of directors had remaining
outstanding authorization from the AGM
to issue up to 10 percent of the shares up
until the next AGM.

As per 31 December 2014, Tethys Oil
held 298,160 of its own shares which were
purchased during the fourth quarter at

an average price of SEK 68.0. The share
repurchase programme is based on a man-
date from the AGM held in May 2014 and
repurchased shares are still part of the total
number of outstanding shares but however
not included in the number of shares in
circulation, which amount to 35,245,590.

Share capital development
Since the company’s inception in Septem-
ber 2001 and up to 31 December 2014 the
parent company’s share capital has devel-
oped as shown below:

Year

Share capital development

Quota value, SEK

Change in number
of shares

Total number
of shares

Change in total
share capital, SEK

Total share
capital, SEK

2001

Formation of the Company

2001

Share issue

2001

Split 100:1

2003

Share issue

2004

Split 2:1

2004

Share issue

2006

Non-cash issue

2006

Share issue

2006

Share issue

2007

Share issue

2007

Exercise of warrants

2007

Share issue

2007

Set-off issue

2008

Split 3:1

2008

Share issue

2008

Exercise of warrants

2009

Share issue

2009

Share issue

2009

Exercise of warrants

2009

Exercise of warrants

2010

Exercise of warrants

2010

Exercise of warrants

2010

Exercise of warrants

2010

Share issue

2010

Share issue

2010

Exercise of warrants

2010

Exercise of warrants

2010

Exercise of warrants

2010

Exercise of warrants

2011

Non-cash issue

2012

Share issue

100,000

400,000

–

250,000

–

1,442,400

200,000

438,480

40,000

150,000

62,500

113,000

–

800,000

300

216,667

333,333

29,364

98,803

42,013

22,905

125,824

41,667

80,421

30,966

14,162

342,942

6,544

500,000

100,000

500,000

750,000

2,192,400

2,392,400

2,830,880

2,870,880

3,020,880

3,020,881

3,083,381

3,196,381

–

3,996,381

3,996,681

4,213,348

4,546,618

4,576,045

4,674,849

4,716,862

4,739,767

4,865,590

4,907,257

4,948,924

5,029,345

5,060,311

5,074,473

5,417,415

5,423,958

5,923,958

100.00

1.00

0.50

0.17

1,000

4,000

495,000

250,000

750,000

2,884,800

400,000

876,960

80,000

300,000

125,000

226,000

1,000

5,000

500,000

750,000

1,500,000

4,384,800

4,784,800

5,661,760

5,741,760

6,041,760

6,041,762

6,166,762

6,392,762

12,785,524

19,178,286

4,800,000

23,978,286

1,800

23,980,086

1,300,000

2,000,000

176,186

592,819

252,080

137,429

754,942

250,000

482,528

185,795

84,971

25,280,086

27,280,086

27,456,272

28,049,091

28,301,171

28,438,600

29,193,542

29,443,542

29,693,542

30,176,070

30,361,865

30,446,836

2,057,653

32,504,489

39,261

32,543,750

3,000,000

35,543,750

Share ownership structure
The 20 largest shareholders in Tethys Oil as per 28 February 2015.

Name

MSIL IPB CLIENT ACCOUNT

NORDNET PENSIONSFÖRSÄKRING AB

FÖRSÄKRINGSAKTIEBOLAGET, AVANZA PENSION

SIX SIS AG, W8IMY

SKANDINAVISKA ENSKILDA BANKEN S.A., W8IMY

BANQUE PICTET & CIE SA, W8IMY (WITHOUT P.R.)

MINOTAURUS ENERGI AS*

BNY GCM CLIENT ACCOUNTS (E) ILM

FRIENDS PROVIDENT INTERNATONAL

MORGAN STANLEY AND CO LLC, W9

UBS AG LDN BRANCH A/C CLIENT, IPB

STATE STREET BANK & TRUST COM., BOSTON

NORDIN, MAGNUS**

BNY MELLON SA/NV (FORMER BNY), W8IMY

CBNY-NORGES BANK

BANQUE ÖHMAN S.A.

SOCIETE GENERALE SA

CLEARSTREAM BANKING S.A., W8IMY

MELLON OMNIBUS 30%, AGENT F ITS CLIENTS

SEB

Total, 20 largest shareholders

Own shares (Tethys Oil AB)

Other, approx. 6,022 shareholders

Total

Source: Euroclear Sweden AB and Tethys Oil AB

* Company owned by Magnus Nordin
** Incl 60,000 shares lent to Pareto Securities AB

Number of shares

Capital and votes

2,837,077

1,371,381

1,143,464

915,941

911,937

875,580

830,000

753,002

719,300

656,428

653,131

637,335

634,127

632,994

611,375

593,500

588,087

584,249

423,459

404,116

16,776,483

352,060

18,415,207

35,543,750

7.98%

3.86%

3.22%

2.58%

2.57%

2.46%

2.34%

2.12%

2.02%

1.85%

1.84%

1.79%

1.78%

1.72%

1.67%

1.65%

1.64%

1.19%

1.14%

47.20%

0.99%

51.81%

100.0%

Distribution of shareholdings
Distribution of shareholdings in Tethys Oil as per 28 February 2015.

Size categories as of 28 February 2015

1 – 1,500

1,501 – 30,000

30,001 – 150,000

150,001 – 300,000

300,001 –

Total

Source: Euroclear Sweden AB

Number of
shares

1,524,884

5,088,924

5,409,735

5,276,373

18,243,834

35,543,750

Percentage of
shares, %

Number of
shareholders

Percentage of
shareholders, %

4.29%

14.32%

15.22%

14.84%

51.33%

100.0%

5,064

850

6,042

83.81%

14.07%

1.29%

0.43%

0.40%

100.0%

Share statistics 2014
The last transaction price in 2014 was
SEK 61.00 corresponding to a total mar-
ket capitalization of MSEK 2,168. Dur-
ing the year the price of Tethys Oil’s share

declined by 10 percent. The highest trans-
action price in 2014 was SEK 92.56 on
22 September 2014 and the lowest was
SEK 51.75 on 16 December 2014. The
turnover velocity was 135 per cent.

Share price development and turnover 2014

Jan
2014

SEK

Feb

Mar

Apr

Maj

Jun

Jul

Aug

Sep

Okt

Nov

Dec

Jan
2015

Feb

Mar

Share price

Turnover

Share price development and turnover last ﬁve years

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500

Share volume
per day

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500

2010

2011

2012

2013

2014

Share price

Turnover

2015

Share volume
per day

SEK

Key ratios

Group

Operational items

2014

2013

2012

2011

2010

Production before government take, bbl

2,804,240

1,709,706

1,399,518

423,469

41,764

Production per day, bbl

7,692

4,684

3,824

1,160

114

Net sales after government take, bbl

1,464,228

850,926

776,248

147,228

18,898

Achieved oil price, USD/bbl

103.87

106.63

110.35

107.37

80.56

Items regarding the income statement and balance sheet

Net sales, MSEK

EBITDA, MSEK

EBITDA-margin, %

Operating result, MSEK

Operating margin, %

Net result, MSEK

Net margin, %

Cash and cash equivalents, MSEK

Shareholders' equity, MSEK

Balance sheet total, MSEK

Capital structure

Equity ratio, %

Leverage ratio, %

Adjusted equity ratio, %

Interest coverage ratio

Investments, MSEK

Net debt/(net cash), MSEK

Profitability

Return on shareholders' equity, %

Return on capital employed, %

Employees

Average number of employees

Number of shares

Dividend per share, SEK

Cash flow from operations per share, SEK

1,046

753

72%

404

39%

350

33%

372

1,675

1,816

592

479

81%

285

48%

240

41%

295

1,100

1,563

584

509

87%

336

58%

314

54%

248

860

1,374

104

81%

80%

67%

456

465

101

n.a

101

n.a.

191

380

384

92.26%

70.38%

62.59%

98.00%

98.95%

n.a.

11.56%

19.66%

n.a.

92.26%

70.38%

62.59%

98.00%

98.95%

n.a.

259

(347)

10.63

22.98

289

127

875

169

n.a.

208

(91)

n.a.

(191)

25.24%

24.50%

47.73%

16.51%

27.48%

26.37%

20.72%

40.44%

20.37%

41.37%

–

19.89

–

9.45

–

15.37

–

3.49

–

5.97

Number of shares at year end, thousands

35,544

32,544

32,504

Shareholders' equity per share, SEK

47.13

30.96

24.20

14.00

11.69

Weighted number of shares for the year, thousands

35,524

35,544

34,465

32,521

30,849

Earnings per share before and after dilution, SEK

9.86

6.76

9.11

2.12

2.60

Parent company

2014

2013

2012

2011

2010

Items regarding the income statement and balance sheet

Operating result, MSEK

Operating margin, %

Net result, MSEK

Net margin, %

Cash and cash equivalents, MSEK

Shareholders' equity, MSEK

Balance sheet total, MSEK

Capital structure

Equity ratio, %

Leverage ratio, %

Adjusted equity ratio, %

Interest coverage ratio, %

Investments, MSEK

Profitability

Return on shareholders' equity, %

Return on capital employed, %

Employees

Average number of employees

Number of shares

Dividend per share, SEK

-145

neg.

148

n.a.

306

313

-12

neg.

-103

neg.

179

588

neg.

-83

neg.

187

281

752

-7

n.a

-15

n.a

250

303

-5

n.a.

-32

n.a.

263

315

97.95%

30.40%

37.40%

82.59%

83.53%

n.a.

202.68%

71.64%

n.a.

97.95%

30.40%

37.40%

82.59%

83.53%

n.a.

-309

61.00%

48.53%

–

n.a.

neg.

–

n.a.

535

neg.

–

n.a.

neg.

–

n.a.

neg.

–

Number of shares at year end, thousands

35,544

32,544

32,504

Shareholders' equity per share, SEK

8.62

5.03

7.92

7.68

8.09

Weighted number of shares for the year, thousands

35,524

35,544

34,465

32,521

30,849

Earnings per share before and after dilution, SEK

4.16

-2.89

-2.40

-0.45

-1.03

Definitions of key ratios

Margins
Operating margin
Operating result as a percentage of yearly turnover.

Net margin
Net result as a percentage of yearly turnover.

Capital structure
Equity ratio
Shareholders’ equity as a percentage of total assets.

Leverage ratio
Net interest bearing debt as a percentage of sharehold-
ers’ equity.

Adjusted equity ratio
Shareholders’ equity plus equity part of untaxed
reserves as a percentage of total assets.

Interest coverage ratio
Earnings before interest, taxes, depreciation, depletion,
amortisation and exploration costs (EBITDA) divided
by net financial result.

Other
Number of employees
Average number of employees full-time.

Investments
Total investments during the year.

Shareholders’ equity per share
Shareholders’ equity divided by the number of out-
standing shares.

Profitability
Return on shareholders’ equity
Net result as percentage of average shareholders’ equity.

Weighted numbers of shares
Weighted number of shares during the year.

Return on capital employed
Net result plus financial costs as a percentage of average
capital employed (total assets less non interests-bearing
liabilities).

Earnings per share
Net result divided by the number of outstanding
shares.

n.a.
Not applicable.

Administration report

(An English translation of the Swedish original)

Tethys Oil AB (publ)

Tethys Oil
Turkey AB

Tethys Oil
France AB

Tethys Oil
Exploration
AB

Tethys Oil
Block
3 & 4 Ltd.

Tethys Oil
Suisse SA

Windsor
Petroleum
(Spain)
Inc.

Tethys Oil
Oman Ltd.

Tethys Oil
Canada AB

Tethys Oil
Spain AB

Tethys Oil
Canada
Ltd.

Tethys Oil
Denmark
AB

Tethys Oil
Middle East
North Africa
B.V.

40%

50%

Jyllands
Olie ApS

Odin
Energi A/S

75%

50%

UAB TAN
Oil

UAB
Minijos
Nafta

75%

UAB LL
Investicijos

Block 15,
Oman

Alès and Attila,
France

Block 3 & 4,
Oman

Raseiniai,
Lithuania

Rietavas,
Lithuania

Gargzdai,
Lithuania

Ownership in subsidiary companies is 100% unless otherwise stated.

The consolidated financial statements of the Tethys Oil Group
(hereafter referred to as “Tethys Oil” “Tethys” or the “Group”),
where Tethys Oil AB (publ) (the “Company”) with organisational
number 556615-8266 is the parent company, are hereby pre-
sented for the twelve months period ended 31 December 2014.
The amounts relating to the comparative period (equivalent period
of last year) are shown in parenthesis after the amount for the cur-
rent period. Segments of the Group are geographical markets. The
numbers in the tables in this report may not add exactly due to
rounding.

OPERATIONS

Tethys Oil is a Swedish energy company focused on exploration
and production of oil and natural gas. Tethys Oil’s core area is
Oman, where the company is one of the largest onshore oil and gas
concession holders. The company’s strategy is twofold: to explore
for oil and natural gas near existing and developing markets; and
to develop proven reserves that have previously been sub-economic
due to location or technological reasons. As at year end 2014 the
company had interests in licences in Oman, France and Lithuania.

Production
Tethys Oil has production from two areas, Blocks 3 & 4 onshore
Oman and the Gargzdai licence onshore Lithuania. Tethys Oil has
30 per cent interest in Blocks 3 & 4 Oman and an indirect interest
of 25 per cent of Gargzdai Lithuania.

Quarterly volumes

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Tethys Oil’s share of quarterly production before government take, (bbl)

Oman, Blocks 3 & 4

Production

Average daily production

Lithuania, Gargzdai

Production

Average daily production

Total production

Total average daily production

762,375

8,287

10,347

112

772,722

8,399

647,569

7,116

10,554

116

658,123

7,232

597,979

6,644

10,603

118

608,582

6,762

757,730

8,236

10,496

114

768,226

8,350

Production from Blocks 3 & 4 onshore Oman derives from three
fields – the Farha South, Saiwan East and Shahd oil fields (the
Shahd oil field was previously named Lower Buah areas). The
production development has mainly been driven by continued
implementation of the water injection programme on Farha South
and from the successful exploration and appraisal results from the
Shahd field. Production from Oman accounts for 99 per cent of
total production.

The terms of the Exploration and Production Sharing Agreement
(“EPSA”) on Blocks 3 & 4 in Oman allows the joint operations
partners to recover their costs up to 40 per cent of the value of
total oil production, this is referred to as cost oil. After deducting
any allowance for cost oil, the remaining production is split 80/20
between the government and the joint operations partners. If there

are no investments to be recovered the joint operations partners
receive after government take 20 per cent of the oil produced. The
terms of the EPSA thus result in the Joint operations partners’
share of production after government take in the interval 20 – 52
per cent, depending on available recoverable cost. So far on Blocks
3 & 4, the joint operations partners’ share of production after gov-
ernment take has been in the high end of the interval, 52 per cent,
as commercial production relatively recently commenced and large
investments have been made. The estimated recoverable costs as
per 31 December 2014, net to Tethys Oil, amounts to MUSD 49.

Production from Gargzdai licence in western Lithuania has gradu-
ally decreased during the period. Tethys Oil’s interest in Gargzdai
is held indirectly through Odin Energi A/S, an associated Danish
company.

bbls

280,000

240,000

200,000

160,000

120,000

80,000

40,000

Average daily and monthly production, net to Tethys Oil during 2013 and 2014

Monthly production Lithuania
Monthly production Oman
Daily production Oman & Lithuania

bbls/day

10,500

9,000

7,500

6,000

4,500

3,000

1,500

Jan
2013

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2014

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Net sales
During 2014, Tethys Oil sold 1,464,228 (850,926) barrels of oil
after government take from Blocks 3 & 4 in Oman. This resulted
in net sales during 2014 of MSEK 1,046 (592).

Important factors affecting net sales:
• Increase of 72 per cent in barrels sold between 2014 and 2013
• 3 per cent lower oil price during 2014 compared to 2013
• 18 per cent stronger USD in relation to SEK during 2014 com-

pared to 2013

The increase in overlift position during 2014 is close to 26,000
barrels, whereas during 2013 the increase in the underlift position
was close to 14,000 barrels. During 2014 more oil was sold than
the entitlement share of production and the opposite has been true
for 2013. The overlift position as per 31 December 2014 amounts
to 12,828 barrels.

Tethys Oil’s average selling price per barrel amounted to USD 104
(107) during the full year 2014. 2014 achieved prices for Tethys
Oil are 3 per cent lower compared to previous year. Due to the two
month future price mechanism there is a time lag to the falling oil
price during the second half of 2014. The significantly lower oil
spot prices during the months of November and December will
come in effect during 2015 and should oil prices remain on these
levels they will significantly affect net sales and accordingly net
result. See also the graph on page 48.

The selling price received by Tethys Oil is determined for each
calendar month based on the monthly average prices of the two
month future price of Omani blend (see chart above). During the
full year 2014, Omani blend prices have been trading between
high levels of USD 111 per barrel and low levels of USD 83 per
barrel. Twelve months 2014 prices are lower compared to equiva-
lent period last year.

Result
Tethys Oil reports a net result after tax for the full year 2014 of
MSEK 350 (240), representing earnings per share of SEK 9.86
(6.76).

The net result for 2014 has mainly been impacted by:
• write down of value in associated companies related to Lithu-

ania of MSEK 127

• strong sales development with an increase of 78 per cent between

2013 and 2014 combined with improved margins

Earnings before
(EBITDA) during 2014 amounted to MSEK 753 (479).

interest, tax, depletion and amortisation

Net result from associated companies
Tethys Oil holds indirect interest in the three Lithuanian licences;
Gargzdai, Rietavas and Raseiniai. Tethys Oil holds a share in these
licences through the interests in associated companies Jylland Olie
and Odin Energi. Total result from Tethys Oils shares in associated
companies Odin Energi and Jylland Olie during 2014 amounted
to MSEK -133 compared to MSEK 5 during 2013. The result
from associated companies 2014 has been impacted by write down
of the value in associated companies related to the Lithuanian pro-
duction licence Gargzdai. The write down is non-cash related item
and is based on an impairment of the Lithuanian asset. The sharp
decrease in oil prices is the explanation of the impairment and
remaining assets relating to Lithuania amounting to MSEK 41 is
related to the exploration potential of the three licenses in Lithu-
ania. Current production from Lithuania is not commercial under
current oil prices. (For more information, please see note 6).

Exploration costs
Exploration costs amounting to MSEK 1 (56) has negatively
affected the result of the full year 2014. The exploration cost in
2013 mainly regarded Block 15 and were made as a consequence
from the negative results from the JAS-1 long term production test.

Depletion, depreciation and amortisation
Depletion, depreciation and amortisation (“DD&A”) for the full
year 2014 amounted to MSEK 214 (138). Most of the DD&A is
related to depletion of oil and gas properties on Blocks 3&4 and
the higher level during 2014 compared to 2013 is explained by
higher production. An increase in reserves following the DeGolyer
and MacNaughton reserves audit as per 30 June 2014 has however
resulted in a lower DD&A per barrel starting 1 July 2014.

Operating expenses
Operating expenses (OPEX) amounted during the full year 2014
to MSEK 264 (152). Operating expenses are related to oil and gas
production on Blocks 3 & 4 in Oman, including; permanent pro-
duction costs (more direct production costs e.g. field staff, tariffs);
general and administrative costs relating to the office in Muscat;
well workovers; other (fees, operator’s overhead contribution); and
accruals. Furthermore over and underlift adjustments are made
within the Operating expenses category. The categories are pre-
sented with amounts in note 10.

OPEX amounted during 2014 to USD 13.9 per barrel (USD 14.0
per barrel). The more direct production costs (permanent produc-
tion costs) amounted to around USD 7.1 per barrel (USD 7.6 per
barrel).

Furthermore, due to an overlift position as per 31 December 2014
amounting to 12,828 barrels, the Operating expenses during the
full year 2014 have been increased by MSEK 9.

There are accrued expenses within the OPEX category amounting
to MSEK 56 (MSEK 23) which are accounted for due to expected
but not yet billed OPEX. Tethys Oil’s OPEX is its share of the
joint venture OPEX related to Blocks 3 and 4 and Tethys Oil is
depending on information from the operator. Without this infor-
mation, Tethys Oil has to make reservations based on judgement.
For further information regarding OPEX, see note 10.

Administrative expenses
Administrative expenses amounted to MSEK 31 (31) for the full
year 2014. Administrative expenses are mainly salaries, rents, list-
ing costs and external services. The administrative expenses are in
line with previous year.

Net financial result
The net financial result amount to MSEK -53 (MSEK -45).
Included in the net financial result 2014 is the extra ordinary effect
of the early redemption of the bond loan amounting to MSEK 23.
Since the early redemption of the bond loan and the movement
from a net debt position to a net cash position, which took place
around mid-year 2014, the fundamentals for the net financial
result has been significantly improved. The development of the
USD/SEK exchange rate, with the strengthening of the USD of 18
per cent has positively impacted the net financial result.

Oil and gas interests
Oil and gas properties as per 31 December 2014 amounted to
MSEK 1,303 (1,012). Investments in oil and gas properties of
MSEK 269 (290) were incurred for the twelve month period
ended 31 December 2014.

Country

Oman

France

Licence
name

Block 15

Attila

Alès

Lithuania

Gargzdai*

Lithuania

Rietavas*

Lithuania

Raseiniai*

New ventures

Total

Book value
31 Dec 2014

Book value 31
Dec 2013

Investments
2014

Block 3,4

1,296

1,011

0.2

–

0.1

263

–

1,303

1,012

269

* The interest in the three Lithuanian licences are indirectly held through a shareholding
in two Danish private companies, which in turn hold shares in Lithuanian companies
holding 100 per cent of the licences. The two Danish companies, Odin Energi and
Jylland Olie, are not consolidated in Tethys Oils financial statements due to the
ownership structure, which is why there are no oil and gas properties related to the
licences. The ownership of Jylland Olie and Odin Energi are presented in the balance
sheet under Shares in associated companies.

Currency exchange effects
The book value of oil and gas properties includes currency
exchange effects of MSEK 200, which are not cash related items
and therefore not included in investments. For more information
please see above under Result – Net financial result and note 9.

Reserves

Review of operations

Oman
Tethys Oil’s net working interest reserves in the Sultanate of Oman
as per 31 December 2014, amounted to 11,794 thousand barrels
of oil (“mbo”) of proven reserves (1P), 17,779 mbo of proven and
probable reserves (2P) and 25,080 mbo of proven, probable and
possible reserves (3P).

Oman

Licence
name

Block 15

Blocks 3&4

Tethys Oil,
%

Total area,
km²

Partners (operator in bold)

40%

30%

1,389

Odin Energy, Tethys Oil

34,610

CCED, Mitsui, Tethys Oil

Development of reserves
(Audited by DeGolyer and MacNaughton)

mbo

Total 31 Dec 2013

10,800

15,201

19,968

Production 2014

-2,759

Revisions

Discoveries

2,116

1,637

2,858

2,479

4,136

3,735

Total 31 Dec 2014

11,794

17,779

25,080

In 2014 Tethys Oil added 1P reserves of 3,753 mbo, representing
an increase of 35 per cent. The company added 2P reserves 5,337
mbo, representing an increase of 35 per cent. The 3P reserves
increased with 7,871 mbo, representing an increase of 39 per cent.
The increase in 2P reserves represents an internal reserve replace-
ment ratio of 193 per cent.

Reserves, 31 December 2014
(Audited by DeGolyer and MacNaughton)

mbo

Farha South field, Oman

8,303

11,186

13,285

Saiwan East field, Oman

Shahd field, Oman

499

2,992

1,266

5,327

2,940

8,855

Total*

11,794

17,779

25,080

* Numbers may not add up due to rounding.

The reserves in the Farha South field are from the Barik reservoir
section only. The reserves in the Saiwan East field, which includes
the B4EW3 area, are in the Khufai reservoir. The reserves in the
Shahd field are in the Lower Buah and Khufai and Lower al Bashir
reservoir.

The review of the reserves in Oman has been conducted by inde-
pendent petroleum consultant DeGolyer and MacNaughton
(“D&M”). The report has been calculated using 2007 Petroleum
Resources Management System (PRMS), Guidelines of the Soci-
ety of Petroleum Engineers (SPE), World Petroleum Council
(WPC), American Association of Petroleum Geologists (AAPG)
and Society of Petroleum Evaluation Engineers (SPEE). As a con-
sequence of the low oil price, the Lithuanian reserves are deemed
sub-economic and are not included as reserves as per 31 December
2014.

Blocks 3 and 4
During the full year 2014, investments amounting to MSEK 263
were made on Blocks 3 & 4.

During 2014, a total of 39 wells were completed on Blocks 3 & 4.
The Farha South field on Block 3 was expanded by the drilling of
9 production wells. In addition, four wells were drilled on previ-
ously undrilled fault blocks along the Farha trend, two of which
encountered oil and were put into production.

The major drilling activity for the year was in the Shahd field,
where the appraisal development programme has been very suc-
cessful resulting in increased production and increased reserves.
A total of 10 wells were drilled in 2014 and the Shahd field will
remain in focus in 2015. A vast amount of data was collected
during the year, allowing for a major expansion of the geological
model of the area with a view to enhance the understanding of the
petroleum system.

The production enhancing water injection programme tallied a
total of 10 water injector wells and five water source wells during
the year.

Block 15
Following the expiry of the Block 15 licence, there are on-going
discussions regarding the possibility of an extension of the licence.

Lithuania

Licence
name

Gargzdai*

Rietavas*

Raseiniai*

Tethys Oil,
%

Total area,
km²

Partners

25%

30%

884

Odin, GeoNafta, Tethys Oil

1,594

Odin, Tethys Oil

1,535

Odin, Tethys Oil, private
investors

Gargzdai licence
The production on the Gargzdai licence is declining according to
expectations. A pilot CO2 production enhancement project has
been carried out and is under evaluation. On the licence, water has
been injected in 7 wells averaging 55,000 m3 per month during
the fourth quarter. Evaluation is ongoing, but the results are not
expected before mid-year 2015.

Rietavas licence
In the Rietavas licence, acquisition of 30 square kilometres of 3D
seismic commenced in December 2014 in the Silale area in the

western part of the licence and is expected to be completed in the
first part of 2015.

Raseiniai licence
In the Raseiniai licence, three out of the eight Silurian reef pros-
pects mapped by last year’s 3D seismic study are planned to be
drilled back to back with expected start early in the second quarter
2015 after all relevant permits have been obtained.

France

Licence
name

Attila

Alès

Tethys Oil,
%

Total area,
km²

Partners (operator in bold)

40%

37.5%

1,986

Galli Coz, Tethys Oil

215

Tethys Oil, Mouvoil

On the French licences, the work programmes have been delayed
and it is unclear when work programmes can be resumed.

Liquidity
Net cash position as per 31 December 2014 amounted to
MSEK 347 compared to a net debt position of MSEK 127 as per
31 December 2013.

The net debt development is explained by the repayment of a
bond loan with nominal value MSEK 400 which was conducted
during the second quarter. The bond was replaced by a four-year,
up to MUSD 100, senior revolving reserve based lending facil-
ity with BNP Paribas as facility agent. During the second quarter,
Tethys Oil exercised its option for early redemption of the bonds
and redeemed all outstanding bonds. The early redemption price
was 104.50 per cent of the nominal amount of the bonds plus
accrued unpaid interest. The payment and redemption occurred
7 April 2014. The interest rate of the new credit facility is floating
between LIBOR + 3.75 per cent to LIBOR + 4.00 per cent per
annum, depending on the level of utilization of the facility. As per
31 December 2014, there was no outstanding debt, i.e. nothing
was borrowed from the new credit facility.

The reduction of net debt during the full year 2014 is explained
by the strong sales development on Blocks 3 & 4, which has been
significantly higher than the oil and gas investments during the
same period.

The development of Blocks 3 & 4 continues, with a main focus on
exploration, appraisal and a water injection programme to enhance
production. Lead times to bring discoveries to production remain
very short. Tethys Oil’s share of the of the original total partnership
investment budget for 2014 on Blocks 3 & 4, amounted to around
MUSD 60 (MSEK 400). Actual investments in Blocks 3 & 4 dur-
ing 2014 amounted to MUSD 38 (MSEK 263). Main reasons for
investments being lower than budget are

• some infrastructure investments have been pushed forward as
the successful Lower Buah appraisal programme has impacted
infrastructure planning

• fewer wells have been drilled than anticipated in the budget due
to, among other things, changes to the drilling programme fol-
lowing new data

The Blocks 3 & 4 investment budget 2015 will continue to focus
on development and appraisal. Following the oil price develop-
ment, Tethys Oil’s investment plans, including the capex budget,
for 2015 is currently being revised. The target is however to fund
investments on the Blocks from available funds and from cash flow
from operations.

Tethys Oil’s operations in Lithuania are expected to be self-
financed from oil production from the Gargzdai licence and avail-
able cash in the associated Lithuanian companies.

A large part of cash and cash equivalents are kept in USD which
has appreciated against SEK during the fourth quarter. The cur-
rency exchange effect on cash and cash equivalents amounted dur-
ing the fourth quarter 2014 to MSEK 40.

Financial assets
Tethys Oil’s interests in three Lithuanian licences are held through
two private Danish companies. For more information regarding
the ownership structure, please refer to note 6. As per 31 Decem-
ber 2014 the shareholding in the two associated Danish compa-
nies, Odin Energi and Jylland Olie, amounted to MSEK 41. The
book value has been affected by a write down of shares in Odin
Energi. The write down is based on an impairment test of the pro-
duction licence Gargzdai where the sharp decline in oil price has
affected the value of remaining reserves. The write down amounted
to MSEK 127. The remaining amount relate to the exploration
potential of the three licences.

Tethys Oil’s share of net profit during 2014 from Odin Energi
and Jylland Olie, which indirectly hold the Lithuanian licences,
amounted to MSEK -133 compared to MSEK 5 during 2013. The
write down of MSEK 127 is part of the net result 2014. During
2014, Tethys Oil’s indirect share of barrels sold was 38,916 bar-
rels which were sold at an average price of USD 104 per barrel,
compared to 47,485 barrels at an average price of USD 107 per
barrel during 2013. During the second quarter a dividend from
the Lithuanian investments was received amounting to MSEK 11.

Tethys Oil receives cash flow from the Lithuanian investments only
through dividends from the associated companies, which is nor-
mally received annually. For more information, please see note 6.

Derivative instruments
As per 31 December 2014, Tethys Oil have no oil price put
options (Brent) outstanding, compared to 31 December 2013
where oil price put options amounted to MSEK 5. During 2014
715,000 put options expired and following the falling oil prices,
the put options generated a profit of MSEK 14. The put options
were acquired for MSEK 6 to secure oil price at USD 90 per bar-
rel. There are no hedges in place for 2015.

Parent company
The Parent company reports a net result after tax for the full year
2014 amounting to MSEK 148 (-103). Administrative expenses
amounted during 2014 to MSEK 20 compared to MSEK 22
during 2013. Net financial profit amounted during 2014 to
MSEK 293 compared to MSEK -91 during 2013. The net financial
profit is explained by anticipated dividend from group companies
of MSEK 334 and gains on put options of MSEK 14 related to the
oil price hedge, however reduced by currency exchange losses. The

anticipated dividend in the annual report is greater than what was
stated in the year-end report, where MSEK 212 was anticipated.
The significant improvement of financial expenditures relate to the
refinancing of the previous bond loan to a loan facility. The bond
loan was held by the parent company and the new loan facility is
held by the subsidiary Tethys Oil Blocks 3 & 4 Ltd.

Significant agreements and commitments
In Tethys Oil’s oil and natural gas operations there are two main
categories of agreements; one that governs the relationship with the
host country; and one that governs the relationship with partners.

The agreements that govern the relationship with host countries
are referred to as licences or Exploration and production sharing
agreements (EPSA or PSA). Tethys Oil holds its interest directly
through aforementioned agreements in Oman and France. The
agreements with host countries have a time limit and are normally
divided into periods. Financial commitments and or work com-
mitments normally relates to the different periods. Tethys Oil has
fulfilled its commitments on Block 15 and Blocks 3 & 4 in Oman
for the current period. In the other areas of operations the com-
mitments are either fulfilled or there are no commitments of which
Tethys Oil can be held liable for. In some of Tethys Oil’s areas of
interest there are requirements of work to be done or minimum
expenditures in order to retain the licences, but no commitments
of which Tethys Oil can be held liable for.

The agreements that govern the relationship with partners are
referred to as Joint Operating Agreements (JOA). Tethys Oil has
JOAs with its partners in all areas of operation.

Other than the aforementioned agreements, there are no indi-
vidual agreements or similar circumstances relating to the busi-
ness which are of crucial significance for the group’s operations or
profitability.

Subsequent events
• Year-end audited reserves Blocks 3 & 4 Oman amounted net to

Tethys Oil to

• 1P reserves 11.8 million barrels (10.8)
• 2P reserves 17.8 million barrels (15.2)
• 3P reserves 25.1 million barrels (20.0)
• Tethys Oil’s share of production from Oman during the first
quarter 2015 amounted to 774,315 barrels corresponding to
8,604 barrels per day

Board of directors
At the Annual General Meeting of shareholders on 14 May 2014
Per Brilioth, Staffan Knafve, Magnus Nordin, Jan Risberg and
Katherine Støvring were re-elected members of the board. No dep-
uty directors were appointed. At the same meeting Staffan Knafve
was appointed chairman of the board.

The work of the board is subject to an established work procedure
that defines the distribution of work between the board and the
managing director. The work procedure is evaluated each year and
revised if deemed appropriate. The board had 14 meetings during
2014. Most importantly the board has adopted the interim reports
of the year as well as the budget of 2015. The five members of the
board have consisted of 4 non-executive directors. These four non-
executive directors are also members of the audit committee and

the remuneration committee. Jan Risberg is chairman of the Audit
committee and Staffan Knafve is chairman of the remuneration
committee.

Remuneration to executive management
The intention of the board of directors is to propose to the 2015
AGM the adoption of a policy on remuneration for 2015. The
remuneration committee has adopted a policy that fundamentally
will be the proposition to the 2015 AGM, containing the follow-
ing elements of remuneration for the executive management; base
salary; pension arrangements; yearly variable salary; non-financial
benefits; long term incentive programme.

For a detailed description on remuneration applied in 2014 and
policy on remuneration as adopted by the remuneration commit-
tee, refer to page 32 of the Corporate Governance report and note
14 of the consolidated financial statements.

Organisation
At the end of the year, Tethys Oil had a total of 18 (17) employees.
Of these, 7 (7) were women. In addition, contractors and consult-
ants are engaged in Tethys Oil’s operations.

The environment
All oil and gas related operations impact the environment and
therefore entail risk. Directly or indirectly through joint opera-
tions, the Group complies with the environmental legislation and
regulations applicable in each country. Areas which are normally
regulated include air pollution, discharges to watercourses, water
use, handling of hazardous substances and waste, land and ground-
water contamination, and restoration of the environment around
the facilities after operations have ceased. Directly and indirectly
through partnerships, Tethys Oil strives to minimise the environ-
mental impact and avoid the occurrence of accidents. For more
information, see the section Sustainability.

Group structure
Tethys Oil AB (publ), with organizational number 556615-8266,
is the parent company in the Tethys Oil Group. The wholly owned
subsidiaries Tethys Oil Oman Limited, Tethys Oil Block 3&4
Limited, Windsor Petroleum (Spain) Inc, Tethys Oil Denmark
AB, Tethys Oil Canada AB, Tethys Oil Spain AB, Tethys Oil Tur-
key AB, Tethys Oil France AB, Tethys Oil Suisse S.A., Tethys Oil
Exploration AB, Tethys Oil Canada Ltd and Tethys Oil Middle
East North Africa BV are part of the group. The Tethys Oil Group
was established 1 October 2003. The subsidiary Tethys Oil Suisse
S.A. is in an on-going process of liquidation.

Share data
As per 31 December 2014, the number of outstanding shares in
Tethys Oil amount to 35,543,750, with a quota value of SEK 0.17.
All shares represent one vote each. Tethys Oil does not have any
incentive program for employees. There has been no change in the
number of outstanding shares since 31 December 2013.

As per 31 December 2014, Tethys Oil held 298,160 of its own
shares which were purchased during the fourth quarter at an aver-
age price of SEK 68.0. The share repurchase programme is based
on a mandate from the AGM held in May 2014 and repurchased
shares are still part of the total number of outstanding shares but

however not included in the number of shares in circulation,
which amount to 35,245,590.

Risk and uncertainties
A statement of risks and uncertainties are presented in note 1, page 61.

Appropriation of profit
The Board of Directors* proposes to the annual general meeting a
total distribution of SEK 3.00 (–) per share, equal to MSEK 106
(–), be paid for the 2014 fiscal year. The distribution is proposed to
be made by a cash dividend of SEK 1 per share and by redemption
of shares of SEK 2 per share. It is also proposed that the balance
of retained earnings after the dividend be retained in the business
as described below.

SEK

Retained earnings

Profit for the year

81,366,345

147,922,589

229,288,934

The Board of Directors proposes that these earnings be appropriated as follows:

To the shareholders, a distribution of SEK 3.00 per share

105,575,070

To be retained in the business

Total

123,713,864

229,288,934

Cash dividend and redemption of shares
The board of directors’ proposal consists of a cash dividend of SEK
1 per share and a mandatory share redemption procedure, whereby
every share is split into one ordinary share and one redemption
share. The redemption share is then automatically redeemed
at SEK 2.00 per share. This corresponds to a total of distribu-
tion to shareholder of SEK 3.00 per share amounting to SEK
105,575,070. The dividend and redemption is subject to approval
at the annual general meeting 2015. The preliminary record day
for the dividend is 18 May 2015 and preliminary day of payment
of dividend is 21 May 2015. Preliminary record date for the share
split is 27 May 2015 and payment of the redemption shares would
preliminary be made 30 June 2015

As per 31 December 2014, the parent company’s and the group’s
equity ratio amounted to 97.76 per cent and 92.26 per cent,
respectively. After the dividend, the parent company’s and the
group’s equity ratio will amount to 96.92 per cent and 91.75 per
cent, respectively.

Tethys Oil has generated significant cash flows in recent years and
the group’s financial position is strong. The Board has considered
the parent company and the group’s consolidation needs through
a comprehensive valuation of the parent company and the group’s
financial position and the parent company and the group’s pos-
sibilities to fulfil their commitments in a long term. The parent
company and the group’s financial position does not give rise to
any other conclusion than that the parent company and the group
can continue its operations and meet its obligations in the short
and long term and make the necessary investments. The Board
believes that the size of the equity, even after the proposed divi-
dend, is in reasonable proportion to the scale of the parent com-
pany and the group’s business as well as the risks associated with
conducting the business.

With reference to the above and what has come to the Board’s
attention, it is the Board’s assessment that the parent company’s
and the group’s financial position implies that the proposed divi-
dend is justifiable pursuant to Chapter 17, Section 3 second and
third paragraph of the Swedish Companies Act, i.e. with reference
to the requirements that the nature, scope and risks of business
put on the size of the parent company’s and the group’s equity as
well as the parent company’s and the group’s need to strengthen its
balance sheet, liquidity and financial position.

Financial statements
The result of the group’s and parent company’s operations and the
financial position at the end of the financial year is shown in the
following income statement, balance sheet, cash flow statement,
statement of changes in equity and related notes. Balance sheet
and income statement will be resolved at the AGM, 13 May 2015.

* Staffan Knafve and Jan Risberg did not participate in the decision.

Price per barrel of oil

USD/bbl

120

100

Brent Spot
Omani Blend Futures
Tethys Oil Sale Price

USD/bbl

120

100

Jan
2013

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2014

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source: Platts, Dubai Mercantile Exchange

Consolidated statement of comprehensive income

MSEK

Net sales of oil and gas

Depreciation, depletion and amortisation

Exploration costs

Other income

Operating expenditures

Net profit/loss from associated companies

Other losses/gains, net

Administrative expenses

Operating result

Financial income and similar items

Financial expenses and similar items

Net financial result

Result before tax

Income tax

Result for the year

Other comprehensive result

Items that may be subsequently reclassified to profit or loss:

Currency translation differences

Other comprehensive result for the year

Total comprehensive income for the year

Number of shares outstanding

Number of shares outstanding (after dilution)

Weighted number of shares

Earnings per share, SEK

Earnings per share (after dilution), SEK

Note

12–14

2014

1,046

-214

-1

–

-264

-133

–

-31

404

-75

-53

350

–

350

245

595

2013

592

-138

-56

-152

–

-31

285

-50

-45

240

–

240

35,543,750

35,524,316

9.86

35,543,750

6.76

Consolidated balance sheet

MSEK

ASSETS

Non current assets

Oil and gas properties

Office equipment

Investment in associated companies

Current assets

Other receivables

Prepaid expenses

Derivative instruments

Cash and cash equivalents

TOTAL ASSETS

SHAREHOLDERS' EQUITY AND LIABILITIES

Shareholders' equity

Share capital

Additional paid in capital

Other reserves

Retained earnings

Total shareholders' equity

Non-current liabilities

Bond issue

Loan facility

Provisions

Current liabilities

Accounts payable

Other current liabilities

Accrued expenses

Total liabilities

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES

Pledged assets

Contingent liabilities

Note

31 Dec 2014

31 Dec 2013

1,303

1,345

–

372

471

1,012

184

1,198

295

366

1,816

1,563

552

198

919

552

-27

569

1,675

1,100

–

110

115

141

1,816

1,789

–

393

–

422

463

1,563

989

–

Consolidated statement of changes in equity

MSEK

Share capital

Paid in capital

Other reserves

Retained earnings

Total equity

Opening balance 1 January 2013

Comprehensive income

Result for the year

Other Comprehensive income

Currency translation differences 2013

Total other comprehensive income

Total comprehensive income

Closing balance 31 December 2013

Opening balance 1 January 2014

Comprehensive income

Result for the year

Other Comprehensive income

Currency translation differences 2014

Total other comprehensive income

Total comprehensive income

Transactions with owners

Purchase of own shares

Total transactions with owners

Closing balance 31 December 2014

–

329

240

–

240

569

350

–

919

–

919

860

240

–

240

1,100

350

245

1,696

-20

1,675

552

-27

–

-27

–

245

219

-20

198

–

552

–

552

Consolidated cash flow statement

MSEK

Note

2014

2013

404

–

-44

–

313

673

-16

707

-269

–

-259

-19

-400

-21

-426

295

372

285

–

-38

–

138

442

-49

-56

336

-275

-15

-1

-6

-289

–

248

-1

295

Cash flow from operations

Operating result

Interest received

Interest paid

Income tax

Adjustment for exploration costs

Adjustment for non cash related items

Total cash flow from operations before change in working capital

Change in receivables

Change in liabilities

Cash flow from operations

Investment activity

Investment in oil and gas properties

Oil and gas properties from cost oil repayment

Dividend from associated companies

Investment in long term receivables

Investment in other fixed assets

Cash flow from investment activity

Financing activity

Purchase of own shares

Bond repayment

Long term credit facility

Gain on derivative instruments

Cash flow from financing activity

Cash flow for the year

Cash and cash equivalents at the beginning of the year

Exchange gains/losses on cash and cash equivalents

Cash and cash equivalents at the end of the year

9, 17

Parent Company income statement

MSEK

Depreciation and amortisation

Other income

Net profit/loss from associated companies

Administrative expenses

Operating result

Financial income and similar items

Financial expenses and similar items

Write down of shares in subsidiaries

Net financial result

Result before tax

Income tax

Result for the year *

Number of shares outstanding

Number of shares outstanding (after dilution)

Weighted number of shares

Note

11–14

2014

-0

-133

-20

-145

360

-65

-2

293

148

–

148

2013

-0

-22

-12

-49

-62

-91

-103

–

-103

35,543,750

35,524,316

35,543,750

* As there are no items in the parent company’s other comprehensive income, no separate report on total comprehensive income is presented.

Parent Company balance sheet

MSEK

ASSETS

Non-current assets

Oil and gas properties

Other fixed assets

Shares in subsidiaries

Long term receivables from group companies

Investment in associates

Current assets

Short term receivables from group companies

Other receivables

Prepaid expenses

Derivative instruments

Cash and cash equivalents

TOTAL ASSETS

SHAREHOLDERS' EQUITY AND LIABILITIES

Shareholders' equity

Restricted equity:

Share capital

Statutory reserve

Unrestricted equity:

Share premium reserve

Retained earnings

Result for the year

Total shareholders' equity

Non-current liabilities

Debt

Current liabilities

Accounts payable

Other current liabilities to group companies

Other current liabilities

Accrued expenses

Total liabilities

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES

Pledged assets

Contingent liabilities

Note

31 Dec 2014

31 Dec 2013

–

208

–

224

313

461

-379

148

306

–

313

–

365

184

551

–

588

481

-277

-103

179

393

–

409

588

989

–

Parent Company statement of changes in equity

Restricted equity

Non-restricted equity

Share
capital

Statutory
reserve

Share
premium
reserve

Retained
earnings

MSEK

Opening balance 1 January 2013

Transfer of prior year net result

Comprehensive income

Loss for the year

Period result

Total comprehensive income

Closing balance 31 December 2013

Opening balance 1 January 2014

Transfer of prior year net result

Comprehensive income

Result for the year

Period result

Total comprehensive income

Transactions with owners

Purchase of own shares

Total transactions with owners

Closing balance 31 December 2014

-194

-83

–

-277

-103

–

Net
result

-83

-103

103

148

–

Total equity

281

–

-103

179

–

148

-20

306

-379

148

–

481

–

481

–

-20

461

Parent Company cash flow statement

MSEK

Cash flow from operations

Operating result

Interest received

Interest paid

Adjustment for non cash related items

Adjustment for dividends not yet paid

Total cash flow from operations before change in working capital

Change in receivables

Change in liabilities

Cash flow from operations

Investment activity

Dividend from associated companies

Investment in long term receivables

Investment in other fixed assets

Investments in derivative instruments

Cash flow from investment activity

Financing activity

Purchase of own shares

Bond repayment

Gain on derivative instruments

Cash flow from financing activity

Cash flow for the year

Cash and cash equivalents at the beginning of the year

Exchange gains on cash and cash equivalents

Cash and cash equivalents at the end of the year

Note

2014

2013

-145

-40

133

334

289

-209

299

-1

–

309

-19

-400

-405

-14

-2

-12

-38

-5

–

-39

-66

-103

-56

–

-6

-54

–

-157

187

Notes

General information
Tethys Oil AB (publ) (“the Company”), corporate identity number 556615-
8266, and its subsidiaries (together “the Group” or “Tethys Oil”) are
focused on exploration for and production of oil and natural gas. The Group
has interests in exploration licences in Oman, France and Lithuania. The
Company is a limited liability company incorporated and domiciled in Stock-
holm, Sweden. The Company is listed on NASDAQ Stockholm.

These consolidated financial statements have been approved for issue by
the board of directors on 17 April 2015.

Basis of preparation
The annual report of Tethys Oil AB/the Group have been prepared in accord-
ance with prevailing International Financial Reporting Standards (IFRS) and
IFRS Interpretations Committee (IFRIC) interpretations adopted by the EU
Commission and the Swedish Annual Accounts Act (1995:1554). In addi-
tion RFR 1 “Supplementary Rules for Groups” has been applied as issued
by the Swedish Financial Reporting Board.

The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 2.

The consolidated financial statements have been prepared under the his-
torical cost basis except as disclosed in the accounting policies below.

Accounting principles
The accounting principles applied in the preparation of these consolidated
financial statements are set out below. The same accounting principles
were used in the Annual report 2013 and have been consistently applied
to all the years presented, unless otherwise stated. The Annual report of
the Group has been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU, the Annual Accounts
Act and RFR 1 “Supplementary rules for groups”. The Annual report for
the Parent company has been prepared in accordance with the Annual
Accounts Act and Swedish Financial Accounting Standards Council’s RFR
2 “Accounting for legal entities”. RFR 2 means that the parent company in
the annual report for the legal entity shall apply IFRS’ rules and statements
as adopted by the EU, so far this is possible within the framework of the
Annual Accounts Act and with regard to the connection between accounting
and taxation. The recommendation states which exceptions and additions
that shall be or are allowed to be made from IFRS. The accounting princi-
ples of the Parent company are the same as for the Group, except in the
cases specified below in the section entitled “Parent Company accounting
principles”.

New accounting principles for 2014
The following standards have been adopted by the group for the first time
for the financial year beginning on or after 1 January 2014 and have a mate-
rial impact on the group:

IFRS 10, “Consolidated financial statements” The objective of the standard
is to build on existing principles by identifying the concept of control as
the determining factor in whether an entity should be included within the
consolidated financial statements of the parent company.

IFRS 11, “Joint arrangements” The standard is focusing on the rights and
obligations of the joint arrangement rather than its legal form. There are
two types of joint arrangement: joint operations and joint ventures. Joint
operations arise where a joint operator has rights to the assets and obliga-
tions relating to the arrangement and hence accounts for its interest in
assets, liabilities, revenue and expenses. Joint ventures arise where the
joint operator has rights to the net assets of the arrangement and hence
equity accounts for its interest.

IFRS 12, “Disclosures of interests in other entities” The standard intro-
duces a range of new and expanded disclosure requirements. These will
require the disclosure of significant judgements and assumptions made by
management in determining whether there is joint control and if there is a
joint venture, a joint operation or another form of interest.

Other amendments applicable from 1 January 2014 did not have any
impact on the consolidated financial statements of the Group.

New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpreta-
tions are effective for annual periods beginning after 1 January 2014, and
have not been applied in preparing these consolidated financial statement.
None of these is expected to have a significant effect on the consolidated
financial statements of the Group, except the following set out below:

IFRS 9, ‘Financial instruments’, addresses the classification, measurement
and recognition of financial assets and financial liabilities. The complete
version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS
39 that relates to the classification and measurement of financial instru-
ments. IFRS 9 retains but simplifies the mixed measurement model and
establishes three primary measurement categories for financial assets:
amortised cost, fair value through OCI and fair value through P&L. The
basis of classification depends on the entity’s business model and the
contractual cash flow characteristics of the financial asset. Investments in
equity instruments are required to be measured at fair value through profit
or loss with the irrevocable option at inception to present changes in fair
value in OCI not recycling. There is now a new expected credit losses model
that replaces the incurred loss impairment model used in IAS 39. For finan-
cial liabilities there were no changes to classification and measurement
except for the recognition of changes in own credit risk in other compre-
hensive income, for liabilities designated at fair value through profit or loss.
IFRS 9 relaxes the requirements for hedge effectiveness by replacing the
bright line hedge effectiveness tests. It requires an economic relationship
between the hedged item and hedging instrument and for the ‘hedged ratio’
to be the same as the one management actually use for risk management
purposes. Contemporaneous documentation is still required but is differ-
ent to that currently prepared under IAS 39. The standard is effective for
accounting periods beginning on or after 1 January 2018. Early adoption is
permitted. The group is yet to assess IFRS 9’s full impact.

IFRS 15, ‘Revenue from contracts with customers’ deals with revenue rec-
ognition and establishes principles for reporting useful information to users
of financial statements about the nature, amount, timing and uncertainty
of revenue and cash flows arising from an entity’s contracts with custom-
ers. Revenue is recognised when a customer obtains control of a good or
service and thus has the ability to direct the use and obtain the benefits
from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS
11 ‘Construction contracts’ and related interpretations. The standard is
effective for annual periods beginning on or after 1 January 2017 and ear-
lier application is permitted. The group is assessing the impact of IFRS 15.

There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the Group.

Principles of consolidation
Subsidiaries are all entities (including structured entities) over which the
group has control. The group controls an entity when the group is exposed
to, or has rights to,variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.Sub-
sidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.

The group uses the acquisition method of accounting to account for busi-
ness combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the group. The consideration transferred

includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabili-
ties assumed in a business combination are measured initially at their
fair values at the acquisition date. On an acquisition-by-acquisition basis,
the group recognises any non-controlling interest in the acquiree either at
fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net assets.

Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also elimi-
nated. Accounting policies of subsidiaries have been changed where neces-
sary to ensure consistency with the policies adopted by the Group.

Joint arrangements
The group applies IFRS 11 to all joint arrangements. Under IFRS 11 invest-
ments in joint arrangements are classified as either joint operations or
joint ventures depending on the contractual rights and obligations for each
investor. The Group has assessed the nature of its joint arrangements and
determined them to be joint operations. In the accounting, the group rec-
ognize in the consolidated financial statements, on a line-by-line basis, its
share of assets, liabilities and expenses of these joint operations incurred
jointly with the other partners, along with the Group’s income from the sale
of the output and any liabilities and expenses that the group has incurred
in relation to the joint operation.

statement. Transactions in foreign currencies are translated at exchange
rates prevailing at the transaction date. Exchange differences are included
in financial income/expenses in the income statement. Goodwill and fair
value adjustments arising on the acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity and translated at the balance
sheet rate of exchange.

Presentation currency
The balance sheets and income statements of foreign Group companies
are translated for consolidation purposes using the current rate method.
All assets and liabilities of the subsidiary companies are translated at the
balance sheet date rates of exchange, whereas the income statements are
translated at average rates of exchange for the year, except for transac-
tions where it is more relevant to use the rate of the day of the transac-
tion. The translation differences which arise are recorded directly in the
foreign currency translation reserve within other comprehensive income.
Upon disposal of a foreign operation the translation differences relating
to that operation will be transferred from equity to the income statement
and included in the result on sale. Translation differences arising from net
investments in subsidiaries, used for financing exploration activities, are
recorded directly in other comprehensive income.

For the preparation of the financial statements for the reporting period, the
following exchange rates have been used.

Jointly controlled companies
As stated above, a subsidiary that is controlled by the Group will be fully
consolidated within the results of Tethys Oil. Joint control exists when
the Group does not have the control to determine the strategic operat-
ing, investing and financing policies of a partially owned entity without the
co-operations of others. When this is the case the entity is proportionally
consolidated.

Currency

SEK/CHF

SEK/EUR

SEK/LTL

SEK/USD

31 December 2014

31 December 2013

2014
average

2014
period end

2013
average

2013
period end

7.53

9.15

2.64

6.88

7.91

9.53

2.70

7.77

7.05

8.68

2.52

6.52

Associated companies
An investment in an Associated company is an investment in an undertak-
ing where the Group exercises significant influence but not control, gener-
ally accompanying a shareholding of at least 20 per cent but not more
than 50 per cent of the voting rights. Such investments are accounted
for in the consolidated financial statements in accordance with the equity
method and are initially recognized at cost. The difference between the
acquisition cost of shares in an associated company and the net fair value
of the assets, liabilities and contingent liabilities of the associated com-
pany recognised at the date of acquisition is recognised as goodwill. The
goodwill is included within the carrying amount of the investment and is
assessed for impairment as part of the investment. The Group’s share in
the post-acquisition results of the associated company is recognised in the
income statement and the Group’s share in post-acquisition movements
in other comprehensive income of the associated company is recognised
directly in other comprehensive income of the Group. When the Group’s
accumulated share of losses in an associated company equals or exceeds
its interest in the associated company, the Group does not recognise fur-
ther losses, unless it has incurred obligations or made payments on behalf
of the associate.

Unrealised gains on transactions between the Group and its associates are
eliminated to the extent of the Group’s percentage in the associates. Unre-
alised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of associ-
ates have been changed where necessary to ensure consistency with the
policies adopted by the Group.

Foreign currencies
Items included in the financial statements of each of the Group’s entities
are measured using the currency of the primary economic environment in
which the entity operates (‘functional currency’). The consolidated financial
statements are presented in Swedish Kronors (SEK) which is the currency
the Group has elected to use as the presentation currency.

Transactions and balances
Monetary assets and liabilities denominated in foreign currencies are
translated at the rates of exchange prevailing at the balance sheet date
and foreign exchange currency differences are recognised in the income

Effect of currency exchange rates on operating result

Comparison with 31 December 2013, MSEK

Net sales of oil and gas

Depreciation, depletion and amortization

Exploration costs

Other income

Operating expenses

Net profit/loss from associate

Other losses/gains, net

Administrative expenses

Summary of currency exchange rate effect on operating result

The table above presents the currency exchange effect on operating result
compared with 2013, by applying the average exchange rate of 2013 on
2014 accounts.

Segment reporting
Operating segments are based on geographic perspective and reported in
a manner consistent with the internal reporting provided to the Executive
Management. Information for segments is only disclosed when applicable.

Classification of assets and liabilities
Non-current assets, long-term liabilities and provisions consist for the most
part solely of amounts that are expected to be recovered or paid more than
twelve months after the balance sheet date. Current assets and current
liabilities consist solely of amounts that are expected to be recovered or
paid within twelve months after the balance sheet date.

Oil and gas properties
Oil and gas properties are initially recorded at historical cost, where it is prob-
able that they will generate future economic benefits. All costs for acquiring
concessions, licences or interests in production sharing contracts and for
the survey, drilling and development of such interests are capitalised on a
field area cost centre basis. This includes capitalisation of decommission-
ing and restoration costs associated with provisions for asset retirement

7.40

9.03

2.55

6.58

-11

–

-14

–

-1

(see “Provisions”). Oil and gas properties are subsequently carried at cost
less accumulated depreciation, depletion and amortisation (including any
impairment). Gains and losses on disposals are determined by comparing
the proceeds with the carrying amounts of assets sold and are recognised
in income. Routine maintenance and repair costs for producing assets are
expensed to the income statement when they occur.

Proceeds from the sale or farm-out of oil and gas concessions in the explo-
ration stage are off set against the related capitalised costs of each cost
centre with any excess of net proceeds over all costs capitalised included
in the income statement. In the event of a sale in the exploration stage any
deficit is included in the income statement.

Oil and gas properties are categorised as either producing or non-producing.

Depreciation, depletion and amortisation
Producing oil and gas properties are depleted on a unit-of-production basis
over the proved and probable reserves of the field concerned, except in the
case of assets whose useful lives differ from the lifetime of the field, in
which case the straight-line method is applied.

In accordance with the unit of production method, net capitalised costs to
reporting date, together with anticipated future capital costs for the devel-
opment of the proved and probable reserves determined at the balance
sheet date price levels, are depleted based on the year’s production in rela-
tion to estimated total proved and probable reserves of oil and gas. Deple-
tion of a field area is charged to the income statement once commercial
production commences, under Depletion, depreciation and amortisation.

Proved reserves are those quantities of petroleum which, by analysis of
geological and engineering data, can be estimated with reasonable cer-
tainty to be commercially recoverable, from a given date forward, from
known reservoirs and under current economic conditions, operating meth-
ods and governmental regulations. Proved reserves can be categorised as
developed or undeveloped. If deterministic methods are used, the term
reasonable certainty is intended to express a high degree of confidence
that the quantities will be recovered. If probabilistic methods are used,
there should be at least a 90 per cent probability that the quantities actu-
ally recovered will equal or exceed the estimates.

Probable reserves are those unproved reserves which analysis of geologi-
cal and engineering data suggests are more likely than not to be recover-
able. In this context, when probabilistic methods are used, there should
be at least a 50 per cent probability that the quantities actually recovered
will equal or exceed the sum of estimated proved plus probable reserves.

Exploration costs
Exploration costs relate to non-producing oil and gas properties and are
recognised in the income statement when a decision is made not to pro-
ceed with an oil and gas project, or when expected future economic benefits
of an oil and gas project are less than capitalised costs. No depletion is
charged to non-producing oil and gas properties.

Costs related to non-producing oil and gas properties and directly asso-
ciated with an exploration well are capitalised until the determination of
reserves is evaluated. If it is determined that a commercial discovery has
not been achieved, these exploration costs are charged to the income
statement as exploration costs.

The field will be transferred from the non-production cost pool to the pro-
duction cost pool within oil and gas properties once commercial production
commences, and accounted for as a producing asset.

Impairment
Tethys Oil continuously assesses its producing oil and gas properties for
any need for impairment. This is performed in conjunction with each bal-
ance sheet date or if there are events or changes in circumstances that
indicate that carrying values of assets may not be recoverable. Such indica-
tors include changes in the Group’s business plans, relinquished licences,
changes in raw materials prices leading to lower revenues and, for oil and
gas properties, downward revisions of estimated reserve quantities.

Testing for impairment losses is performed for each cash generating unit,
which corresponds to licence right, production sharing agreement or equiva-
lent owned by Tethys Oil. A cash generating unit thus usually corresponds
to each acquired asset in each country in which Tethys Oil carries on oil
and gas operations. Impairment testing means that the balance sheet
item amount for each cash generating unit is compared to the recoverable
amount for the assets, which is the higher of the fair value of the assets
less sales expenses and the value in use. The value in use of the assets is
based on the present value of future cash flows discounted by a discount
rate; see also Note 9 under the section Impairment testing. An impairment
loss is recorded when an asset’s or a cash generating unit’s recorded value
exceeds the recoverable amount. Impairment losses are charged to the
income statement, under Depletion, depreciation and amortisation.

Interest
Interest on borrowings to finance the acquisition of producing oil and gas
properties is charged to income as incurred. Interest on borrowings to
finance fields under development is capitalized within oil and gas proper-
ties until production commences.

Valuation principles financial items
The Group classifies its financial assets in the following categories: at fair
value through profit or loss, loans and receivables and other liabilities. The
classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets
at initial recognition.

Tethys Oil reports a financial asset or a financial liability in the balance
sheet when the company becomes a party to the instrument’s contrac-
tual terms. The company derecognises a financial liability or part thereof
when the obligation stated in the relevant contract is fulfilled or otherwise
terminated.

Tethys Oil bases the fair value of financial instruments depending on avail-
able market data at time of valuation. Data are categorised into three cat-
egories; Level 1: quoted prices in active markets. Level 2: valuation based
on observable market data. Level 3: valuation techniques incorporating
information other than observable market data. The reported value – after
any impairment – of accounts receivable and accounts payable is assumed
to equate to their fair value, since these entries are short-term in nature.

a) Financial assets and liabilities at fair value through profit or loss
Financial assets and liabilities at fair value through profit or loss are finan-
cial assets held for trading. A financial asset and liabilities are classified in
this category if acquired principally for the purpose of selling in the short
term. Derivatives are also categorised as held for trading unless they are
designated as hedges. Assets and liabilities in this category are classified
as current assets or liabilities if expected to be settled within 12 months;
otherwise, they are classified as non-current. Derivate instruments in this
category are described in note 7.

Financial assets and liabilities carried at fair value through profit or loss
are both initially and subsequently recognised at fair value, and transaction
costs are expensed in the income statement.

b) Receivables and other receivables
Receivables and other receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than 12
months after the end of the reporting period. These are classified as non-
current assets. The group’s receivables comprise ‘trade and other receiva-
bles’ and ‘cash and cash equivalents’ in the balance sheet. Receivables
and other receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. Assets
are also measured less provision for impairment.

c) Other liabilities
Other liabilities are non-derivative financial liabilities with fixed or determi-
nable payments that are not quoted in an active market. They are included
in current liabilities, except for maturities greater than 12 months after the
end of the reporting period. These are classified as non-current liabilities.
Other liabilities are recognised initially at fair value and subsequently meas-
ured at amortised cost using the effective interest method.

d) Impairment of financial assets
The group assesses at the end of each reporting period whether there
is objective evidence that a financial asset or group of financial assets
is impaired. A financial asset or a group of financial assets is impaired
and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss event (or events) has
an impact on the estimated future cash flows of the financial asset or group
of financial assets that can be reliably estimated. For loans and receivables
category, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) dis-
counted at the financial asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is recognised in
the consolidated income statement

Fixed assets other than oil and gas
Other tangible fixed assets are stated at cost less accumulated depre-
ciation. Depreciation is based on cost and is calculated on a straight line
basis over the estimated economic life of 3 to 5 years for office equipment
and other assets.

Additional costs to existing assets are included in the assets’ net book
value or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably.

The net book value of any replaced parts is written off. Other additional
expenses are deemed to be repair and maintenance costs and are charged
to the income statement when they are incurred. The net book value is writ-
ten down immediately to its recoverable amount when the net book value
is higher. The recoverable amount is the higher of an asset’s fair value less
cost to sell and value in use.

Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, including
offsetting bank overdrafts, short-term deposits, money market funds and
commercial paper that have a maturity of three months or less at the date
of acquisition.

Equity
Share capital consists of the registered share capital for the Parent Com-
pany. Share issue costs associated with the issuance of new equity are
treated as a direct reduction of proceeds. Excess contribution in relation to
the issuance of shares is accounted for in the item additional paid-in-capital.

The currency translation reserve contains unrealised translation differ-
ences due to the conversion of the functional currencies into the presenta-
tion currency.

Retained earnings contain the accumulated results attributable to the
shareholders of the Parent Company.

Provisions
A provision is reported when the Company has a legal or constructive obli-
gation as a consequence of an event and when it is more likely than not
that an outflow of resources is required to settle the obligation and a reli-
able estimate can be made of the amount. Provisions are measured at the
present value of the expenditures expected to be required to settle the obli-
gation using a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the obligation. The increase
in the provision due to passage of time is recognised as financial expense.

On fields where the Group is required to contribute to site restoration costs,
a provision is recorded to recognise the future commitment. An asset is
created, as part of the oil and gas property, to represent the discounted
value of the anticipated site restoration liability and depleted over the life of
the field on a unit of production basis. The corresponding accounting entry
to the creation of the asset recognises the discounted value of the future
liability. The discount applied to the anticipated site restoration liability is
subsequently released over the life of the field and is charged to financial
expenses. Changes in site restoration costs and reserves are treated pro-
spectively and consistent with the treatment applied upon initial recognition.

Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised costs using the
effective interest method, with interest expense recognised on an effective
yield basis. The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of the
financial liability, or a shorter period where appropriate.

Revenue
Revenues from the sale of oil and gas are recognised in the income state-
ment net of royalties in kind or in cash (government take). Revenues asso-
ciated with the sale of crude oil are recognized at the fair value of the
consideration received or receivable when the significant risks and rewards
of ownership have been transferred, which is when title passes from the
Company to the customer. For Tethys Oil’s operations, customers take title
when the crude oil is loaded onto a tanker.

Underlift and overlift
Crude oil and natural gas produced and sold, below or above the Com-
pany’s working interest share in the related oil and gas property, results in
production underliftings, or overliftings. Underliftings are recorded as Other
receivables valued at operating cost, and overliftings are recorded in Other
current liabilities and accrued at the sales value. Underliftings are reversed
from Other receivables when the crude oil is lifted and sold, with the sales
proceeds recorded as revenue and the cost of the oil expensed. Overlift-
ings are reversed from Other current liabilities when sufficient volumes are
produced to make up the overlifted volume.

Profit oil and cost recovery
Blocks 3 & 4, being Tethys Oil’s main and only producing oil and gas prop-
erty, is governed by an Exploration and Production Sharing Contract (EPSA).
Under the EPSA, revenues are derived from cost recovery oil and gas and
profit oil and gas. Cost recovery oil and gas allows Tethys Oil to generally
recover all investments and operating expenses (CAPEX and OPEX). Profit
oil and gas is allocated to the host government and contract parties in
accordance with their respective equity interests.

Other
Incidental revenues from the production of oil and gas are offset against
capitalised costs of the related cost centre until quantities of proven and
probable reserves are determined or commercial production has com-
menced. Service income, generated by providing technical and manage-
ment services to joint operations, is recognised as other income.

Income taxes
Presented income taxes include tax payable or tax receivable for the report-
ing period, adjustments in regard to previous year’s taxes and changes in
deferred tax.

Valuations of all tax liabilities/claims is in nominal amounts and are pre-
pared in accordance with tax legislation and tax rates decided or announced
and at which they are likely to be resolved.

The tax expense for the period comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it relates
to items recognised in other comprehensive income or directly in equity.
In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively. Deferred income tax is recognised, using the
liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated finan-
cial statements. Deferred income tax assets are recognised only to the
extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.

Pension obligations
The majority of the pension obligations of the Group are governed by legally
required social costs. Additional pension schemes exists which are funded
through payments to insurance companies. These are defined contribution
plans. A defined contribution plan is a pension plan under which the group
pays fixed contributions into a separate entity. The Group has no legal or
constructive obligations to pay further contributions should this legal entity

not hold sufficient assets to pay all employees the benefits relating to
employee service in the current or prior periods.

Severance pay
Severance pay is payable when employment is terminated by the Group
before the normal retirement date, or whenever an employee accepts volun-
tary redundancy in exchange for the severance pay. The Group recognises
severance pay when it is demonstrably committed to either: terminating
the employment of current employees according to a detailed formal plan
without possibility of withdrawal; or providing severance pay as a result
of an offer made to encourage voluntary redundancy. Benefits falling due
more than 12 months after the balance sheet date are discounted to their
present value.

Related party transactions
Tethys Oil recognises the following related parties: associated companies,
jointly controlled entities, members or the family of the key management
personnel or other parties that are partly, directly or indirectly, controlled by
key management personnel or of its family or of any individual that controls,
or has joint control or significant influence over the entity.

Parent Company accounting principles
The Parent Company has prepared its Annual Report in compliance with
Swedish Annual Accounts Act and recommendation RFR 2, Accounting for
Legal Entities of the Swedish Financial Reporting Board.

Subsidiaries
Holdings in subsidiaries are recognized in the Parent Company financial
statements according to the cost method of accounting. The values of sub-
sidiaries are tested for impairment when there is an indication of a decline
in the value.

Taxes
The Parent Company’s financial statements recognize untaxed reserves
including deferred tax. The consolidated financial statements, however,
reclassify untaxed reserves to deferred tax liability and equity.

Note 1, Risk management
The Group’s activities expose it to a number of risks and uncertainties
which are continuously monitored and reviewed. Presented below are the
main risks and uncertainties of the group as identified by the directors and
how the group handles these risks.

Operational risk management
Technical and geological risk
At its current stage of development Tethys Oil is partly commercially produc-
ing oil and partly exploring for and appraising undeveloped known oil and/
or natural gas accumulations. The operational risk is different in these
different parts of Tethys Oil’s operations. The main operational risk in explo-
ration and appraisal activities is that the activities and investments made
by Tethys Oil and its partners will not evolve into commercial reserves of
oil and gas.

Oil price
The oil price is of significant importance to Tethys Oil in all parts of opera-
tions as income and profitability is and will be dependent on prices pre-
vailing from time to time. Significantly lower oil prices will reduce current
and expected profitability in projects and can make projects sub economic.
Lower oil prices could also decrease the industry interest in Tethys Oil’s
projects regarding farmout or sale of assets. There were no oil price hedges
in place as per 31 December 2014.

Tethys Oil’s has a flexible approach towards oil price hedging, based on
an assessment of the benefits of the hedge contract in specific circum-
stances. Based on analysis of the circumstances Tethys Oil will assess the
benefits of forward hedging sales contracts for the purpose of establishing
a secured cash flow. If Tethys Oil believes that the hedging contract will
provide an enhanced cash flow or if the risk of not being able to meet
investment commitments is high, then Tethys Oil may choose to enter into
an oil price hedge.

Net result in financial statements (MSEK)

Shift in oil price (USD/barrel)

Total effect on net result (MSEK)

350

-5

-50

Access to equipment
An operational risk factor is access to equipment in Tethys Oil’s project.
Especially in the drilling/development phase of a project the group is
dependent on advanced equipment such as rigs, casing, pipes etc. A short-
age of theses supplies can present difficulties for Tethys Oil to fulfil pro-
jects. Limited access to drilling rigs has in the past led to cost increases
and has in part been the cause of project delays.

Political risk
Tethys Oil has operations, alone or with partners, in several different coun-
tries and can therefore be subject to political risk. The political risks are
monitored and factored in when evaluating possible projects. Asset diversi-
fication is again Tethys Oil’s principal approach to deal with this risk. Spe-
cifically, Tethys Oil also deals with political risk by emphasising continuous
close dialog with host country authorities and interest groups, nationally
as well as locally. Tethys Oil holds its oil and gas interest through licences,
directly or indirectly, which are granted by national governments. Tethys Oil’s
operations are often also subject to local permits. Therefore Tethys Oil and
the industry are subject to a wide range of political risks on different levels
and the business is highly sensitive to political changes.

Environment
Oil and gas operations can be environmentally sensitive. Tethys Oil devotes
considerable effort and expense to identify and mitigate any perceived envi-
ronmental risk. The operations are subject to extensive regulatory control
with regard to environmental matters, both on national and international
levels. Environmental legislation regulates inter alia the control of water
and air contamination, waste material, licensing requirements, restrictions
on carrying out operations in environmentally sensitive and littoral areas.

Key personnel
Tethys Oil is dependent on certain key personnel, some of whom have
founded the company at the same time as they are some of the existing
shareholders and members of the board of directors of the company. These
people are important for the successful development of Tethys Oil. The
company actively tries to strike an optimal balance between its dependence
of key personnel and its methods for retaining these.

Licenses
Tethys Oil’s direct interests are held through agreements with host coun-
tries, for example licenses or production sharing agreements. These agree-
ments are often limited in time and there are no guarantees that the agree-
ments can be extended when a time limit is reached.

Financial risk management
The Group’s activities expose it to a variety of financial risks, mainly catego-
rized as exchange rate risk and liquidity risk. The Group’s risks are continu-
ously monitored and analysed by the board of directors and management.
The aim is to minimise potential adverse effects on the Group’s financial
performance.

Foreign currency risk
The Group is exposed to fluctuations in the foreign exchange markets as
fluctuations in exchange rates can negatively affect the operating profit,
cash flow and equity. The major proportion of the Group´s assets relate
to international oil and gas discoveries valued in USD and which generate
revenues in USD. During 2014, all of Tethys Oil’s oil sales and operative
expenditures were denominated in USD. The exchange risk effect the Group
by transaction risk and translation risk.

Transaction risk
Transaction exposure arises in the cash flow when invoicing or the costs
of invoiced goods and services are not in the local currency. By operating
in several countries, Tethys Oil is exposed to fluctuations in a number of
currencies. Presented below is the exposure to currencies with reference to
items in the financial statements:

Net sales 2014

Investments 2014

100 per cent in USD

99 per cent in USD

External financing 2014

no external financing at year-end 2014

Tethys Oil does not currently hedge exchange rates. The Group’s policy is
to hold a large portion of liquidity in USD to reduce the exchange rate risk.

Translation risk
Exchange-rate changes affect the Group in conjunction with the translation
of the income statements of foreign subsidiaries to SEK as the Group’s
operating profit is affected and when net assets in foreign subsidiaries
are translated into SEK which can negatively affect the Group’s operating
profit and statement of financial position. The Group does not hedge its
translation exposure and fluctuating currency rates might negatively affect
the operating profit and financial position of the Group.

Fair value
IAS 39 valuation categories and related balance sheet items

31 December 2014

Financial assets and

Receivables

liabilities at fair value

and other

Other

MSEK

through profit or loss

receivables

liabilities

Other receivables

Cash and bank

Derivative instruments*

Debt

Accounts payables

Other current liabilities

–

372

–

110

350

-10%

31 December 2013

Financial assets and

liabilities at fair value

Receivables
and other

Other

-54

MSEK

through profit or loss

receivables

liabilities

Net result in financial statements (MSEK)

Shift in SEK/USD

Total effect on net result (MSEK)

Equity in financial statements (MSEK)

Shift in SEK/USD

Total effect on equity (MSEK)

350

+10%

1,675

+10%

167

1,675

-10%

-167

Liquidity risks and capital risk
By operating in several countries, Tethys Oil is exposed to fluctuations in a
number of currencies. Income is and will also most likely be denominated
in foreign currencies, US dollars in particular. Furthermore, Tethys Oil has
since inception been equity and debt financed through share and bond
issues and also financed by asset divestment. Additional capital could be
needed to finance Tethys Oil’s future operations and/or for acquisition of
additional licences. The main risk is that this need could occur during less
favourable market conditions.

Fall due profile on Tethys Oil’s

financial liabilities

31 December 2014

31 December 2013

MSEK

<1 year

1–3 year

<1 year

1–3 year

Interest bearing loans

Interest

Accounts payables and other

liabilities

Total

–

112

113

–

449

–

487

Credit risk
Tethys Oil’s policy is to limit credit risk by limiting the counter-parties to
major banks and oil trading companies. Tethys Oil is selling all of its oil
through Mitsui Energy Trading Singapore which is part of Mitsui & C.o Ltd.
As at 31 December 2014 the Group’s receivables on oil sales amounted
to MSEK 86 (MSEK 63), this also represent the maximal exposure on
accounts receivable. There is no history of default. Cash and cash equiv-
alents are maintained with banks having strong long-term credit ratings.
Maximal exposure regarding other financial assets are those presented in
the balance sheet.

It is the responsibility of the board of directors to overview the Group’s capi-
tal structure and financial management, approve certain business regard-
ing acquisition, investments, possible lending as well as on-going monitor-
ing exposure to financial risks.

Other receivables

Cash and bank

Derivative instruments*

Debt

Accounts payables

Other current liabilities

–

295

–

393

* Note that Derivative instruments are put options. These instruments can be sold and
are categorized as level 2 in accordance with IFRS 7. The valuation is made based on
available market prices of the Brent oil price. The company has no derivative instru-
ments as per 31 December 2014.

Note 2, Critical accounting estimates and
judgements

Estimates and judgements are continuously evaluated and are based on
historical experience and other factors, including expectations of future
events which are believed to be reasonable under the circumstances. The
Group makes estimates and assumptions concerning the future. The esti-
mates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets within the next financial year
are discussed below.

Estimates in oil and gas reserves
The business of the Group is the exploration for, development of and pro-
duction of oil and gas reserves. Estimates of oil and gas reserves are used
in the calculations for impairment tests and accounting for depletion and
site restoration. Changes in estimates in oil and gas reserves, resulting in
different future production profiles, will affect the discounted cash flows
used in impairment testing, the anticipated date of site decommissioning
and restoration and the depletion charges in accordance with the unit of
production method.

Investments in associated companies
The Group determines if the carrying value for investments in associated
companies has suffered any impairment where any objective evidence
of impairment exists. Objective evidence could for example come from
reserve report updates, production reports and other third party studies
of the asset. This assessment is performed to identify where the carry-
ing value exceeds its recoverable amount. The recoverable amounts have
been determined based on value in use calculations. Assessments used
in these calculations include judgement of the future cash flows, discount
rates and exchange rates.

Site restoration provision
Amounts used in recording a provision for site restoration are estimates
based on current legal and constructive requirements and current technol-
ogy and price levels for the removal of facilities and plugging and abandon-
ing of wells. Due to changes in relation to these items, the future actual
cash outflows in relation to the site decommissioning and restoration can
be different. To reflect the effects due to changes in legislation, require-
ments and technology and price levels, the carrying amounts of site resto-
ration provisions are reviewed on a regular basis. The effects of changes
in estimates do not give rise to prior year adjustments and are treated pro-
spectively over the estimated remaining commercial reserves of each field.
While the Group uses its best estimates and judgement, actual results
could differ from these estimates.

Impairment of oil and gas properties
The Group annually tests, on a field by field basis, oil and gas properties to
determine that the net book amount of capitalized costs within each field
less royalties and deferred production or revenue related taxes is covered
by the anticipated future net revenue from oil and gas reserves attributable
to the Group’s interest in related fields (note 9). The Group will use its
judgement and make assumptions to perform these tests.

Tax
The company has not recorded a deferred tax asset in relation to the tax
losses carried forward as there is uncertainty as to if the tax losses may
be utilised (note 17).

Events after the balance sheet date
All events up to the date when the financial statements were authorised
for issue and which have a material effect in the financial statements have
been disclosed.

Note 3, Segment information
The Group’s accounting principle for segment describes that operating seg-
ments are based on geographic perspective and reported in a manner con-
sistent with the internal reporting provided to the executive management,
which is considered to be the chief operating decision maker. Previous
years, the company’s chief operating decision maker has been considered
to be the board of directors. There have been no changes to the operating
segments due to the change of operating decision maker. The operating
result for each segment is presented below.

Group income statement Jan–Dec 2014

MSEK

Net sales

Depreciation, depletion and

amortization

Exploration costs

Other income

Operating expenses

Net profit/loss from associates

Other losses/gains, net

Administrative expenses

Operating result

Total financial items

Result before tax

Income tax

Result for the period

MSEK

Net sales

Depreciation, depletion and

amortization

Exploration costs

Other income

Operating expenses

Net profit/loss from associates

Other losses/gains, net

Administrative expenses

Operating result

Total financial items

Result before tax

Income tax

Result for the period

Dubai

France

Lithuania

–

-5

–

-1

–

-1

–

-133

–

Oman

1,046

-214

–

-264

–

-5

Sweden

Switzerland

Other

–

-20

–

-133

564

Group income statement Jan–Dec 2013

Dubai

France

Lithuania

–

-5

–

-1

–

-1

–

Oman

592

-137

-51

-152

–

-3

314

Sweden

Switzerland

Other

–

-22

–

-2

–

-4

–

-4

Total

1,046

-214

-1

–

-264

-133

–

-31

404

-53

350

–

350

Total

592

-138

-56

-152

–

-31

285

-45

240

–

240

As per 31 December 2014 (and comparative periods) in Tethys Oil, the only
oil producing area is Oman, from which net sales are recorded. Net sales,
operating expenses and depletion, which is presented in notes 4, 9 and 10,
therefore only relate to Oman and Blocks 3 & 4 in particular.

Regarding Oil and gas properties and Office equipment, segment reporting
is provided in note 9 and 18. Please refer to note 3 regarding Credit risk
exposure on accounts receivables.

Note 4, Net sales of oil and gas
During the full year 2014, Tethys Oil sold 1,464,228 (850,926) barrels
of oil after government take from Blocks 3 & 4 in Oman. This resulted in
net sales during 2014 of MSEK 1,046 (592). The average selling price
amounted to USD 103.87 per barrel during 2014 (106.63).

Tethys Oil is selling all of its oil through Mitsui Energy Trading Singapore,
which is part of Mitsui & Co Ltd. All oil sales is from Blocks 3 & 4 Oman
and are made on a monthly basis.

Note 5, Other income
In accordance with the farmout agreement with Mitsui from 2010, Tethys
Oil received from Mitsui a bonus amounting to MSEK 65 (MUSD 10) as
commercial production exceeded 10,000 bopd for 30 consecutive days
and following the approval of the Field Development Plan (“FDP”) December
2012. The bonus was received during the first quarter 2013.

Parts of the administrative expenses in Tethys Oil are charged to oil and gas
projects where the expenditures are capitalised. In case of Tethys Oil being
the operator, these administrative expenditures are, through the above,
also funded by the partners. The chargeout to the projects where Tethys
Oil is operator is presented in the consolidated income statement as Other
income. All other internal chargeouts are eliminated in the consolidated
financial statements.

Note 6, Associated companies
Tethys Oil holds an indirect interest of three Lithuanian companies hold-
ing three licences; Gargzdai, Rietavas and Raseiniai licences. The interest
is held through two Danish private companies which are part of the Odin
Group of companies, Odin Energi and Jylland Olie. The table below presents
the ownership and the result from associates for the full year 2014.

Tethys Oil AB

Ownership

Odin Energi

UAB Minijos Nafta

Gargzdai licence

50%

Jylland Olie

50%

UAB TAN Oil

40%

Jylland Olie

75%

UAB TAN Oil

100%

Raseiniai licence

100%

UAB LL Investicos

Rietavas licence

Tethys Oil's indirect interest

25%

30%

40%

75%

100%

30%

MSEK

UAB Minijos Nafta

UAB TAN Oil

UAB LL Investicos

Income statement in associated companies

1 Jan – 31 Dec 2014

Gross revenue

Royalty

Net revenue

Depreciation

Appraisal/development costs

Operating expenditures

Administrative expenditures in Lithuanian company

Operating result

Financial income

Financial expenditures

Profit before tax

Tax

Net profit in associated companies

117

-12

105

-21

-4

-54

-10

-1

-2

–

-1

-2

–

-1

-3

–

-3

–

-3

-0

-7

-1

-4

-11

-1

-7

–

-7

MSEK

UAB Minijos Nafta

UAB TAN Oil

UAB LL Investicos

Tethys Oil’s share of profit loss from associated companies 1 Jan – 31 Dec 2014

1 Jan – 31 Dec 2014

Gross revenue

Royalty

Net revenue

Depreciation

Appraisal/development costs

Operating expenditures

Administrative expenditures in Lithuanian company

Operating result

Financial income

Financial expenditures

Profit before tax

Tax

Tethys Oil’s share of net profit from associated companies

Total share of net profit from associated companies 2014

-3

-5

-1

-14

-3

–

-1

–

-1

–

-1

–

-1

–

MSEK

UAB Minijos Nafta

UAB TAN Oil

UAB LL Investicos

Income statement in associated companies

1 Jan – 31 Dec 2013

Gross revenue

Royalty

Net revenue

Depreciation

Appraisal/development costs

Operating expenditures

Administrative expenditures in Lithuanian company

Operating result

Financial income

Financial expenditures

Profit before tax

Tax

Net profit from in associated companies

147

-14

133

-24

-5

-65

-12

-1

-4

–

-1

-2

–

-4

-6

-5

–

-5

–

MSEK

UAB Minijos Nafta

UAB TAN Oil

UAB LL Investicos

Tethys Oil's share of profit loss from associated companies 1 Jan – 31 Dec 2013

1 Jan – 31 Dec 2013

–

-1

–

-1

–

31 Dec 2014

31 Dec 2013

184

-11

-8

-127

188

-9

–

184

Gross revenue

Royalty

Net revenue

Depreciation

Appraisal/development costs

Operating expenditures

Administrative expenditures in Lithuanian company

Operating result

Financial income

Financial expenditures

Profit before tax

Tax

Tethys Oil’s share of net profit from associated companies

Total share of net profit from associated companies 2013

MSEK

1 January

Tethys Oil’s share of net profit from associated companies

Dividend from associated companies

Depletion

Impairment cost*

Balance end of period

* Please find more information regarding impairment in note 9

-4

-6

-1

-16

-3

–

-1

Note 7, Derivative instruments
As per 31 December 2014, Tethys Oil have no oil price put options (Brent)
outstanding, compared to 31 December 2013 where oil price put options
amounted to MSEK 5. During 2014 715,000 put options expired and fol-
lowing the falling oil prices, the put options generated a profit of MSEK 14.
The put options were acquired for MSEK 6 to secure oil price at USD 90 per
barrel. There are no hedges in place for 2015.

Note 8, Provisions
Tethys Oil estimates that Tethys Oil’s share of site restoration regarding
Blocks 3 & 4 amounts to MSEK 25 (29). As a consequence of this provi-
sion, oil and gas properties have increased with an equal amount. The
reduction of the provision is related to a more detailed calculation of the
site restoration provision affecting the provision’s net present value.

Note 9, Oil and gas properties

Country

Licence name

Phase

Expiration date

commitments

Tethys Oil

Partners (operator in bold)

Remaining

Oman

France

Lithuania

MSEK

Block 15

Block 3,4

Attila

Alès

Gargzdai3

Rietavas3

Raseiniai3

Exploration

Production

Exploration

Oct 2014

Jul 2040

20151

None

40%

30%

40%

Odin Energy, Tethys Oil

CCED, Mitsui, Tethys Oil

Galli Coz, Tethys Oil

MUSD 1.52

37.5%

Tethys Oil, MouvOil

Production

No expiration date

None

Exploration

Sep 2017

MLTL 6.2

MLTL 6.6

25%

30%

Odin, GeoNafta, Tethys Oil

Odin, Tethys Oil, private investors

31 Dec 2014

31 Dec 2013

Producing cost pools

Non-producing cost pools

Total oil and gas properties

MSEK

1,296

1,303

Other non–cash

Currency

adjustments

exchange diff

Book value

1 Jan–31 Dec

DD&A4
1 Jan–31 Dec

Exploration costs

Investments

1 Jan–31 Dec

Country

Asset type

31 Dec 2014

Oman Blocks 3 & 4

Producing

1,296

Oman Block 15

Non-producing

France Attila

Non-producing

France Alès

Non-producing

New ventures

Non-producing

Total

MSEK

2014

365

–

2014

199

–

2014

-213

–

200

-213

2014

–

-1

–

-1

–

1,303

Other non–cash

Currency

adjustments

exchange diff

Book value

1 Jan–31 Dec

DD&A4
1 Jan–31 Dec

Exploration costs

Investments

1 Jan–31 Dec

Country

Asset type

31 Dec 2013

2013

Oman Blocks 3 & 4

Producing

1,011

Oman Block 15

Non-producing

France Attila

Non-producing

France Alès

Non-producing

Sweden Gotland

Non-producing

New ventures

Non-producing

–

Total

1,012

–

-5

–

-5

2013

-137

–

-137

2013

–

-51

-1

–

-2

-1

-56

2014

263

–

2013

263

–

1,011

1,012

Book value

1 Jan 2014

1,011

–

Book value

1 Jan 2013

890

–

290

920

269

1,012

1 In accordance with the licence terms, Tethys Oil has in connection with the licence extension filed a mandatory application of relinquishment of part of the licence which is still pending

approval from French authorities.

2 Tethys Oil has a commitment towards the partner MouvOil and the French authorities to pay for seismic and drilling. The work is estimated to amount to MUSD 1.5.

3 The interest in the three Lithuanian licences are indirectly held through a shareholding in two Danish private companies, which in turn hold shares in Lithuanian companies holding 100
per cent of the licences. The two Danish companies, Odin Energi and Jylland Olie, are not consolidated in Tethys Oils financial statements due to the ownership structure, which is why
there are no oil and gas properties related to the licences. The ownership of Jylland Olie and Odin Energi are presented in the balance sheet under Shares in associated companies.

4 Depletion, depreciation and amortisation.

5 Other non-cash related items regard provision for site restoration.

Impairment testing
In Tethys Oil’s impairment testing, the Company uses its best efforts to
estimate production profiles, general cost and development environment.
To calculate future free cash flows, the forward oil price as traded in the
market was used, where the oil price started at USD 50 per barrel and
moved up to USD 68 per barrel in a two year period, and thereafter a flat
price of USD 68 per barrel. With regard to discount rates, a rate of 7.3
per cent and 9.7 per cent (both before tax) has been used for Omani and
Lithuanian assets respectively. During 2014 impairment was made with
regard to Lithuanian asset Gargzdai of MSEK 127, following the decline
in oil prices the asset was determined to be sub-commercial. The assets
in Oman are commercial despite the decline in oil prices and the carried
values are deemed defensible. There was no impairment of assets made
during 2013. The impairment cost is disclosed in note 6.

Exploration costs during 2014 amounted to MSEK 1 and mainly related to
projects which were terminated during the year. Exploration costs during
2013 amounted to MSEK 56 and were mainly related to Block 15 where an
extended well test did not support commerciality of the project. Exploration
costs are further described in the administration report.

Note 10, Operating expenditures

MSEK

Group

Parent

Operating expenditures

2014

2013

2014

2013

General & Administrative

Production cost Permanent Produc-
tion Facilities

Well workovers

Over- / Underlift

Other

Accruals

Transferred costs from previous year

-45

-99

-31

-9

-10

-56

-14

-25

-63

-19

-9

-23

-13

Total

-264

-152

–

Note 11, Other losses/gains, net

MSEK

Group

Parent

Other losses/gains, net

2014

2013

2014

2013

1 Jan 2014–

31 Dec 2014

12 months

1 Jan 2013–

31 Dec 2013

12 months

Foreign exchange gains

Foreign exchange losses

Total

-0.1

MSEK

Investments Block 3 & 4