Annual Report 2015
Operational and financial summary
MSEK (unless specifically stated)20152014201320122011Average daily production, before government take, bbl9,8047,6924,6843,8241,160Net sales, after government take, bbl1,805,0561,464,228850,926776,248147,228Average selling price per barrel, USD58.09103.87106.63110.35107.37Revenues9051,027602583104EBITDA49674348850984Operating result19439329433683Net result for the year19834024931469Earnings per share, SEK5.669.567.009.102.12Cash and cash equivalents43637229524893Shareholders’ equity1,8641,6751,109860456Non-current liabilities 34254224172Investments324259289875208Number of shares at the end of the year35,543,75035,543,75035,543,75035,543,75032,543,750Of which repurchase shares at the period end1,083,669298,160–––Market capitalization at the end of the period2,0442,1682,3991,8931,432Share price at the end of the period, SEK57.561.0067.5053.2544.002P-reserves, million barrels of oil18.217.815.214.3– Annual General Meeting
The Annual General Meeting will be held
on 18 May 2016, 3 p.m. at Grand Hôtel,
Södra Blasieholmshamnen 8, in Stock-
holm. To attend the AGM, please see
Tethys Oil’s website, www.tethysoil.com,
for more information.
Letter to the shareholders
Dear friends and investors,
For Tethys Oil, 2015 was a year of many
achievements in a very challenging macro
environment. We have every reason to be
proud of the solid work carried out by our
partners and of course also by our own peo-
ple on Blocks 3 and 4 onshore Oman. The
operational performance of Blocks 3 and
4 was exceptionally good and we ended
the year with a record high production of
11,606 barrels of oil per day. The produc-
tion continued to increase in 2016, and up
until planned maintenance on the fields
temporarily reduced the production in end
of March, we have had a firm average daily
production above 12,000 barrels of oil.
And our reserves continued to increase.
We added more proved and probable
(2P) reserves than we produced. Since we
booked our first reserves in 2012, we have
every year been able to report a 2P reserve
replacement ratio well above 100 per cent.
Our 2P reserves now stand at 18.2 million
barrels. The 1P reserves are even better,
showing an increase in absolute numbers
of more than one million barrels, under-
scoring the robustness of our producing
reserves. So having moved reserves from
3P into 2P and 1P we are happy to note
a 3P number of 27.9 million barrels as we
enter 2016, showing an increase of almost
3 million barrels for the year after taking
into account the 3.5 million barrels pro-
duced in 2015.
Our growing production and reserves are a
result of the work programme carried out
on the blocks. Eleven new production wells
were drilled on the Farha South oil field
and ten new production and appraisal wells
were drilled on the Shahd oil field. Success-
ful exploration drilling also added one new
producing structure on the Shahd field. At
the end of 2015, a new reservoir within the
Shahd field, the Lower Khufai, was brought
on stream. This new reservoir responded
very well to horizontal drilling, and was a
major reason for the production increase in
late 2015 and early 2016.
The water injection programme on the
Farha South field continued with five new
injection wells. The injection programme
on the Shahd field, which was launched
with one well in 2014, continued in 2015
with six new injections wells drilled. The
water injection programme on the Shahd
field is showing signs of working, but the
evaluation of the impact of the injection
programme will continue.
Another rig was added to the operations
in late 2015, which brought the total rig
count to five rigs including a work over rig
on the blocks by year end.
The seismic acquisition in the northwest
corner of Block 4 was completed in 2015.
The interpretation of the data has started.
This survey is adding another piece to the
seismic map that will guide us going for-
ward with the exploration on the blocks.
We experienced successes also in our Euro-
pean assets when the drilling programme
on the Raseiniai licence onshore Lithuania
resulted in a well that flowed oil to surface
during tests. The Tidikas-1 encountered a
combined oil column of almost 50 metres
in two different lime stone formations.
There are now clear indications that an
active petroleum system exists within the
Raseiniai licence. Long term production
tests are being carried out and we are eager
to learn more about these structures.
The volatile macro environment
Our operational success was counterbal-
anced by events outside of our control –
movements in the oil price. The period of
relative stability in oil prices, that we expe-
Europe Brent Spot Price FOB
USD/bbl
150
125
100
75
50
25
0
2006
2008
2010
2012
2014
2016
Source: U.S. Energy Information Administration
World liquid fuels production and consumption balance
World production
World consumption
forecast
mmbbl/d
97
95
93
91
89
87
2011
2012
2013
2014
2015
2016
2017
Source: U.S. Energy Information Administration, March 2016
4
rienced for the five years from 2009–2014,
was definitely broken when the oil prices
went into freefall in the second half of
2014. The volatility continued in 2015,
and the fall in prices accelerated towards
the end of the year. The oil price reached
a low in mid January 2016 when prices
briefly dropped below USD 30 per barrel
for Brent and WTI. By the time of writ-
ing prices are up by more than 50 per cent
since the January lows so maybe the worst
is over but it is probably too early to call a
‘new normal’.
In difference to the sharp decline in oil
prices in 2008 and 2009, which was caused
by expected falling demand following the
financial crisis, the present fall is caused by
an oversupply of crude oil. The demand for
oil has been increasing, and is expected to
continue to increase with over 1 million
barrels of oil per day in 2016 and 2017,
with Asia as the key driver. In Europe the
consumption of oil has been falling since
2006.
The problem is that the supply of oil has
been growing at a faster pace and exceeding
the demand, and thereby putting the deli-
cate balance between supply and demand
out of balance. Technological innovation is
the key explanation of the increases in sup-
ply, and it come inter alia from new ways
of appraising wells, such as 3D seismic
imaging, from new drilling and comple-
tion techniques, such as horizontal drill-
Global oil demand
27%
-7%
-9%
41%
47%
37%
mbopd
30,000
25,000
20,000
15,000
10,000
5,000
0
North
America
South &
Central America
Europe &
Eurasia
Middle East
Africa
Asia Pacific
Source: BP Statistical Review of World Energy June 2015
2004
2014
Global oil supply
10%
61%
16%
22%
39%
mbopd
12,000
10,000
8,000
6,000
4,000
2,000
0
Saudi Arabia
Russian
Federation
US
China
Canada
Source: BP Statistical Review of World Energy June 2015
2004
2014
5
Milestones2001Tethys Oil was founded2004IPO and listing on First North, Stockholm2006First Company-operated well drilled in Denmark2007Acquisition of interests in Blocks 3 and 4 in Oman201020 per cent of Blocks 3 and 4 farmed out to MitsuiEarly production from Blocks 3 and 4 commences2012Oil producing assets onshore Lithuania acquiredThree year MSEK 400 bond loan issuedFDP for Blocks 3 and 4 approved, licence terms extented until 20402013Listing on Nasdaq Stockholm2014A four-year, up to MUSD 100, Senior Revolving Reserve-Based Lending FacilityMSEK 400 bond redeemed2015Average daily production exceeds 11,000 bopd at the end of the yearTethys Oil pays dividend and distributes SEK 3.00 per share to its shareholders North America rotary oil rig count
Europe Brent spot price FOB
Rigs
1,800
1,500
1,200
900
600
300
0
2006
2008
2010
2012
2014
2016
Source: Baker Hughes Incorporated
mmbopd
10
US crude production last ten years
8
6
4
2
0
Shale oil
Conventional oil
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: U.S. Energy Information Administration
mmbopd
10
US crude production last two years
9
8
7
Jan
2014
Apr
Jul
Oct
Jan
2015
Apr
Jul
Oct
Jan
2016
Source: U.S. Energy Information Administration
6
ing and multi-stage hydraulic fracturing.
And the high price levels in recent years
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.
A large amount of the market surplus is
coming from shale oil production in the
USA. The US production amounted by
year end 2015 to 9.3 million barrels per
day, of which almost half came from shale
production. Only five years ago, USA pro-
duced less than 1 million barrels per day
of shale oil.
However, production from unconven-
tional reservoirs are typically more expen-
sive than much conventional oil produc-
tion, and the new oil price environment
puts pressure on high cost producers. The
overall investments in the oil industry has
as a result fallen sharply. Maybe the clearest
example of the downturn in investments is
visible in the North America rig count sta-
tistics. Only 25 per cent of the rigs in oper-
ation in 2014 are still drilling, and the oil
production in the USA has started to fall.
Tethys Oil, on the other hand, is as a
low cost producer operating in conven-
tional reservoirs at lower OPEX levels,
less affected by the low prices having
break even points substantially lower than
unconventional players.
So, where will the global oil produc-
tion and the oil prices go from here? The
cyclic nature of the oil price is embedded
in the industry. Previously, OPEC with
its share of world production, and more
importantly share of available excess sup-
ply, exercised significant influence over the
oil price by increasing or reducing world
production.
However, the longer the oil price remains
low, the greater the risk, or possibility, of a
marked correction and large price upswing
in the future. If today’s sharp decreases in
investment in exploration and production
infrastructure would continue, the price
increase can be dramatic. Thus it seems
unlikely that lower prices could be sus-
tained for any longer period of time. But
a sharp correction can certainly present a
valuable opportunity to acquire assets for
any player able to maintain a long term
view.
Outlook
Our two blocks onshore the desert of
the Sultanate of Oman have turned into
a world class asset. A few years ago we
described the blocks as a smorgasbord
of opportunity – and what a buffet they
have turned into. With the addition of
production from the Lower Khufai, we
have shown that the blocks hold massive
potential for growth. The Buah overlays
the Khufai and both reservoirs are present
in large parts at least of the eastern area of
the blocks.
As exploration and appraisal continues
in 2016 within and close to the produc-
ing areas in all three fields, we have every
reason to believe that much more oil can
be found. With the successful bringing
on stream of the new reservoir within the
Shahd field, a water injection programme
in the Buah layer showing signs of work-
ing combined with a steady production on
the Farha South field, we also believe that
production will continue to increase dur-
ing 2016. As the production from the new
reservoirs is optimized, the production
for individual months will fluctuate, and
possibly show more volatility than dur-
ing 2015. In the spring of 2016, planned
maintenance work at the fields will lead
to temporary production disruption. Our
focus on cash flow will continue, and the
work programme will be continually mon-
itored to stay optimized in relation to oil
prices.
Our balance sheet remains one of the strong-
est of our peer group and as the oil price
has fallen further, our relative strength has
increased. There is a lot of opportunity out
there. We are well positioned and are contin-
uously evaluating new projects. We continue
to be a cash dividend company, and propose
a dividend of SEK 1 per share. Depending
on how oil prices, production levels invest-
ments and other events unfold we will con-
tinually evaluate the sense in distributing
more cash to shareholders in accordance
with our long term financial goals.
So stay with us, times are not uninteresting.
Stockholm in April 2016
Magnus Nordin
Managing director
7
Lithuania
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
** The average daily production from the Gargzdai licence amounted in 2015
to 106 bopd.
France
Area
Interest
Phase
Attila
1,986 km²
40%
Exploration (dormant)
Alès
215 km²
37.5%
Exploration (dormant)
Tethys Oil
Tethys Oil is a mid sized Swedish oil company with
focus on onshore areas with known oil discoveries.
Tethys Oil’s core area is Oman, where the company
holds 2P reserves of 18 mmbo and has oil production
of about 12,000 barrels per day from Blocks 3 and 4.
With a cash flow driven development approach, Tethys
Oil’s main operational target is incremental increases of
production and reserves from the Omani blocks. Tethys
Oil also has onshore exploration licences in Lithuania
and France and some production in Lithuania. The head
office is located in Stockholm and the company’s shares
are listed on Nasdaq Stockholm (TETY).
88
Oman
Area
Interest
Phase
Blocks 3 and 4 34,610 km²
30%
Production/
exploration
Reserves
(2P)
Average daily
production 2015
18.2 mmbo
9,698 bopd
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Targeting increase in production and reserves
License
acquisition
Production
Exploration
Development
Exploratory
drilling
Appraisal
Tethys Oil aims to have a well-balanced
and self-financed portfolio of oil assets,
offering both production development
and exploration potential. The main target
is, with a cash flow orientated approach,
to incrementally increase production and
reserves in Oman. Furthermore, the explo-
ration and development of Tethys Oil’s
assets elsewhere will also continue.
In addition, new projects are constantly
being evaluated. According to Tethys Oil’s
successful strategy, new growth platforms
should primarily be onshore appraisal pro-
jects where oil has previously been discov-
ered, but was deemed sub-commercial for
various reasons.
Tethys Oil’s primary objective is to cre-
ate shareholder value and in doing so the
company will have a balanced approach
to growth and shareholder distributions,
with a long term capital structure target of
a zero net cash position.
Tethys Oils operations should be con-
ducted in an economical, socially and envi-
ronmentally responsible way, to the benefit
of all stakeholders.
1010
Reserves
mmbo
30
25
20
15
10
5
0
6.3
27.9
7.9
25.1
-3.5
Possible
Probable
Proven
Possible
Probable
Proven
7.7
18.7
-1.7
3.0
20.0
-2.8
-1.4
12.4
High
Best
Low
Possible
Probable
Proven
Possible
Probable
Proven
3C 2011
Production
Additions
3P 2012
Production
Additions
3P 2013
Production
Additions
3P 2014
Production
Additions
3P 2015
Field Development Plan for Blocks 3 and 4 approved
Oman
Tethys Oil’s net working interest reserves in
the Sultanate of Oman as per 31 Decem-
ber 2015, amounted to 12,905 thousand
barrels of oil (“mbo”) of proven reserves
(1P), 18,244 mbo of proven and probable
reserves (2P) and 27,863 mbo of proven,
probable and possible reserves (3P).
In 2015 Tethys Oil increased 1P reserves
of 4,651 mbo, representing an increase
of 39 per cent. The company increased
2P reserves 4,005 mbo, representing an
increase of 23 per cent. The 3P reserves
increased with 6,323 mbo, representing
an increase of 25 per cent. The increase in
2P reserves represents an internal reserve
replacement ratio of 113 per cent.
The review of the reserves in Oman has
been conducted by independent petroleum
consultant DeGolyer and MacNaughton
(“D&M”). The report has been estimated
using 2007 Petroleum Resources Manage-
ment System (PRMS), Guidelines of the
Society of Petroleum Engineers (SPE),
World Petroleum Council (WPC), Ameri-
can Association of Petroleum Geologists
(AAPG) and Society of Petroleum Evalu-
ation Engineers (SPEE).
1111
Oman
Salalah Mughsail road
Oman – part of the oil fairway
The Sultanate of Oman, strategically
located in the south eastern part of the Ara-
bian Peninsula, overlooks the Arabian Sea,
the Sea of Oman and the Arabian Gulf. It
also overlooks the strategic Strait of Hor-
muz at the point of entry to the Arabian
Gulf. Oman neighbours includes United
Arab Emirates, Saudi Arabia and Yemen.
Oman is a beautiful country, combining
white sand beaches, rolling desert dunes
and expansive mountain ranges. Oman
is also the oldest independent state in the
Arab world with a long and exciting history
of thousands of years. Modern archaeolog-
ical discoveries suggest that humans settled
in it during the Stone Age, i.e. more than
10,000 years ago. And, most importantly
for Tethys Oil, Oman is also a major oil
nation with a present production of about
1 million barrels of oil per day. Oman has
in excess of 5 billion barrels of estimated
proved oil reserves, ranking Oman as the
7th largest proved oil reserve holder in
the Middle East and the 18th largest in
the world (BP Statistical Review of World
Energy, June 2015).
In this highly prospective country, Tethys
Oil has its core area. With the desire and
ambition to become a dedicated and suc-
cessful player in the Omani oil and gas
industry, Tethys Oil acquired interest in
the licence for Blocks 3 and 4 in 2007.
The blocks cover an area of 34,610 square
kilometres in the central eastern part of
Oman. Tethys Oil AB, through its wholly
owned subsidiary Tethys Oil Block 3 & 4
Ltd, has a 30 per cent interest in Blocks
3 and 4. Partners are Mitsui E&P Mid-
dle East B.V. with 20 per cent and the
operator CC Energy Development S.A.L.
(Oman branch) holding the remaining 50
per cent.
12
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Muscat
Block 3
Block 4
SuLTAnATe
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1313
At first glance, it may seem like the explora-
tion, development and production launch
of crude oil on Blocks 3 and 4 have been
a straightforward and comprehensible pro-
cess. However, numerous large companies
had explored for oil and gas for 40 years
and drilled 27 exploration wells in these
two blocks. In the majority of the wells, oil
was found, but no discovery was of com-
mercial value.
What was deemed not hydrocarbon pro-
spective areas by previous operators has
turned commercial with the help of the
collective experience accumulated by part-
ner groups specialists, new technology,
higher oil prices and perseverance.
tance to adapt a comprehensive approach.
New discoveries have been made in new
areas, but new discoveries have also been
made in formations above or belove exist-
ing discoveries.
3D seismic surveys have been a key factor
to the development of the blocks. Seismic
data have revealed that many of the dry
holes drilled by previous operators would
not have been drilled if the 3D data was
available prior to drilling. Seismic studies
use the fact that sound waves travel at dif-
ferent speeds in different materials in order
to map the subsurface rocks. 2D seismic
provides data along two axis, length and
depth. 3D seismic studies are more expen-
sive, but adds a third dimension of width.
Production conditions vary from area to
area within the blocks, and when explor-
ing the blocks, it has been of great impor-
In 2012, the Field Development Plan
for Blocks 3 and 4 was approved and the
exploration and production terms for the
licence were extended until 2040. Three
oil fields are today in production on the
blocks. Since an early production system
was launched in August 2010, Tethys Oil’s
share of the production (before govern-
ment take) has increased from some 200
barrels of oil per day to well over 10,000
barrels of oil per day at year end 2015.
Only a minor part of the blocks has been
explored. Out of the total area of the blocks
of 34,610 square kilometres, around 6,000
square kilometres of seismic data have been
acquired so far. The studies have resulted
in the mapping of a large number of new
prospects. In addition to far field explora-
tion, the modern history of the blocks how-
ever supports that near field exploration are
equally or even more successful.
Gharif
Ghudun
Barik
Al Bashir
Miqrat
Amin
Buah
Shuram
Khufai
Masirah Bay
Formations
Geological formations are natural formations
and structures in the rock and ground which
have occurred as a result of usually very slow
geological processes of different kinds 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 and 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.
1414
The successful development of the Farha South field
The first well to be drilled on the blocks
with Tethys Oil as partner was Farha
South-3 in early 2009. The Farha South oil
discovery was originally made in 1986 by
a previous operator. The discovery well had
flowed oil from the Lower Al Bashir sand-
stone layer, and oil was yet again found in
that layer, which flowed more than 754
barrels of oil per day on test in 2009. How-
ever, a long term production test revealed
the reservoir to be tight.
However, the Barik sandstone, at an aver-
age depth of 1,600 meters and overlaying
the Lower Al Bashir, also had excellent oil
shows when drilled, and flowed on test 379
barrels of oil per day. The Barik was put
on long term production test, and proved
itself to be a reliable producer.
The oil of the Farha South is not trapped
in one large continuous reservoir, but is
instead trapped in smaller, usually adja-
cent fault blocks. These faults are relatively
small and 3D seismic has been essential in
the mapping of drillable fault blocks.
The low content of gas combined with the
absence of a water drive in the Barik layer,
make pumps and water injections neces-
sary. Water is injected into the reservoir in
order to increase the pressure and thereby
stimulate production. Some 20 fault blocks
have so far been put into production, and
about 75 per cent of the fault blocks have
been developed with water injection. The
oil from the Barik layer is of high quality,
more than 40 degrees API and does not
contain any sulphur.
The Farha South-3 well was the start of
what today is the Farha South oil field. The
field is today the largest field on the blocks
holding 10.2 million barrels of proved and
possible reserves (2P) net to Tethys Oil,
corresponding to 56 per cent of Tethys
Oil’s total 2P reserves of the blocks. The
production has grown steadily since the
field came on stream in 2010 and the field
has produced the majority of the compa-
ny’s total oil production to date.
P
D
AH
AG
AE
AF
AD
Q
I K
AA
AC
AB
M AK
E
A
AN
Fault blocks at the Farha South field
O
F
Oil producing fault blocks
H
B
J
L
AS
C
Z
T
X
Y
N
S
V G
Oil producing fault blocks with water injection
Drilled fault blocks
Prospective fault blocks
Faults
N
0
2
4 km
15
The Shahd oil field boosts production
At the the Shahd oil field, the oil is
extracted at greater depths, mainly from
the Lower Buah carbonate at 2,000 metres.
It was discovered in 2013, in an area not
previously explored with the drill bit.
When discovered, the Shahd field opened
up a new producing area, and the field has
delivered the majority of the increase in
the company’s total reserves over the last
years. The field holds 6.8 million barrels
of proved and possible reserves (2P) net to
Tethys Oil, corresponding to 37 per cent of
Tethys Oil’s total 2P reserves of the blocks.
The Shahd oil field is located approxi-
mately 20 kilometres west of the Saiwan
East oil field. The oil from the Lower Buah
layer holds a quality of approximately
38 degrees API. Like the Farha South
field, this area is also highly faulted and
the Lower Buah layer in the field is not
one large continuous reservoir. The oil is
instead trapped in separate structures. So
far, a handful of Lower Buah reservoirs
have been put into production.
After the strong growth in reserves and
production since the discovery, an upgrade
and revision of the geological model was
conducted. A pattern has emerged, sug-
gesting that fractures may play an impor-
tant role in understanding this highly
faulted area. At the end of the fourth quar-
ter 2015, a new reservoir within the Shahd
field, the Lower Khufai, was successfully
brought on stream. This new carbonate
reservoir responded very well to horizon-
tal drilling, and was a major reason for
the production increase around new year
2015/2016.
Another important insight made was that
water injection is expected to have a very
strong impact on the production from
Lower Buah. An injection programme
was launched in 2015. The programme is
showing signs of working, but the evalu-
ation of the impact of the injection pro-
gramme continues.
1616
The Shahd oil field
Producing areas
Prospects / Prospective areas
Faults
17
The Saiwan East oil field
The Saiwan oil field was the second field to
be discovered and put on stream. Here, the
oil is produced from an even greater depth
from the Khufai carbonate at depths rang-
ing from 1,700 to 2,400 metres. This res-
ervoir, previously unknown as an oil pro-
ducer in Oman, is today in production on
the field, producing oil with a density of 32
degrees API. The field is the smallest so far
discovered on the blocks, both regarding
reserves and production, and the Khufai
carbonate has turned out to be challenging
in many regards. The bringing on stream
of the Khufai reservoir also on the Shahd
field is of great interest for further under-
standing also of the Saiwan East field.
Unexpectedly large quantities of oil with
different gravities and viscosities have also
been found on the field. However, the
findings suggest that any potential produc-
tion from the heavy oil in Saiwan East will
require enhanced oil recovery techniques.
Transportation and sales
The oil produced at all of the fields are
transported through a pipeline to Qarn
Alam metering station, west of the licence.
Here the oil volumes are recorded and the
quality is measured. From Qarn Alam,
the oil is transported through the Omani
national pipeline system to the Mina Al
Fahal crude export terminal in Muscat. At
this terminal, the oil is lifted and loaded
into oil tankers. From Muscat, the oil is
shipped to different destinations in Asia.
In 2015, the final destinations for Tethys
Oil’s sale of oil were China and Taiwan.
Blocks 3 and 4 are held through an Explo-
ration and Production Sharing Agreement
(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 production is typically
split 80/20 between the government and
the partners.
Tethys Oil sells all of its oil through Mitsui
Energy Trading Singapore, which is part of
Mitsui & Co Ltd. The price is determined
based on the monthly average price of the
two month future contract of Oman blend
as traded on Dubai Mercantile Exchange,
with a premium following the higher qual-
ity of the oil produced in the blocks.
Oil tankers loading in Muscat Bay
1818
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Muscat
Office
A team of highly trained
subsurface senior special-
ists has been recruited and
reside at the Tethys Oil
office in Muscat. As per
the Omani government
directive related to the
employment, preference
is always given to Omani
nationals.
In addition, and as part of
the company’s corporate
social responsibility, Tethys
Oil is closely coordinating
with Sultan Qaboos Uni-
versity in offering Master
degree
to
Omani geoscience gradu-
ate students.
sponsorship
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1919
Vibrator truck
Receiver truck
Geophones (receivers)
GAS
OIL
WATER
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
transition between
the
sound waves, at
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 axis, 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.
Vibrator trucks at Blocks 3 and 4
2020
Vibrator truck
Receiver truck
Seismic mapping Blocks 3 and 4, Oman
Geophones (receivers)
GAS
OIL
WATER
WATER
BLOCK 3
N
Alam Station &
Pipeline System
Farha South Field
Saiwan East Field
Shahd
field
2D areas
2013
3D areas
2009–2013
2014
2015
BLOCK 4
As the seismic coverage increases, particu-
lar interest will be the mapping of poten-
tial continuations of the producing layers.
Both within the core area of producing
fields and areas between them, as any pos-
sible extension further north or west, or
east and south.
2121
Lithuania
2222
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Oil in the Baltics
Tethys Oil’s portfolio also includes licences
in Europe. The company has indirect
interests in three onshore license in Lithu-
ania and two onshore dormant licences in
France.
Lithuania is located by the Baltic Sea in
the north east part of Europe. Lithuania
is not a notable oil producer, but oil was
discovered in Lithuania some 60 years ago.
The Lithuanian oil production reached its
peak at about 10,000 barrels of crude oil
per day by the turn of the millennium, but
has now dropped to about 2,000 barrels
per day. The production is located in the
western part of the country. It might seem
like that there are better places to explore
for oil, but the Lithuania tax regime is very
attractive, so even smaller amounts of oil
can generate good value.
Tethys Oil’s Lithuanian licences cover
some 4,000 square kilometres onshore the
Baltic Sedimentary Basin. The Gargzdai
licence is in production with about 110
barrels of oil per day net to Tethys Oil. The
oil produced at the Gargzdai licence has an
API of about 42 degrees and is normally
sold on a weekly basis to a nearby refinery.
The price is based on and set close to the
daily Brent price.
The Rietavas and the Raseiniai licences are
exploration licences. Since the acquisition
of the licence interests in 2012, a couple
of exploration wells have been drilled and
seismic studies been conducted. The work
programmes on the licenses are focused
on evaluation for both conventional and
unconventional hydrocarbon potential.
On the Rietavas licence oil discoveries
have been made in the Cambrian sand-
stones, but it is yet quite unexplored. The
Raseiniai licence covers a trend of Silurian
reefs. In the 2015 drilling programme, two
wells were drilled into these reefs, and one
well flowed oil to surface. This well, the
Tidikas-1 exploration well, is now in a long
term production test.
Gargzdai
Rietavas
Raseiniai
LIThuAnIA
Vilnius
23
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”), whereas environmental
concerns being at the forefront. Tethys Oil
always strives to conduct the 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 has the main
responsibility for the day to day work and
the business on the site. Tethys Oil does
not act as operator in any of its active
assets. The activities in Tethys Oil’s dif-
ferent 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 according to good oil
field practices. All subcontractors that are
used are subject to the same conditions.
In Oman, preference shall be given to
Omani contractors and Omani Nationals.
Tethys Oil is closely coordinating with Sul-
tan Qaboos University in offering Master
degree sponsorship to Omani geoscience
graduate students.
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.
24
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2525
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) (“the
Company”) is a publicly traded company
listed on Nasdaq Stockholm, Mid Cap.
Tethys Oil adheres to the Swedish Code of
Corporate Governance (“the Code”). The
code is published on www.bolagstyrning.
se, where a description of the Swedish Cor-
porate Governance model can be found.
This Corporate Governance Report 2015
is submitted in accordance with the Swed-
ish Annual Accounts Act and the Code.
It explains how Tethys Oil has conducted
its corporate governance activities dur-
ing 2015. Tethys Oil does not report any
deviations from the code, Nasdaq Stock-
holm’s rule book for issuers, recommenda-
tions from the Swedish Securities Council,
decisions from Disciplinary Committee at
Nasdaq Stockholm or statements from the
Swedish Securities Council. The report has
been reviewed by the company’s auditors,
please see page 31.
external and internal framework
for governance in Tethys Oil
External:
• Swedish Companies Act
(e.g. Swed-
legislation
• Accounting
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,
opment and shareholders, see pages 33–35
and Tethys Oil’s website.
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 13 May 2015.
The AGM was attended by 111 sharehold-
ers, representing about 23 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 2014 and discharge of
liability for the board of directors and
the managing director
• Re-election of Per Brilioth, Magnus
Nordin and Katherine Støvring. Dennis
Harlin and Geoffrey Turbott were newly
elected directors. Dennis Harlin was
elected chairman of the board
• The chairman will be paid a fee of
SEK 540,000 and each AGM elected
member not employed by the company
will be paid SEK 230,000. The chair-
man of the audit committee will be paid
SEK 65,000 and each of the commit-
tee’s members will be paid SEK 35,000.
The members of the remuneration com-
mittee will be paid SEK 35,000. The
total fees for committee work, includ-
ing committee chairmen fees shall not
exceed SEK 310,000
• Auditors will be paid as invoices are
approved
Information policy, CSR policy etc
• Principles of remuneration to senior
Shareholders
Tethys Oil’s shares are traded on Nasdaq
Stockholm. At year end 2015 the share
capital amounted to MSEK 6, represented
by 35,543,750 shares, each with a par value
of SEK 0.17. All shares represent one vote
each. At 31 December 2015, the number
of shareholders was 5,563 (5,410). Of the
total number of shares, foreign sharehold-
ers accounted for approximately 61 per
cent. 49 per cent of the Swedish sharehold-
ing was held by legal entities. For further
information on share, share capital devel-
executives
• Incentive programme as part of the
remuneration package to employees.
Issuance of 356,000 warrants where each
warrant entitled to subscription to one
new share in Tethys Oil. The warrants
have a three year duration and the strike
price of the warrants was SEK 80.40 per
share
• 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
2015, the nomination committee for the
AGM 2016 consists of members appointed
by three of the largest shareholders of the
Company based on shareholdings as per
30 September 2015. The names of the
members of the nomination committee
were announced and posted on the Com-
pany’s website on 13 November 2015, i.e.
within the time frame of six months before
the AGM as prescribed by the Code.
The nomination committee for the AGM
2016 has held 6 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 AGM 2016, 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
• Auditors and auditor’s fee
• Proposal regarding procedures and prin-
ciples for establishing a nomination
committee and issues pertaining thereto
for the AGM 2017
The work of the nomination committee
has during 2015 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-
26
ground and experience and also taken part
of the board evaluation.
The nomination committee for the AGM
2016 consisted of the following members:
• Erik Norman, chairman of the nomina-
tion committee, representing himself,
and
• Mikael Petersson, representing Lans-
downe Investment Company Limited
• Niklas Antman, representing Incentive
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 7 planned
meetings during the financial year.
The board’s work in 2015
During 2015 the board held 7 scheduled
meetings and 12 extraordinary meetings.
AS
Board of directors’ attendance
• Dennis Harlin, chairman in Tethys Oil
AB
The board and its work
Board composition
The articles of association stipulate that
the board of directors of Tethys Oil shall
consist of no less than three and no more
than ten board members with no more
than three 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
2015 of five directors and no deputies.
Dennis Harlin has been chairman of the
board. Four board members are independ-
ent from the Company, the Company’s
management and the Company’s larger
shareholders, and five board members are
independent from larger shareholders.
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
name
Dennis Harlin
Magnus Nordin
Katherine Støvring
Geoffrey Turbott
Per Brilioth
Independence
from larger
shareholders
Board meetings
Audit
committee
Remuneration
committee
Yes
No
Yes
Yes
Yes
14/14
19/19
19/19
11/14
17/19
3/3
n.a
6/6
3/3
6/6
4/4
n.a
4/4
4/4
4/4
Meetings and main items for scheduled meetings 2015
February
Year-end report 2014
April
May
June
July
Annual report 2014, notice to AGM
First quarter report 2015
Constituent meeting and adoption of manuals and policies
Strategy
August
Second quarter report 2015, Capital structure
November
Third quarter report 2015, New ventures
December
Budget 2016, New ventures
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 members.
This is done on an annual basis through
a questionnaire which is anonymous for
the directors. The assessment focuses on
such factors as the board’s way of working,
number of meetings and effectiveness, time
for preparation, available competence and
individual board members influence of the
board’s work. The nomination committee
takes part of the results, and it is a compo-
nent in the nomination committee’s work
to submit proposals concerning board
members.
Remuneration committee
The board has established a remunera-
tion committee for the period up to and
including the AGM 2016, consisting of
all board members with the exception of
the managing director Magnus Nordin.
Per Brilioth is the chairman of the com-
mittee. The
remuneration committee
convened 4 times in 2015. The work has
mainly focused on establishing princip-
les for remuneration to management, to
monitor and evaluate variable remunera-
tion and construct and propose an incen-
tive programme to the AGM 2015. The
remuneration committee reports to the
board, normally in conjunction with the
following board meeting.
27
Audit committee
The board has established an audit com-
mittee for the period up to and including
the AGM 2016, consisting of all board
members with the exception of the mana-
ging director Magnus Nordin. Geoffrey
Turbott is the chairman of the committee.
The audit committee convened 6 times
in 2015. 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. Furthermore
the audit committee has worked towards
improving the interim financial reporting
to shareholders. 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 registered
firm of auditors may be appointed as the
company’s auditor.
Tethys Oil’s auditor is Pricewaterhouse-
Coopers AB with Johan Malmqvist as
Lead partner and Ulrika Ramsvik as co-
signing auditor. PricewaterhouseCoopers
AB was elected as the Company’s auditor
at the AGM 2015.
Tethys Oil AB’s auditor: Pricewater-
houseCoopers AB
Johan
Malmqvist
ulrika
Ramsvik
Lead partner
Co-signing
auditor
1975
2015
1973
2014
Role
Born
Company auditor
since
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, such as in-depth
reviews during audit. Remuneration to the
auditors of Tethys Oil is paid in accordance
with approved current accounts. In 2015,
remuneration to PricewaterhouseCoop-
ers AB amounted to MSEK 1. For details
on remuneration to auditors, see note 11,
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 policy to executive
management
Remuneration policy to the executive man-
agement includes five main components:
• Base salary
• Share based incentive programme
• 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
28
to those offered by similar companies.
include managing director
Executives
(CEO), chief financial officer (CFO) and
executive vice president (EVP) corporate
development.
Share based incentive programme
The share based incentive programme has
the purpose to retain and recruit qualified
and committed personnel on a global mar-
ket for oil companies. The programme is
available to all employees and is intended
to be re-occurring. The 2015 programme
is a three year programme.
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 annual 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
executive
TSEK
Base
salary
Variable
salary
Other
benefits*
Pension
arrangements
Total
2015
2014
Magnus Nordin
1,733
Morgan Sadarangani
1,156
Jesper Alm
Total
1,061
3,950
405
270
135
810
1,424
702
718
2,844
324
216
216
756
3,886
2,579
2,344
1,689
2,130
701
8,360
4,969
* Other benefits are mainly distribution of warrants from
the incentive programme in line with the decision from
the AGM 2015.
The increase in remuneration to manage-
ment relate to partly an increase of base
salaries, but mainly to variable salaries and
implementation of pension arrangements.
For further information, please see note 13.
Remuneration to the board 2015
Remuneration paid to the board of direc-
tors during 2015 amounted to a total of
TSEK 1,200, allocated among the board
members in the way shown in the below
table. The annual general meeting 2015
resolved that remuneration of the chairman
of the board of directors shall be TSEK 540
per annum and of the other members
TSEK 230 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
2015
1,450
540
230
65
35
–
35
2014
1,375
450
175
50
25
25
25
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.
At the current size of the company and the
fact that the company holds non-operated
interest it is not considered necessary for a
dedicated internal auditor function.
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.
29
Board of directors
Function
Elected
Born
Education
Experience
Other board duties
Dennis harlin
Per Brilioth
Magnus nordin
Katherine h. Støvring
Geoffrey Turbott
Chairman of the board,
director
Director, chairman of the
renumeration committee
Managing director,
director
2015
1941
2013
1969
2001
1956
Director
2012
1965
Director, chairman of the
audit committee
2015
1963
Military Academy higher
technical course
Bachelor of Science in
Business Administration,
University of Stockholm,
Master of Finance,
London Business School
Bachelor of Arts,
University of Lund
and Master of Arts,
University of California
Los Angeles
Master of Law, University
of Oslo and MSc in
Business Management,
London Business School
Member of New Zealands
institute of chartered
accountants
Executive positions in
companies investing in
the Russian oil and gas
sector
Several executive
positions in different oil
companies
Several executive
positions in the energy
and shipping industry
Brigadier general (ret.).
Vice president SAAB/
Gripen International
1996–2009. Defence
attaché in Bern and
Rome and seconded
to Ministry of Foreign
Affairs
Worked with public
companies in which the
Lundin family holds a
major shareholding from
1995 to 2013, whereof as
Chief Financial Officer and
Vice President of Finance
at Lundin Petroleum AB
from 2002 to 2013
Member of the board of
Vostok New Ventures AB,
Vostok Emerging Finance
Ltd, RusForest AB, Egidaco
Investments PLC, Avito
Holdings AB, Kontakt East
Holding AB, X5 Group AB,
Gateway Storage Company
Ltd, Pomegranate AB,
LeoVegas AB, Pet
Sounds AB and Svenska
Fotografiska museet AB
Shares in Tethys Oil as
of 31 December 2015
142,051
5,000
1,464,127
–
–
Remuneration for board
and committee work
610,000
300,000
Independent of
the company and
management
Independent of the
company's major
shareholders
Yes
Yes
Yes
Yes
–
No
Yes
300,000
330,000
Yes
Yes
Yes
Yes
30
executive management
Magnus nordin
Morgan Sadarangani
Jesper Alm
Function
Managing director
Chief financial officer
EVP corporate development
2004
1975
2014
1975
With Tethys Oil since
2004
1956
Born
Education
Experience
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)
Shares in Tethys Oil as
of 31 December 2015
1,464,127
Warrants in Tethys Oil as
of 31 December 2015
78,000
* Including shares held through endowment policy.
144,200
39,000
5,750*
39,000
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 Corpo-
rate Governance Statement for the year 2015 on pages 26–31
and that it has been prepared in accordance with the Annual
Accounts Act.
porate Governance Statement is different and substantially less
in scope than an audit conducted in accordance with Interna-
tional Standards on Auditing and generally accepted auditing
standards in Sweden.
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 opin-
ions. This means that our statutory examination of the Cor-
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, 27 April 2016
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Ulrika Ramsvik
Authorized Public Accountant
31
Board of directors, Management
Dennis harlin,
born in 1941. Member of the
board since 2015 and chairman
of the board since 2015. Mem-
ber of the audit committee and
remuneration committee.
Per Brilioth,
born in 1969. Member of the
board since 2013 and mem-
ber of the audit committee and
chairman of the remuneration
committee.
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.
Magnus nordin,
born in 1956. Managing director
and member of the board since
2001.
Jesper Alm,
born in 1975. EVP corporate
development. Employed since
2014.
Katherine h. Støvring,
born in 1965. Member of the
board since 2012 and member
of the audit committee and the
remuneration committee.
Geoffrey Turbott,
born in 1963. Member of the
board since 2015 and chair-
man of the audit committee and
member of the remuneration
committee.
Technical manager
Fredrik Robelius,
born in 1973. Employed since
2011.
32
The Tethys Oil share
Tethys Oil’s shares are traded on the
Nasdaq Stockholm. 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.
share
Shares outstanding
capi-
registered
Tethys Oil’s
tal at 31 December 2015 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. As
per 31 December 2015 the board of direc-
tors had remaining outstanding authoriza-
tion from the AGM to issue up to 10 per-
cent of the shares up until the next AGM.
As per 31 December 2015, Tethys Oil
held 1,083,669 of its own shares which
were purchased during the fourth quarter
2014 and during 2015 at an average price
of SEK 56.96. The share repurchase pro-
gramme is based on a mandate from the
AGM held in May 2015 and repurchased
shares are still part of the total number
of outstanding shares but however not
included in the number of shares in circu-
lation, which amount to 34,964,288.
Tethys Oil has an incentive programme
as part of the remuneration package
to employees. The company has issued
356,000 warrants, of which 330,000 have
been allotted, where each warrant entitles
to subscription to one new share in Tethys
Oil. The warrants have been recalculated
as a consequence of the share redemption
carried out during the second quarter of
2015 and now each entitles to subscrip-
tion to 1.03 shares in Tethys Oil. The war-
rants have a three year duration and the
strike price of the warrants is SEK 80.40
per share. As the strike price is above the
share price as per the reporting date in this
report, the warrants are not included in the
fully diluted number of shares.
Share capital development
Since the company’s inception in Septem-
ber 2001 and up to 31 December 2015 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
2001
2001
2003
2004
2004
2006
2006
2006
2007
2007
2007
2007
2008
2008
2008
2009
2009
2009
2009
2010
2010
2010
2010
2010
2010
2010
2010
2010
2011
2012
2015
2015
2015
Formation of the Company
Share issue
Split 100:1
Share issue
Split 2:1
Share issue
Non-cash issue
Share issue
Share issue
Share issue
Exercise of warrants
Share issue
Set-off issue
Split 3:1
Share issue
Exercise of warrants
Share issue
Share issue
Exercise of warrants
Exercise of warrants
Exercise of warrants
Exercise of warrants
Exercise of warrants
Share issue
Share issue
Exercise of warrants
Exercise of warrants
Exercise of warrants
Exercise of warrants
Non-cash issue
Share issue
Share split 1:2 (redemption shares)
Redemption
Bonus issue
100.00
100.00
1.00
1.00
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.17
0.08
0.08
0.17
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
19,178,286
23,978,286
23,980,086
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
32,504,489
32,543,750
35,543,750
71,087,500
35,543,750
35,543,750
1,000
4,000
495,000
250,000
750,000
2,884,800
400,000
876,960
80,000
300,000
2
125,000
226,000
12,785,524
4,800,000
1,800
1,300,000
2,000,000
176,186
592,819
252,080
137,429
754,942
250,000
250,000
482,528
185,795
84,971
2,057,653
39,261
3,000,000
35,543,750
-35,543,750
–
33
100,000
400,000
–
250,000
–
1,442,400
200,000
438,480
40,000
150,000
1
62,500
113,000
–
800,000
300
216,667
333,333
29,364
98,803
42,013
22,905
125,824
41,667
41,667
80,421
30,966
14,162
342,942
6,544
500,000
–
-2,961,979
2,961,979
100,000
500,000
500,000
750,000
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
5,923,958
5,923,958
5,923,958
Capital structure target and dividend policy
Tethys Oil’s primary objective is to create shareholder value and
in doing so the company will have a balanced approach to growth
and shareholder distributions, with a long term capital structure
target of a zero net cash position.
For the fiscal year 2015, the board of directors proposes to the
AGM 2016 a total distribution of SEK 1.00 (SEK 3.00) per share,
equal to MSEK 34 (MSEK 106). The distribution, subject to
approval by the AGM, is proposed to be made by a cash dividend.
Share ownership structure
The 20 largest shareholders in Tethys Oil as per 31 March 2016.
name
MSIL IPB CLIENT ACCOUNT
NORDIN, MAGNUS*
CBNY-NORGES BANK
MELLON OMNIBUS 30%, AGENT F ITS CLIENTS
FÖRSÄKRINGSAKTIEBOLAGET, AVANZA PENSION
SKANDINAVISKA ENSKILDA BANKEN S.A., W8IMY
BANQUE PICTET & CIE SA, W8IMY (WITHOUT P.R.
NORDNET PENSIONSFÖRSÄKRING AB
BANQUE ÖHMAN S.A.
MORGAN STANLEY AND CO LLC, W9
SIX SIS AG, W8IMY
SSB CLIENT OMNIBUS AC OM07 (15 PCT)
NORMAN, CARL ERIK
JPMC:ESCROW SWISS RESIDENT ACCOUNT
J P MORGAN CLEARING CORP, W9
SSB CLIENT OMNIBUS AC OM03 (0 PCT)
SEB VÄRLDENFOND
MELLON US TAX EXEMPT ACCOUNT
UBS AG LDN BRANCH A/C CLIENT, IPB
MORGAN STANLEY & CO INTL PLC, W-8BEN
Total, 20 largest shareholders
TETHYS OIL AB
Other, approx. 5,687 shareholders
Total
Source: Euroclear Sweden AB and Tethys Oil AB
* Directly and through the company Minotaurus Energi AS
number of shares
Capital and votes
3,213,595
1,464,127
989,666
946,561
927,812
856,260
809,580
710,149
695,000
646,851
623,312
622,621
585,000
540,470
518,322
443,554
432,967
427,934
400,675
393,211
16,247,667
1,083,669
18,212,414
35,543,750
9.04%
4.12%
2.78%
2.66%
2.61%
2.41%
2.28%
2.00%
1.96%
1.82%
1.75%
1.75%
1.65%
1.52%
1.46%
1.25%
1.22%
1.20%
1.13%
1.11%
45.71%
3.05%
51.24%
100.00%
34
Distribution of shareholdings
Distribution of shareholdings in Tethys Oil as per 31 March 2016.
holding
1 – 500
501 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 15,000
15,001 – 20,000
20,001 –
Total 2016-03-31
Source: Euroclear Sweden AB
number of
shares
561,928
684,152
1,851,586
952,497
550,411
692,414
30,250,762
35,543,750
Percentage of
shares, %
number of
shareholders
Percentage of
shareholders, %
1.58%
1.92%
5.21%
2.68%
1.55%
1.95%
85.11%
100.00%
3,772
802
757
131
42
38
166
66.08%
14.05%
13.26%
2.30%
0.74%
0.67%
2.91%
5,708
100.00%
Share statistics 2015
The final transaction price in 2015 was SEK 57.5 corresponding
to a total market capitalization of MSEK 2,044. During the year
the price of Tethys Oil’s share declined by 2.9 percent. The highest
transaction price in 2015 was SEK 70.4 on 20 April 2015 and the
lowest was SEK 40.5 on 15 September 2015. The turnover veloc-
ity was 134 percent on Nasdaq Stockholm.
Share price development and turnover 2015
75
60
45
30
15
0
Jan
2015
SEK
Feb
Mar
Apr
Maj
Jun
Jul
Aug
Sep
Okt
Nov
Dec
Feb
Mar
Jan
2016
Share price
Turnover
1,000,000
800,000
600,000
400,000
200,000
0
Share volume
per day
35
Key financial data
Group
Operational items
2015
2014
2013
2012
2011
Production before government take, bbl
3,578,488
2,804,240
1,709,706
1,399,518
423,469
Production per day, bbl
9,804
7,692
4,684
3,824
1,160
Net sales after government take, bbl
1,805,056
1,464,228
850,926
776,248
147,228
Achieved oil price, USD/bbl
58.09
103.87
106.63
110.35
107.37
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, %
Investments, MSEK
Net cash, MSEK
Profitability
Return on shareholders' equity, %
Return on capital employed, %
Other
Average number of employees
Dividend per share, SEK
Cash flow from operations per share, SEK
905
496
55%
194
21%
198
22%
436
1,864
2,165
86%
n.m.
324
436
11%
14%
18
1.00*
14.38
1,027
743
72%
393
38%
340
33%
372
1,675
1,816
92%
n.m.
259
372
25%
26%
18
1.00**
19.89
602
488
81%
294
49%
249
41%
295
1,109
1,572
70%
12%
289
-104
25%
21%
17
n.a.
9.45
583
509
87%
336
58%
314
54%
248
860
1,374
63%
20%
875
-152
48%
40%
19
n.a.
15.37
104
84
81%
83
80%
69
67%
93
456
465
98%
n.m.
208
93
17%
20%
12
n.a.
3.49
Number of shares at year end, thousands
35,544
35,544
35,544
35,544
32,544
Shareholders' equity per share, SEK
52.45
47.13
30.96
24.20
14.00
Weighted number of shares for the year, thousands
34,964
35,524
35,544
34,465
32,521
Earnings per share before and after dilution, SEK
5.66
9.56
7.00
9.10
2.12
* According to the board’s proposal to the upcoming annual meeting 2016.
** Not including share redemption of SEK 2.00 per share
36
Parent
2015
2014
2013
2012
2011
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, %
Investments, MSEK
Profitability
Return on shareholders' equity, %
Return on capital employed, %
Other
Average number of employees
Dividend per share, SEK
Cash flow from operations per share, SEK
-22
neg.
310
n.a.
366
472
517
91%
n.a.
41
80%
neg.
-145
neg.
148
n.a.
15
306
313
98%
n.a.
-309
61%
neg.
6
1.00*
15.55
7
1.00**
4.69
-12
neg.
-103
neg.
31
179
588
30%
203%
54
neg.
neg.
6
n.a.
neg.
40
neg.
-83
neg.
187
281
752
37%
72%
535
neg.
neg.
6
n.a.
neg.
-7
neg.
-15
neg.
4
250
303
83%
n.a.
48
neg.
neg.
6
n.a.
neg.
Number of shares at year end, thousands
35,544
35,544
35,544
35,544
32,544
Shareholders' equity per share, SEK
13.28
8.62
5.03
7.92
7.68
Weighted number of shares for the year, thousands
34,964
35,524
35,544
34,465
32,521
Earnings per share before and after dilution, SEK
8.87
4.16
-2.89
-2.40
-0.45
* According to the board’s proposal to the upcoming annual meeting 2016.
** Not including share redemption of SEK 2.00 per share
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.
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.
Net cash/net debt
Cash and equivalents less interest bearing debt.
Shareholders’ equity per share
Shareholders’ equity divided by the number of out-
standing shares.
Investments
Total investments during the year.
Weighted numbers of shares
Weighted number of shares during the year.
Leverage ratio
Net interest bearing debt as a percentage of sharehold-
ers’ equity.
Profitability
Return on shareholders’ equity
Net result as percentage of average shareholders’ equity.
Earnings per share
Net result divided by the number of outstanding
shares.
Adjusted equity ratio
Shareholders’ equity plus equity part of untaxed
reserves as a percentage of total assets.
Return on capital employed
Net result plus financial costs as a percentage of average
capital employed (total assets less non interests-bearing
liabilities).
n.a.
Not applicable.
n.m.
Not meaningful.
37
38
Administration report
(An English translation of the Swedish original)
Tethys Oil AB (publ)
Tethys Oil Block 3 & 4 Ltd.
Blocks 3 and 4, Oman
Tethys Oil Denmark AB
Tethys Oil Middle East North Africa B.V.
Tethys Oil Exploration AB
Tethys Oil France AB
Tethys Oil Oman Ltd.
Tethys Oil Spain AB
Jyllands Olie ApS
Odin Energy A/S
40%
50%
Alès and Attila, France
UAB TAN Oil
Raseiniai, Lithuania
UAB LL Investicijos
Rietavas, Lithuania
UAB Minijos Nafta
Gargzdai, Lithuania
75%
50%
Above are material group companies of the Tethys Oil group.
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 2015.
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 infrastructure
and markets; and to develop proven reserves that have previously
been sub-economic due to location or technological reasons. As
at year end 2015 the company had interests in licences in Oman,
France and Lithuania.
Production
Tethys Oil’s core area is the Sultanate of Oman, where the com-
pany holds a 30 per cent interest in Blocks 3 and 4. Tethys Oil also
has interests in three licenses onshore Lithuania and two licenses
onshore France. The primary production comes from the three
fields; Farha South, Shahd and Saiwan East on Blocks 3 and 4 in
Oman. The production growth of around 9 per cent quarter on
quarter and 31 per cent year on year has been in line with expecta-
tions and has mainly been driven by the on-going implementation
of the water injection programme on Farha South and from the
successful exploration and appraisal results on the Shahd oil field.
Tethys Oil has additional production in Lithuania.
The terms of the Exploration and Production Sharing Agreement
(“EPSA”) on Blocks 3 and 4 in Oman allows the joint operations
partners to recover their costs from up to 40 per cent of the value
of total oil production, this is referred to as cost oil. After deduct-
ing 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 pro-
duced. 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 and 4, the joint operations partners’ share of production
after government 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 2015, net to Tethys Oil, amounts to
MUSD 43.
Production from the Gargzdai licence in western Lithuania has
gradually decreased during the period. Tethys Oil’s share of Gargz-
dai is indirectly owned through Odin Energi A/S, a Danish associ-
ated company.
39
Volumes, before government take
2015
2014
2013
2012
2011
Tethys Oil’s share of annual production, (bbl)
Oman, Blocks 3 and 4
Production
Average daily production
Lithuania, Gargzdai
Production
Average daily production
3,539,631
2,765,654
1,663,069
1,345,854
421,868
9,698
7,577
4,556
3,687
1,156
38,857
42,000
46,637
53,664
1,601*
106
115
128
147
4*
Total production
3,578,488
2,804,240
1,709,706
1,399,518
423,469
Total average daily production
9,804
7,692
4,684
3,824
1,160
* Note that production from Lithuania during 2011 only includes part of one month as the asset was acquired in December 2011.
Average daily production net to Tethys Oil, from 2011 to 2016
12,000
10,000
8,000
6,000
4,000
2,000
0
2011
2012
2013
2014
2015
Reserves
Oman
Tethys Oil’s net working interest reserves in the Sultanate of Oman
as per 31 December 2015, amounted to 12,905 thousand barrels
of oil (“mbo”) of proven reserves (1P), 18,244 mbo of proven and
probable reserves (2P) and 27,863 mbo of proven, probable and
possible reserves (3P).
Development of reserves
(Audited by DeGolyer and MacNaughton)
increased with 6,323 mbo, representing an increase of 25 per cent.
The increase in 2P reserves represents an internal reserve replace-
ment ratio of 113 per cent.
Reserves, 31 December 2015
(Audited by DeGolyer and MacNaughton)
mbo
Farha South Field, Oman
Shahd Oil Field, Oman
1P
7,581
4,947
377
2P
10,249
6,841
1,154
3P
12,683
11,984
3,196
27,863
mbo
1P
2P
3P
Saiwan East Field, Oman
Total 31 Dec 2014
11,794
17,779
25,080
Total*
12,905
18,244
Production 2015
Revisions
-3,540
4,651
-3,540
4,005
-3,540
6,323
Total 31 Dec 2015
12,905
18,244
27,863
In 2015 Tethys Oil added 1P reserves of 4,651 mbo, represent-
ing an increase of 39 per cent. The company added 2P reserves
4,005 mbo, representing an increase of 23 per cent. The 3P reserves
* Numbers may not add up due to rounding.
The review of the reserves in Oman has been conducted by independ-
ent petroleum consultant DeGolyer and MacNaughton (“D&M”).
The report has been calculated using 2007 Petroleum Resources
Management System (PRMS), Guidelines of the Society of Petro-
leum Engineers (SPE), World Petroleum Council (WPC), American
40
Association of Petroleum Geologists (AAPG) and Society of Petroleum
Evaluation Engineers (SPEE).
Revenue*
Revenue
2015
2014
2013
2012
2011
Barrels sold, bbl
1,805,056 1,464,228
850,926
776,248
147,228
Underlift (overlift)
movement, bbl
35,552
(26,088)
13,870
(76,404)
75,795
Result
Tethys Oil reports a net result after tax for 2015 of MSEK 198,
representing earnings per share of SEK 5.66. The result for 2015
is down 42 per cent compared to 2014. Net result is mainly down
due to lower oil prices, which has created lower results on all levels
as expenditures are in line or higher compared to the previous year.
Operating expenses
Operating expenses
2015
2014
2013
2012
2011
Oil price, USD/bbl
58.09
103.87
106.63
110.35
107.37
Production costs, MSEK
313
224
134
Implied SEK/USD
exchange rate
8.45
6.88
6.52
6.82
6.55
Net sales, MSEK
886
1,046
592
584
104
Underlift (overlift),
MSEK
18
(19)
Revenue, MSeK
905
1,027
10
602
(1)
583
–
104
* Please see note 1 for information regarding change in accounting principles.
Revenue for 2015 is down 12 per cent compared to revenue 2014
and the main reason is the decline in oil prices which are down 44
per cent between the years. There has only been a minor change
from overlift to underlift during between 2015 to 2014.
During the 2015, Tethys Oil sold 1,805,056 barrels of oil from
Blocks 3 and 4 in Oman, representing 23 per cent increase in
comparison with 2014 when 1,464,228 barrels of oil were sold.
This resulted in net sales during 2015 of MSEK 886 compared
to MSEK 1,046 during 2014. In addition to Net sales, there has
been an adjustment for underlift amounting to MSEK 18, which
together with Net sales adds up to Revenue of MSEK 905.
Sale quantities for oil sales are nominated two months in advance
and are not based upon the actual production in a month; as a
result, sales quantities can be above or below production quanti-
ties. Where the sales quantity exceeds the quantity of barrels pro-
duced an overlift position occurs and where it is less, an underlift
position occurs. There was a movement from overlift to underlift
between year-end 2014 and 2015. The total underlift position as
per 31 December 2015 is 22,725 barrels. The valuation of both
over and underlift is based on market price as from 2015. (for
more information please see page 54 under section Accounting
principles). The comparative periods have been restated to reflect
the change in accounting principle.
Tethys Oil sells all of its oil through Mitsui Energy Trading Sin-
gapore, which is part of Mitsui & Co Ltd. All oil sales come from
Blocks 3 and 4 Oman and are made on a monthly basis. The sell-
ing price is the monthly average of the two month future price for
Omani blend.
The average selling price amounted to USD 58 per barrel during
2015, 44 per cent lower compared to 2014. The average price for
Dated Brent oil during 2015 amounted to USD 52.32 per bar-
rel. The average exchange rate of US dollar in relation to SEK has
moved from 1 January 2015 of SEK 7.77 per dollar to SEK 8.51
per dollar as per 31 December 2015.
Well workovers, MSEK
49
31
19
Total operating
expenses, MSeK
Operating expenses per
barrel, USD
362
255
153
12.1
13.4
14.1
10.4
93
2
95
–
–
–
–
Operating expenses during 2015 amounted to MSEK 362 com-
pared to MSEK 255 during 2014. Operating expenses are related
to oil and gas production on Blocks 3 and 4 in Oman, and com-
prise expenses for field staff, expenses related to maintenance, well
workovers and interventions and administration.
Operating expenses per barrel has since 2011 been in the range
USD 10–14 per barrel. Of these expenses, around 50–60 per cent
is field related production costs, i.e. excluding costs for work over
rigs, office costs etc.
The increase in operating expenses is in line with the increased
levels of production and this has resulted in the operating costs
per barrel decreasing over the years. In 2012 the project was still in
start-up mode, and since then there has been a continuous reduc-
tion in operating expenses per barrel. Tethys Oil expects to see
operating expenses per barrels to further decrease in 2016 from
general cost reductions in the oil and gas industry and as most
operating expenses are fixed and that production is expected to
continue to grow.
Depletion, depreciation and amortisation
DD&A
2015
2014
2013
2012
2011
DD&A, MSEK
293
214
138
DD&A, MUSD
35
31
21
55
8
DD&A per barrel, USD
9.8
11.2
12.6
5.9
–
–
–
Depletion, depreciation and amortisation (“DD&A”) for 2015
amounted to MSEK 293 compared to MSEK 214 for 2014. The
DD&A charge relates to Blocks 3 and 4 Oman and the increase is
explained by higher production. Depletion per barrel has decreased
over the years with the exception of 2012 where investments were
low as Tethys Oil was funded as per the carry agreement with Mit-
sui. The trend of lower depletion per barrel is expected to con-
tinue alongside further successful development of Blocks 3 and 4
in Oman.
41
Net back
net back, uSD/bbl
2015
2014
2013
2012
2011
Oil price achieved (sales
barrels)
58.1
103.9
106.6
110.4
107.4
Revenue (after
government take)
Operating expenses
net back
30.2
12.1
18.1
54.0
55.4
57.4
13.4
14.1
10.4
40.6
41.3
47.0
–
–
–
The net back per barrel has mainly been driven by the oil price
development, which has continuously declined since the second
half of 2014.
Net profit from associated companies
Tethys Oil holds indirect interest in the three Lithuanian licences;
Gargzdai, Rietavas and Raseiniai, through associated companies
Jylland Olie and Odin Energi. The result from Tethys Oil’s share
in these associated companies during 2015 amounted to MSEK -3
compared to MSEK -133 during 2014. There has been a long
term trend of declining production from Gargzdai, which is in
line with expectations. Reduced revenues following the fall in oil
price has led to cost reduction measures being introduced. The net
loss from associated companies during 2014 was mainly related
to the write off of investments in the Gargzdai licence following
lower oil prices.
Administrative expenses
Administrative expenses amounted to MSEK 44 for 2015 com-
pared to MSEK 31 during 2014. Administrative expenses are
mainly salaries, rents, listing costs and external services. Admin-
istrative expenses have basically been stable except for non cash
related costs regarding the incentive programme for employees
which have increased the administrative expenses.
Tax
In Oman, Tethys Oil’s oil and gas operations are governed by an
Exploration and Production Sharing Agreement (EPSA) whereby
Tethys Oil receives its share of oil after government take. Under
the terms of the EPSA, Tethys Oil is subject to Omani income
taxes and royalties which are paid in full, on behalf of Tethys Oil,
from the government share of oil. As Omani income tax is not
paid directly by Tethys Oil but is taken in kind, these taxes are not
presented in Tethys Oil’s income statement.
Net financial result
The result for the full year 2015 has been impacted by net for-
eign exchange losses and fees on long term debt. The net currency
exchange effect of the group amounts to MSEK 21 and most of
the effect relates to the stronger US dollar in relation to the Swed-
ish krona. Currency translation differences recorded on loans
between the parent company and subsidiaries are non-cash related
items. Interest and fees related to the credit facility amounted to
MSEK 8 and other financial expenditures amounted to MSEK 10.
The currency exchange effect and fees on long term debt is part of
net financial result amounting to MSEK 4 for the full year.
Investments and work programme
Summary of oil and gas interests (MSEK):
Country
Oman
Lithuania
France
New ventures
Total
Book value
31 Dec 2015
Book value
31 Dec 2014
Investments
Jan–Dec 2015
1,625
1,303
348
–
–
1
–
–
–
–
–
1
1,625
1,303
348
Blocks 3 and 4
During 2015, total investments amounted to MSEK 348 of
which almost all relate to Blocks 3 and 4. Investments during the
year have been in line with investments 2014. There has been an
increased focus on development and production drilling during
2015.
Investments Blocks
3 and 4, MSeK
Drilling – Exploration/
Appraisal
Drilling – Development
G&G
Facilities
Pipeline
Other capex
2015
2014
2013
2012
2011*
41
122
71
65
25
22
77
74
50
53
38
-30
58
7
103
111
67
61
5
3
6
139
57
540**
–
–
–
–
–
17
17
Total investments
Blocks 3 and 4
347
263
263
861
* During 2011 Tethys Oil’s investments on Blocks 3 and 4 were carried by Mitsui.
** The high level of other capex during 2012 relate to the repayment to Mitsui regarding
the carry agreement for investments made on Tethys Oil’s behalf during 2010 and
2011.
In 2015, a total of 40 wells were completed on Blocks 3 and 4.
11 production wells, five water injection wells and one water well
were drilled on producing fault blocks in the Farha South field on
Block 3. One well was drilled in a previously undrilled fault block
along the Farha trend. The well did not encounter oil.
The appraisal/development of the Shahd oil field on Block 4
continued with ten new appraisal/production wells. One well
was drilled in a previously undrilled structure on the Shahd oil
field. The well discovered oil and has been put into production.
In the end of 2015, a new reservoir within the Shahd field, the
Lower Khufai Carbonates, was successfully brought on stream.
This new reservoir responded very well to horizontal drilling, and
was a major reason for the production increase in late 2015 and
early 2016. The water injection programme on the Shahd field is
showing signs of working, but the evaluation of the impact of the
injection programme will continue. Six injections wells three water
wells were added to the field in 2015.
A far field exploration well was completed in the B4 West 3D area
in south western part of Block 4. Another far field exploration well
was drilled in the southern part of Block 4, in the area where a seis-
mic study was completed in 2014. Both wells did not encounter
42
oil and have been suspended to allow for further study. Once the
results have been evaluated, the areas will be assessed also for other
well locations.
MSEK 348. Including the dividend received from Lithuanian
assets, the cash flow from operations after investments amounted
to MSEK 179.
The seismic acquisition in the northwest corner of Block 4 was
completed in 2015. The processing of the data has started.
A new rig was put in operations in late 2015, making it a total of
five rigs including a work over rig in operations on the blocks by
year end.
The Blocks 3 and 4 investment budget for 2016 will continue
to focus on development and appraisal. Following the oil price
development, Tethys Oil’s investment plans, including the capex
budget, for 2016 will be closely monitored and subject to on-
going revisions. The target is to fund investments on Blocks 3 and
4 from available funds and from cash flow from operations.
Tethys Oil also had interests in Block 15 onshore north western
part of Oman. The licence terms for the block expired in 2014.
Tethys Oil’s operations in Lithuania are expected to be self-
financed from available cash and cash flow generated from the
associated Lithuanian companies.
Associated companies
Lithuania
As per 31 December 2015 the shareholding in the two associated
Danish companies holding the interest in Lithuanian licenses,
amounted to MSEK 15 (MSEK 41). The reduction in book
value is an effect of the net result for 2015 and more importantly
the received dividend during the period, which amounted to
MSEK 23. The book value related to Minijos Nafta (Gargzdai) is
zero and as there are no liabilities related to Minijos Nafta Tethys
Oil does not recognize any negative net result. Unrecognized net
result during 2015 from Minijos Nafta amounted to MSEK -8.
A drilling programme on the Raseiniai licence was completed in
2015. The wells were targeting Silurian limestone and marl reefs
mapped by an 80 square kilometres 3D seismic study completed
in 2014. The Tidikas-1 was drilled vertically to the Cambrian
sandstone at a measured depth of 1,413 metres and cores were
taken from Silurian and Ordovician limestones, marl and dolo-
mites. The well encountered a combined oil column of almost
50 metres in two different lime stone formations and flowed oil
to surface during drill stem tests. The well has been put on a long
term production test. The Bedugnis-1 well was drilled vertically
to a total measured depth of 1,067 meters and recorded oil shows
while drilling but no oil flowed to surface. The location of fur-
ther wells on the Raseiniai licence will be determined after more
information has been gained through the long term production
test of the Tidikas-1 well and the analysis of the cores. The drill-
ing programme was fully funded from available funds within the
Lithuanian company holding the licence.
Acquisition and mapping of a 30 square kilometres 3D survey was
completed at the Rietavas licence. An additional 15 kilometres of
2D seismic was acquired across the possible fault related linear
anomaly seen from the recent gravity survey.
Liquidity and financing
Cash and bank and Net cash as per 31 December 2015 amounted
to MSEK 436 compared to MSEK 372 as per 31 December 2014.
A large part of cash and cash equivalents are held in USD which
has appreciated against SEK during the full year 2015. The cur-
rency exchange effect on cash and cash equivalents amounted dur-
ing the full year 2015 to MSEK 32.
Parent company
The Parent company reports a net result after tax for 2015 amount-
ing to MSEK 310 compared to MSEK 293 for 2014. Adminis-
trative expenses amounted to MSEK 29 for 2015 compared to
MSEK 20 for 2014. Administrative expenses have basically been
stable except for costs related to the incentive programme for
employees which have increased the administrative expenses. Net
financial result amounted to MSEK 332 during 2015 compared
to MSEK 293 for 2014. The reason behind the strong net finan-
cial result and the equivalently strong net result is an anticipated
dividend from the wholly owned subsidiary Tethys Oil Block 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 Blocks 3 and 4 in Oman. In the other
areas of operations the commitments 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.
Tethys Oil distributed MSEK 106 to shareholders in the form of
a dividend (SEK 1 per share) and share redemption (SEK 2 per
share) in line with the approval granted at the AGM 2015. Fur-
thermore, the share repurchase programme added MSEK 42 to the
distribution of capital to shareholders.
During 2015, the cash flow from operations amounted to
MSEK 503 and investments in oil and gas amounted to
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.
43
Subsequent events
• Tethys Oil’s share of the production, before government take,
from Blocks 3 and 4 Oman amounted during the first quarter
2016 to 1,101,031 barrels of oil, corresponding to 12,099 bar-
rels of oil per day
• As per 31 December 2015 the audited reserves for Blocks 3 and
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.
4 Oman net to Tethys Oil amounted to:
• 1P reserves 12,905 thousand barrels (11,794)
• 2P reserves 18,244 thousand barrels (17,779)
• 3P reserves 27,863 thousand barrels (25,080)
There have been no significant issues with regard to HSE on
any of Tethys Oil’s assets. For more information, see the section
Sustainability.
Board of directors
At the Annual General Meeting of shareholders on 13 May
2015 Per Brilioth, Magnus Nordin and Katherine Støvring were
re-elected members of the board. Dennis Harlin and Geoffrey
Turbott were newly elected directors. No deputy directors were
appointed. At the same meeting Dennis Harlin was appointed
chairman of the board.
Group structure
Tethys Oil AB (publ), with organizational number 556615-8266,
is the parent company in the Tethys Oil Group. Material subsidiar-
ies include Tethys Oil Oman Limited, Tethys Oil Block 3&4 Lim-
ited, Tethys Oil Denmark AB, Tethys Oil Spain AB, Tethys Oil
France AB and Tethys Oil Exploration AB are part of the group.
The Tethys Oil Group was established 1 October 2003.
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 19 meetings dur-
ing 2015. Most importantly the board has approved the interim
reports of the year and a capital structure target for the company
as well as the budget 2016. 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 remu-
neration committee. Geoffrey Turbott is chairman of the audit
committee and Per Brilioth is chairman of the remuneration
committee.
Remuneration to executive management
The intention of the board of directors is to propose to the 2016
AGM the adoption of a policy on remuneration for 2016. The
remuneration committee has adopted a policy that fundamentally
will be the proposition to the 2016 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 2015 and
policy on remuneration as adopted by the remuneration com-
mittee, refer to page 29 of the Corporate Governance report and
note 13 of the consolidated financial statements.
Organisation
At the end of the year, Tethys Oil had a total of 18 (18) 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
Share data
As per 31 December 2015, 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. The company has the same
number of shares at 31 December 2015 as at 31 December 2014.
As per 31 December 2015, Tethys Oil held 1,083,669 of its own
shares which have been purchased since commencement of the
programme during the fourth quarter 2014. The shares have been
purchased at an average price of SEK 56.96. Repurchased shares
are still part of the total number of outstanding shares but how-
ever not included in the number of weighted shares in circulation,
which amount to 34,964,288 for the twelve months period ending
31 December 2015.
There have been no further repurchase of shares up until publica-
tion of this report.
Seasonal effects
Tethys Oil has no significant seasonal variations.
Transactions with related parties
There have been no transactions with related parties during the full
year 2015, nor for any comparative periods.
Risk and uncertainties
A statement of risks and uncertainties are presented in note 1, page
58.
Appropriation of profit
The Board of Directors proposes to the annual general meeting
a total distribution of SEK 1.00 (SEK 3.00) per share, equal to
MSEK 34 (MSEK 106), be paid for the 2015 fiscal year. The dis-
tribution is proposed to be made by a cash dividend of SEK 1 per
share. It is also proposed that the balance of retained earnings after
the dividend be retained in the business as described below.
44
SeK
Retained earnings
Profit for the year
84,702,835
310,167,751
394,870,585
The Board of Directors proposes that these earnings be appropriated as follows:
To the shareholders, a distribution of SEK 1.00 per share
34,460,081
To be retained in the business
360,410,504
394,870,585
Cash dividend
The board of directors’ proposal consists of a cash dividend of
SEK 1 per share amounting to SEK 34,460,081. The dividend
is subject to approval at the annual general meeting 2016. The
preliminary record day for the dividend is 20 May 2016 and pre-
liminary day of payment of dividend is 25 May 2016.
As per 31 December 2015, the group’s and the parent compa-
ny’s equity ratio amounted to 86.13 per cent and 91.33 per cent,
respectively. After the dividend, the parent company’s and the
group’s equity ratio will amount to 85.91 per cent and 90.72 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 the 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 Annual General
Meeting, 18 May 2016.
45
Consolidated statement of comprehensive income
MSEK
Revenue
Operating expenditures
Gross profit
Depreciation, depletion and amortisation
Exploration costs
Net profit/loss from associated companies
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
4
9
3, 8, 17
8
6
11–13
14
15
16
19
19
19
19
19
2015
905
-362
543
-293
-9
-3
-44
194
58
-54
4
198
–
198
136
136
334
2014
1,027
-255
772
-214
-1
-133
-31
393
21
-75
-53
340
–
340
245
245
595
35,543,750
35,543,750
34,964,288
5.66
5.66
35,543,750
35,543,750
35,524,316
9.56
9.56
46
Consolidated balance sheet
MSEK
ASSETS
Non current assets
Oil and gas properties
Office equipment
Investment in associated companies
Other long term receivables
Current assets
Other receivables
Prepaid expenses
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
Provisions
Current liabilities
Accounts payable
Accrued expenses
Other current liabilities
Total liabilities
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES
Pledged assets
Contingent liabilities
Note
31 Dec 2015
31 Dec 2014
1,625
1,303
1
15
3
1
41
–
1,644
1,345
69
16
436
521
80
19
372
471
2,165
1,816
6
552
295
1,012
1,864
34
34
1
167
99
267
300
2,165
1,813
–
6
552
198
919
1,675
25
25
2
110
2
115
141
1,816
1,789
–
8
17
6
18
19
7
21
23
24
47
Consolidated statement of changes in equity
MSEK
Share capital
Paid in capital
Other reserves
Retained earnings
Total equity
-27
–
-27
–
–
245
245
219
-20
-20
200
200
–
–
136
136
136
-42
–
–
–
-42
295
569
9
578
340
340
–
–
919
–
–
919
919
198
198
–
–
1,117
–
-35
-70
3
-102
1,012
1,100
9
1,109
340
340
245
245
1,694
-20
-20
1,675
1,675
198
198
136
136
1,253
-42
-35
-70
3
-144
1,864
Opening balance 1 January 2014
Change in accounting principles (note 1)
Restated opening balance 1 January 2014
Comprehensive income
Year end result 2014
Year end result
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
Opening balance 1 January 2015
Comprehensive income
Year end result 2015
Year end result
Other Comprehensive income
Currency translation differences 2015
Total other comprehensive income
Total comprehensive income
Transactions with owners
Purchase of own shares
Dividends paid
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2015
6
–
6
–
–
–
–
–
–
–
6
6
–
–
–
–
–
–
–
0
–
–
6
552
–
552
–
–
–
–
–
–
–
552
552
–
–
–
–
–
–
–
–
–
–
552
48
Consolidated cash flow statement
MSEK
note
2015
2014
194
0
-8
–
9
285
480
16
7
503
-348
23
-2
4
-324
-42
–
-35
-70
0
–
-147
32
372
32
436
393
0
-44
–
1
313
673
-15
49
707
-269
11
–
–
-259
-19
-400
–
–
-21
14
-426
22
295
55
372
Cash flow from operations
Operating result
Interest received
Interest paid
Income tax
Adjustment for exploration costs
Adjustment for depletion, depreciation and amortisation
and other 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
Dividend from associated companies
Investment in other fixed assets
Net assets of acquired subsidiaries net after cash
Cash flow from investment activity
Financing activity
Purchase of own shares
Bond repayment
Dividends paid
Share redemption
Long term credit facility
Return on investments
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
14
15
8
8, 16
8
6
17
19
20
49
Parent Company income statement
MSEK
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*
note
2015
6
11–13
14
15
22
16
11
-3
-29
-22
412
-80
–
332
310
–
310
2014
9
-133
-20
-145
238
-65
-2
293
148
–
148
* As there are no items in the parent company’s other comprehensive income, no separate report on total comprehensive income is presented.
50
Parent Company balance sheet
MSEK
ASSeTS
non-current assets
Other fixed assets
Shares in subsidiaries
Long term receivables from group companies
Investment in associates
Current assets
Other receivables
Prepaid expenses
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
Current liabilities
Accounts payable
Other current liabilities to group companies
Accrued expenses
Total liabilities
TOTAL ShARehOLDeRS' eQuITY AnD LIABILITIeS
Pledged assets
Contingent liabilities
note
31 Dec 2015
31 Dec 2014
–
7
126
15
148
1
1
366
368
517
6
71
419
-334
310
472
1
43
0
45
517
1
–
–
2
45
41
88
209
1
15
224
313
6
71
461
-379
148
306
2
2
2
6
313
1
–
17
22
6
18
19
21
23
24
51
Parent Company statement of changes in equity
Restricted equity
unrestricted equity
MSEK
Opening balance 1 January 2014
Transfer of prior year net result
Comprehensive income
Loss for the year
Period result
Total comprehensive income
Transactions with owners
Purchase of own shares
Total transactions with owners
Closing balance 31 December 2014
Opening balance 1 January 2015
Transfer of prior year net result
Comprehensive income
Result for the year
Period result
Total comprehensive income
Transactions with owners
Purchase of own shares
Dividends paid
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2015
Retained
earnings
-277
-103
net
result
-103
103
–
–
–
–
–
-379
-379
148
–
–
–
–
-35
-70
3
-102
-334
–
148
148
–
–
148
148
-148
310
310
310
–
–
–
–
–
310
Total equity
179
–
–
148
148
-20
-20
306
306
–
310
310
310
-42
-35
-70
3
-144
472
Share
capital
Statutory
reserve
Share
premium
reserve
6
–
–
–
–
–
–
6
6
–
–
–
–
–
–
0
–
–
6
71
481
–
–
–
–
-20
-20
461
461
–
–
–
–
-42
–
–
–
-42
419
–
–
–
–
–
–
71
71
–
–
–
–
–
–
–
–
–
71
52
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
Dividends paid
Share redemption
Return on investments
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
2015
2014
14
15
6
17
19
-22
4
-0
34
350
298
207
38
544
23
-61
0
-2
-41
-42
–
-35
-71
0
-147
356
15
-5
366
-145
6
-40
133
334
289
209
1
81
11
299
-1
–
309
-19
-400
–
–
14
-405
-14
31
-2
15
53
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 27 April 2016.
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.
MSEK
2015
2014
2013
2012
2011
Revenue, old accounting principles*
Revenue, new accounting principles
EBITDA, old accounting principles
EBITDA, new accounting principles
EBIT, old accounting principles
EBIT, new accounting principles
886
905
382
496
187
194
Net result, old accounting principles
190
Net result, new accounting principles
198
1,046
1,027
753
743
404
393
350
340
592
602
479
488
285
294
240
249
584
583
509
509
336
336
314
314
104
104
84
84
83
83
69
69
Earnings per share, old accounting
principles, SEK per share
5.45
9.86
6.76
9.10
2.12
Earnings per share, new accounting
principles, SEK per share
5.66
9.56
7.00
9.10
2.12
Shareholders’ equity, old accounting
principles
1,857
1,675
1,100
860
456
The consolidated financial statements have been prepared under the his-
torical cost basis except as disclosed in the accounting policies below.
Shareholders’ equity, new account-
ing principles
1,864
1,675
1,109
860
456
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 2014 and have been consistently applied
to all the years presented, except for the valuation of over- and underlift
as described below. 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 pre-
pared 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 principles 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”.
Change in over- and underlift valuation
The accounting principles as described in the Annual report 2014 have
been used in the preparation of this report, with the exception of the valu-
ation and presentation of overlift and underlift. The accounting principles
in the Annual report 2014 stated that overlift should be valued at market
value and underlift valued at cost. Furthermore the previous accounting
principles stated that the overlift and underlift adjustment was presented
within the Operating expenses category in the Income statement. Following
an internal review of the accounting principles used in the preparation of
the financial reports, the company has decided to value both overlift and
underlift at market value and furthermore introduce Revenue at the top of
the Income statement which would include both the previous line item Net
sales and also include overlift and underlift adjustment. The purpose of the
change is to better align Revenue with production, have a more understand-
able Operating expenses category and thereby increase transparency and
investors’ understanding of the company. The change in valuation of under-
lift has had an effect on historic results and equity as per the below table.
In this financial report all historic financial data has been recalculated with
the new accounting principles. Over time, there will be no change in results
or equity in the company and difference from the change in valuation prin-
ciples is only timing related and will only have a temporarily effect during
a financial period.
*Note that Revenue under old accounting principles represents Net sales.
New accounting principles for 2015
IASB has issued several amendments to financial standards effective as
from 1 January 2015 of which no one has had any material impact on the
consolidated financial statments 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 2016, 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-
54
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 2018 and ear-
lier application is permitted. The group is assessing the impact of IFRS 15.
IFRS 16 Leases
In January 2016, IASB issued a new lease standard that will replace IAS
17 Leases and the related interpretations IFRIC 4, SIC-15 and SIC-27. The
standard requires assets and liabilities arising from all leases, with some
exceptions, to be recognized on the balance sheet. This model reflects that,
at the start of a lease, the lessee obtains the right to use an asset for a
period of time and has an obligation to pay for that right. The accounting for
lessors will in all material aspects be unchanged. The standard is effective
for annual periods beginning on or after 1 January 2019. Early adoption
is permitted. EU has not yet adopted the standard. The group has not yet
assessed the impact of IFRS 16.
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.
Jointly controlled companies
As stated above, a subsidiary that is controlled by the Group will be fully con-
solidated within the results of Tethys Oil. Joint control exists when the Group
does not have the control to determine the strategic operating, 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.
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.
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
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.
31 December 2015
31 December 2014
Currency
2015 average 2015 period end
2014 average 2014 period end
SEK/EUR
SEK/USD
SEK/CHF
9.42
8.45
8.80
9.30
8.51
8.60
9.15
6.88
7.53
Effect of currency exchange rates on operating result
Comparison with 31 December 2014, MSEK
Revenue
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
9.53
7.77
7.91
169
-55
-2
0
-67
0
0
-3
41
55
The table above presents the currency exchange effect on operating result
compared with 2014, by applying the average exchange rate of 2014 on
2015 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
probable that they will generate future economic benefits. All costs for
acquiring concessions, licences or interests in production sharing con-
tracts and for the survey, drilling and development of such interests are
capitalised on a field area cost centre basis. This includes capitalisation
of decommissioning and restoration costs associated with provisions
for asset retirement (see “Provisions”). Oil and gas properties are sub-
sequently 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.
56
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 differ-
ence between the asset’s carrying amount and the present value of esti-
mated future cash flows (excluding future credit losses that have not been
incurred) discounted 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 market value, and overliftings are recorded in
Other current liabilities and accrued at the market value. Underliftings are
reversed from Other receivables when the crude oil is lifted and sold. Over-
liftings are reversed from Other current liabilities when sufficient volumes
are produced to make up the overlifted volume.
Profit oil and cost recovery
Blocks 3 and 4 in Oman, being Tethys Oil’s main and only producing oil
and gas property, 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
57
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 vol-
untary 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.
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)
198
+5
20
198
-5
-20
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 projects.
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.
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.
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.
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 2015.
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
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 2015, 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:
58
Revenue 2015
Investments 2015
100 per cent in USD
99 per cent in USD
External financing 2015
no external financing at year-end 2015
Fair value
IAS 39 valuation categories and related balance sheet items
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.
MSEK
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.
Other receivables
Prepaid expenses
Cash and bank
Debt
Accounts payables
Other current liabilities
31 December 2015
Financial assets and
Receivables
liabilities at fair value
and other
Other
through profit or loss
receivables
liabilities
–
–
–
–
–
–
69
16
436
–
–
–
–
–
–
–
1
99
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)
198
+10%
20
1,864
+10%
20
198
-10%
-20
1,864
-10%
-20
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 2015
31 December 2014
MSEK
<1 year
1–3 year
<1 year
1–3 year
Accounts payables and other
liabilities
Total
100
100
–
–
4
4
–
–
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 & Co. Ltd.
As at 31 December 2015 the Group’s receivables on oil sales amounted
to MSEK 69 (MSEK 80), this also represents 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.
31 December 2014
Financial assets and
liabilities at fair value
Receivables
and other
Other
MSEK
through profit or loss
receivables
liabilities
Other receivables
Prepaid expenses
Cash and bank
Debt
Accounts payables
Other current liabilities
–
–
–
–
–
–
80
19
372
–
–
–
–
–
–
–
2
2
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.
59
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 has used its
judgement and made 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 16).
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
segments are based on geographic perspective and reported in a man-
ner consistent with the internal reporting provided to the executive man-
agement, 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 executive management. 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.
MSEK
Revenue
Operating expenses
Depreciation, depletion and amortisation
Exploration costs
Other income
Net profit/loss from associates
Administrative expenses
Operating result
Total financial items
Result before tax
Income tax
Result for the period
MSEK
Revenue
Operating expenses
Depreciation, depletion and amortisation
Exploration costs
Other income
Net profit/loss from associates
Administrative expenses
Operating result
Total financial items
Result before tax
Income tax
Result for the period
Lithuania
–
–
–
–
–
-3
–
-3
Lithuania
–
–
–
–
–
-133
–
-133
As per 31 December 2015 (and comparative periods) in Tethys Oil, the only
oil producing area from which net sales are recorded is Oman. Revenue,
operating expenses and depletion, which is presented in notes 4, 9 and 10,
therefore only relate to Oman and Blocks 3 and 4 in particular.
Regarding Oil and gas properties and Office equipment, segment reporting
is provided in note 8 and 17. Please refer to note 1 regarding Credit risk
exposure on accounts receivables.
Oman
1,027
-255
-214
–
–
–
-5
553
Group income statement Jan–Dec 2015
Oman
905
-362
-293
-9
–
–
-10
231
Sweden
Other
–
–
0
–
–
–
-29
-29
–
–
–
–
–
–
-5
-5
Group income statement Jan–Dec 2014
Sweden
Other
–
–
–
–
–
–
-20
-20
–
–
–
-1
–
–
-5
-6
2015
886
18
905
Note 4, Revenue
Revenue, MSEK
Net sales
Underlift (overlift)
Revenue
Tethys Oil sells all of its oil through Mitsui Energy Trading Singapore, which
is part of Mitsui & Co Ltd. All oil sales come from Blocks 3 and 4 Oman and
are made on a monthly basis. The selling price is the monthly average of
the two month future price for Omani blend.
Total
905
-362
-293
-9
–
-3
-44
194
4
198
–
198
Total
1,027
-255
-213
-1
–
-133
-31
393
-53
340
–
340
2014
1,046
-19
1,027
60
Note 5, Other income
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. Tethys Oil is as per 31 December 2015 not operator
in any of its licences.
Note 6, Associated companies
Tethys Oil holds an indirect interest of three Lithuanian companies hold-
ing three licences; Gargzdai, Rietavas and Raiseiniai 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 2015.
owns
of
owns
of
owns
of
owns
of
Tethys Oil AB (publ)
50%
Odin Energy A/S
50%
UAB Minijos Nafta
40%
Jyllands Olie ApS
75%
UAB TAN Oil
100%
Gargzdai, Lithuania
100%
Raseiniai, Lithuania
100%
UAB LL Investicijos
100%
Rietavas, Lithuania
Tethys Oil’s
indirect interest
25%
30%
30%
MSEK
Income statement in associated companies
UAB Minijos Nafta
UAB TAN Oil
1 Jan – 31 Dec 2015
1 Jan – 31 Dec 2015
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
79
-11
68
-23
-20
-48
-11
-34
3
-3
-34
-2
-32
3
–
2
-10
-5
-1
-10
-23
10
-3
-15
–
-15
The book value related to Minijos Nafta (Gargzdai) is zero, and as there are no liabilities related to Minijos Nafta, Tethys Oil does not recognize any negative net result.
MSEK
UAB Minijos Nafta
UAB TAN Oil
Tethys Oil’s share of profit loss from associated companies
1 Jan – 31 Dec 2015
1 Jan – 31 Dec 2015
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 2015
-3
61
–
–
–
–
–
–
–
–
1
–
1
-3
-1
–
-3
-5
3
-1
-3
–
-3
MSEK
Income statement in associated companies
UAB Minijos Nafta
UAB TAN Oil
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
Net profit from in associated companies
117
-12
105
-21
-4
-54
-10
16
2
-1
17
-2
14
–
–
–
-1
-2
–
-1
-3
–
–
-3
–
-3
MSEK
UAB Minijos Nafta
UAB TAN Oil
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
2
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 8.
29
-3
26
-5
-1
-14
-3
4
–
–
4
-1
4
–
–
–
–
–
–
–
-1
–
–
-1
–
-1
31 Dec 2015
31 Dec 2014
41
-3
-23
–
–
15
184
2
-11
-8
-127
41
62
Oman
France
France
Lithuania
Lithuania
Lithuania
MSEK
Attila
Alès
Gargzdai3
Rietavas3
Raseiniai3
Note 7, Provisions
Tethys Oil estimates that Tethys Oil’s share of site restoration regarding Blocks 3 and 4 amounts to MSEK 34 (25). As a consequence of this provision,
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 8, Oil and gas properties
Country
Licence name
Phase
Expiration date
commitments
Tethys Oil
Partners (operator in bold)
Remaining
Block 3,4
Production
July 2040
Exploration
Exploration
20151
20151
None
None
30%
40%
CCED, Mitsui, Tethys Oil
Galli Coz, Tethys Oil
MUSD 1.52
37.5%
Tethys Oil, MouvOil
Production
No expiration date
None
Exploration
No expiration date
None
Exploration
Sep 20174
MEUR 1.2
25%
30%
30%
Odin, GeoNafta, Tethys Oil
Odin, Tethys Oil, private investors
Odin, Tethys Oil, private investors
31 Dec 2015
31 Dec 2014
Producing cost pools
Non-producing cost pools
Total oil and gas properties
1,625
1
1,625
MSEK
Other non–cash
Currency
adjustments
exchange diff
DD&A
Exploration costs
Investments
Book value
1 Jan–31 Dec
1 Jan–31 Dec
1 Jan–31 Dec
1 Jan–31 Dec
1 Jan–31 Dec
Country
Asset type
31 Dec 2015
Oman Blocks 3 and 4 Producing
1,625
Oman Block 15
Non-producing
France Attila
Non-producing
France Alès
Non-producing
New ventures
Non-producing
–
–
–
1
2015
137
–
–
–
–
2015
138
–
–
–
–
2015
-292
–
–
–
–
2015
–
-9
–
–
–
-9
1,626
137
138
-292
348
1,303
Total
MSEK
Other non–cash
Currency
adjustments
exchange diff
DD&A
Exploration costs
Investments
Book value
1 Jan–31 Dec
1 Jan–31 Dec
1 Jan–31 Dec
1 Jan–31 Dec
1 Jan–31 Dec
Country
Asset type
31 Dec 2014
Oman Blocks 3 and 4 Producing
1,296
Oman Block 15
Non-producing
France Attila
Non-producing
France Alès
Non-producing
Sweden Gotland
Non-producing
New ventures
Non-producing
7
–
–
–
–
2014
36
–
–
–
–
–
2014
199
1
–
–
–
–
2014
-213
–
–
–
–
–
Total
1,303
36
200
-213
2014
–
–
-1
–
–
–
-1
1,296
7
1,303
Book value
1 Jan 2015
1,296
7
–
–
–
Book value
1 Jan 2014
1,011
–
–
–
–
–
2015
347
1
–
0
0
2014
263
6
1
–
–
–
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 An application for an extension until 2022 has been filed.
63
Impairment testing
In Tethys Oil’s impairment testing, the Company uses its best efforts to esti-
mate production profiles, general cost and development environment. To
calculate future free cash flows, the forward oil price as traded in the mar-
ket as per 31 December 2015 was used. With regard to discount rates, a
rate of 8 per cent after tax has been used for Omani and Lithuanian assets
respectively. There has been no impairment of assets during 2015. 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 impairment cost is disclosed in note 6. There has
been no impairment of oil and gas properties during 2015.
Exploration costs during 2015 amounted to MSEK 9 and mainly related to
Block 15 as the project was terminated during the year. Exploration costs
during 2014 amounted to MSEK 1 and were mainly related to new venture
projects which were rejected or no longer pursued.
Note 11, Remuneration to company auditor
MSEK
Group
Parent
Remuneration to company
auditor include:
2015
2014
2015
2014
PwC:
Audit fee
Audit-related fees
Tax consultation
Other
Total
-1
-0
–
–
-1
-1
–
–
–
-1
-1
-0
–
–
-1
-1
–
–
–
-1
Note 12, Administrative expenses
MSEK
Group
Parent
Administrative expenses
2015
2014
2015
2014
2014
Personnel costs
-25
-16
-14
MSEK
Investments Block 3 and 4
Categories
Drilling – Exploration/Appraisal
Drilling – Development
G&G
Facilities
Pipeline
Other capex
Total
MSEK
2015
-41
-122
-71
-65
-25
-22
-347
Drilling – Exploration/Appraisal
Drilling – Development
G&G
Facilities
Pipeline
Tethys Oil sole cost
Other capex
Accumulated depreciation
Total
300
688
288
611
174
39
330
-805
1,625
Oil & gas properties Block 3 and 4
Categories
31 Dec 2015
31 Dec 2014
Rent
Other office costs
Listing costs
Costs of external relations
Other costs
Total
-77
-74
-50
-53
-38
30
-263
-2
-3
-1
-1
-11
-44
Note 13, Employees
Average number of employees
per country
Parent company
Sweden
Total parent company
Subsidiary companies in Sweden
Subsidiary companies foreign
Oman
Switzerland
231
500
188
490
132
30
191
-466
1,296
United Arab Emirates
Total subsidiary companies foreign
Note 9, Operating expenditures
Total group
MSEK
Group
Parent
Operating expenditures
2015
2014
2015
2014
TSEK
2015
2014
Production costs
Well workovers
Total
-313
-49
-362
-233
-31
-264
–
–
–
–
–
–
Note 10, Other losses/gains, net
MSEK
Group
Parent
Other losses/gains, net
2015
2014
2015
2014
Foreign exchange gains
Foreign exchange losses
Total
0
-0.1
-0.1
0
-0.1
-0.1
0
-0.1
-0.1
0
-0.1
-0.1
Salaries, other remuneration
and social costs
Parent company
Sweden
Total parent company
Subsidiary companies in Sweden
-2
-2
-1
-2
-8
-2
-2
-1
-1
-9
-9
-2
-2
-1
-2
-7
-31
-29
-20
2015
2014
Total
Total men
Total
Total men
6
6
–
8
–
3
11
18
4
4
–
5
–
2
7
11
7
7
–
6
1
4
11
18
4
4
–
4
–
3
7
11
Salaries,
other
remune-
ration
Salaries,
other
Social
remune-
costs
ration
Social
costs
10,270
10,270
3,395
3,395
6,512
6,512
–
4,190
3,136
7,326
1,993
1,993
–
–
–
–
Subsidiary companies foreign
Oman
United Arab Emirates
8,526
2,634
Total subsidiary companies foreign
11,160
–
–
–
Total group
21,430
3,395
13,838
1,993
64
TSEK
2015
2014
Salaries and other remuneration
distributed between the board
Board and
Managing
Board and
Other
Managing
Other
and other employees
Director
employees
Director
employees
Parent company
Sweden
Total parent company
Subsidiary companies in Sweden
Subsidiary companies foreign
Oman
United Arab Emirates
Total subsidiary companies foreign
3,806
3,806
–
–
–
–
6,464
6,464
–
8,526
2,634
11,160
2,579
2,579
–
–
–
–
3,933
3,933
–
4,190
3,136
7,326
Total group
3,806
17,624
2,579
11,259
The group currently has 18 full time employees.
Magnus Nordin as managing director is entitled to twelve months payment
if the Company terminates the employment and other members of execu-
tive management are entitled to nine months payment if the Company ter-
minates their employment.
Principles for remuneration and other terms of
employment for management 2015
It is the aim of Tethys Oil to recruit, motivate and retain executives capable
of achieving the objectives of the Group, and to encourage and appropri-
ately reward superior performance in a manner that enhances shareholder
value. Accordingly, the Group operates a policy on remuneration which
ensures that there is a clear link to business strategy and a close align-
ment with shareholder interests, and aims to ensure that executives are
rewarded fairly for their contribution to the Group’s performance.
The Company’s policy on remuneration for executives, has been approved
by the remuneration committee and is described here below. The term
‘executives’ refers to the managing director, chief financial officer (CFO)
and EVP corporate development.
Remuneration committee
The remuneration committee is to receive information on, and to determine
matters regarding the remuneration of Group management. The committee
is responsible for reviewing the policy on remuneration and the compensa-
tion of executives and for making recommendations thereon to the board
of directors. The proposed compensation level, criteria for variable salary
and other employment terms for the managing director are submitted by
the remuneration committee to the board for approval. For other executives,
the managing director is responsible for proposing appropriate terms of
compensation for approval to the remuneration committee and for report-
ing to the board.
In 2015 and 2014 one woman has been a member of the board of directors
and no women have been members of the executive management.
Elements of remuneration
There are five key elements to the remuneration package of executives in
the Group:
Salaries and other remune-
ration to management
during 2015, TSEK expensed
Salaries
Bonus Benefits Pensions
Magnus Nordin
Morgan Sadarangani
Jesper Alm
Total
1,733
1,156
1,061
3,950
405
270
135
810
1,424
702
718
2,844
324
216
216
756
Benefits mainly include received warrants from the incentive programme
Salaries and other remune-
ration to management
during 2014, TSEK expensed
Magnus Nordin
Morgan Sadarangani
Jesper Alm
Total
Salaries
Bonus Benefits Pensions
1,652
1,102
566
540
360
–
3,320
900
11
11
6
28
375
217
129
721
TSEK
Salaries and other remunera-
tion to board members (in their
Remune-
capacity as board members)
Salaries
ration
Total
2015
Total
2014
Total
2015
3,886
2,344
2,130
8,360
Total
2014
2,579
1,690
701
4,969
Atten-
dance
2015
17/19
14/14
Per Brilioth
Dennis Harlin
Staffan Knafve
Magnus Nordin
Jan Risberg
Katherine Støvring
Geoffrey Turbott
Total
–
–
–
–
–
–
–
–
225
225
–
–
87
–
500
500
193
–
–
250
225
–
–
250
225
–
–
97
87
–
19/19
–
19/19
11/14
1,200
1,200
464
At the Annual General Meeting of shareholders on 13 May 2015 Per Brili-
oth, Magnus Nordin and Katherine Støvring were re-elected members of the
board. Dennis Harlin and Geoffrey Turbott were newly elected directors. No
deputy directors were appointed. At the same meeting Dennis Harlin was
appointed chairman of the board.
There have not been any agreements on pensions for any of the directors
of the board. For the executive management, the pension costs follow a
defined contribution plan.
1) base salary;
2) share based incentive programme;
3) pension arrangements;
4) yearly variable salary;
5) non-financial 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 execu-
tive. The base salary shall be reviewed annually to ensure that it remains
competitive. In order to assess the competitiveness of the salary and ben-
efit packages offered by the Group, comparisons may be made to those
offered by similar companies. In such circumstances, the comparator group
is chosen with regard to:
a) Swedish companies in the same industry;
b) the size of the company (turnover, profits and employee numbers);
c) the diversity and complexity of their businesses;
d) the geographical spread of their businesses; and
e) their growth, expansion and change profile.
Periodic benchmarking activities may also be undertaken to ensure that
remuneration packages remain in line with local market conditions.
Share based incentive programme
The share based incentive programme has the purpose to retain and recruit
qualified and committed personnel on a global market for oil companies.
The programme is available to all employees and is intended to be re-
occurring. The 2015 programme is a three year programme.
Pension Arrangements
The pension benefits comprise a defined contribution scheme with premi-
ums calculated on the full base salary. The pension contributions shall be
in relation to the base salary and is set on an individual basis but shall not
be higher than what is tax deductible.
Yearly Variable Salary
The Company considers that a yearly variable salary is an important part
of the remuneration package where associated performance targets reflect
the key drivers for value creation and growth in shareholder value. At the
end of each year, the managing director will make a recommendation to the
remuneration committee regarding the payment of the yearly variable salary
to employees based upon their individual contribution to the Company’s per-
formance. After consideration of the managing director’s recommendations,
the remuneration committee will recommend to the board of directors for
65
approval the level of the yearly variable salary of the executive management
and other employees, to the extent that such award is in excess of USD
10,000 per employee per year. The yearly variable salary for executives
shall normally be within the range of 1–4 monthly salaries.
Note 17, Office equipment
MSEK
Group
Parent
Office equipment
2015
2014
2015
2014
Non-Financial Benefits
Non-financial benefits shall be based on market terms and shall facilitate
the discharge of each executive’s duties.
Severance Arrangements
A mutual termination period of six months applies between the Company
and the executives. In addition, severance terms are incorporated into the
employment contracts for the executives that give rise to compensation
in the event the Company terminates their employment or in the event
of change of control of the Company. The managing director is entitled
to 12 months payment if the Company terminates the contract and other
executive management are entitled to 9 months payments if the Company
terminates their contracts.
Assets
1 January
Additions
Disposals
31 December
Depreciations
1 January
Depreciation charges of the year
Disposals
31 December
Net book value
Note 14, Financial income and similar items
MSEK
Group
Parent
Interest income
Gain on currency exchange rates
Income from derivatives
Revaluation of shares in group
companies
Group contribution
Anticipated dividend
Total
2015
2014
2015
2014
-
57
-
1
-
-
–
7
14
-
–
58
21
4
55
-
1
1
350
412
6
5
14
-
-
334
359
MSEK
Dubai
France
Lithuania
Oman
Sweden
Switzerland
Other
Total
4
–
–
4
-2
-1
–
-3
1
5
1
-3
4
-3
-1
2
-2
1
2
–
–
2
-1
-1
–
-2
–
1
1
–
2
-1
–
–
-1
–
Net book value, office equipment
2015
2014
–
–
–
1
–
–
–
1
–
–
–
1
–
–
–
1
Note 15, Financial expenses and similar items
MSEK
Group
Parent
Note 18, Other receivables
MSEK
Group
Parent
Other receivables
2015
2014
2015
2014
2015
2014
2015
2014
VAT
Interest expenses
Currency exchange losses
Other financial expenses
Koncernbidrag
Total
-8
-36
-10
-
-54
-32
-26
-17
-
-75
-
-36
-2
-42
-80
-28
-26
-12
-
-65
Note 16, Tax
The group’s income tax charge amount to MSEK – (MSEK –). The company
has not recorded a deferred tax asset in relation to the tax losses carried
forward since there is uncertainty as to if the tax losses may be utilised.
The tax losses are in another jurisdiction than where main profits are gen-
erated. Tax losses carried forward amounted to MSEK 220 (MSEK 363).
There are no time limits to the utilization of the tax losses.
In Oman, Tethys Oil’s oil and gas operations are governed by an Exploration
and Production Sharing Agreement (EPSA), where it is stated that Tethys Oil
is subject to income tax as per the Companies Tax Law. Under the EPSA,
Tethys Oil receives its share of oil after government take (i.e net after royal-
ties taken in kind). Omani income taxes are paid on behalf of Tethys Oil by
the government and from the government take. As Omani income tax is
not paid directly by Tethys Oil and are taken in kind before net sales, these
taxes are not presented in the income statement. Based on this, taxes
presented in the income statement are expected to be low in the future.
Receivables oil sales
Other
Total
2
64
4
69
2
78
1
80
1
–
–
1
1
–
–
1
Note 19, Shareholders’ equity
As per 31 December 2015, the number of outstanding shares in Tethys
Oil amounts to 35,543,750 (35,543,750), with a quota value of SEK 0.17
(0.17). All shares represent one vote each. The company has the same
numbers of shares as per 31 December 2015 as per 31 December 2014.
As per 31 December 2015, Tethys Oil held 1,083,669 of its own shares
which have been purchased since commencement of the programme during
the fourth quarter 2014. The shares have been purchased at an average
price of SEK 56.96. Repurchased shares are still part of the total number
of outstanding shares but however not included in the number of weighted
shares in circulation, which amount to 34,964,288 for the twelve months
period ending 31 December 2015.
There have been no further repurchase of shares after 31 December 2015.
Earnings per share
Earnings per share before dilution are calculated by dividing profit for
the year attributable to ordinary shareholders of the Parent Company by
weighted average number of ordinary shares outstanding and in circulation
during the year. Total repurchased shares amounting to 1,083,669 have
been excluded from shares in circulation. There are no dilution effects for
2015 and 2014.
66
Note 20, Non-current liabilities
Tethys Oil has a four-year, up to MUSD 100, senior revolving reserve based
lending facility. Security for the facility is the interest in the Blocks 3 and
4 licence. The interest rate of the 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 2015 was there no
outstanding balance of the lending facility.
Note 21, Accrued expenses
MSEK
Group
Parent
Accrued expenses
2015
2014
2015
2014
Accruals related to oil and gas
operations
Other accrued expenses
Total
167
0
167
–
2
2
–
0
0
–
2
2
Reg. office
Number of shares
Percentage
per share
Nominal value
Note 22, Shares in subsidiaries
Company
Tethys Oil Denmark AB
Tethys Oil Spain AB
Tethys Oil Turkey AB
Tethys Oil Exploration AB
Tethys Oil France AB
Tethys Oil Canada AB
Tethys Oil Oman Ltd
Tethys Oil Block 3&4 Ltd
Reg. Number
556658-1467
556658-1442
556658-1913
556658-1483
556658-1491
556788-2872
95212
101981
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Gibraltar
Gibraltar
Tethys Oil Suisse SA
660-1139007-2
Switzerland
Windsor Petroleum (Spain) Inc.
TOHME B.V.
Tulip Oil Holding Middle East B.V.
549 282
64104575
59755288
British Virgin Islands
The Netherlands
The Netherlands
MSEK
Shares in subsidiaries
1 January
Acquisitions
Shareholder’s contribution
Write down of shares in subsidiaries
31 December
1,000
1,000
1,000
1,000
1,000
1,000
100
1000
100
1
1
1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
SEK 100
SEK 100
SEK 100
SEK 100
SEK 100
SEK 100
GBP 1
USD 1
CHF 1,000
USD 1
EUR 1
EUR 1
Parent
Parent
31 December 2015
31 December 2014
2
2
3
–
7
2
–
2
-2
2
The write down of shares in group companies is related to the exploration costs described in note 9, and further described in the Administration report.
Note 23, Pledged assets
As per 31 December 2015, pledged assets amounted to MSEK 1,813
(1,789). Pledged assets are mainly a continuing security with regard to the
credit facility where Tethys Oil has entered into a pledge agreement. The
pledge relates to all shares in the subsidiary Tethys Oil Block 3 & 4 Ltd for
the benefit of the lenders in the credit facility and the value of the pledge
is equal to the shareholders’ equity value in Tethys Oil Block 3&4 Ltd. Of
pledged assets, MSEK 1 (1) relate to a pledge in relation to office rental.
Note 24, Contingent liabilities
There are no outstanding contingent liabilities as per 31 December 2015,
nor for the comparative period.
Note 25, Related party transactions
There have been no related party transaction during 2015 nor for the com-
parative period.
Note 26, Subsequent events
• Tethys’ share of the production, before government take, from Blocks 3
and 4 onshore the Sultanate of Oman amounted during the first quarter
2016 to 1,101,031 barrels of oil, corresponding to 12,099 barrels of oil
per day
• As per 31 December 2015 the audited reserves for Blocks 3 and 4
Oman net to Tethys Oil amounted to:
• 1P reserves 12,905 thousand barrels (11,794)
• 2P reserves 18,244 thousand barrels (17,779)
• 3P reserves 27,863 thousand barrels (25,080)
67
Assurance
The board of directors and the managing director declare that the
consolidated financial statements have been prepared in accord-
ance with IFRS as adopted by the EU and give a true and fair
view of the Group’s financial position and results of operations.
The financial statements of the Parent Company have been pre-
pared in accordance with generally accepted accounting principles
in Sweden and give a true and fair view of the Parent Company’s
financial position and results of operations. The statutory Admin-
istration Report of the Group and the Parent Company provides
a fair review of the development of the Group’s and the Parent
Company’s operations, financial position and results of operations
and describes material risks and uncertainties facing the Parent
Company and the companies included in the Group.
Stockholm, 27 April 2016
Dennis Harlin, chairman of the board
Per Brilioth, director
Katherine Støvring, director
Geoffrey Turbott, director
Magnus Nordin, managing director
Auditor’s endorsement
Our audit report was submitted on 27 April 2016.
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized public accountant
Lead partner
Ulrika Ramsvik
Authorized public accountant
68
Auditor’s report
To the annual meeting of the shareholders of Tethys Oil AB (publ),
corporate identity number 556615-8266
Report on the annual accounts and consolidated
accounts
We have audited the annual accounts and consolidated accounts of
Tethys Oil AB (publ) for the year 2015. The annual accounts and
consolidated accounts of the company are included in the printed
version of this document on pages 39–68.
Responsibilities of the Board of Directors and the Managing
Director for the annual accounts and consolidated accounts
The Board of Directors and the Managing Director are responsible
for the preparation and fair presentation of these annual accounts
in accordance with the Annual Accounts Act and of the consoli-
dated accounts in accordance with International Financial Reporting
Standards , as adopted by the EU, and the Annual Accounts Act, and
for such internal control as the Board of Directors and the Managing
Director determine is necessary to enable the preparation of annual
accounts and consolidated accounts that are free from material mis-
statement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these annual accounts
and consolidated accounts based on our audit. We conducted our
audit in accordance with International Standards on Auditing and
generally accepted auditing standards in Sweden. Those standards
require that we comply with ethical requirements and plan and per-
form the audit to obtain reasonable assurance about whether the
annual accounts and consolidated accounts are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the annual accounts and con-
solidated accounts. The procedures selected depend on the audi-
tor’s judgement, including the assessment of the risks of material
misstatement of the annual accounts and consolidated accounts,
whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the company’s prepara-
tion and fair presentation of the annual accounts and consolidated
accounts in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the company’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the Board of
Directors and the Managing Director, as well as evaluating the over-
all presentation of the annual accounts and consolidated accounts.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the annual accounts have been prepared in accord-
ance with the Annual Accounts Act and present fairly, in all mate-
rial respects, the financial position of the parent company as of 31
December 2015 and of its financial performance and its cash flows
for the year then ended in accordance with the Annual Accounts Act.
The consolidated accounts have been prepared in accordance with
the Annual Accounts Act and present fairly, in all material respects,
the financial position of the group as of 31 December 2015 and of
their financial performance and cash flows for the year then ended
in accordance with International Financial Reporting Standards, as
adopted by the EU, and the Annual Accounts Act. The statutory
administration report is consistent with the other parts of the annual
accounts and consolidated accounts.
We therefore recommend that the annual meeting of shareholders
adopt the income statement and balance sheet for the parent com-
pany and the group.
Report on other legal and regulatory requirements
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the proposed appropriations of the
company’s profit or loss and the administration of the Board of
Directors and the Managing Director of Tethys Oil AB (publ) for
the year 2015.
Responsibilities of the Board of Directors and the Managing
Director
The Board of Directors is responsible for the proposal for appropria-
tions of the company’s profit or loss, and the Board of Directors and
the Managing Director are responsible for administration under the
Companies Act.
Auditor’s responsibility
Our responsibility is to express an opinion with reasonable assurance
on the proposed appropriations of the company’s profit or loss and
on the administration based on our audit. We conducted the audit
in accordance with generally accepted auditing standards in Sweden.
As a basis for our opinion on the Board of Directors’ proposed appro-
priations of the company’s profit or loss, we examined the Board of
Directors’ reasoned statement and a selection of supporting evidence
in order to be able to assess whether the proposal is in accordance
with the Companies Act.
As a basis for our opinion concerning discharge from liability, in
addition to our audit of the annual accounts and consolidated
accounts, we examined significant decisions, actions taken and cir-
cumstances of the company in order to determine whether any mem-
ber of the Board of Directors or the Managing Director is liable to
the company. We also examined whether any member of the Board
of Directors or the Managing Director has, in any other way, acted
in contravention of the Companies Act, the Annual Accounts Act or
the Articles of Association.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinions.
Opinions
We recommend to the annual meeting of shareholders that the profit
be appropriated in accordance with the proposal in the statutory
administration report and that the members of the Board of Direc-
tors and the Managing Director be discharged from liability for the
financial year.
Stockholm, 27 April 2016
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Ulrika Ramsvik
Authorized Public Accountant
69
Definitions and abbreviations
AGM
EGM
IPO
SEK
TSEK
MSEK
USD
TUSD
Annual General Meeting
API
Extraordinary General Meeting
Initial Public Offering
Swedish krona
Thousands of Swedish kronor
Millions of Swedish kronor
Block
US dollar
Thousands of US dollars
MUSD
Million US dollars
CHF
Swiss francs
TCHF
Thousands of Swiss francs
bbl
boe
bopd
mbo
mboe
Oil production is often given in numbers of barrels
per day. One barrel of oil = 159 litres, Barrel Volume
measurement.
A volume unit used when oil, gas and NGL are to be
summarized. The concept is tied to the amount of
energy released upon combustion of different types
of petroleum. Because oil equivalents depend on the
amount of energy, it is not constant and different
conversion factors are used. In “Oil Field Units” for
example, are 5,800 cubic feet of gas = 1barrel of oil
equivalents.
Barrels of Oil per Day
Thousand Barrels
Thousand Barrels of Oil Equivalents
mboepd Thousand Barrels of Oil Equivalents per Day
mbopd Thousand Barrels of Oil per Day
mmbo
Million Barrels
mmboe
Million Barrels of Oil Equivalent
A specific gravity scale developed by the American
Petroleum Institute (API) for measuring the rela-
tive density of various petroleum liquids, expressed
in degrees. API gravity is gradated in degrees on a
hydrometer instrument and was designed so that
most values would fall between 10° and 70° API
gravity.
A country’s exploration and production area is
divided into different geographical blocks. An agree-
ment is entered into with a host country granting the
company the right to explore and produce oil and
gas in the designated area, in return for paying to the
government licence fees and royalties on production.
(Also referred to as Concession(s) or Licence(s)).
Uncontrolled release of oil, gas or water from an oil
well.
A reference oil for the various types of oil in the North
Sea, used as a basis for pricing. West Texas Intermedi-
ate (WTI) and Dubai are other reference oils.
Blowout
Brent
Concession Agreement entered into with a host country granting
the company the right to explore and produce oil and
gas in a designated area, in return for paying to the
government licence fees and royalties on production.
(Also referred to as Block(s) or Licence(s)).
Condensate A mixture of the heavier elements of natural gas, i.e.
pentane, hexane, heptane etc. Is a liquid at atmos-
pheric pressure. Also called natural gasoline or nafta.
Cost oil
A share of oil produced used to cover ongoing opera-
tions costs and to recover past exploration, appraisal
and development expenditures.
Crude oil The oil produced from a reservoir, after the gas is
removed in separation. Crude oil is a fossil fuel
formed by plant and animal matter several million
years ago.
EPSA
Fault
Farm out/
farm in
Exploration Production Sharing Agreement
A fracture within rock structures where relative motion
has occurred across the fracture surface.
The holder of shares in an oil licence may transfer
(farm out) shares to another company in exchange
for this company taking over some of the work com-
mitments in the licence, such as paying for a drilling
or a seismic investigation within a certain period. In
return, the company brought in receives a share in
any future revenues. If the conditions are met the
company may retain the licence shares if not the
shares are taken back by the original holder. This is
known as ”farm-in” and ”farm-out”.
70
Heavy oil Heavy crude oil is any type of crude oil which does
not flow easily. It is referred to as "heavy" because its
density or specific gravity is higher than that of light
crude oil. Heavy crude oil has been defined as any
liquid petroleum with an API gravity less than 20°. It
is therefore more difficult to produce than lighter oil
and its combustion is more polluting.
Hydrocar-
bons
Naturally occurring organic substances composed
of hydrogen (H) and carbon (C). If an occurrence
primarily contains light hydrocarbons, they are most
often in gas form in the reservoir, and are then called
a gas field. If it is primarily heavy hydrocarbons, they
are in liquid form in the reservoir, and called an oil
field. Under certain conditions both can exist in the
reservoir where a gas cap lies above the oil. Oil always
contains a certain element of light hydrocarbons that
are freed in production, also known as associated gas.
HSE
Health, Safety and Environment
Injection
wells
Leads
License
LOGS
Wells to be used for injection of fluids into reservoir
for enhancement of hydrocarbon recovery. By inject-
ing gas or water (or both) the degree of recovery can
be increased.
Leads are possible accumulations of hydrocarbons
where more geological data needs to be gathered and
evaluations need to be performed before they can be
called prospects, where drilling is considered to be
feasible.
A permit to search for and produce oil and gas. Oil
and natural gas assets are usually owned by the coun-
try in which the accumulation is discovered. The oil
companies obtain permission from the respective
country’s government to explore for and extract oil
and natural gas. These permits can be called conces-
sions, permits, production sharing agreements or
licenses depending on the country in question. A
license usually consists of two parts an exploration
permit and a production license.
The result of surveys which gather information from
the wellbore and surrounding formations which typi-
cally consist of traces and curves. These can be inter-
preted to give information about oil, gas and water.
Onshore Designation for operations on land.
Offshore Designation for operations at sea.
Operator The member of a joint operations, designated to
lead the work on an oil or gas license or field. The
company needs approval from the authorities in the
country.
Porosity The porosity of a rock is determined by measuring
the amount of cavities inside, and determining what
percentage of the total volume that consists of cavitie.
Profit oil The remaining share of oil produced after royalty
been paid and cost recovery through the cost oil. The
profit oil is shared according to the production shar-
ing agreement and working interests.
Prospect
A geographical area which exploration has shown
contains sedimentary rocks & structures that may be
favourable for the presence of oil or gas.
PSA
Production Sharing Agreement
Page 11
Reserves
and
resources
Reservoir An accumulation of oil or gas in a porous type of rock
with good porosity, such as sandstone or limestone.
Seismic
data
Seismic investigations are made to be able to describe
geological structures in the bedrock. Sonar signals are
transmitted from the ocean surface or the surface of
the ground (pings), and the echoes are captured by
special measurement instruments. Used to localise
occurrences of hydrocarbons.
Spud
To initiate drilling.
Sandstone Sandstone is a sedimentary rock composed mainly of
sand-sized minerals or rock grains. Most sandstone is
composed of quartz, but also often consists of feld-
spar, rock fragments, mica and numerous other min-
eral grains held together with silica or another type of
cement. The relatively high porosity and permeability
of sandstone makes it to a valuable rock in reservoirs.
WTI
West Texas Intermediate – the primary reference oil
used as a basis for pricing of oil in North America.
Financial information
The company plans to publish the following financial reports:
Three month report 2016 (January – March 2016) on 3 May 2016
Six month report 2016 (January – June 2016) on 16 August 2016
Nine month report 2016 (January – September 2016) on 1 November 2016
Year-end report 2016 (January – December 2016) on 14 February 2017
71
Address
Corporate head Office
Tethys Oil AB (publ)
Hovslagargatan 5B
SE-111 48 Stockholm
Sweden
Telephone +46 8 505 947 00
Fax +46 8 505 947 99
E-mail: info@tethysoil.com
Technical Office
Tethys Oil Oman Ltd
PO Box 1918
PC 130 Athaiba
Muscat
Sultanate of Oman
www.tethysoil.com
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