Annual Report 2016
Operational and financial summary
MUSD* (unless specifically stated)20162015201420132012Production, before government take, bbl4,478,1213,578,4882,807,6531,709,7061,399,518Average daily production, before government take, bbl12,2359,8047,6924,6843,824Net sales, after government take, bbl2,357,7011,805,0561,464,228850,926776,248Average selling price per barrel, USD40.558.1103.9106.6110.3Revenues87.1107.0149.392.285.5Operating result-0.523.057.145.149.3EBITDA44.158.6108.074.874.5Result for the period2.723.449.438.146.0Earnings per share (after dilution), USD0.080.671.391.071.34Net cash39.051.247.8-14.9-21.3Shareholders’ equity196.8217.2214.3168.4130.1Non-current liabilities 8.84.03.363.164.1Investments in oil and gas properties48.540.839.344.1132.1Number of shares at the end of the year35,543,75035,543,75035,543,75035,543,75035,543,750Of which repurchase shares at the period end1,329,2241,083,669298,160––Distribution to shareholders, SEK per share4.003.00–––Market capitalization at the end of the period, MSEK2,7992,0442,1682,3991,893Share price at the end of the period, SEK78.7557.561.0067.5053.252P-reserves in Oman (million barrels of oil)21.418.217.815.214.3* Starting 1 January 2016, the Tethys Oil group presents the financial reports in USD. Please note that all comparative financials have been restated. Contents
2
Operational and financial summary
4
Letter to the shareholders
9
Reserves
10
Operations
22
Sustainability report
24
Corporate governance report
30
Board of directors
32
Executive management
33
The Tethys Oil share
36
Key financial data
38
Administration report
Financial statements for the group
45
Financial statements for the parent company 49
53
Notes
66
Assurance
67
Auditor’s report
70
Definitions and abbreviations
71
Financial information
72
Address
Annual General Meeting
The Annual General Meeting will be held on
17 May 2017, 3:00 p.m. at Grand Hôtel, Södra
Blasieholmshamnen 8, in Stockholm. To attend
the AGM, please see Tethys Oil’s website,
www.tethysoil.com, for more information.
Letter to the shareholders
Dear friends and investors,
What a year 2016 turned out to be. The
oil business went on quite a rollercoaster
ride when the international oil prices at
the beginning of the year fell to an over
ten year low, and then gradually strength-
ened during the year. We ended the year
at about USD 55 per barrel following
the agreement between OPEC and non-
OPEC members to cut oil output. But
Tethys Oil remained cash flow positive the
entire year, even during the lows of Janu-
ary. And in a stormy macro environment,
Tethys Oil’s operational performance con-
tinued to improve. We produce a higher
amount of oil at a lower cost at the same
time as our reserve base is increasing.
Production growth
In 2016, we produced 4.5 million bar-
rels of oil, corresponding to an increase
of 25 percent compared to 2015 and the
highest so far for any year. Almost all
our oil was produced from our extraordi-
nary assets Blocks 3&4, but we also had
a small contribution from our producing
assets onshore Lithuania. The production
amounted to 12,235 bopd and although
we are proud of our production numbers,
we continue to aim higher.
Our production growth ambitions will,
however, not have a visible effect during
the first half of 2017. Oman signed up
to the OPEC initiated production limita-
tions at the end of 2016, which has given
us a monthly target production of about
12,300 bopd for the first six months. We
will however continue to drill and keep
our activity levels in high gear in order
to be fully prepared for continued future
growth.
Decreasing production costs
Following higher efficiency with higher
production and general cost reductions,
we have been able to reduce our operating
expenses per barrel even further this past
year. In 2016, our operating expenses per
barrel amounted to USD 8.2, a reduction
of over 30 percent compared with
USD 12.1 per barrel in 2015. Our low
costs made it possible for us to produce oil
with a positive cash flow even at the low
oil prices we saw in the beginning of 2016.
Additional distribution to our
shareholders
In 2016, we distributed in total MUSD 15
to you, our shareholders. It was done as
a dividend of SEK 1.00 per share in sec-
ond quarter 2016 and SEK 3.00 per share
through a redemption procedure in the
fourth quarter 2016. We continue to be a
cash dividend company, and again propose
a dividend of SEK 1.00 per share. Depend-
ing on how events will unfold during the
year, we will continually evaluate the pos-
sibility of distributing more cash to share-
holders in accordance with our long term
financial goals, as we have done over the
past years.
So stay with us, we remain committed to
deliver a successful and sustainable devel-
opment to create value to our stakeholders.
Stockholm in April 2017
Magnus Nordin
Managing director
Increasing reserves
We are also proud of our reserve growth.
In 2016, we could report a reserve replace-
ment ratio of 171 percent. So, even though
our production increased by 25 percent,
we increased our reserves by more and at
the end of the year 2016 the 2P reserves
amounted to 21.4 million barrels. The
increased reserves are attributable to our
ongoing appraisal and optimization pro-
gram. Drilling of appraisal and produc-
tion wells and implementation of water
injection has resulted in reserves having
moved from the 3P to the 2P category. The
3P number has further increased as the
appraisal wells have extended the limits of
the areas of our fields that are in produc-
tion. The reserve growth demonstrates the
robustness of our existing fields.
We believe that there is scope for further
development in our existing fields. The
budget for 2017 will be in line with 2016,
but more attention will be given explora-
tion activities. We are hopeful that the
exploration wells currently in progress and
those planned for later in 2017, will have a
significant impact on our ability to further
increase reserves.
4
In March 2017, less than seven years after
the production started in 2010, the cumu-
lative total oil production on Blocks 3&4
reached 50 million barrels, corresponding to
15 million barrels net to Tethys Oil (before
government take). This milestone has been
achieved as a result of the skills and hard
work of all the staff, contractors and suppli-
ers. The oil produced has created significant
economic value for the people of Oman, the
shareholders of Tethys Oil and the other
stakeholders of the joint venture group, and
generated jobs.
5
Milestones2001Tethys Oil was founded2004IPO and listing on First North, Stockholm2006First Company-operated well drilled in Denmark2007Acquisition of interests in Blocks 3&4201020 percent of Blocks 3&4 farmed out to MitsuiEarly production from Blocks 3&4 commences2012Oil producing assets onshore Lithuania acquiredThree year MSEK 400 bond loan issuedField Development Plan for Blocks 3&4 approved, licence terms extended until 20402013Listing on Nasdaq Stockholm2014Arrangement of a four-year, up to MUSD 100, Senior Revolving Reserve-Based Lending FacilityThe MSEK 400 bond loan redeemed2015Production exceeds 11,000 bopd at the end of the year (before government take)Tethys Oil pays dividend and distributes SEK 3.00 per share to its shareholders2016Production in 2016 amounts to 12,235 bopd (before government take)Tethys Oil pays dividend and distributes SEK 4.00 per share to its shareholders 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 to
114 bopd in 2016.
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 21.4 mmbo and has oil production
of about 12,000 bopd from Blocks 3&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).
66
Oman
Area
Interest
Phase
Blocks 3&4
29,130 km²
30%
Production/
exploration
Reserves
(2P)
Average daily
production 2016
21.4 mmbo
12,121 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 tar-
get, with a cash flow orientated approach,
is to incrementally increase production
and reserves in Oman. Furthermore, the
exploration 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 Oil’s operations should be con-
ducted in an economical, socially and envi-
ronmentally responsible way, to the benefit
of all stakeholders.
88
Reserves
mmbo
30
25
20
15
10
5
0
7.9
25.1
-3.5
7.7
18.7
-1.7
3.0
20.0
-2.8
Possible
Possible
Probable
Proven
12.4
-1.4
High
Best
Low
Possible
Probable
Proven
Probable
Proven
6.3
29.7
6.3
27.9
-4.4
Possible
Probable
Possible
Probable
Proven
Proven
3C 2011
Prod.
Add.
3P 2012
Prod.
Add.
3P 2013
Prod.
Add.
3P 2014
Prod.
Add.
3P 2015
Prod.
Add.
3P 2016
Field Development Plan approved
Oman
Tethys Oil’s net working interest reserves in
Oman as per 31 December 2016 amounted
to 14,222 mbo of proven reserves (1P),
21,408 mbo of proven and probable
reserves (2P) and 29,729 mbo of proven,
probable and possible reserves (3P).
Development of reserves, Blocks 3&4
(Audited by DeGolyer and MacNaughton Canada Limited)
mbo
1P
2P
3P
In 2016 Tethys Oil added 1P reserves of
5,753 mbo, representing an increase of 45
percent; 2P reserves of 7,600 mbo, rep-
resenting an increase of 42 percent; and
3P reserves of 6,302 mbo, representing
an increase of 23 percent. The increase in
2P reserves represents and internal reserve
replacement ratio of 171 percent.
Reserves Blocks 3&4, Oman as per
31 December 2016
(Audited by DeGolyer and MacNaughton Canada Limited)
The review of the reserves in Oman has
been conducted by independent petroleum
consultant DeGolyer and MacNaughton
Canada Limited. The report has been esti-
mated using 2007 Petroleum Resources
Management System (PRMS), Guidelines
of the Society of Petroleum Engineers
(SPE), World Petroleum Council (WPC),
American Association of Petroleum Geolo-
gists (AAPG) and Society of Petroleum
Evaluation Engineers (SPEE).
Total 31
December 2015
12,905
18,244
27,863
mbo
1P
2P
3P
Production 2016
-4,436
-4,436
-4,436
Farha South
8,672
11,569
14,028
Discoveries
146
238
304
Shahd
4,728
7,847
13,000
Revisions
5,607
7,362
5,998
Saiwan East
822
1,992
2,701
Total 31
December 2016
14,222
21,408
29,729
Total 31
December 2016
14,222
21,408
29,729
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Operations
Oman – part of the oil fairway
Al Alam Palace garden
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 archaeologi-
cal 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 boepd. Oman has in excess of
5 billion barrels of estimated proven oil
reserves, ranking Oman as the 7th largest
proved oil reserve holder in the Middle
East and the 23rd largest in the world (BP
Statistical Review of World Energy, June
2016).
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&4 in 2007. The
blocks cover an area of 29,130 square
kilometres in the central eastern part of
Oman. Tethys Oil, through its wholly
owned subsidiary Tethys Oil Block 3 &
4 Ltd, has a 30 percent interest in Blocks
3&4. Partners are Mitsui E&P Middle
East B.V. with 20 percent and the operator
CC Energy Development S.A.L. (Oman
branch) holding the remaining 50 percent.
10
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Block 3
Block 4
Block 3
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Salalah
1111
Unlocking of the black gold
In hindsight it might seem like the explora-
tion, development and production launch
of crude oil on Blocks 3&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 well was commercially
successful.
What was deemed not hydrocarbon pro-
spective areas by previous operators have
turned commercial with the help of the
collective experience accumulated by the
partner groups’ specialists, new technol-
ogy, higher oil prices and perseverance.
Production conditions vary from area to
area within the blocks, and when explor-
ing the blocks, it has been of great impor-
tance to adopt a comprehensive approach.
New discoveries have been made in new
areas, but new discoveries have also been
made in formations above or below exist-
ing discoveries.
3D seismic surveys have been a key factor
to the development of the blocks. Seismic
data has revealed that many of the dry
holes drilled by previous operators would
not have been drilled if 3D data had been
available prior to drilling.
In 2012, the Field Development Plan
for Blocks 3&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
bopd per day to in excess of 12,000 bopd
in 2016.
Despite intense exploration and develop-
ment activity for over nine years only a
minor part of the blocks has been explored.
Out of the total area of the blocks of
29,130 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.
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.
in
On Blocks 3&4, reservoirs
formations
like Khufai, Barik, Lower Al Bashir, Buah and
Masirah Bay have been explored. Tethys Oil has
reserves and production in reservoirs in the
Khufai, Barik, Lower Al Bashir and Lower Buah
formations.
1212
The Farha South oil field
Farha South-3 was the first well to be
drilled on the blocks with Tethys Oil as
partner. It spudded early 2009. Oil on
Farha South was originally discovered in
1986 by a previous operator, when the
Lower Al Bashir sandstone layer flowed oil.
With Farha South-3, oil was again found
in the Lower Al Bashir layer, which flowed
more than 754 bopd on test in 2009. A
long term production test though revealed
the reservoir to be tight.
The Barik sandstone, at an average depth
of 1,600 meters and overlaying the Lower
Al Bashir, also had excellent oil shows in
the Farha South-3 well, 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 a large number of
smaller, usually adjacent fault blocks.
These faults are relatively small and 3D
seismic has been essential in the mapping
of drillable fault blocks. The only way to
confirm that a fault block is oil bearing is
by drilling.
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. 21 fault blocks have
so far been put into production, with
one additional fault block being added in
2016. About 70 percent of the fault blocks
have been developed with water injection.
The oil from the Barik layer is of high qual-
ity, 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 11.6 mmbo of proved and pos-
sible reserves (2P) net to Tethys Oil, cor-
responding to 54 percent of Tethys Oil’s
total 2P reserves on the blocks. The pro-
duction has grown steadily since the field
came on stream in 2010 and the field has
produced the majority of the Company’s
total oil production to date.
P
Fault blocks at the Farha South field
Oil producing fault blocks
Oil producing fault blocks with water injection
Drilled fault blocks
Prospective fault blocks
Faults
N
0
2
4 km
AA
AC
AB
M AK
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N
AS
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V G
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AH
AG
AE
AF
AD
Q
I K
Facts
2P reserves, net: 11.6 mmbo
First well with Tethys Oil as partner:
Farha South-3, 2009
Main producing layer: Barik sandstone at
depth of about 1,600 meters
Oil trapped in smaller, usually adjacent
fault blocks
Fault blocks in production: 21
Oil quality: more than 40 degrees API
API stands for the American Petroleum
Institute, which is the major United States
trade association for the oil and natural
gas industry. The API gravity standard is
used to compare densities of petroleum
liquids. It is a measure of how heavy or
light a petroleum liquid is compared to
water. If its API gravity is greater than 10,
it is lighter and floats on water; if less than
10, it is heavier and sinks. For example,
if one petroleum liquid is less dense
than another, it has a greater API gravity.
Less dense oil or “light oil” is preferable
to more dense oil as it contains greater
quantities of hydrocarbons that can be
converted to gasoline.
13
The Shahd oil field
only way to confirm that a undrilled struc-
ture is oil bearing is by drilling. So far, a
handful of Lower Buah reservoirs have
been put into production.
In the end of 2015, a new reservoir within
the Shahd field, the Lower Khufai, was
successfully brought on stream. This new
carbonate reservoir responded very well to
horizontal drilling, and was a major reason
for the production increase around new
year 2015/2016.
Like the Fahra South field, water injec-
tion is needed on the Shahd oil field. A
water injection programme was launched
in 2015. The system is expected to impact
both reserves and production positively
going forward.
At the Shahd field, oil is extracted at greater
depths than the Farha South field, mainly
from the Lower Buah carbonate at 2,000
metres. The Shahd field was discovered in
2013 through the exploration well Shahd
B-1, 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 major-
ity of the increase in the Company’s total
reserves over the last years. The field holds
7.8 mmbo of proved and possible reserves
(2P) net to Tethys Oil, corresponding to
37 percent of Tethys Oil’s total 2P reserves
on 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. The
Facts
2P reserves, net: 7.8 mmbo
Discovery well: Shahd B-1, 2013
Main producing layer: Lower Buah carbo-
nate at depth of about 2,000 meters
Production also from Lower al Bashir and
Khufai
Oil quality: approx. 38 degrees API
N
Faults
Producing areas
Prospects /
Prospective areas
14
The Saiwan East oil field
The Saiwan oil field was the second field
to be discovered and put on stream on
Blocks 3&4. The field was discovered
with the drilling of the Saiwan East-2 well
in 2009. Here, the oil is produced from
an even greater depth from the Khufai
carbonate at depths ranging from 1,700
to 2,400 metres. This reservoir, previously
unknown as an oil producer in Oman,
is today in production on the field, pro-
ducing oil with a density of on average
32 degrees API. The field is the smallest
so far discovered on the blocks, holding
2.0 mmbo of proved and possible reserves
(2P) net to Tethys Oil, corresponding to
9 percent of Tethys Oil’s total 2P reserves
on the blocks. 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 understanding
also of the Saiwan East field.
Large quantities of oil with different grav-
ities and viscosities have also been found
on the field. However, the findings sug-
gest that any potential production from
the heavy oil in Saiwan East will require
enhanced oil recovery techniques.
Facts
2P reserves, net: 2.0 mmbo
First well with Tethys Oil as partner:
Saiwan East-2, 2009
Main producing layer: Khufai carbonate at
depth of about 1,700–2,400 meters
Oil quality: on average approx. 32 degrees
API
1515
Transportation and sales
The oil produced at all of the fields are
transported through a pipeline to Qarn
Alam metering station, west of the blocks.
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.
Blocks 3&4 are held through an Explora-
tion 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 percent 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 on Blocks 3&4.
Produced oil
Joint Venture
Blocks 3&4
40
bbl
maximum cost
recovery 40%
100
bbl
60
bbl
40+12=
52 bbl
20%
split
80%
Sultanate
of Oman
48
bbl
Tethys Oil
30%
CCED
50%
Mitsui
20%
15.6
bbl
26
bbl
10.4
bbl
1616
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Tethys Office
and personnel
Tethys Oil personnel consist of highly
motivated individuals from six different
nationalities, ranging in age from early
twenties to mid seventies and with a bal-
anced gender representation (41 percent
female and 59 percent male). A majority of
the staff have graduated from universities
and colleges, primarily with geosciences,
engineering or business.
Muscat Office
A team of highly trained subsurface senior
specialists has been recruited and are based
at the Tethys Oil office in Muscat. As per
the Omani government directive related
to the employment, preference is given
to Omani nationals. The Muscat office is
the base for the Group’s Chief Technical
Officer.
In addition, and as part of the Company’s
corporate social responsibility activities,
Tethys Oil is closely coordinating with Sul-
tan Qaboos University in Muscat in offer-
ing Master degree sponsorship to Omani
geoscience graduate students.
Stockholm Office
Tethys Oil head office is located in central
Stockholm, Sweden. The Stockholm office
is the base for the Managing Director and
the Chief Financial Officer, along with the
Group’s financial and communication teams.
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1717
Vibrator truck
Receiver truck
Geophones (receivers)
GAS
OIL
WATER
WATER
Seismic studies
A key exploration activity is geophysical seismic.
The principle behind seismic is that sound
waves travel at different speeds in different
materials and that the sound waves, at the
transition between 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&4
1818
Vibrator truck
Receiver truck
Seismic mapping Blocks 3&4, Oman
BLOCK 3
N
Geophones (receivers)
GAS
OIL
WATER
WATER
Alam Station &
Pipeline System
Farha South Field
BLOCK 3
Saiwan East Field
Shahd
field
BLOCK 4
2D areas
2013
3D areas
2009–2013
2014
2015
1919
2020
The Baltic licences
Tethys Oil’s portfolio also includes licences
in Europe. The Company has indirect
interests in three onshore licenses in Lithu-
ania and two dormant onshore licences in
France. The French licences have passed the
expiring date, and discussions regarding the
future of them are ongoing.
Lithuania is located by the Baltic Sea in the
north east part of Europe. Lithuania is not
a notable oil producer, but oil was discov-
ered 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 114 bopd net to Tethys
Oil in 2016. The oil produced at the Garg-
zdai 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. One exploration wells drilled in
2015 flowed oil to surface.
Facts
Gargzdai licence:
Partners: Odin Energi (25%), Geonafta (50%), Tethys (25% indirect)
Licence area: 884 km²
License awarded in 1995. Tethys Oil acquired interests in 2012
Tethys share of production: 114 bopd
Rietavas and Raseiniai licences
Tethys 30%, Partners Odin Group and private investors
Licence area: 1,594 and 1,535 km² respectively
Presence of oil confirmed.
A number of wells drilled and seismic studies conducted
Gargzdai
Raseiniai
LIThuAnIA
Rietavas
Vilnius
21
Sustainability report
Tethys Oil is an oil and gas exploration
and production company with a primary
objective of creating shareholder value
working across the whole upstream indus-
try lifecycle of exploration, development
and production. The Group considers a
sustainable approach to its operations and
projects to be critical to deliver long-term
shareholder value.
A central tenet of Tethys Oil’s business
model is to explore for and produce oil and
gas in an economically, socially, and envi-
ronmentally responsible way. The Group
applies the same standards to its activities
worldwide to satisfy both its commer-
cial and ethical requirements. Tethys Oil
strives to continuously improve its perfor-
mance and to act in accordance with good
industry practice and high standards of
corporate citizenship.
Sustainability
and Corporate Social
Responsibility (“CSR”) is viewed by the
Group as a question of strategic impor-
tance and thus Tethys Oil’s board of direc-
tors has approved a CSR policy to be
implemented by the Group management.
This policy underpins the Group’s work on
sustainability and corporate social respon-
sibility. The policy clearly defines the
Group’s core values, a code of conduct to
be applied by employees, contractors, and
partners as well as policies in a number of
key areas within CSR and sustainability.
Tethys Oil’s Core Values
• 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.
health and Safety
The principles behind the Health and
Safety (“HSE”) policies are to provide a
healthy and safe working environment for
the Group’s employees and to minimise
the potential impact of the Group’s activi-
ties on the environment. Corporate HSE
goals set corporate requirements on opera-
tional entities, which include identifying
relevant HSE issues and ways of address-
ing them through environmental studies,
establishing plans and procedures, training
staff and attributing HSE responsibilities,
maintaining emergency response and con-
tingency plans, monitoring and reporting
performance.
The Group has a policy to conduct all its
operations in compliance with all applica-
ble legislation. The Group recognises that
the prevention of accidents and ill health
is essential to the efficient operation of its
business.
It is the Group’s objective to provide a safe
working environment for employees, con-
tract personnel and members of the gen-
eral public who may be put at risk by the
activities of its operations.
Community Relations
The Group has a commitment to have
a beneficial impact on the community
through engaging in a dialogue with the
Group’s stakeholders, whether these are
local communities or relevant interest
groups, such as the government and civil
society. The Group engages in an active
relationship with the stakeholders in order
to understand the concerns surrounding
the group’s operations and jointly set goals.
The Group has the policy, while engaging
in oil exploration and production activi-
ties, to operate in a manner that is con-
sistent with the welfare of neighbouring
communities.
The Group seeks to enhance and con-
tribute to the local communities through
the hiring of local staff and participation
in local projects. The Muscat office has a
majority of Omani nationals as employees
and Tethys Oil has for several years offered
a master degree scholarship to Omani geo-
science students in cooperation with Sul-
tan Qaboos University in Muscat.
environment
Tethys Oil and its affiliated partners will
strive to ensure that the exploration and
production operations are conducted in
compliance with all applicable environ-
mental laws and regulations. The Group
22
will continue to work to minimise the
environmental impact within the scope
of its operations. It will co-operate with
industry, government and the public on
programmes to protect the environment.
The Group will provide the necessary
training for its employees to ensure that
they have the knowledge and capability
to conduct operations in a manner that
is consistent with sound environmental
practices.
human Rights
Tethys Oil has committed firmly to the
United Nations Global Compact (stated
further in the Code of Conduct), as well as
follow the United Nations Guiding Princi-
ples on Business and Human Rights. The
Group has made a commitment to support
internationally recognised human rights
wherever it operates.
Human Rights are to be understood as
those referred to in the Universal Declara-
tion of Human Rights (UDHR), the Inter-
national Covenant on Civil and Political
Rights and the International Covenant
on Economic, Social and Cultural Rights
and in the International Labour Organisa-
tion’s (ILO) Conventions, and in relation
to business activities, in the Global Com-
pact, the OECD Guidelines for Multina-
tional Enterprises, and the UN Guiding
Principles.
The Group recognises the importance of
respecting the rights of local communi-
ties, and thus prior to any new investment,
it analyses potential impacts on human
rights. While the Group respects all
human rights, it focuses primarily on those
human rights that potentially may be most
impacted by its operations. The Group fur-
thermore expects all its affiliated partners
to respect human rights and to observe
highest standards of professional integrity.
Personnel
Tethys Oil recognises that its performance
as a company is dependent upon the per-
formance of its employees as individuals.
The Group seeks to promote diversity
amongst its employees with a mix of gen-
der, age and nationality as a step towards
improving the Group’s performance and
Sustainability – a continuous process
As of 31 December 2016 all of Tethys Oil’s
various license interests and holdings are
non-operated and as a result Tethys Oil
executes the sustainability work on its pro-
jects indirectly and in cooperation with
the relevant operator. During the year,
the Group has actively worked to apply
its CSR policy in all its projects where
possible and applying the same standards
when screening new venture projects. All
non-operated assets are, however, inde-
pendently reviewed by Tethys Oil out of
a HSES (health, safety, environment and
social) perspective and Tethys Oil will
closely monitor any contractor or opera-
tor. Wherever changes can be favourably
employed, such will be recommended.
By implementing the sustainability and
CSR policies in its own organisation
Tethys Oil seeks to set a standard for its
partners and lead by example.
attractiveness as an employer. Although a
small organisation, Tethys Oil personnel
consist of highly motivated individuals of
six different nationalities, ranging in age
from early twenties to mid seventies and
with a balanced gender representation (41
percent female and 59 percent male).
Anti-Corruption
Tethys Oil has a zero-tolerance policy with
regards to corruption. Its policy on cor-
ruption is laid out clearly under the Code
of Conduct part of its CSR policy that
employees should refrain from accepting
or offering improper payments, gifts or
engaging in bribery or any form of corrupt
business practices. The policy also applies
to partners, contractors and suppliers.
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2323
Corporate governance report
systems
Corporate governance practices refer to
through
the decision-making
which owners, directly or indirectly, con-
trol a company. Tethys Oil is a publicly
traded company listed on Nasdaq Stock-
holm, Mid Cap. Tethys Oil adheres to the
Swedish Code of Corporate Governance
(“the Code”). The Code is published on
www.bolagsstyrning.se, where a descrip-
tion of the Swedish Corporate Govern-
ance model can be found. This Corporate
Governance Report 2016 is submitted
in accordance with the Swedish Annual
Accounts Act and the Code. It explains how
Tethys Oil has conducted its corporate gov-
ernance activities during 2016. Tethys Oil
does not report any deviations from the
Code, Nasdaq Stockholm’s rule book for
issuers, recommendations from the Swed-
ish Securities Council, decisions from Dis-
ciplinary Committee at Nasdaq Stockholm
or statements from the Swedish Securities
Council. The report has been reviewed by
the Company’s auditors, please see page 29.
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,
Information policy, CSR policy etc
Shareholders
Tethys Oil’s shares are traded on Nasdaq
Stockholm. At year end 2016 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 2016, the number
of shareholders was 5,529 (5,563). Of the
total number of shares, foreign sharehold-
ers accounted for approximately 64 per-
cent. 18 percent of the Swedish sharehold-
ing was held by legal entities. Tethys Oil’s
holding of its own shares amounted to
1,329,224 (3.74%). For further informa-
tion on share, share capital development
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 18 May 2016.
The AGM was attended by 179 sharehold-
ers, representing 38 percent 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 2015 and discharge of
liability for the board of directors and
the managing director
• Re-election of Per Brilioth, Dennis Har-
lin, Magnus Nordin, Katherine Støvring
and Geoffrey Turbott and election of
Richard Rettig as director. Dennis Har-
lin was elected chairman of the board
• The chairman will be paid a fee of
SEK 560,000 and each AGM elected
member not employed by the company
will be paid SEK 250,000. The chair-
man of the audit committee and the
chairman of the remuneration commit-
tee will be paid SEK 65,000 respectively
and each of the committees’ members
will be paid SEK 35,000. The total fees
for committee work, including com-
mittee chairmen fees shall not exceed
SEK 410,000. In addition, the AGM
approved a frame of SEK 250,000 for
work by directors outside of regular
board work, payable following resolu-
tion of the board of directors
• Auditors will be paid as invoices are
approved
• Principles of remuneration to senior
executives
• Incentive programme as part of the
remuneration package to employees.
Issuance of 350,000 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 65.50 per
share
24
• Authorization for the board to decide on
repurchasing own shares up to not more
than one-tenth of all outstanding shares
• Rules for the appointment and work of
the nomination committee
• Authorization for the board to resolve
to issue new shares and/or convertibles
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 AGM
can be found at Tethys Oil’s website,
www.tethysoil.com.
extraordinary General Meeting
An Extraordinary General Meeting
(“EGM) was held in Stockholm on 25
October 2016. The EGM was attended by
129 shareholders, representing 32 percent
of the votes and share capital in the com-
pany. The resolutions passed by the meet-
ing included the following;
• Share split, reduction of share capital
and increase of share capital by way of a
bonus issue, enabling the share redemp-
tion program of SEK 3.00 per share
The minutes recorded at the EGM
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
2016, the nomination committee for the
AGM 2017 consists of members appointed
by three of the largest shareholders of the
Company based on shareholdings as per 30
September 2016 and the chairman of the
board. The names of the members of the
nomination committee were announced
and posted on the Company’s website on
16 November 2016, i.e. within the time
frame of six months before the AGM as
prescribed by the Code.
The nomination committee for the AGM
2017 has held four meetings during its
mandate and informal contacts have taken
place between such meetings. The nomina-
tion committee report, including the final
proposals to the AGM 2017, 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 2018
The work of the nomination committee
included evaluation of the board’s work,
competence and composition, as well as the
independence of the members. The nomi-
nation committee also considered other cri-
teria such as the background 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,
• Viktor Modigh, representing Magnus
Nordin
• Mikael Petersson, representing Lans-
downe Investment Company Limited,
and
• Dennis Harlin, chairman of Tethys Oil
The board and its work
Board composition
The articles of association stipulate that the
board of directors of Tethys Oil shall con-
sist of no less than three and no more than
ten board members with no more than
three deputy board members. Board mem-
bers are elected for a maximum of one year
at a time. The board of directors of Tethys
Oil since the AGM 2016 has consisted of
six directors and no deputies. Dennis Har-
lin has been chairman of the board. Five
board members are independent from the
Company, the Company’s management
and the Company’s larger shareholders, and six board members are independent from
larger shareholders.
Board of directors elected at the AGM 2016
Member
elected
Position
Year of
birth
nationality
Independent in
relation to the
Company
Independent
in relation to
the Company’s
larger
shareholders
Dennis Harlin
2015
Chairman
1941
Sweden
Per Brilioth
2013
Member
1969
Sweden
Magnus Nordin
2001
Member
1956
Sweden
Richard Rettig
2016
Member
1978
Sweden
Katherine
Støvring
Geoffrey
Turbott
2012
Member
1965 United States
2015
Member
1963
New Zealand
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Rules of procedure
The board of directors’ work is governed
by annually adopted rules of procedure.
The board of directors supervise the work
of the managing director by continually
following up the Company’s operations.
The board of directors also ensures that the
Company’s organisation, administration
and control are properly managed. The
board of directors adopts strategies and
goals and resolves on larger investments,
acquisitions and disposals of business
activities or assets. The board of directors
also appoints the managing director and
determines the managing director’s salary
and other compensation.
The chairman of the board of directors
supervises the work and is responsible for
it being well organised and efficient. This
entails, among other things, continually
following the Company’s operations in
contact with the managing director and
being responsible for other board mem-
bers receiving the information and docu-
mentation needed to ensure high quality
discussions and well-founded decisions
by the board of directors. The chairman is
responsible for the evaluation of the board
of directors’ and the managing director’s
work and represents the board of directors
in ownership matters.
According to the current rules of proce-
dure the board of directors shall, after the
constituent board meeting following the
AGM, hold a minimum of seven ordinary
meetings during a calendar year.
Timing and main items for ordinary meetings 2016
February
Fourth quarter and year-end report 2015
April
May
Annual report 2015 and AGM 2016
First quarter report 2016
August
Second quarter report 2016
September
Strategy
November
Third quarter report 2016
December
Budget
25
Assessment 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 work-
ing, number of meetings and effectiveness,
time for preparation, available competence
and individual board members influence
of the board’s work. The nomination com-
mittee takes part of the results, and it is a
component in the nomination commit-
tee’s work to submit proposals concerning
board members.
Tethys Oil’s auditor: Pricewaterhouse-
Coopers AB
Johan
Malmqvist
ulrika
Ramsvik
Role
Lead partner
Co-signing
auditor
The board’s work in 2016
During 2016 the board held seven ordi-
nary meetings and nine extraordinary
meetings.
Year of birth
Company auditor
since
1975
2015
1973
2014
Board of directors and committee attendance
Member Audit
committee
Member
Remuneration
committee
Board
meetings
Audit
committee
meetings
Remuneration
committee
meetings
Board member
Dennis Harlin
(Chairman)
Per Brilioth
Magnus Nordin
Richard Rettig
Katherine Støvring
Geoffrey Turbott
Yes (Chairman)
Yes
Yes
No
Yes
Yes
Yes
16/16
Yes (Chairman)
13/16
No
Yes
Yes
Yes
16/16
8/9
15/16
16/16
4/4
4/4
–
2/2
4/4
4/4
3/3
3/3
–
0/0
3/3
3/3
Remuneration committee
The board has established a remuneration
committee for the period up to and includ-
ing the AGM 2017, consisting of all board
members with the exception of the manag-
ing director Magnus Nordin. Per Brilioth is
the chairman of the committee. The remu-
neration committee convened three times
in 2016. The work has mainly focused on
establishing principles for remuneration
to management, to monitor and evaluate
variable remuneration and the application
of the guidelines for remuneration as well
as to construct and propose an incentive
programme to the AGM 2016. The remu-
neration committee reports to the board,
normally in conjunction with the follow-
ing board meeting.
Audit committee
The board has established an audit com-
mittee for the period up to and including
the AGM 2017, consisting of all board
members with the exception of the man-
aging director Magnus Nordin. Geoffrey
Turbott is the chairman of the committee.
The audit committee convened four times
in 2016. 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 mak-
ing processes regarding such matters. The
audit committee also regularly liaises with
the Group’s statutory auditor as part of the
annual audit process and reviews the audit
fees and the auditor’s independence and
impartiality. The Audit committee reports
to the board, normally in conjunction with
the following board meeting.
external auditors of the Company
Statutory auditor
Pursuant to its Articles of Association,
Tethys Oil must have one or two auditors,
and no more than two deputies. A regis-
tered firm of auditors may be appointed
as the Company’s auditor. Tethys Oil’s
auditor
is PricewaterhouseCoopers AB
with Johan Malmqvist as Lead partner
and Ulrika Ramsvik as co-signing auditor.
PricewaterhouseCoopers AB was elected as
the Company’s auditor at the AGM 2016.
26
The audit firm has, besides the audit, con-
ducted a limited number of other assign-
ments 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 accord-
ance with approved current accounts. In
2016, remuneration to Pricewaterhouse-
Coopers AB amounted to MUSD 0.1
(MUSD 0.1). For details on remuneration
to auditors, see note 10, auditor’s fees.
Independent qualified reserves auditor
Tethys Oil’s independent qualified reserves
auditor annually certifies Tethys Oil’s
oil reserves, although such assets are not
included in the Company’s balance sheet.
The current independent qualified reserves
auditor is DeGolyer and MacNaughton.
For further information, see Reserves on
page 39.
Managing director and executive
management
The executive management in Tethys Oil
at the time of the AGM consisted of the
managing director, the chief financial
officer (“CFO”) 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.
Changes to executive management
The executive management structure was
unchanged until September 2016 when
a chief technical officer (“CTO”) was
appointed and included in the execu-
tive management. Beginning December
the position of EVP seized to exist. The
executive management at year-end con-
sists of the managing director, the CFO
and the CTO. The board of directors have
approved these changes to the executive
management, being a permitted deviation.
Remuneration policy to executive
management
Remuneration policy to the executive
management includes five elements:
• Basic salary
• Pension arrangements
• Yearly variable salary, including the right
to participate in share-based long-term
incentive
• Other benefits
• Severance pay
shall be within the range of 1–4 monthly
salaries per person and year. The targets for
variable cash remuneration shall be deter-
mined by the board prior to each financial
year and individual agreements shall be
arranged with each participant, the content
of which depends on the participant’s posi-
tion at the time the agreement is arranged.
The targets shall be objectively quantifi-
able and related to budget. The targets
shall consist of financial and operational
key indicators. The yearly variable salary
will be determined annually in connection
with publication of the year-end report for
the respective financial year based on an
evaluation of the participants’ achievement
of the targets as described in the individ-
ual agreements. Payment of variable cash
remuneration shall be conditional upon
the participant remaining employed for the
duration of the programme. The board has
the right to adjust the incentive program
during the term of the programme in the
case of, for example, extraordinary increases
or decreases in the group’s earnings.
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 annually.
Other benefits
Non-financial benefits shall be based on
market terms and shall facilitate the duties
of each senior executive.
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 rea-
sons exist.
Remuneration to executive management 2016
(amounts in SEK thousands)
Basic salary
The basic salary shall be in line with mar-
ket conditions, be competitive, and shall
take into account the scope and responsi-
bility associated with the position, as well
as the skills, experience, and performance
of the executive.
Managing
director
Other executive
management
Total
Basic
salary
Pension
arrange-
ments
Variable
salary
Share based
long-term
incentive
Other
benefits
Total
2016
Total
2015
2,082
443
340
1,288
12
4,164
3,886
3,080
5,162
485
927
454
794
1,584
2,871
241
5,844
4,474
253
10,008
8,360
Pension arrangements
The pension benefits comprise a defined
contribution scheme with premiums cal-
culated on the full basic salary. The pen-
sion contributions shall be in relation to
the basic salary and is set on an individual
basis but shall not be higher than what is
tax deductible.
Variable salary
Senior executives shall be part of two vari-
able remuneration systems payable in cash
and/or in combination with a right to
acquire warrants in the Company in a long-
term incentive programs. Variable salary to
employees will be based upon their indi-
vidual contribution to the Company’s per-
formance. The yearly variable cash salary
The increase in remuneration to executive
management primarily relate to increased
base salaries and changes to the executive
management structure during the year. For
further information, please see note 12.
Remuneration to the board 2016
Remuneration to be paid to the board of
directors for the period between the AGMs
of 2016 and 2017 amounts to a total of
TSEK 1,970, allocated among the board
members in the way shown in the below
table. The annual general meeting 2016
resolved that remuneration of the chair-
man of the board of directors shall be
TSEK 560 per annum and of the other
members TSEK 250 per member per
annum. Remuneration is not paid for ser-
vice of the boards or directors of subsidiar-
ies. Magnus Nordin, who is employed by
Tethys Oil, does not receive any remunera-
tion for his service on the board of direc-
tors. Annual fees for committee members
are TSEK 35 per committee assignment
and annual fees for the chairman of each
of the audit and remuneration commit-
tee are TSEK 65. Further, if a member of
the board of directors, following a resolu-
tion by the board of directors, performs
tasks which are outside the regular board
work, separate remuneration in the form
of hourly fees on market terms may be paid
by resolution of the Board of Directors,
for which purpose a frame of TSEK 250
was allowed. Out of this frame, a total of
TSEK 120 has been paid.
27
Remuneration to board and committee members for the period between the AGMs of 2016 and 2017
(amounts in SEK thousands)
Member
Dennis Harlin
Per Brilioth
Magnus Nordin
Richard Rettig
Katherine Støvring
Geoffrey Turbott
Total
Board of directors
Audit committee
Remuneration committee
Separate renumeration
Total
560
250
–
250
250
250
1,560
35
35
35
65
Not member
Not member
35
35
65
205
35
35
35
205
–
–
–
–
–
120
120
630
350
–
320
320
470
2,090
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 reli-
able financial reporting. The Company’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.
Stockholm, 18 April 2017
Tethys Oil AB (publ)
The board of directors
28
Auditor’s report on the Corporate Governance Statement
To the general meeting of the shareholders in Tethys Oil AB (publ), corporate identity number 556615-8266
engagement and responsibility
It is the board of directors who is responsible for the
corporate governance statement for the year 2016 on
pages 24–28 and that it has been prepared in accord-
ance with the Annual Accounts Act.
The scope of the audit
Our examination has been conducted in accordance
with FAR’s auditing standard RevU 16 The auditor’s
examination of the corporate governance statement.
This means that our examination of the corporate gov-
ernance statement is different and substantially less
in scope than an audit conducted in accordance with
International Standards on Auditing and generally
accepted auditing standards in Sweden. We believe that
the examination has provided us with sufficient basis
for our opinions.
Opinions
A corporate governance statement has been prepared.
Disclosures in accordance with chapter 6 section 6 the
second paragraph points 2–6 the Annual Accounts Act
and chapter 7 section 31 the second paragraph the same
law are consistent with the annual accounts and the
consolidated accounts and are in accordance with the
Annual Accounts Act.
Stockholm, 18 April 2017
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Ulrika Ramsvik
Authorized Public Accountant
29
Board of directors
Member
Function
Elected
Year of birth
Education
Experience
Military Academy higher technical course
Brigadier general (ret.). Vice president
SAAB/Gripen International 1996–2009.
Defence attaché in Switzerland and Italy
and seconded to Ministry for Foreign
Affairs
Dennis harlin
Per Brilioth
Magnus nordin
Richard Rettig
Katerine Støvring
Geoffrey Turbott
Chairman of the board, member audit
and remuneration committee
Board member, member of audit
committee and chairman of the
remuneration committee
Board member and managing director
Board member and member of audit and
Board member and member of audit and
Board member, member of remuneration
remuneration committee
remuneration committee
committee and chairman of audit
2015
1941
2013
1969
2001
1956
2016
1978
2012
1965
committee
2015
1963
–
470
Yes
Yes
Member
Function
Elected
Year of birth
Education
Shares in Tethys Oil
(per 31 December 2016)*
Remuneration for board
and committees
(SEK thousands)
Independent in relation to
the Company
Independent in relation
to the Company’s larger
shareholders
Bachelor of Arts, University of Lund and
Master of Arts, University of California
Los Angeles
Master of Science in Business and
Master of Law, University of Oslo and
Former member of New Zealand’s institute
Economics, Stockholm School of
MSc in Business Management, London
of chartered accountants
Economics
Business School
Several executive positions in different oil
companies
Founded and operated companies within
Several executive positions in the energy
Worked with public companies in which the
Experience
asset management and equities trading.
and shipping industry
Lundin family holds a major shareholding
Is today active as private investor.
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 directors of
Minotaurus AB, Minotaurus Fastigheter
AB and Minotaurus Energi AS
Member of the board of directors Invium
Partners AB
Member of the board of directors of Tetbury
Other board duties
Forestry Ltd and Progress Land Ltd
Bachelor of Science in Business
Administration, University of Stockholm,
Master of Finance, London Business
School
Executive positions in companies
investing in emerging markets and the
oil and gas sector. Currently CEO of
Vostok New Ventures AB.
Chairman of the board of directors of
Pet Sounds AB, Gavald Holdings AB,
Pet Sounds Digitalt AB, Pomegranate
Investment AB and thunderroad AB.
Member of the board of directors Vostok
New Ventures Ltd., Kontakt East Holding
AB, FG Stores Stockholm AB, Fotografiska
Holding AB, LeoVegas AB, Garantibil
Sverige AB, Avito AB, NMS INVEST AB
and Vostok Emerging Finance Ltd. Deputy
member of the board of directors of
Digital Agency Ryssland AB.
312,500
320
Yes
Yes
–
320
Yes
Yes
10,000
1,464,127
–
No
Yes
350
Yes
Yes
3030
Other board duties
Member of the board of directors Harlin
Consulting AB
Shares in Tethys Oil
(per 31 December 2016)*
142,071
Remuneration for board
and committees
(SEK thousands)
Independent in relation to
the Company
Independent in relation
to the Company’s larger
shareholders
630
Yes
Yes
* Privately, via company and via insurance policy.
Member
Function
Elected
Year of birth
Education
2015
1941
Affairs
Shares in Tethys Oil
142,071
(per 31 December 2016)*
Remuneration for board
630
and committees
(SEK thousands)
Independent in relation to
Yes
the Company
Independent in relation
Yes
to the Company’s larger
shareholders
* Privately, via company and via insurance policy.
2013
1969
School
350
Yes
Yes
2001
1956
–
No
Yes
Pet Sounds Digitalt AB, Pomegranate
AB and Minotaurus Energi AS
Investment AB and thunderroad AB.
Member of the board of directors Vostok
New Ventures Ltd., Kontakt East Holding
AB, FG Stores Stockholm AB, Fotografiska
Holding AB, LeoVegas AB, Garantibil
Sverige AB, Avito AB, NMS INVEST AB
and Vostok Emerging Finance Ltd. Deputy
member of the board of directors of
Digital Agency Ryssland AB.
10,000
1,464,127
Dennis harlin
Per Brilioth
Magnus nordin
Richard Rettig
Katerine Støvring
Geoffrey Turbott
Chairman of the board, member audit
Board member, member of audit
Board member and managing director
and remuneration committee
committee and chairman of the
remuneration committee
Board member and member of audit and
remuneration committee
Board member and member of audit and
remuneration committee
Board member, member of remuneration
committee and chairman of audit
committee
2016
1978
2012
1965
2015
1963
Military Academy higher technical course
Bachelor of Science in Business
Bachelor of Arts, University of Lund and
Administration, University of Stockholm,
Master of Arts, University of California
Master of Finance, London Business
Los Angeles
Master of Science in Business and
Economics, Stockholm School of
Economics
Master of Law, University of Oslo and
MSc in Business Management, London
Business School
Former member of New Zealand’s institute
of chartered accountants
Experience
Brigadier general (ret.). Vice president
Executive positions in companies
Several executive positions in different oil
SAAB/Gripen International 1996–2009.
investing in emerging markets and the
companies
Defence attaché in Switzerland and Italy
oil and gas sector. Currently CEO of
and seconded to Ministry for Foreign
Vostok New Ventures AB.
Founded and operated companies within
asset management and equities trading.
Is today active as private investor.
Several executive positions in the energy
and shipping industry
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
Function
Elected
Year of birth
Education
Experience
Other board duties
Member of the board of directors Harlin
Chairman of the board of directors of
Member of the board of directors of
Consulting AB
Pet Sounds AB, Gavald Holdings AB,
Minotaurus AB, Minotaurus Fastigheter
Member of the board of directors Invium
Partners AB
Member of the board of directors of Tetbury
Forestry Ltd and Progress Land Ltd
Other board duties
312,500
320
Yes
Yes
–
320
Yes
Yes
o
s
s
u
R
o
e
t
t
a
M
y
b
o
t
o
h
P
–
470
Yes
Yes
3131
Shares in Tethys Oil
(per 31 December 2016)*
Remuneration for board
and committees
(SEK thousands)
Independent in relation to
the Company
Independent in relation
to the Company’s larger
shareholders
Executive management
Magnus nordin
Jesper Alm
Fredrik Robelius
Function
Managing director
Chief Financial Officer
Chief Technical Officer
Employed since
Year of birth
Education
2004
1956
2014
1975
2011
1973
Bachelor of Arts, University of Lund and
Master of Arts, University of California
Los Angeles
M.Sc. Business Administration,
University of Lund
PhD Engineering Physics, Uppsala
University; Postgraduate Diploma Petroleum
Engineering, Heriot-Watt University
Experience
Several executive positions in different
oil companies
Various positions in Corporate Finance
at Pareto Securities
Energy engineering positions in Fortum,
petroleum engineering related positions in
Tanganyika Oil and Sinopec
Shares in Tethys Oil
(per 31 December 2016)*
1,464,127
5,750
7,000
Warrants in Tethys Oil
(per 31 December 2016)
Warrants 2015/18: 78,000
Warrants 2016/19: 70,000
Warrants 2015/18: 39,000
Warrants 2016/19: 47,000
Warrants 2015/18: 43,000
Warrants 2016/19: 45,000
* Privately, via company and via insurance policy.
3232
The Tethys Oil share
Tethys Oil’s shares are traded on 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.
Shares outstanding
Tethys Oil’s registered share capital at 31 December 2016 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 participation in Tethys Oil’s assets and earnings. As per 31
December 2016 the board of directors had remaining outstand-
ing authorization from the AGM to issue up to 10 percent of the
shares up until the next AGM. As per 31 December 2016, Tethys
Oil held 1,329,224 of its own shares which were purchased dur-
ing 2014 to 2016 at an average price of SEK 57.40. The share
repurchase programme is based on a mandate from the respective
AGM and repurchased shares are still part of the total number of
outstanding shares but however not included in the number of
shares in circulation, which amount to 34,214,526.
Tethys Oil has a warrant programme as part of the remuneration
package to employees. Warrants have been issued following the
AGMs in 2015 and 2016. The terms for each warrant series have
been recalculated as a consequence of recalculation events, being
the distribution to shareholders in 2015 and 2016, respectively.
The current terms are:
Warrant
program
Issued
Allotted
Strike price,
SeK
no of shares
each warrant
entitle to
2015/2018
356,000
312,000
2016/2019
350,000
335,000
76.80
62.60
1.08
1.05
As the strike price is below the share price as per year-end 2016,
the warrants are included in the fully diluted number of shares.
Share capital development
Since the company’s inception in September 2001 and up to 31 December 2016 the parent company’s share capital has developed 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
2016
2016
2016
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
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
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
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
–
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
–
-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
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.
SEK 1.00, equal to MSEK 34 (MSEK 34). The distribution, sub-
ject to approval by the AGM, is proposed to be made by a cash
dividend.
For the financial year 2016, the board of directors proposes to the
AGM 2017 a total distribution of SEK 1.00 per share (AGM 2016
During 2016, following an EGM in October, a further SEK 3.00
per share was distributed via a share redemption program, equal
to MSEK 102.
Share ownership structure
The 20 largest shareholders in Tethys Oil as per 28 February 2017.
name
Lansdowne Investment Company Cyprus
JPM Chase NA
Magnus Nordin
SEB Funds
Grandeur Peak Funds
SIX SIS AG
Avanza Pension
Skandinaviska Enskilda Banken S.A.
Öhman Bank S.A.
JP Morgan Securities LLC
Carl Erik Norman
BNYMSANV re GCLB re BNY GCM Client
Handelsbanken Funds
Norges Bank
John Hancock Funds
Nordnet Pensionsförsäkringar AB
Banque Pictet Cie SA
SSB Client Omnibus AC OM07 (15 PCT)
Morgan Stanley and Co LLC
SSBTC A/C London Branch Clients
Total, 20 largest shareholders
Tethys Oil AB
Summary other (appr. 5,870) shareholders
Total number of shares
Source: Euroclear and the Company
number of shares
Share of capital and votes
8.91
5.27
4.12
3.93
3.60
2.28
2.16
2.06
1.89
1.78
1.65
1.64
1.49
1.36
1.33
1.22
1.21
1.21
1.18
1.15
43.45
3.74
52.81
100.00
3,165,694
1,871,851
1,464,127
1,398,305
1,278,231
810,012
768,172
731,100
671,280
631,508
585,000
584,567
528,579
483,504
472,540
435,364
431,574
430,963
420,446
410,364
15,444,470
1,329,224
18,770,056
35,543,750
34
Distribution of shareholdings
Distribution of shareholdings per 28 February 2017.
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
number of
shares
Percentage of
shares
560,339
642,420
1,654,260
1,075,852
489,618
640,486
30,480,775
35,543,750
1.58%
1.81%
4.65%
3.03%
1.38%
1.80%
85.76%
100.00%
number of
shareholders
4,042
760
707
146
37
35
172
Percentage of
shareholders
68.52%
12.88%
11.99%
2.47%
0.63%
0.59%
2.92%
5,899
100.00%
Share statistics 2016
The final transaction price in 2016 was SEK 78.75 corresponding
to a total market capitalization of MSEK 2,799. During the year
the price of Tethys Oil’s share increased by 37.0 percent. The high-
est transaction price in 2016 was SEK 80.25 on 28 December and
the lowest was SEK 45.70 on 21 January. The turnover velocity
was 76.4 percent on Nasdaq Stockholm.
Share price development and turnover 2016
75
60
45
30
15
0
Jan
2016
SEK
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Share price
Turnover
1,000,000
800,000
600,000
400,000
200,000
Jan
2017
Feb
0
Share volume
per day
35
Key financial data
Group
Operational items
2016
2015
2014
2013
2012
Production before government take, bbl
4,478,121
3,578,488
2,807,653
1,709,706
1,399,518
Production per day, bbl
12,235
9,804
7,692
4,684
3,824
Net sales after government take, bbl
2,357,701
1,805,056
1,464,228
850,926
776,248
Achieved oil price, USD/bbl
40.5
58.1
103.9
106.6
110.3
Items regarding the income statement and balance sheet
Revenue, MUSD
EBITDA, MUSD
EBITDA-margin, %
Operating result, MUSD
Operating margin, %
Net result, MUSD
Net margin, %
Cash and cash equivalents, MUSD
Shareholders' equity, MUSD
Balance sheet total, MUSD
Capital structure
Equity ratio, %
Leverage ratio, %
Investments, MUSD
Net cash, MUSD
Profitability
Return on shareholders' equity, %
Return on capital employed, %
Other
Average number of full time employees
Dividend per share, SEK
Cash flow from operations per share, USD
87.1
44.1
51%
-0.5
-1%
2.7
3%
39.0
196.8
238.9
82%
neg.
48.5
39.0
1.29%
4.20%
19
1.00*
1.53
107.0
58.6
55%
23.0
21%
23.4
22%
51.2
217.2
253.6
86%
neg.
40.8
51.2
149.3
108.0
72%
57.1
38%
49.4
33%
47.8
214.3
233.5
92%
neg.
39.3
47.8
92.2
74.8
81%
45.1
49%
38.1
41%
44.8
168.4
238.7
71%
12%
44.1
-14.9
85.5
74.5
87%
49.3
58%
46.0
54%
37.5
130.1
207.8
63%
20%
132.1
-21.3
10.85%
25.82%
25.56%
46.81%
13.59%
30.87%
29.82%
49.38%
17
1.00*
1.69
18
n.a.
2.89
17
n.a.
1.45
19
n.a.
2.25
Number of shares at year end, thousands
35,544
35,544
35,544
35,544
35,544
Shareholders' equity per share, USD
Weighted number of shares (before dilution) for the year, thousands
Weighted number of shares (after dilution) for the year, thousands
Earnings per share before dilution, USD
Earnings per share after dilution, USD
5.54
34,324
34,372
0.08
0.08
6.11
34,964
34,964
0.67
0.67
6.03
35,524
35,524
1.39
1.39
4.74
35,544
35,544
1.07
1.07
3.66
34,465
34,465
1.34
1.34
* Not including share redemption of 3.00 SEK per share in 2016, and 2.00 SEK per share in 2015.
36
Definitions of key ratios
Relevant reconciliations of alternative performance measures
MUSD
Operating result
Depreciation, depletion and amortization
Exploration costs
EBITDA
Cash and bank
Interest bearing debt
Net cash
Cash flow from operations
Investment in oil and gas properties
Cash flow from operations after investments
2016
2015
-0.5
44.4
0.1
44.1
39.0
–
39.0
52.7
-48.5
4.2
23.0
34.7
1.0
58.6
51.2
–
51.2
59.1
-40.8
18.3
2014
57.1
31.1
19.8
108.0
47.8
–
47.8
102.7
-39.3
63.4
2013
2012
45.1
21.1
8.6
74.8
44.8
-59.7
-14.9
51.5
-44.1
7.4
49.3
8.0
17.2
74.5
37.5
-58.8
-21.3
77.7
-132.1
-54.4
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, deprecia-
tion, depletion, amortisation and explora-
tion costs (EBITDA) divided by net finan-
cial result.
Net cash/net debt
Cash and equivalents less interest bearing
debt.
Investments
Total investments during the year.
Profitability
Leverage ratio
Net interest bearing debt as a percentage of
shareholders’ equity.
Return on shareholders’ equity
Net result as percentage of average share-
holders’ equity.
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 per-
centage of average capital employed (total
assets less non interests-bearing liabilities).
Other
Number of employees
Average number of employees full-time.
Shareholders’ equity per share
Shareholders’ equity divided by the num-
ber of outstanding shares.
Weighted numbers of shares
Weighted number of shares during the
year.
Earnings per share
Net result divided by the number of out-
standing shares.
n.a.
Not applicable.
n.m.
Not meaningful.
37
Administration report
(An English translation of the Swedish original)
Tethys Oil AB (publ)
Tethys Oil Block 3 & 4 Ltd.
Blocks 3&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 2016.
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 2016 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 percent interest in Blocks 3&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&4. The
production growth of 25 percent year on year has generally been
in line with expectations. The production from the Shahd field
during the fourth quarter was somewhat below expectations, pri-
marily caused by a slower implementation of water injection than
anticipated. Tethys Oil has additional production in Lithuania.
The terms of the Exploration and Production Sharing Agreement
(“EPSA”) on Blocks 3&4 allows the joint operations partners
to recover their costs from up to 40 percent of the value of total
oil production, this is referred to as cost oil. After deducting any
allowance for cost oil, the remaining production is split 80/20
between the government and the joint operations partners. If there
are no costs to be recovered the joint operations partners receive
after government take 20 percent of the oil produced. The terms
of the EPSA thus result in the joint operations partners’ share of
production after government take in the interval 20–52 percent,
depending on available recoverable cost. So far on Blocks 3&4, the
joint operations partners’ share of production after government
take has been in the high end of the interval, 52 percent, as the
joint venture partners have continued to invest on Blocks 3&4.
The estimated recoverable costs as per 31 December 2016, net to
Tethys Oil, amounts to MUSD 58.1.
Tethys Oil’s share of Gargzdai is indirectly owned through Odin
Energi A/S, a Danish associated company.
38
Tethys Oil’s share of volumes, before government take (bbls)
2016
2015
2014
2013
2012
Tethys Oil’s share of annual production, (bbl)
Oman, Blocks 3&4
Production
Average daily production
Lithuania, Gargzdai
Production
Average daily production
4,436,438
3,539,631
2,765,654
1,663,069
1,345,854
12,121
9,698
7,577
4,556
3,687
41,684
38,857
42,000
46,637
53,664
114
106
115
128
147
Total production
4,478,121
3,578,488
2,807,653
1,709,706
1,399,518
Total average daily production
12,235
9,804
7,692
4,684
3,824
Average daily production net to Tethys Oil, quarterly
12,000
10,000
8,000
6,000
4,000
2,000
0
2010
2011
2012
2013
2014
2015
2016
Reserves
Oman
Tethys Oil’s net working interest reserves in Oman as per 31
December 2016 amounted to 14,222 thousand barrels of oil
(“mbo”) of proven reserves (1P), 21,408 mbo of proven and prob-
able reserves (2P) and 29,729 mbo of proven, probable and pos-
sible reserves (3P).
Development of reserves, Blocks 3&4
(Audited by DeGolyer and MacNaughton Canada Limited)
ing an increase of 23 percent. The increase in 2P reserves represents
and internal reserve replacement ratio of 171 percent.
Reserves Blocks 3&4, 31 December 2016
(Audited by DeGolyer and MacNaughton Canada Limited)
Mbo
Farha South field
Shahd field
Saiwan East field
1P
8,672
4,728
822
2P
11,569
7,847
1,992
3P
14,028
13,000
2,701
29,729
Mbo
1P
2P
3P
Total 31 December 2016
14,222
21,408
Total 31 December 2015
12,905
18,244
27,863
Production 2016
Discoveries
Revisions
-4,436
146
5,607
-4,436
238
7,362
-4,436
304
5,998
Total 31 December 2016
14,222
21,408
29,729
In 2016 Tethys Oil added 1P reserves of 5,753 mbo, representing
an increase of 45 percent; 2P reserves of 7,600 mbo, representing
an increase of 42 percent; and 3P reserves of 6,302 mbo, represent-
The review of the reserves in Oman has been conducted by independ-
ent petroleum consultant DeGolyer and MacNaughton Canada Lim-
ited. The report has been estimated using 2007 Petroleum Resources
Management System (PRMS), Guidelines of the Society of Petroleum
Engineers (SPE), World Petroleum Council (WPC), American Asso-
ciation of Petroleum Geologists (AAPG) and Society of Petroleum
Evaluation Engineers (SPEE).
39
Export reporting error
Tethys Oil has been informed by the operator of Blocks 3&4 that an
inadvertent fiscal metering calibration problem has resulted in over-
reporting of exported oil from Blocks 3&4 during the period August
2010 until February 2016 (the “Export Reporting Error”). Tethys Oil
estimates that its share of the overestimated volume of oil amounts to
157,000 barrels (before government take). To rectify the over-reported
quantity of delivered oil, the Blocks 3&4 partners have agreed with
the pipeline operator and the Ministry of Oil and Gas to repay the
over-lifted amount in cash. Tethys Oil estimates, that Tethys Oil’s
share of the cash repayment, will amount to MUSD 5.9, which con-
sequently have reduced Tethys Oil’s 2016 revenue and result with that
amount. The mechanism for the settlement details are being discussed,
but Tethys Oil expects that the final settlement will reflect the relevant
agreements. Tethys Oil estimates that the negative undiscounted net
cash effect for Tethys Oil will be less than MUSD 1.4. The discounting
effect has been estimated to be immaterial.
Of the total error amount of MUSD 5.9, MUSD 1.9 is included in
current provisions and MUSD 4.0 is included in non-current provi-
sions as per 31 December 2016.
31 December 2016 is 28,029 barrels. The valuation of both over
and underlift is based on market price.
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&4 and are made on a monthly basis. The selling price is the
monthly average of the two month future price for Omani blend.
The average selling price amounted to USD 40.5 per barrel during
2016, 30 percent lower compared to 2015. The average price for
Dated Brent oil during 2016 amounted to USD 43.7 per barrel.
Result
Tethys Oil reports a net result after tax for 2016 of MUSD 2.7,
representing earnings per share of USD 0.08. The result for 2016
is down 88 percent compared to 2015. 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
2016
2015
2014
2013
2012
Production costs, MUSD
33.5
38.4
32.7
20.5
13.7
Revenue
Revenue
2016
2015
2014
2013
2012
Well workovers, MUSD
3.1
4.5
4.4
3.0
0.2
Total operating
expenses, MuSD
Operating expenses per
barrel, USD
36.5
42.9
37.2
23.5
13.9
8.2
12.1
13.4
14.1
10.4
Operating expenses during 2016 amounted to MUSD 36.5 com-
pared to MUSD 42.9 during 2015. Operating expenses are related
to oil and gas production on Blocks 3&4, and comprise expenses
for field staff, expenses related to maintenance, well workovers and
interventions and administration.
Operating expenses per barrel since 2012 have been in the range
USD 8 to 14 per barrel. During 2016 operating expenses per bar-
rel has been significantly reduced compared with 2015. The reduc-
tion in operating expenditures per barrel has been expected and is
the result of general cost reductions and higher production.
Depletion, depreciation and amortisation
DD&A
2016
2015
2014
2013
2012
DD&A, MUSD
44.4
34.6
31.0
21.0
DD&A per barrel, USD
10.0
9.8
11.2
12.6
8.0
5.9
Depletion, depreciation and amortisation (“DD&A”) for 2016
amounted to MUSD 44.4, which is higher than 2015 and attrib-
utable to higher production. The DD&A charge relates to Blocks
3&4.
Barrels sold, bbl
2,357,701 1,805,056 1,464,228
850,926
776,248
Underlift (overlift)
movement, bbl
(50,754)
35,552
(26,088)
13,870
(76,404)
Oil price, USD/bbl
40.5
58.1
103.9
106.6
110.4
Net sales, MUSD
95.4
104.9
152.1
90.7
85.7
Underlift (overlift),
MUSD
Overlift adjustment
reporting error,
MUSD
(2.4)
2.2
(2.8)
1.5
(0.2)
(5.9)
–
–
–
–
Revenue, MuSD
87.1
107.0
149.3
92.2
85.5
Revenue for 2016 is down 19 percent compared to revenue 2015
and the main reason is the decline in oil prices which are down
30 percent between the years. There has been a transition from
underlift to overlift during 2016.
During 2016, Tethys Oil sold 2,357,701 barrels of oil from Blocks
3&4, representing 31 percent increase in comparison with 2015
when 1,805,056 barrels of oil were sold. This resulted in net sales
during 2016 of MUSD 95.4 compared to MUSD 104.9 during
2015. In addition to Net sales, there has been an adjustment for
overlift amounting to MUSD 8.3 of which MUSD 5.9 relate to
the Export Reporting Error, which together with Net sales adds up
to Revenue of MUSD 87.1.
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 underlift to overlift
between year-end 2016 and 2015. The total overlift position as per
40
Net back
net back, uSD/bbl
2016
2015
2014
2013
2012
Oil price achieved (sales
barrels)
Revenue (after
government take)
40.5
58.1
103.9
106.6
110.4
21.0
30.2
54.0
55.4
57.4
Operating expenses
8.2
12.1
13.4
14.1
10.4
net back
12.8
18.1
40.6
41.3
47.0
The reduction in net back per barrel during 2016 has mainly been
driven by the oil price development.
Net result 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 2016 amounted to MUSD -0.7
compared to MUSD -0.4 during 2015. 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.
Administrative expenses
Administrative expenses amounted to MUSD 5.8 for 2016 com-
pared to MUSD 5.2 during 2015. Administrative expenses are
mainly salaries, rents, listing costs and external services. Admin-
istrative expenses have been stable between years 2016 and 2015.
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 2016 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 MUSD 5.3 and most
of the effect relates to the stronger US dollar in relation to the
Swedish 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 MUSD 0.6 and other financial expenditures amounted to
MUSD 1.8. The currency exchange effect and fees on long term
debt is part of net financial result amounting to MUSD 3.1 for
the full year.
Investments and work programme
Summary of oil and gas interests (MUSD):
Country
Oman
Lithuania
France
New ventures
Total
Book value 31
Dec 2016
Book value 31
Dec 2015
Investments
Jan–Dec 2016
190.8
189.1
48.2
–
–
0.3
191.1
–
–
0.1
189.1
–
–
0.3
48.5
Blocks 3&4
During 2016, total investments amounted to MUSD 48.5 of
which almost all relate to Blocks 3&4. Investments during the
year have been in line with investments 2015. There has been an
increased focus on development and production drilling during
2016.
Drilling – Development
25.5
14.4
Investments Block
3&4, MuSD
Drilling – Exploration/
Appraisal
G&G
Facilities
Pipeline
Other capex
Total investments
Blocks 3&4
2016
2015
2014
2013
2012
2.4
4.8
4.1
10.7
1.6
3.9
8.4
7.6
2.9
2.6
9.6
9.2
6.2
6.6
4.7
1.9
7.5
1.2
13.2
19.9
8.6
7.8
0.6
2.3
1.2
24.7
10.2
72.9*
48.2
40.7
38.3
40.0
130.1
* 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.
A total of 38 wells were completed on Blocks 3&4 in 2016. The
main focus during the first nine months of 2016 was on the Shahd
field, where in total 30 wells were drilled. Towards the end of the
third quarter 2016, the drilling resumed on the Farha South oil
field, where a total of eight wells were drilled in 2016.
Planned maintenance work was carried out on all three fields on
Blocks 3&4 during the spring 2016. The work included tempo-
rary shut downs of the fields, which had some effect on the pro-
duction. The main objectives of the maintenance work were to
verify asset integrity of the systems and to add and change compo-
nents. As part of the work, the whole plant has been flushed with
water and nitrogen. Asset integrity of the whole plant as well as
separate components have been tested and verified. Internal clean-
ing and inspection of components, e.g. separators and heater treat-
ers have been conducted. New pumps have been installed. Tie-ins
for future separators and heater treaters have also been added. The
work was finished in the second quarter, and completed the main-
tenance work on the Blocks 3&4 fields.
A total of five rigs including a work over rig are in operations on
the blocks.
41
Block 3: Farha South Field
A total of six appraisal/production wells were drilled on the Farha
South field in 2016. One of these, the FS-130 well, was drilled in a
previously undrilled fault block. The new fault block AO is located
about one kilometre to the west of fault block Z, in the south west
part of the field. FS-130 was drilled vertically down to the target,
the Barik sandstone, with a total vertical depth of 1,680 metres.
FS-130 encountered oil and the AO fault block is now in produc-
tion. The water injection system at Farha South oil field was fur-
ther developed during the year, and two injector wells were drilled.
The produced water treatment system on Farha South field was
expanded in order to handle the increasing volumes of the water
produced in connection with the oil production. The expansion of
the system decreases the need for new water wells as well as taking
care of the water by-product.
Block 4: Shahd and Saiwan East oil fields
17 appraisal/production wells were drilled on the Shahd field in
2016. The water injection programme continued on the Shahd
field with eight new injection wells and four new water wells.
In addition, one near field exploration well was drilled in a previ-
ously undrilled structure in the northern extension of the Shahd
area. The well discovered oil and is producing from the Khufai
layer.
A set of new separators were installed on the Saiwan East field in
2016.
Associated companies
Lithuania
As per 31 December 2016, the value of the shareholding in the
two associated Danish companies holding the interests in Lithua-
nian licenses, amounted to MUSD 0.3 compared to MUSD 2.0 at
the end of 2015. The reduction in book value is explained by a loss
from associated companies of MUSD -0.7 (-0.4) and dividends
received during the period which amounted to MUSD 0.7 (2.7).
The book value is also impacted by currency exchange differences.
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 from Minijos Nafta.
Production continued on the Gargzdai licence, with cost cutting
measures implemented in the first three quarters of 2016. With
the higher oil price environment at the end of the year, some
high water rate production wells previously shut-in were being re-
opened for testing and possibly being put back into production.
The long term production testing of the exploration well Tidikas-1,
which was completed in 2015 on the Raseiniai licence continued
in 2016 but was terminated in August 2016. The results suggest
that the main target, the Silurian reef, has poor reservoir proper-
ties. Oil is clearly present, but flows have been small and barely
sustainable. During the later part of the test, small, but more sus-
tainable flows, have however been established from the carbonate
‘platform’ below the reef. The presence of live oil within this rock
layer suggests a stratigraphic element. Nearby focus will be on bet-
ter understanding the carbonate layers below the reefal structures
and the extent of the ‘platform’ will be evaluated from seismic.
Tethys Oil has received the data from a 50 kilometres 2D survey
over the Nemunas area in the south of the Raseiniai licence.
The operator has been granted a five year extension to the Raseiniai
license. The remaining commitments will be additional 3D seis-
mic and one well. The license is now valid until September 2022.
Liquidity and financing
Cash and bank and Net cash as per 31 December 2016 amounted
to MUSD 39.0 compared to MUSD 51.2 as per 31 December
2015.
In May 2016 a dividend of SEK 1.00 per share was paid to share-
holders, which in total amounted to MUSD 4.1. Furthermore
MUSD 1.7 was used to repurchase 245,555 shares during the
twelve months ending 31 December 2016.
An extra general meeting (‘EGM) of shareholders was held 25
October 2016 in Stockholm. The EGM resolved to distribute
SEK 3.00 per share through a share redemption programme. The
total value of the distribution amounted to MUSD 11.5. The
redemption programme was completed at the end of November.
During the twelve months ended 31 December 2016, the cash
flow from operations amounted to MUSD 52.7 and investments
in oil and gas amounted to MUSD 48.5. For the twelve months
2016 the cash flow from operations after investments in oil and gas
amounted to MUSD 4.2.
Tethys Oil’s operations on Blocks 3&4, including investment pro-
gramme, are expected to be funded from cash flow from opera-
tions and from available funds.
Tethys Oil’s operations in Lithuania are expected to be funded
from cash flow from operations and available cash in the associ-
ated Lithuanian companies.
Parent company
The Parent company reports a net result after tax for 2016 amount-
ing to MSEK 23.4 compared to MSEK 310.2 for 2015. Adminis-
trative expenses amounted to MSEK 31.3 for 2016 compared to
MSEK 29.2 2015. Net financial result amounted to MSEK 46.6
during 2016 compared to MSEK 372.5 for 2015. The stronger
USD in comparison to SEK is the main reason for the positive
net financial result during the year. The reason behind the strong
net financial result in 2015 was an anticipated dividend from the
wholly owned subsidiary Tethys Oil Block 3&4 Ltd. No such divi-
dend was expected at the end of 2016.
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
42
fulfilled its commitments on Blocks 3&4. 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.
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.
The environment
All oil and gas related operations impact the environment and
therefore entail risk. Directly or indirectly through joint opera-
tions, the Group complies with the environmental legislation and
regulations applicable in each country. Areas which are normally
regulated include air pollution, discharges to watercourses, water
use, handling of hazardous substances and waste, land and ground-
water contamination, and restoration of the environment around
the facilities after operations have ceased. Directly and indirectly
through partnerships, Tethys Oil strives to minimise the environ-
mental impact and avoid the occurrence of accidents.
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.
There have been no significant issues with regard to Health, Safety
and Environment (“HSE”) on any of Tethys Oil’s assets. For more
information, see the section Sustainability.
Board of directors
At the Annual General Meeting (“AGM”)of shareholders on 18
May 2016 Per Brilioth, Magnus Nordin, Dennis Harlin, Kath-
erine Støvring and Geoffrey Turbott were re-elected members of
the board. Richard Rettig was a newly elected director. 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 subsidi-
aries include Tethys Oil Oman Limited, Tethys Oil Block 3&4
Limited, Tethys Oil Denmark AB, Tethys Oil Spain AB, Tethys
Oil France AB and Tethys Oil Exploration AB. 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 16 meetings dur-
ing 2016. 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 for 2017. The six members of the board
have consisted of five non-executive directors. These five non-
executive directors are also members of the audit committee and
the remuneration 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 2017
AGM the adoption of a policy on remuneration for 2017. The
remuneration committee has adopted a policy that fundamentally
will be the proposition to the 2017 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 descrip-
tion on remuneration applied in 2016 and policy on remuneration
as adopted by the remuneration committee, refer to page 27 of
the Corporate Governance report and note 12 of the consolidated
financial statements.
Organisation
At the end of the year, Tethys Oil had an average of 19 (17) full
time employees. Of these, 7 (6) were women. In addition, contrac-
tors and consultants are engaged in Tethys Oil’s operations.
Share data
As per 31 December 2016, 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
amount of shares outstanding as per 31 December 2015. Tethys
Oil has a warrant based incentive programme for employees, for
further information please see note 21. As the subscription price
is below the share price as per the reporting date in this report,
the warrants are included in the diluted number of shares which
amount to 36,232,460 per 31 December 2016.
As per 31 December 2016, Tethys Oil held 1,329,224 of its own
shares which have been purchased since commencement of the
programme during the fourth quarter 2014. 245,555 shares were
purchased during 2016. The repurchased shares are still included
in the total number of shares, but are not included in the average
number of shares in circulation. The weighted average number of
shares in circulation during 2016 before dilution is 34,324,020
and after dilution 34,372,065.
After 31 December 2016 and up to the date of publication for this
report, Tethys Oil has not acquired any further shares.
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 2016, nor for any comparative periods.
Risk and uncertainties
A statement of risks and uncertainties are presented in note 1.
43
Appropriation of profit
The board of directors proposes to the AGM a total distribu-
tion of SEK 1.00 (SEK 1.00) per share, equal to MSEK 34.2
(MSEK 34.5) or MUSD 3.6 (MUSD 3.7), be paid for the 2016
fiscal year. The distribution is proposed to be made by a cash divi-
dend of SEK 1.00 per share. It is also proposed that the balance of
retained earnings after the dividend be retained in the business as
described below.
MSeK
Retained earnings
Profit for the year
245.8
23.4
269.2
The Board of Directors proposes that these earnings be appropriated as follows:
To the shareholders, a distribution of SEK 1.0 per share
To be retained in the business
34.2
235.0
269.2
Cash dividend
The board of directors’ proposal consists of a cash dividend of
SEK 1.00 per share amounting to SEK 34,214,526. The dividend
is subject to approval at the AGM 2017. The preliminary record
day for the dividend is 19 May 2017 and preliminary day of pay-
ment of dividend is 24 May 2017.
As per 31 December 2016, the group’s and the parent compa-
ny’s equity ratio amounted to 82.4 percent and 96.9 percent,
respectively. After the dividend, the group’s and the parent com-
pany’s equity ratio will amount to 82.1 percent and 96.6 percent,
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 statements, balance sheets, cash flow state-
ments, statements of changes in equity and related notes. Bal-
ance sheets and income statements will be resolved at the AGM,
17 May 2017.
44
Consolidated statement of comprehensive income
Financial statements for the group
MUSD
Revenue
Operating expenses
Gross profit
Depletion, depreciation and amortisation
Exploration costs
Share of net profit/loss from associates
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 period
Other comprehensive result
Items that may be subsequently reclassified to profit or loss:
Exchange differences
Other comprehensive result for the period
Total comprehensive result for the period
Attributable to:
Shareholders in the parent company
Non controlling interest
Number of shares outstanding
Number of shares outstanding (after dilution)
Weighted average number of shares (before dilution)
Weighted average number of shares (after dilution)
Earnings per share (before dilution), USD
Earnings per share (after dilution), USD
note
3
9
3, 8
8
6
10–12, 21
13
14
15
17
17
17
17
17
17
2016
87.1
-36.5
50.5
-44.4
-0.1
-0.7
-5.8
-0.5
9.3
-6.2
3.1
2.7
–
2.7
-7.0
-7.0
-4.4
-4.4
–
2015
107.0
-42.9
64.2
-34.7
-1.0
-0.4
-5.2
23.0
7.1
-6.6
0.5
23.5
-0.1
23.4
-3.5
-3.5
19.9
19.9
–
35,543,750
35,543,750
36,232,460
35,543,750
34,324,020
34,964,288
34,372,065
34,964,288
0.08
0.08
0.67
0.67
45
Consolidated balance sheet
MUSD
ASSeTS
non current assets
Oil and gas properties
Office equipment
Investment in associates
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
Reserves
Retained earnings
Total shareholders' equity
non current liabilities
Non current provisions
Loan facility
Current liabilities
Current provisions
Accounts payable
Accrued expenses
Other current liabilities
Total liabilities
note
31 Dec 2016
31 Dec 2015
1 Jan 2015
8
6
16
17
7
18
7
19
191.1
189.1
166.4
0.1
0.3
–
0.1
1.7
0.3
0.2
5.2
–
191.4
191.3
171.8
7.4
1.1
39.0
47.5
9.2
1.9
51.2
62.3
11.4
2.5
47.8
61.7
238.9
253.6
233.5
0.8
71.0
-1.1
126.2
196.8
8.8
–
8.8
1.9
0.2
9.8
21.5
33.3
42.1
0.8
71.0
5.9
139.5
217.2
4.0
–
4.0
–
0.1
20.2
12.1
32.4
36.3
0.8
71.0
9.4
133.1
214.3
3.3
–
3.3
–
0.3
14.5
1.1
15.9
19.2
TOTAL ShARehOLDeRS' eQuITY AnD LIABILITIeS
238.9
253.6
233.5
46
Consolidated statement of changes in equity
MUSD
Share capital
Paid in capital
Other reserves
Retained earnings
Total equity
Attributable to shareholders of the parent company
Opening balance 1 January 2015
0.8
71.0
Comprehensive income
Result for twelve months 2015
Currency exchange differences twelve
months 2015
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
Opening balance 1 January 2016
Comprehensive income
Result for twelve months 2016
Currency exchange differences twelve months
2016
Total comprehensive income
Transactions with owners
Purchase of own shares
Dividends paid
Share redemption
Incentive programme
Total transactions with owners
–
–
–
–
–
–
–
–
0.8
0.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
71.0
71.0
–
–
–
–
–
–
–
–
9.4
–
-3.5
-3.5
–
–
–
–
–
5.9
5.9
–
-7.0
-7.0
–
–
–
–
–
Closing balance 31 December 2016
0.8
71.0
-1.1
133.1
214.3
23.4
–
23.4
-4.9
-4.1
-8.3
0.3
-17.0
139.5
139.5
2.7
–
2.7
-1.5
-3.7
-10.9
0.3
-15.8
126.2
23.4
-3.5
19.9
-4.9
-4.1
-8.3
0.3
-17.0
217.2
217.2
2.7
-7.0
-4.4
-1.5
-3.7
-10.9
0.3
-15.8
196.8
47
Consolidated cash flow statement
MUSD
Cash flow from operations
Operating result
Interest received
Interest paid
Income tax
Adjustment for exploration costs
Adjustment for depletion, depreciation 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
Investment in other fixed assets
Cash from associated companies, net
Cash flow from investment activity
Financing activity
Purchase of own shares
Share redemption
Dividend
Long term credit, net after issue costs
Cash flow from financing activity
Period cash flow
Cash and cash equivalents at the beginning of the period
Exchange gains/losses on cash and cash equivalents
Cash and cash equivalents at the end of the period
note
2016
2015
13
14
8
8
8
6
17
18
-0.5
–
-0.7
–
0.1
45.7
44.7
-1.8
9.8
52.7
-48.5
–
0.1
-48.4
-1.7
-11.5
-4.1
–
-17.4
-13.1
51.2
0.9
39.0
23.0
–
-1.0
-0.1
1.0
32.8
55.7
-8.9
12.3
59.1
-40.8
-0.0
2.8
-38.1
-4.8
-8.5
-4.3
-0.1
-17.7
3.4
47.8
0.0
51.2
48
Parent Company income statement
Financial statements for the parent company
MSEK
Other income
Share of net profit/loss from associates
Administrative expenses
Operating result
Financial income and similar items
Financial expenses and similar items
Write down of shares in subsidiaries
net financial result
Appropriations
Result before tax
Income tax
Result for the year *
note
5
6
10–12, 21
13
14
20
24
15
2016
10.6
-5.6
-31.3
-26.3
85.1
-31.5
-7.0
46.6
3.1
23.4
–
23.4
2015
10.5
-3.2
-29.2
-21.9
410.9
-38.2
-0.2
372.5
-40.4
310.2
–
310.2
* As there are no items in the parent company’s other comprehensive income, no separate report on total comprehensive income is presented.
49
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
Other current liabilities
Accrued expenses
Total liabilities
TOTAL ShARehOLDeRS' eQuITY AnD LIABILITIeS
note
31 Dec 2016
31 Dec 2015
20
6
16
17
19
0.2
1.0
245.2
2.7
249.1
2.8
0.7
104.6
108.1
357.2
5.9
71.1
481.0
-235.2
23.4
346.2
1.5
7.1
2.1
0.2
10.9
357.2
0.3
7.3
126.0
14.8
148.2
0.8
1.5
365.8
368.1
516.6
5.9
71.1
481.0
-396.4
310.2
471.9
0.9
43.2
0.2
0.4
44.8
516.6
50
Parent Company statement of changes in equity
Restricted equity
unrestricted equity
MSEK
Share
capital
Statutory
reserve
Share
premium
reserve
Opening balance 1 January 2015
5.9
71.1
481.0
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
Opening balance 1 January 2016
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
–
–
–
–
–
5.9
5.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
71.1
71.1
481.0
481.0
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
-399.6
147.9
–
–
–
-41,6
-35.2
-70.4
2.5
-144.7
net
result
147.9
-147.9
310.2
310.2
310.2
–
–
–
–
–
-396.4
310.2
-396.4
310.2
–
–
–
-14.6
-34.4
-102.6
2.6
-149.0
310.2
-310.2
23.4
23.4
23.4
–
–
–
–
–
Closing balance 31 December 2016
5.9
71.1
481.0
-235.2
23.4
Total equity
306.3
–
310.2
310.2
310.2
-41.6
-35.2
-70.4
2.5
-144.7
471.9
471.9
–
23.4
23.4
23.4
-14.6
-34.4
-102.6
2.6
-149.0
346.2
51
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
Dividends paid
Share redemption
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
2016
2015
13
14
6
17
-26.3
0.0
–
9.5
–
-16.8
-1.2
-33.9
-51.9
6.4
-71.9
–
–
-65.6
-14.6
-34.4
-102.6
-151.7
-269.2
365.8
8.0
104.6
-21.9
4.1
–
-34.5
350.0
297.7
207.5
38.3
543.5
22.8
-61.1
-0.1
-2.5
-40.8
-41.6
-35.2
-70.4
-147.1
355.6
14.7
-4.5
365.8
52
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.
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
earlier application is permitted. The group is assessing the impact of IFRS
15 and at present does not expect any material effect on the group financial
reporting apart from possible changes in presentation.
These consolidated financial statements have been approved for issue by
the board of directors on 18 April 2017.
Basis of preparation
The annual report of Tethys Oil AB/the Group have been prepared in accord-
ance with prevailing International Financial Reporting Standards (IFRS) and
IFRS Interpretations Committee (IFRIC) interpretations adopted by the EU
Commission and the Swedish Annual Accounts Act (1995:1554). In addi-
tion RFR 1 “Supplementary Rules for Groups” has been applied as issued
by the Swedish Financial Reporting Board.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 2.
The consolidated financial statements have been prepared under the his-
torical cost basis except as disclosed in the accounting policies below.
Accounting principles
The accounting principles applied in the preparation of these consolidated
financial statements are set out below. The same accounting principles
were used in the Annual report 2015 and have been consistently applied to
all the years presented. 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”.
New accounting principles for 2016
IASB has issued several amendments to financial standards effective as
from 1 January 2016 of which no one has had any material impact on the
consolidated financial statements of the Group.
IAS 21 allows financial reporting in currencies other than Swedish kronors
(SEK), for Swedish groups. Tethys Oil’s board of directors have decided to
adopt USD as the reporting currency for the Group in order to improve the
understanding of Tethys Oil’s financial reporting and to increase transpar-
ency. See page 54 for details.
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 15, ‘Revenue from contracts with customers’ deals with revenue rec-
ognition and establishes principles for reporting useful information to users
of financial statements about the nature, amount, timing and uncertainty
of revenue and cash flows arising from an entity’s contracts with custom-
ers. Revenue is recognised when a customer obtains control of a good or
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 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 Janu-
ary 2019. Early adoption is permitted. The EU has not yet adopted the
standard. The standard will primarily impact the accounting of the group’s
operational leases. At present the group only has leases for office rent and
other leases concerning items of lesser value, such as copying machines.
Considering the few leases in the group, the preliminary assessment is that
the standard will have no material impact on the group.
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the Group.
Principles of consolidation
Subsidiaries are all entities (including structured entities) over which the
group has control. The Group controls an entity when the group is exposed
to, or has rights to variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity. Sub-
sidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for busi-
ness combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the group. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabili-
ties assumed in a business combination are measured initially at their
fair values at the acquisition date. On an acquisition-by-acquisition basis,
the group recognises any non-controlling interest in the acquiree either at
fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net assets.
53
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also elimi-
nated. Accounting policies of subsidiaries have been changed where neces-
sary to ensure consistency with the policies adopted by the Group.
Joint arrangements
Under IFRS 11 Joint Arrangements investments in joint arrangements
are classified as either joint operations or joint ventures. The classifica-
tion depends on the contractual rights and obligations of each investor,
rather than the legal structure of the joint arrangement. Tethys Oil has joint
operations.
Joint operations
Tethys Oil recognises its direct right to the assets, liabilities, revenues and
expenses of joint operations and its share of any jointly held or incurred
assets, liabilities, revenues and expenses. These have been incorporated
in the financial statements under the appropriate headings. The Group con-
ducts oil- and gas operations as a joint operation that does not have a
separate legal entity status through licenses which are held jointly with
other companies. The Groups financial statements reflect the Groups share
of production, capital costs, operational costs, current assets and liabilities
in the joint operations.
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 percent but not more than
50 percent 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 acquisi-
tion cost of shares in an associated company and the net fair value of the
assets, liabilities and contingent liabilities of the associated company rec-
ognised 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 accumu-
lated share of losses in an associated company equals or exceeds its
interest in the associated company, the Group does not recognise further
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 US dollars (USD) which is the currency the
Group has elected to use as the presentation currency.
New financial reporting currency
IAS 21 allows financial reporting in currencies other than Swedish kronors
(SEK), for Swedish groups. Tethys Oil’s board of directors have decided
to adopt USD as the reporting currency for the Group in order to improve
the understanding of Tethys Oil’s financial reporting and to increase trans-
parency. As a consequence recalculations have been made for non-USD
reporting entities with, the comparative figures translated into USD whereby
assets and liabilities are translated at the closing rate at the date of that
balance sheet and income and expenses are translated at the exchange
rates at the dates of the transactions. Share capital and additional paid in
capital has been recalculated using the balance day rate at 31 December
2014. Retained earnings are translated against historical year end rates.
As a consequence a redistribution between retained earnings and reserves
has taken place. The financial reporting in USD has commenced as from
1 January 2016. The parent company will continue to use SEK as financial
reporting 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 2016
31 December 2015
Currency
2016 Average
2016 Period end
2015 Average
2015 Period end
SEK/USD
SEK/EUR
SEK/CHF
8.63
9.52
8.75
9.42
9.80
9.17
8.45
9.42
8.80
8.51
9.30
8.60
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
54
case of assets whose useful lives differ from the lifetime of the field, in
which case the straight-line method is applied.
classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets
at initial recognition.
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 percent probability that the quantities actually
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 percent 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 8 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
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.
Financial assets and liabilities carried at fair value through profit or loss
are both initially and subsequently recognised at fair value, and transaction
costs are expensed in the income statement.
B) Receivables and other receivables
Receivables and other receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than 12
months after the end of the reporting period. These are classified as non-
current assets. The group’s receivables comprise ‘trade and other receiva-
bles’ and ‘cash and cash equivalents’ in the balance sheet. Receivables
and other receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. Assets
are also measured less provision for impairment.
C) Other liabilities
Other liabilities are non-derivative financial liabilities with fixed or determi-
nable payments that are not quoted in an active market. They are included
in current liabilities, except for maturities greater than 12 months after the
end of the reporting period. These are classified as non-current liabilities.
Other liabilities are recognised initially at fair value and subsequently meas-
ured at amortised cost using the effective interest method.
D) Impairment of financial assets
The group assesses at the end of each reporting period whether there
is objective evidence that a financial asset or group of financial assets
is impaired. A financial asset or a group of financial assets is impaired
and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss event (or events) has
an impact on the estimated future cash flows of the financial asset or group
of financial assets that can be reliably estimated. For loans and receivables
category, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) dis-
counted at the financial asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is recognised in
the consolidated income statement.
Fixed assets other than oil and gas
Other tangible fixed assets are stated at cost less accumulated depre-
ciation. Depreciation is based on cost and is calculated on a straight line
basis over the estimated economic life of 3 to 5 years for office equipment
and other assets.
Additional costs to existing assets are included in the assets’ net book
value or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably.
55
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 properties, 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 prospectively 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&4, being Tethys Oil’s main and only producing oil and gas prop-
erty, is governed by an Exploration and Production Sharing Contract (EPSA).
Under the EPSA, revenues are derived from cost recovery oil and gas and
profit oil and gas. Cost recovery oil and gas allows Tethys Oil to generally
recover all investments and operating expenses (CAPEX and OPEX). Profit
oil and gas is allocated to the host government and contract parties in
accordance with their respective equity interests.
Other
Incidental revenues from the production of oil and gas are offset against
capitalised costs of the related cost centre until quantities of proven and
probable reserves are determined or commercial production has com-
menced. Service income, generated by providing technical and manage-
ment services to joint operations, is recognised as other income.
Income taxes
Presented income taxes include tax payable or tax receivable for the report-
ing period, adjustments in regard to previous year’s taxes and changes in
deferred tax.
Valuations of all tax liabilities/claims is in nominal amounts and are pre-
pared in accordance with tax legislation and tax rates decided or announced
and at which they are likely to be resolved.
The tax expense for the period comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it relates
to items recognised in other comprehensive income or directly in equity.
In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively. Deferred income tax is recognised, using the
liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated finan-
cial statements. Deferred income tax assets are recognised only to the
extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Employee benefits
Short-term employee benefits such as salaries, social premiums and holi-
day pay, are expensed when incurred.
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.
Share based incentive programme
Equity-settled share based payments are recognized in the income state-
ment as administrative expenses and as equity in the balance sheet. The
option is measured at fair value at the date of grant using the Black &
Scholes options pricing model and is charged to the income statement
without revaluation of the value of the option.
Severance pay
Severance pay is payable when employment is terminated by the Group
before the normal retirement date, or whenever an employee accepts volun-
tary redundancy in exchange for the severance pay. The Group recognises
severance pay when it is demonstrably committed to either: terminating
the employment of current employees according to a detailed formal plan
without possibility of withdrawal; or providing severance pay as a result
of an offer made to encourage voluntary redundancy. Benefits falling due
more than 12 months after the balance sheet date are discounted to their
present value.
Related party transactions
Tethys Oil recognises the following related parties: associated companies,
jointly controlled entities, members or the family of the key management
personnel or other parties that are partly, directly or indirectly, controlled by
key management personnel or of its family or of any individual that controls,
or has joint control or significant influence over the entity.
56
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.
Financial instruments
Assets and liabilities are recognised initially at fair value plus transaction
costs and subsequently measured at amortised cost unless stated other-
wise. Financial assets are derecognised when the rights to receive cash
flows from the investments have expired, or have been transferred and the
Group has transferred substantially all risks and rewards of ownership. IAS
39 is not applied.
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.
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.
Group contributions
The parent company uses the alternative method in accounting for group
contributions and records paid as well as received contributions as appro-
priations in the income statement.
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.
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 among 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 depend-
ence 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 differ-
ent parts of Tethys Oil’s operations. The main operational risk in exploration
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 2016.
Tethys Oil’s has a flexible approach towards oil price hedging, based on
an assessment of the benefits of the hedge contract in specific circum-
stances. Based on analysis of the circumstances Tethys Oil will assess the
benefits of forward hedging sales contracts for the purpose of establishing
a secured cash flow. If Tethys Oil believes that the hedging contract will
provide an enhanced cash flow or if the risk of not being able to meet
investment commitments is high, then Tethys Oil may choose to enter into
an oil price hedge.
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 result, cash flow
and equity. The major proportion of the Group’s assets relate to interna-
tional oil and gas discoveries valued in USD and which generate revenues
in USD. During 2016, all of Tethys Oil’s oil sales and operative expenditures
were denominated in USD. The exchange risk affect the Group by transac-
tion 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. Tethys Oil further holds bank accounts denominated in foreign
currencies and is exposed to fluctuations in exchange rates. Presented
below is the exposure to currencies with reference to items in the financial
statements:
2016
100% in USD
99% in USD
No
2015
100% in USD
99% in USD
No
Net result in financial statements (MUSD)
Shift in oil price (USD/barrel)
2.7
+5
Revenue
Investments
2.7
-5
External financing at year end
Total effect on net result (MUSD)*
+11.8
-11.8
* Excluding over-/underlift
Access to equipment
An operational risk factor is access to equipment in Tethys Oil’s project.
Especially in the drilling/development phase of a project the group is
dependent on advanced equipment such as rigs, casing, pipes etc. A short-
age of theses supplies can present difficulties for Tethys Oil to fulfil pro-
jects. Limited access to drilling rigs has in the past led to cost increases
and has in part been the cause of project delays.
Tethys Oil does not currently hedge exchange rates. The Group’s policy is
to hold a large portion of liquidity in USD to reduce the exchange rate risk.
Translation risk
Exchange-rate changes affect the Group in conjunction with the translation
of the income statements of group entities to USD as the Group’s operat-
ing profit is affected and when net assets are translated into USD which
can negatively affect the Group’s operating profit and statement of financial
position. The parent company has issued loans to its subsidiaries denomi-
57
nated in USD and exchange rate changes impact the income statement of
the parent company. The Group does not hedge its translation exposure
and fluctuating currency rates might negatively affect the operating profit
and financial position of the Group.
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 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 and resources
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 and
resources are used in the calculations for impairment tests, in-house mod-
eling and accounting for depletion and site restoration. Changes in esti-
mates in oil and gas reserves and resources, resulting in different future
production profiles, will affect the discounted cash flows used in impairment
testing, the anticipated date of site decommissioning and restoration and
the depletion charges in accordance with the unit of production method.
Investments in associated companies
The Group determines if the carrying value for investments in associated
companies has suffered any impairment where any objective evidence
of impairment exists. Objective evidence could for example come from
reserve report updates, production reports and other third party studies
of the asset. This assessment is performed to identify where the carry-
ing value exceeds its recoverable amount. The recoverable amounts have
been determined based on value in use calculations. Assessments used
in these calculations include judgement of the future cash flows, discount
rates and exchange rates.
Site restoration provision
Amounts used in recording a provision for site restoration are estimates
based on current legal and constructive requirements and current technol-
ogy and price levels for the removal of facilities and plugging and abandon-
ing of wells. Due to changes in relation to these items, the future actual
cash outflows in relation to the site decommissioning and restoration can
be different. To reflect the effects due to changes in legislation, require-
ments and technology and price levels, the carrying amounts of site resto-
ration provisions are reviewed on a regular basis. The effects of changes
in estimates do not give rise to prior year adjustments and are treated pro-
spectively over the estimated remaining commercial reserves of each field.
While the Group uses its best estimates and judgement, actual results
could differ from these estimates.
Impairment of oil and gas properties
The Group annually tests, on a field by field basis, oil and gas properties to
determine that the net book amount of capitalized costs within each field
less royalties and deferred production or revenue related taxes is covered
by the anticipated future net revenue from oil and gas reserves attributable
to the Group’s interest in related fields (note 8). The Group has used its
judgement and made assumptions e.g. future oil prices, discount rates and
reserves and resources 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 15).
Net result in financial statements (MUSD)
Shift in SEK/USD
Total effect on net result (MUSD)
2.7
+10%
4.1
2.7
-10%
-4.2
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 bank loans 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. Tethys Oil continuously
ensures that sufficient cash balances are maintained in order to cover day
to day operations. Management relies on cash forecasting to assess the
Company’s cash position (including available amounts from lending facility)
based on expected future cash flows.
Fall due profile on Tethys Oil’s
financial liabilities
31 December 2016
31 December 2015
MUSD
<1 year
1–3 year
<1 year
1–3 year
Accounts payables and other
liabilities
Total
21.7
21.7
–
–
12.2
12.2
–
–
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 2016 the Group’s receivables on oil sales amounted
to MUSD 7.1 (MUSD 7.5), 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.
Fair value
IAS 39 valuation categories and related balance sheet items
31 December 2016
Financial assets and
liabilities at fair value
Financial
assets at
Financial
liabilities at
MUSD
through profit or loss
amortised cost
amortised cost
Other receivables
Cash and bank
Accounts payables
Other current liabilities
–
–
–
–
7.4
39.0
–
–
31 December 2015
–
–
0.2
21.5
Financial assets and
liabilities at fair value
Financial
assets at
Financial
liabilities at
MUSD
through profit or loss
amortised cost
amortised cost
Other receivables
Cash and bank
Accounts payables
Other current liabilities
–
–
–
–
9.2
51.2
–
–
–
–
0.1
12.1
All financial assets and liabilities are current and the fair value of these
are deemed to be the carrying amount as the discounting effects are not
material.
58
Note 3, Segment information
The Group’s accounting principle for segment describes that operating
segments are based on geographic perspective and reported in a manner
consistent with the internal reporting which is primarily based on income
statement ratios and provided to the executive management, which is con-
sidered to be the chief operating decision maker. Previous years, the com-
pany’s chief operating decision maker has been considered to be the board
of directors. There have been no changes to the operating segments due
to the change of operating decision maker. The operating result for each
segment is presented below. Revenue and income relate to external (non-
intra group) transactions.
MUSD
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
MUSD
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
Oman
87.1
-36.5
-44.4
–
–
–
-1.7
4.5
Oman
107.0
-42.9
-34.6
-1.0
–
–
-1.7
26.8
Group income statement Jan–Dec 2016
Lithuania
Sweden
Other
–
–
–
–
–
-0.7
–
-0.7
–
–
–
–
–
–
-3.6
-3.6
–
–
–
-0.1
–
–
-0.4
-0.5
Group income statement Jan–Dec 2015
Lithuania
Sweden
Other
–
–
–
–
–
-0.4
–
-0.4
–
–
–
–
–
–
-3.4
-3.4
–
–
–
–
–
–
-0.1
-0.1
Total
87.1
-36.5
-44.4
-0.1
–
-0.7
-5.8
-0.5
3.1
2.7
–
2.7
Total
107.0
-42.9
-34.7
-1.0
–
-0.4
-5.2
23.0
0.5
23.5
-0.1
23.4
As per 31 December 2016 (and comparative periods) in Tethys Oil, the only
oil producing area is Oman, from which net sales are recorded. Revenue,
operating expenses and depletion, which is presented in notes 4, 8 and 9,
therefore only relate to Oman and Blocks 3&4 in particular.
Regarding Oil and gas properties, segment reporting is provided in note
8. Please refer to note 3 regarding Credit risk exposure on accounts
receivables.
Note 4, Revenue
MUSD
Net sales,
Underlift (overlift)
Overlift adjustment Export
Reporting Error
Revenue
2016
95.4
-2.4
-5.9
87.1
2015
104.9
2.2
–
107.0
2016 includes an overlift adjustment of MUSD 5.9 following the estimated
effects of a export reporting error on Blocks 3&4 (the “Export Reporting
Error”), which occurred during the period August 2010 to February 2016.
Tethys Oil estimates that its share of the overestimated volume of oil
amounts to 157,000 barrels (before government take). To rectify the over-
reported quantity of delivered oil, the Blocks 3&4 partners have agreed with
the pipeline operator and the Ministry of Oil and Gas to repay the over-lifted
amount in cash. Tethys Oil estimates, that Tethys Oil’s share of the cash
repayment, will amount to approximately MUSD 5.9, which consequently
will reduce Tethys Oil’s 2016 revenue and result with that amount.
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&4 and are made
on a monthly basis. The selling price is the monthly average of the two
month future price for Omani blend.
Note 5, Other income
Parts of the administrative expenses in Tethys Oil, such as overhead costs
in the Parent company, are charged to oil and gas projects where the expen-
ditures are capitalised. Other income in the Parent company during 2016
amounted to MSEK 10.6 compared to MSEK 10.5 in 2015. 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 con-
solidated financial statements. Tethys Oil is as per 31 December 2016 not
operator in any of its licences.
59
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 2016.
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%
MUSD
1 January
Tethys Oil’s share of net profit from associated companies
Dividend from associated companies
Exchange differences
Balance end of period
31 Dec 2016
31 Dec 2015
1.7
-0.7
-0.7
–
0.3
5.2
-0.4
-2.7
-0.4
1.7
Note 7, Provisions
Tethys Oil estimates that Tethys Oil’s share of site restoration regarding
Blocks 3&4 amounts to MUSD 4.8 (4.0). As a consequence of this provi-
sion, oil and gas properties have increased with an equal amount. The
change in the provision is related to a more detailed calculation of the site
restoration provision affecting the provision’s net present value.
Tethys Oil has a non-current provision of MUSD 4.0 from of the estimated
total error amount of MUSD 5.9 from the Export Reporting Error on Blocks
3&4. Tethys Oil also has a current provision of 1.9 MUSD related to the
Export Reporting Error.
MUSD
1 January 2016
Additions
Changes in estimates
Unwinding of discount
31 December 2016
Current
Non-current
Total
Abandonment provision
Other provisions
MUSD
Abandonment provision
Other provisions
4.0
–
0.5
0.3
4.8
–
4.8
4.8
–
1 January 2015
5.9
Additions
–
–
5.9
1.9
4.0
5.9
Changes in estimates
Unwinding of discount
31 December 2015
Current
Non-current
Total
3.3
–
0.5
0.2
4.0
–
4.0
4.0
–
–
–
–
–
–
–
–
Note 8, Oil and gas properties
Country
Licence name
Phase
Expiration date
commitments
Tethys Oil
Partners (operator in bold)
Remaining
Blocks 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 2022
MEUR 1.2
25%
30%
30%
Odin, GeoNafta, Tethys Oil
Odin, Tethys Oil, private investors
Odin, Tethys Oil, private investors
31 Dec 2016
31 Dec 2015
190.8
0.3
191.1
189.1
–
189.1
Oman
France
France
Lithuania
Lithuania
Lithuania
MUSD
Attila
Alès
Gargzdai3
Rietavas3
Raseiniai3
Producing cost pools
Non-producing cost pools
Total oil and gas properties
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. Discussions regarding the future of the French licences are ongoing.
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
percent 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.
60
MUSD
Book value
adjustments
1 Jan–31 Dec
1 Jan–31 Dec
Other non–cash
DD&A
Exploration costs
Investments
1 Jan–31 Dec
Country
Asset type
31 Dec 2016
1 Jan–31 Dec 2016
Oman Blocks 3&4
Producing
190.8
-2.1
-2.1
-44.4
Book value
adjustments
1 Jan–31 Dec
1 Jan–31 Dec
Other non–cash
DD&A
Exploration costs
Investments
1 Jan–31 Dec
–
–
–
–
–
–
–
–
Oman Block 15
Non-producing
France Attila
Non-producing
France Alès
Non-producing
New ventures
Non-producing
Total
MUSD
–
–
–
0.3
191.1
Country
Asset type
31 Dec 2015
1 Jan–31 Dec 2015
Oman Blocks 3&4
Producing
189.1
17.6
Oman Block 15
Non-producing
France Attila
Non-producing
France Alès
Non-producing
New ventures
Non-producing
Total
–
–
–
0.1
189.1
Impairment testing
In Tethys Oil’s impairment testing, the Company uses its best efforts to
estimate production profiles, general cost and development environment.
To calculate future free cash flows, the forward oil price as traded in the
market as per 31 December 2016 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 2016
or 2015.
Exploration costs during 2016 amounted to MUSD 0.1 and were mainly
related to new venture projects which were rejected or no longer pursued.
Exploration costs during 2015 amounted to MUSD 1.0 and were mainly
related to Block 15 as the project was terminated during the year.
2016
-44.4
–
–
–
–
2015
-34.6
–
–
–
–
2016
–
–
–
–
-0.1
-0.1
2016
48.2
–
–
–
0.3
48.5
2015
–
-1.0
–
–
–
-1.0
2015
40.7
–
–
–
0.1
40.7
Book value
1 Jan 2016
189.1
–
–
–
0.1
189.1
Book value
1 Jan 2015
165.4
1.0
–
–
–
166.4
17.6
-34.6
Note 9, Operating expenditures
Operating expenditures
Production costs
Well workovers
Total
Group MUSD
Parent MSEK
2016
-33.5
-3.1
-36.5
2015
-38.4
-4.5
-42.9
2016
2015
–
–
–
–
–
–
Note 10, Remuneration to Company auditor
Group MUSD
Parent MSEK
Remuneration to company audi-
tor include:
2016
2015
2016
2015
MUSD
Investments Block 3&4
Categories
Drilling – Exploration/Appraisal
Drilling – Development
G&G
Facilities
Pipeline
Other capex
Total
MUSD
2016
-2.4
-25.5
-4.1
-10.7
-1.6
-3.9
-48.2
PwC:
Audit fee
Audit-related fees
Tax consultation
Other
Total
2015
-4.8
-14.4
-8.4
-7.6
-2.9
-2.6
-40.7
-0.1
-0.1
0
–
–
0
–
–
-1.0
-0.2
–
–
-1.0
-0.2
–
–
-0.1
-0.1
-1.2
-1.2
Note 11, Administrative expenses
Group MUSD
Parent MSEK
Administrative expenses
2016
2015
Personnel costs
Rent
Other office costs
Listing costs
Costs of external relations
Other costs
Total
-3.5
-0.3
-0.1
-0.1
-0.1
-1.7
-5.8
-2.9
-0.3
-0.3
-0.1
-0.1
-1.5
-5.2
2016
-16.5
-1.8
-0.5
-0.8
-1.1
-10.5
-31.3
2015
-13.7
-1.7
-1.6
-1.0
-1.0
-10.2
-29.2
Oil & gas properties Block 3&4
Categories
31 Dec 2016
31 Dec 2015
Drilling – Exploration/Appraisal
Drilling – Development
G&G
Facilities
Pipeline
Tethys Oil sole cost
Other capex
Accumulated depreciation
Total
37.8
107.9
38.2
83.1
22.1
5.1
35.4
-138.9
190.8
35.3
80.9
33.8
71.8
20.4
4.5
36.9
-94.5
189.1
61
Note 12, Employees
Average number of full time
2016
2015
employees per country
Total
Total men
Total
Total men
Parent company
Sweden
Total parent company
Subsidiary companies in Sweden
Subsidiary companies foreign
Oman
United Arab Emirates
Total subsidiary companies foreign
Total group
7
7
–
10
2
12
19
5
5
–
7
1
8
13
6
6
–
9
2
11
17
4
4
–
6
1
7
11
Salaries and other
remuneration to
Pension
Share based
executive management
Basic
arrange-
Variable
long term
Other
during 2016, MSEK
salary
ments
Salary
incentive*
benefits
Total
2016
Managing director
-2.082
-0.443
-0.340
-1.288
-0.012
-4.164
Other executive manage-
ment
-3.080
-0.485
-0.454
-1.584
-0.241
-5.844
Total
-5.162
-0.928
-0.794
-2.872
-0.253 -10.008
Salaries and other
remuneration to
Pension
Share based
executive management
Basic
arrange-
Variable
long term
Other
during 2015, MSEK
salary
ments
Salary
incentive*
benefits
Total
2015
Managing director
-1.733
-0.324
-0.405
-1.413
-0.011
-3.886
Other executive manage-
ment
-2.217
-0.432
-0.405
-1.397
-0.023
-4.474
TSEK
2016
2015
Total
-3.950
-0.756
-0.810
-2.810
-0.034
-8.360
Salaries,
other
remune-
ration
Salaries,
other
Social
remune-
costs
ration
Social
costs
* Received warrants from the incentive programme in 2016 has been for the managing
director 70,000 (78,000) and Other executive management 87,000 (78,000) totaling
157,000 (156,000). See note 21 for further details.
Salaries, other remuneration
and social costs
Parent company
Sweden
Total parent company
Subsidiary companies in Sweden
Subsidiary companies foreign
Oman
United Arab Emirates
Total subsidiary companies foreign
Total group
-1.4
-1.4
-1.3
-0.3
-1.6
-3.1
-0.4
-0.4
–
–
–
-0.4
-1.2
-1.2
-1.0
-0.3
-1.3
-2.5
-0.4
-0.4
–
–
–
-0.4
TSEK
2016
2015
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
-0.5
-0.5
–
–
–
–
Total group
-0.5
-0.9
-0.9
–
-1.3
-0.3
-1.6
-2.6
-0.5
-0.5
–
–
–
–
-0.5
-0.7
-0.7
–
-1.0
-0.3
-1.3
-2.0
The average number of full time employees in the group is currently 19.
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.
Executive management consists of three members of which the managing
director is one.
In 2016 and 2015 one woman has been a member of the board of directors
and no women have been members of the executive management.
MSEK
Salaries and other remunera-
tion to board members (in their
Remune-
capacity as board members)
Salaries
ration
Total
2016
Total
2015
Atten-
dance
2016
Per Brilioth
Dennis Harlin
Staffan Knafve
Magnus Nordin
Jan Risberg
Katherine Støvring
Geoffrey Turbott
Richard Rettig
Total
–
–
–
–
–
–
–
–
–
-0.250
-0.250
-0.225
13/16
-0.560
-0.560
–
16/16
–
–
–
–
–
–
-0.500
–
–
16/16
-0.250
–
-0.250
-0.250
-0.225
15/16
-0.250
-0.250
-0.250
-0.250
–
–
16/16
8/9
-1.560
-1.560
-1.200
At the Annual General Meeting of shareholders on 18 May 2016 Per Brili-
oth, Magnus Nordin, Dennis Harlin, Katherine Støvring and Geoffrey Turbott
were re-elected members of the board. Richard Rettig was a newly elected
director. 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.
Remuneration policy to executive management
Remuneration policy to the executive management includes five elements:
• Basic salary
• Pension arrangements
• Yearly variable salary, including the right to participate in share-based
long-term incentive
• Other benefits
• Severance pay
Basic salary
The basic salary shall be in line with market conditions, be competitive,
and shall take into account the scope and responsibility associated with
the position, as well as the skills, experience, and performance of the
executive.
Pension arrangements
The pension benefits comprise a defined contribution scheme with premi-
ums calculated on the full basic salary. The pension contributions shall be
in relation to the basic salary and is set on an individual basis but shall not
be higher than what is tax deductible.
62
Variable salary
Senior executives shall be part of two variable remuneration systems pay-
able in cash and/or in combination with a right to acquire warrants in the
Company in a long-term incentive programs. Variable salary to employees
will be based upon their individual contribution to the Company’s perfor-
mance. The yearly variable cash salary shall be within the range of 1-4
monthly salaries per person and year. The targets for variable cash remu-
neration shall be determined by the board prior to each financial year and
individual agreements shall be arranged with each participant, the content
of which depends on the participant’s position at the time the agreement is
arranged. The targets shall be objectively quantifiable and related to budget.
The targets shall consist of financial and operational key indicators. The
yearly variable salary will be determined annually in connection with publi-
cation of the year-end report for the respective financial year based on an
evaluation of the participants’ achievement of the targets as described in
the individual agreements. Payment of variable cash remuneration shall be
conditional upon the participant remaining employed for the duration of the
programme. The board has the right to adjust the incentive program dur-
ing the term of the programme in the case of, for example, extraordinary
increases or decreases in the group’s earnings.
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 annually.
Other benefits
Non-financial benefits shall be based on market terms and shall facilitate
the duties of each senior executive.
Severance arrangements
A termination period of twelve months applies between the Company and
managing director and nine months between the company and other mem-
bers 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.
Note 13, Financial income and similar items
Interest income
Gain on currency exchange rates
Other financial income
Anticipated dividend
Total
Group MUSD
Parent MSEK
2016
2015
2016
2015
–
9.1
0.3
–
9.3
–
7.0
0.2
–
7.1
9.0
73.7
2.4
–
85.1
4.1
55.3
1.5
350.0
410.9
Note 14, Financial expenses and similar items
Interest expenses
Currency exchange losses
Other financial expenses
Total
Group MUSD
Parent MSEK
2016
2015
2016
2015
-0.6
-3.8
-1.8
-6.2
-1.0
-4.4
-1.2
-6.6
–
-31.2
-0.3
-31.5
–
-35.7
-2.5
-38.2
Note 15, Tax
The group’s income tax charge amount to MUSD 0.0 (MUSD 0.1). The com-
pany 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 prof-
its are generated. Tax losses carried forward amounted to MSEK 200.7
(MSEK 234.5). There are no time limits to the utilization of the tax losses.
The tax on the Parent company’s result before tax differs from the theoreti-
cal amount that would arise using the Swedish tax rate as follows:
Parent MSEK
Result before tax
Tax at applicable tax rate 22%
Non-deductible expenses
Non-taxable income
Utilization of tax loss carry forwards previously not recorded as deferred tax assets
Tax expense
2016
23.4
-5.1
-3.1
0.5
7.7
0.0
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.
Note 16, Other receivables
Other receivables
2016
2015
2016
2015
Group MUSD
Parent MSEK
VAT
Receivables Oil sales
Other
Total
0.1
7.1
0.3
7.4
0.1
7.5
1.6
9.2
2.7
–
0.2
2.8
0.6
–
0.2
0.8
Note 17, Shareholders’ equity
As per 31 December 2016, the number of outstanding shares in Tethys
Oil amount to 35,543,750, with a quota value of SEK 0.17. All shares rep-
resent one vote each. The Company has the same amount of shares out-
standing as per 31 December 2015. Tethys Oil has a warrant based incen-
tive programme for employees, for further information please see Note 21.
As the subscription price is below the share price as per the reporting date
in this report, the warrants are included in the diluted number of shares
which amount to 36,232,460 per 31 December 2016.
As per 31 December 2016, Tethys Oil held 1,329,224 of its own shares
which have been purchased since commencement of the programme during
the fourth quarter 2014. 245,555 shares were purchased during 2016.
The repurchased shares are still included in the total number of shares,
but are not included in the average number of shares in circulation. The
weighted average number of shares in circulation during 2016 before dilu-
tion is 34,324,020 and after dilution 34,372,065.
After 31 December 2016 and up to the date of publication for this report,
Tethys Oil has not acquired any further shares.
63
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 1,329,224 have
been excluded from shares in circulation.
Earnings per share after 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 while also including the effect of warrants where the subscription price
is below the share price. There are no dilution effects for 2015.
Appropriation of profit
The Board of Directors proposes to the annual general meeting a total
distribution of SEK 1.00 (SEK 1.00) per share, equal to MSEK 34.2 (MSEK
34.5) or MUSD 3.6 (MUSD 3.7), be paid for the 2016 fiscal year. The distri-
bution is proposed to be made by a cash dividend of SEK 1 per share. It is
also proposed to the annual general meeting that the balance of retained
earnings after the dividend be retained in the business.
Note 18, Non-current liabilities
Tethys Oil has a four-year, up to MUSD 38, senior revolving reserve based
lending facility. Security for the facility is the interest in the Blocks 3&4
licence. The interest rate of the credit facility is floating between LIBOR +
3.75 percent to LIBOR + 4.00 percent per annum, depending on the level of
utilization of the facility. As per 31 December 2016 there was no outstand-
ing balance on the lending facility.
Note 19, Accrued expenses
Accrued expenses
2016
2015
2016
2015
Group MUSD
Parent MSEK
Accruals related to oil and gas
operations
Other accrued expenses
Total
9.7
0.1
9.8
19.8
0.4
20.2
–
0.2
0.2
–
0.4
0.4
Note 20, Shares in subsidiaries
Reg. Number
556658-1467
556658-1442
556658-1913
556658-1483
556658-1491
556788-2872
95212
101981
549 282
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
Windsor Petroleum (Spain) Inc.
MSEK
Shares in subsidiaries
1 January
Acquisitions/Relinquishments
Shareholder’s contribution
Write down of shares in subsidiaries
31 December
Reg. office
Number of shares
Percentage
per share
Nominal value
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
Gibraltar
Gibraltar
British Virgin Islands
1,000
1,000
1,000
1,000
1,000
1,000
100
1,000
1
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
USD 1
Parent
Parent
31 December 2016
31 December 2015
7.3
-6.4
0.4
-0.4
1.0
1.5
2.4
3.5
-0.1
7.3
The write down of shares in group companies is mainly related to the exploration costs in various group entities described in note 8.
64
Note 21, Incentive programme
Tethys Oil has an incentive programme as part of the remuneration pack-
age to employees. The allocation is not guaranteed and the board of direc-
tors of the Company shall resolve on and implement the allocation. The
warrants have been transferred free of charge to the participants and the
group accounts for any income tax for the participants to the extent such
tax is attributable to the programme. The market value of the warrants has
been calculated in accordance with the Black & Scholes formula by an
independent valuation institution. The subscription price is based on the
volume-weighted average of the purchase price for the Company’s share on
NASDAQ OMX Stockholm during approximately a two week period prior to
the date of allocation.
Warrants were issued 2016 and 2015 following a decision by the respec-
tive AGM. The number of issued warrants during 2016 was 350,000
(356,000) and the number of warrants allocated during 2016 was 335,000
(312,000). Issued but not allocated warrants are held by the company.
No warrants were exercised during the year.
Warrant incentive
programme
Exercise period
2015 incentive programme
23 May – 5 Oct, 2018
2016 incentive programme
28 May – 4 Oct, 2019
Subscription
price, SEK
76,8
62,6
Total
Number of warrants
1 Jan 2016
Issued 2016
Expired 2016
Exercised 2016
31 Dec 2016
356,000
0
356,000
0
350,000
350,000
0
0
0
0
0
0
356,000
350,000
706,000
Warrant incentive
programme
Exercise period
Subscription
price, SEK
2015 incentive programme
23 May – 5 Oct, 2018
76,8
Total
Number of warrants
1 Jan 2015
Issued 2015
Expired 2015
Exercised 2015
31 Dec 2015
0
0
356,000
356,000
0
0
0
0
356,000
356,000
Group MUSD
Parent MSEK
Warrant incentive programme
2016
2015
2016
2015
Incentive programme cost
Total
-0.7
-0.7
-0.6
-0.6
-4.6
-4.6
-4.2
-4.2
Note 22, Pledged assets
As per 31 December 2016, pledged assets amounted to MUSD 173.2
(213.0). 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, MUSD 0.1 (0.1) relate to a pledge in relation to office
rental in the parent company.
Note 23, Contingent liabilities
There are no outstanding contingent liabilities as per 31 December 2016,
nor for the comparative period.
Note 24, Appropriations
Parent (MSEK)
Paid group contributions
Received group contributions
Total
2016
–
3.1
3.1
2015
-41.6
1.2
-40.4
As the subscription price is below the share price as per 31 December
2016, the warrants are included in the diluted number of shares which
amount to 36,232,460 on the balance day and in the diluted average num-
ber of shares in circulation during the fourth quarter ending 31 December
2016 of 34,405,662. The cost is calculated in accordance with the Black
& Scholes formula where the main inputs are the factors in the above table
and the expected volatility. The cost for the incentive programme is included
as part of administrative expenses and includes tax and social charges
where applicable
Note, 25 Related party transactions
In the Tethys Oil Group, Tethys Oil AB (publ) with organisational number
556615-8266 is the parent company. There have been no related party
transaction during 2016 nor for the comparative period.
Note, 26 Subsequent events
In December 2016, OPEC and certain non-OPEC members agreed to reduce
each country’s oil production for an initial period of six months starting
1 January 2017. Oman agreed to reduce production by 45,000 bopd. The
Oman Ministry of Oil and Gas has advised the larger producers in the coun-
try of a production level recommendation. For Blocks 3&4 the production
level recommendation is 41,000 bopd, or 12,300 bopd net to Tethys Oil.
However, the recommendation also includes a recommendation to compen-
sate individual production shortfalls within the group of producers.
Tethys Oil’s share of the production, before government take, from Blocks
3&4 amounted in January and February 2017 to 383,059 and 347,152
barrels of oil respectively, corresponding to 12,357 and 12,398 barrels of
oil per day, respectively.
65
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, 18 April 2017
Dennis Harlin, chairman of the board
Per Brilioth, director
Katherine Støvring, director
Geoffrey Turbott, director
Magnus Nordin, managing director
Richard Rettig, director
66
Auditor’s report
To the general meeting of the shareholders of Tethys Oil AB (publ), corporate identity number 556615-8266
Report on the annual accounts and consolidated accounts
Opinions
We have audited the annual accounts and consolidated accounts of
Tethys Oil AB (publ) for the year 2016. The annual accounts and
consolidated accounts of the company are included on pages 38–66
in this document.
In our opinion, the annual accounts have been prepared in accord-
ance with the Annual Accounts Act and present fairly, in all material
respects, the financial position of parent company as of 31 December
2016 and its financial performance and cash flow 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 2016 and their financial performance
and cash flow for the year then ended in accordance with International
Financial Reporting Standards (IFRS), 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 general meeting of shareholders
adopts the income statement and balance sheet for the parent com-
pany and the group.
Basis for Opinions
We conducted our audit in accordance with International Standards
on Auditing (ISA) and generally accepted auditing standards in Swe-
den. Our responsibilities under those standards are further described
in the Auditor’s Responsibilities section. We are independent of the
parent company and the group in accordance with professional eth-
ics for accountants in Sweden and have otherwise fulfilled our ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinions.
Our audit approach
Audit scope
Tethys Oil is a Swedish Oil and Gas company with its primary opera-
tions located in Oman. The operations in Oman represented 100% of
the group’s revenue for the financial year 2016 and 80% of the group’s
assets as per 31 December 2016. We designed our audit by determin-
ing materiality and assessing the risks of material misstatement in the
consolidated financial statements. In particular, we considered where
the Board of Directors and the Managing Director made subjective
judgements; for example, in respect of significant accounting estimates
that involved making assumptions and considering future events that
are inherently uncertain. As in all of our audits, we also addressed the
risk of management override of internal controls, including among
other matters consideration of whether there was evidence of bias that
represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient
work to enable us to provide an opinion on the consolidated financial
statements as a whole, taking into account the structure of the Group,
the accounting processes and controls, and the industry in which the
group operates.
Our planning of the audit included an assessment of the level
of audit work to be performed at the group’s headquarters and at
local offices. Following the group’s organisation certain processes for
accounting and financial reporting is performed outside the group’s
headquarter which means that we performed our audit work both at
the group’s headquarters but also at the local office in Oman, where we
have obtained reporting from specified procedures performed by our
component team in Oman.
We have obtained reporting from our component auditors at two
occasions in the 2016 financial year and we have reported the results
from our procedures to management and the Audit Committee after
the review of the Report for the nine months period ended 30 Septem-
ber, 2016 and after the year-end audit of the financial year 2016.
Materiality
The scope of our audit was influenced by our application of material-
ity. An audit is designed to obtain reasonable assurance whether the
financial statements are free from material misstatement. Misstate-
ments may arise due to fraud or error. They are considered material
if individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the
financial statements.
Based on our professional judgement, we determined certain quan-
titative thresholds for materiality, including the overall group mate-
riality for the financial statements as a whole. These, together with
qualitative considerations, helped us to determine the scope of our
audit and the nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
We chose income before tax as the benchmark because, in our view,
it is the benchmark against which the performance of the Group is
most commonly measured by users, and is a generally accepted bench-
mark. While the underlying business and level of operating activities
across the group, including production volumes and transactions pro-
cessed, are broadly consistent with prior years, income before tax has
been materially impacted by the volatility in the oil price. Auditing
standards specifically acknowledge that an alternative approach to
determining materiality may be more appropriate where revenue and
income are volatile and not representative of underlying or sustained
business performance. Given the volatility in the profit before tax as
a result of the volatility in the oil price, we have determined that our
materiality should be based on an average of income before tax for the
years 2014, 2015 and 2016.
Key audit matters
Key audit matters of the audit are those matters that, in our profes-
sional judgment, were of most significance in our audit of the annual
accounts and consolidated accounts of the current period. These mat-
ters were addressed in the context of our audit of, and in forming our
opinion thereon, the annual accounts and consolidated accounts as
a whole, but we do not provide a separate opinion on these matters.
67
Key audit matter
Recoverability of the carrying value of oil and gas properties
The carrying value of oil and gas properties represents the majority of the
assets in the balance sheet in the group and amounted to MUSD 191.1
(MUSD 189.1) as per 31 December 2016.
The carrying value of oil and gas properties is supported by the higher
of either value in use calculations or fair value less cost of disposal
(recoverable amount).
Management has prepared an impairment test for the oil and gas
properties associated with Blocks 3&4 in Oman. The test with the aim to
assess the recoverability of the carrying value requires management to
exercise significant judgement as described in the Accounting policies as
well as in note 2 and 8 to the Annual Report where there is a risk that the
valuation of oil and gas properties and any potential impairment charge or
reversal of impairment may be incorrect.
Management’s test requires consideration of a number of factors,
including but not limited to, the Group’s intention to proceed with a future
work programme, the success of future drilling, the size of proved and
probable reserves, prospective resources, short and long term oil prices,
future costs as well as discount and inflation rates.
The estimation of oil and natural gas reserves and prospective resources
is a significant area of judgement due to the technical uncertainty in
assessing the estimated quantities. The estimates of proven and probable
reserves has a direct impact on depletion charges forms the basis of the
estimation of future planned production applied in the impairment tests of
oil and gas properties.
The estimation of reserves are also a fundamental indicator of the
future potential of the group’s performance and therefore becomes critical
information provided in the annual accounts. The estimates of proven and
probable reserves are certified by the group’s external reserves auditor,
DeGolyer and MacNaughton, which is considered to be an expert firm in this
area. The estimates of prospective resources are performed by the group’s
in-house reservoir engineer.
Management has
in
incorporated all these
determining the recoverable amount of the assets and compared it with the
carrying value. This test has concluded that the carrying value of oil and gas
properties associated with Blocks 3&4 is considered to be recoverable.
judgmental
factors
how our audit addressed the Key audit matter
We have obtained management’s impairment test prepared for the
purposes of determining the recoverable amount of oil and gas properties.
The assumptions that underpin management’s calculation of the
recoverable amount of oil and gas assets are inherently judgmental. Our
audit work therefore assessed the reasonableness of management’s key
judgements of the recoverable amount of Blocks 3&4. Specifically our work
included, but was not limited to, the following procedures:
• comparison of short-term oil price assumptions against external oil price
forward curves;
• comparison of long-term oil price assumptions against views published
by brokers, economists, consultancies and respected industry bodies,
which provided a range of relevant third-party data points;
• comparison of production profiles and proved and probable reserves to
the reserve reports from DeGolyer and MacNaughton and prospective
resources estimates prepared by in-house reservoir engineer;
• verification of estimated future operating costs and capital expenditures
by agreement to budgets and where applicable, third party data;
• assessing the reasonability of the assumptions for inflation and discount
rate;
• testing of the mathematical accuracy of the model to calculate the
recoverable amount.
We obtained the estimation of proven and probable reserves certified
by the group’s external reserves auditor and management’s in-house
estimation of prospective resources. Our audit work included but was not
limited to:
• determining that the group’s process for collecting reserve reports was
timely and robust;
• assessing competence and objectivity of DeGolyer and MacNaughton,
to satisfy ourselves they were appropriately qualified to carry out the
volumes estimation;
• assessing the process for making in-house estimates of prospective
resources;
• validation
that
the updated
included
appropriately in the group’s consideration of impairment and in
accounting for depletion charges.
reserves estimates were
Other Information than the annual accounts and
consolidated accounts
Responsibilities of the Board of Directors and the
Managing Director
This document also contains other information than the annual
accounts and consolidated accounts and is found on pages 1–23,
30–37 and 70–71. The Board of Directors and the Managing Director
are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts
does not cover this other information and we do not express any form
of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consoli-
dated accounts, our responsibility is to read the information identified
above and consider whether the information is materially inconsistent
with the annual accounts and consolidated accounts. In this proce-
dure we also take into account our knowledge otherwise obtained in
the audit and assess whether the information otherwise appears to be
materially misstated.
If we, based on the work performed concerning this information,
conclude that there is a material misstatement of this other informa-
tion, we are required to report that fact. We have nothing to report in
this regard.
The Board of Directors and the Managing Director are responsible
for the preparation of the annual accounts and consolidated accounts
and that they give a fair presentation in accordance with the Annual
Accounts Act and, concerning the consolidated accounts, in accord-
ance with IFRS as adopted by the EU. The Board of Directors and
the Managing Director are also responsible for such internal control
as they 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.
In preparing the annual accounts and consolidated accounts, The
Board of Directors and the Managing Director are responsible for the
assessment of the company’s and the group’s ability to continue as a
going concern. They disclose, as applicable, matters related to going
concern and using the going concern basis of accounting. The going
concern basis of accounting is however not applied if the Board of
Directors and the Managing Director intends to liquidate the com-
pany, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of
Director’s responsibilities and tasks in general, among other things
oversee the company’s financial reporting process.
68
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the
annual accounts and consolidated accounts as a whole are free from
material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinions. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs and generally accepted auditing standards in
Sweden will always detect a material misstatement when it exists. Mis-
statements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the
annual accounts and consolidated accounts is available on Revisors-
nämnden’s website: www.revisorsinspektionen.se/rn/showdocument/
documents/rev_dok/revisors_ansvar.pdf. This description is part of
the auditor’s report.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Board of Direc-
tors and the Managing Director of Tethys Oil AB (publ) for the year
2016 and the proposed appropriations of the company’s profit or loss.
We recommend to the general 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 Directors
and the Managing Director be discharged from liability for the finan-
cial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted audit-
ing standards in Sweden. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities section. We are
independent of the parent company and the group in accordance with
professional ethics for accountants in Sweden and have otherwise ful-
filled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinions.
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. At the proposal of a dividend,
this includes an assessment of whether the dividend is justifiable con-
sidering the requirements which the company’s and the group’s type of
operations, size and risks place on the size of the parent company’s and
the group’s equity, consolidation requirements, liquidity and position
in general.
The Board of Directors is responsible for the company’s organi-
zation and the administration of the company’s affairs. This includes
among other things continuous assessment of the company’s and the
group’s financial situation and ensuring that the company’s organiza-
tion is designed so that the accounting, management of assets and
the company’s financial affairs otherwise are controlled in a reassuring
manner. The Managing Director shall manage the ongoing adminis-
tration according to the Board of Directors’ guidelines and instruc-
tions and among other matters take measures that are necessary to
fulfill the company’s accounting in accordance with law and handle
the management of assets in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, and thereby
our opinion about discharge from liability, is to obtain audit evidence to
assess with a reasonable degree of assurance whether any member of the
Board of Directors or the Managing Director in any material respect:
• has undertaken any action or been guilty of any omission which can
give rise to liability to the company, or
• in any other way has acted in contravention of the Companies Act,
the Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of
the company’s profit or loss, and thereby our opinion about this, is to
assess with reasonable degree of assurance whether the proposal is in
accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guar-
antee that an audit conducted in accordance with generally accepted
auditing standards in Sweden will always detect actions or omissions
that can give rise to liability to the company, or that the proposed
appropriations of the company’s profit or loss are not in accordance
with the Companies Act.
A further description of our responsibility for the audit of the
administration is available on Revisorsnämnden’s website: www.
revisors inspektionen.se/rn/showdocument/documents/rev_dok/
revisors_ansvar.pdf. This description is part of the auditor’s report.
Stockholm the 18 April 2017
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)).
Blocks 3&4 onshore the Sultanate of Oman, in which
license the Company holds a 30 percent interest.
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.
Blocks
3&4
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”.
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Heavy oil Heavy crude oil has been defined as any liquid petro-
leum with an API gravity less than 20. Heavy oil has
in general higher viscosity and is thus not flowing
as easy as light oil. 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.
Oman
The Sultanate of Oman.
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.
HSE
Health, Safety and Environment
Prospect
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.
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
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 2017 (January – March 2017) on 2 May 2017
Six month report 2017 (January – June 2017) on 15 August 2017
Nine month report 2017 (January – September 2017) on 7 November 2017
Year-end report 2017 (January – December 2017) on 13 February 2018
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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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