Annual Report 2018
Contents
Letter to the shareholders
5
Tethys Oil
6
Mission, Vision and Values
8
Expanding reserve and resource base
9
Operations
10
Corporate governance report
20
Board of Directors
26
Executive management
28
The Tethys Oil share
29
Payments to authorities
32
Key financial data
33
Definitions and abbreviations
34
Administration report
35
42
Financial statements for the group
Financial statements for the parent company 46
50
Notes
63
Assurance
64
Auditor’s report
67
Financial information
68
Address
The Sustainability Report has been moved to a sep-
arate document, available on www.tethysoil.com.
Annual General Meeting
The Annual General Meeting will be held on 15 May
2019, 3:00 p.m. at Grand Hôtel, Södra Blasie-
holmshamnen 8, in Stockholm. To attend the AGM,
please visit Tethys Oil’s website, www.tethysoil.com,
for more information.
Another successful year for Tethys Oil
• Record financial results in 2018 with a record distribution
proposal to shareholders
• Successful appraisal of
Tethys Oil’s contingent
resources
Contingent resources
Total 31 December 2018
mmbo
25
20
15
10
5
0
1C
2C
3C
Reserves
mmbo
40
35
30
25
20
15
10
5
0
20.0
Possible
-2.8
Prod.
Probable
Proven
6.3
29.7
-4.4
Prod.
Possible
7.1
32.4
-4.3
Add.
7.8
35.9
6.3
27.9
-4.4
7.9
25.9
Add.
Possible
-3.5
Prod.
Add.
Possible
Add.
Prod.
Possible
Add.
Prod.
Possible
Probable
Probable
Probable
Probable
Proven
Proven
Proven
Proven
Probable
Proven
3P 2013
Prod.
Add.
3P 2014
Prod.
Add.
3P 2015
Prod.
Add.
3P 2016
Prod.
Add.
3P 2017
Prod.
Add.
3P 2018
• Excellent
continuation of
the 2P reserves
replacement ratio –
177 percent in 2018.
Seventh consecutive
year of increasing
2P reserves
Prod.= Production
Add. = Additions
Reserve replacement ratio, %
200
150
100
50
2014
2015
2016
2017
2018
The Blocks 3&4 success story
Tethys Oil acquired an interest in Blocks 3&4 in 2007
and, together with the other partners in the licence inter-
est, initiated oil production on the blocks three years later.
From August 2010 through to year-end 2018, Tethys Oil’s
net production from Blocks 3&4, before government take,
has amounted to about 23 million barrels, while annually
increasing reserves. This has been achieved due to the
skills and hard work of all the staff of Tethys Oil and the
partner group, contractors and suppliers. The oil produced
on Blocks 3&4 has created significant value for the share-
holders of Tethys Oil and the other stakeholders in the
licence interest, and the people of Oman, including locally
generated employment.
Work on new exploration Block 49 is gearing up
In late 2017, Tethys Oil’s operations in Oman were expanded
when Tethys Oil was awarded a licence as operator for the
exploration Block 49. In 2018, Tethys Oil conducted a seis-
mic campaign, whereby 253 km² of 3D and 299 km of
2D seismic data were acquired in the north-eastern part
of the license area. The purpose of the seismic campaign
is to further define possible oil traps and to enhance the
understanding of the deeper parts of the block in general.
44
y
b
o
t
o
h
P
Operational and financial summaryMUSD1 (unless specifically stated) 20182017201620152014Average daily production, before government take, Oman Blocks 3&4, bbl11,76712,16212,1219,6987,577Average selling price per barrel, USD70.551.840.558.1103.9Revenue and other income157.3119.387.1107.0149.3EBITDA106.678.244.158.6108.0Net cash73.142.039.051.247.8Investments in oil and gas properties55.840.448.540.839.3Dividend, SEK per share2111–Extraordinary distribution to shareholders, SEK per share4–32–Market capitalization at the end of the period, MSEK2,3252,3372,7992,0442,1682P Reserves in Oman (million barrels of oil)25.422.021.418.217.802C Contingent resources in Oman (million bbl)12.517.3–––1 Starting 1 January 2016, the Tethys Oil group presents the financial reports in USD. Please note that comparative financials from 2014–2015 have been restated.
Letter to the shareholders
Looking forward
We continue to see large possibilities for
organic growth on Blocks 3&4. We will con-
tinue our appraisal programme on the 2017
discoveries. We still have over 12 million
barrels of contingent resources to mature
to reserves. We expect the results of three to
five exploration wells on Blocks 3&4 and
prospect maturation on Block 49 will get
seriously under way. Not to mention any-
thing else that may come our way.
We expect our investments in Oman to
amount to MUSD 50–55 in 2019, the bulk
of which will be spent on Blocks 3&4.
So stay with us – it will be an exciting year
2019!
Stockholm in April 2019
Magnus Nordin
Managing Director
Seismic surveys
A significant amount of new seismic data
was acquired in 2018 – 2,750 km2 3D seis-
mic on Blocks 3&4 and 253 km2 of 3D and
299 km of 2D on Block 49. All new seismic
data will guide our exploration drilling on
our blocks in the years to come. So 2019
looks like it could be quite an active year
from the exploration perspective.
Block 49
We have reprocessed some 1,500 km of vin-
tage 2D seismic data, and a number of seis-
mic anomalies were identified. This could be
possible – primarily stratigraphic – oil traps.
After integration of all available data in
Tethys Oil’s geological model, the presence
of source rock as well as potential reservoir
rocks have also been confirmed. Processing
of the seismic data acquired late in 2018 is
ongoing and the data will be ready for inter-
pretation and mapping during 2019.
New ventures
In December 2018, we attempted to
increase our presence in Oman further by
entering into an agreement to acquire a two
percent interest in the Mukhaizna field.
Unfortunately, Tethys Oil was informed by
the seller that partner pre-emption rights
had been exercised, preventing us from
completing the transaction. This slight set-
back does not, however, diminish our ambi-
tion to grow in Oman and elsewhere.
Continued distribution to our
shareholders
Reflecting the strong operational and
financial position of Tethys Oil, the board
of directors is proposing an ordinary divi-
dend of SEK 2.00 per share. Further, in
line with Tethys Oil’s long-term capital
structure target, the board of directors is
proposing an extraordinary distribution of
SEK 6.00 per share.
Dear friends and investors,
We are delighted to report record financial
results for the full year 2018. Our revenues
and other income increased 32 percent to
MUSD 157.3 and our EBITDA increased
36 percent and amounted to MUSD 106.6.
We are equally delighted to report a 2P
reserve replacement ratio of 177 percent for
2018 – the highest for three years and the
seventh consecutive year of increasing our
2P reserves. So our main asset, Blocks 3&4
onshore Oman certainly continues to con-
firm its growth potential!
We generated a substantial amount of cash
last year enabling us to increase our distri-
bution to shareholders to about MUSD 30.
Cash generation remains strong and our
balance sheet continues to be among the
strongest of comparable companies. With
no debt and still a substantial amount of
cash, we are in strong position to expand
our project portfolio.
An important part of the 2018 work pro-
gramme on Blocks 3&4 has been the
appraisal and development of the significant
three discoveries that were made in 2017.
The Ulfa, Erfan and Samha fields, as the
discoveries now are called, have contributed
materially to our reserves and production.
Production in 2018 was very stable and aver-
aged 11,767 bopd. For 2019 we expect aver-
age production to increase and have guided
for an average between 12–13 000 bopd for
the year. Our average selling price contin-
ued to increase throughout the year, and
averaged at USD 70.5 per barrel in 2018, a
level we haven’t seen since 2014.
In 2018, we produced 4.3 million bar-
rels and we added 7.6 million barrels of
2P reserves. The additions and revisions
include maturation of contingent resources
to reserves and upside revisions of the Farha
South, Shahd and Erfan fields.
Appraisal and development of the Ulfa,
Samha and Erfan fields will continue in
2019 and with a remaining resource base of
2C contingent resources of 12.5 million bar-
rels, we are in a good position to continue
to replace and increase our reserves in 2019.
5
Tethys Oil
Tethys Oil is a Swedish oil company with focus on onshore areas
with known oil discoveries. Tethys Oil’s core area is Oman, where
the Company holds interests in Blocks 3&4 and Block 49. The
reserve and resource base on Blocks 3&4 amounts to 25.4 mmbo
of 2P reserves and 12.5 mmbo of 2C contingent resources. The
average oil production in 2018 from Blocks 3&4 amounted to
11,767 bopd (Tethys Oil’s share of gross production, before gov-
ernment take). Tethys Oil also has onshore exploration licences in
Lithuania and France and limited production in Lithuania. The
head office is located in Stockholm and the Company’s shares are
listed on Nasdaq Stockholm (TETY).
Oman
Blocks 3&4
Area
(km²)
29,130
Interest
30%
Phase
Production/
exploration
Block 49
15,439
100%
Exploration
2P Reserves
(mmbo)
2C Contingent
Resources
(mmbo)
Average daily
production
2018 (bbl)
25.4
–
12.5
–
11,767
–
6
Consession boundaries
Sultanate of Oman
Tethys Oil holds a 30 percent interest in
Blocks 3&4, where CC Energy Develop-
ment S.A.L. (Oman branch) is the opera-
tor. Tethys Oil also holds 100 percent
interest and is operator in Block 49. These
blocks cover an area of 44,569 km2, which
makes Tethys Oil one of the largest conces-
sion holders in Oman in terms of acreage.
8
MOGC
8
MOGC
17
Petrotel
40
Petrotel
مدﻧﺳﻣ
MUSANDAM
ءﺎﺣدﻣ
MADHA
Open
43A
Open
31
ARA
44
ARA
18
Open
تﺎﯾﻧﺎﻣﯾدﻟا رزﺟ
Juzor ad Daymaniyyat
43B
Open
طﻘﺳﻣ
MUSCAT
41
Open
9
Occidental
15
HCF
47
Open
5
Daleel
27
Occidental
30
Occidental
65
Government of Sultanate of Oman
62
Occidental
62 Oil
Open
Vacant
Open
51
Open
42
OOCEP
36
APEX
38
Open
61
BP
60
OOCEP
48
OOCEP
3
CC Energy
Open
59
Open
77
Open
70
Open
4
CC Energy
7
HCF
66
MOL
73
Open
49
Tethys Oil
75
Open
74
Open
57
Petroleb
76
Open
58
Open
6
PDO
ةرﯾﺻﻣ
Masirah
71
Open
72
Open
NLS
50
Masirah Oil Ltd
53
Occidental
54
Lasso
55
Open
56
Medco
67
Petrotel
ﺔﻟﻼﺻ
SALALAH
39
Petrotel
تﺎﯾﻧﻼﺣﻟا رزﺟ
Juzor al Hallaniyyat
52
ENI
100
50
0
100 km
Source: Sultanate of Oman Ministry of Oil and Gas
77
Mission, Vision and Values
Mission
Tethys Oil is an oil and gas exploration and
production company with a primary objec-
tive of creating shareholder value working
across the whole upstream industry lifecy-
cle of exploration, appraisal, development
and production. A central belief in Tethys
Oil’s business model is to explore for and
produce oil and gas in an economically,
socially, and environmentally responsible
way. The Group applies the same standards
to its activities worldwide to satisfy both
its commercial and ethical requirements as
per Tethys Oil’s Code of Conduct.
Vision
Tethys Oil’s vision is that growth continues
through the Group’s exploration success.
Tethys Oil seeks to build, maintain and
expand a well-balanced and self-financed
portfolio of oil assets, offering a measured
exposure to onshore production, develop-
ment, appraisal and exploration potential.
The focus today and tomorrow is on geog-
raphies with proven petroleum systems,
existing infrastructure, established institu-
tional frameworks and low political risk. In
all its activities, Tethys Oil seeks a balanced
approach to risk.
Tethys Oil seeks to be a sustainable and
profitable business
long-term. Sustain-
ability means running a business that is
not only profitable but in tune with the
requirements and expectations of stake-
holders both within and outside the
Group.
Tethys Oil will continue to create increased
shareholder value with a balanced approach
to growth and shareholder distributions,
with a long-term capital structure target of
a zero net cash position.
Values
Tethys Oil’s corporate culture emanate
from the Company’s Scandinavian roots.
It is the responsibility of the Tethys Oil’s
management to foster a corporate culture
that promotes the values and principles
outlined in Tethys Oil’s Code of Conduct.
Tethys Oil aims to act in all respects in a
responsible, fair, accountable and ethical
manner towards all aspects of the environ-
ment and to all individuals and entities
that the Company encounters in its course
of doing business. Tethys Oil aims to apply
the same standards to all its activities wher-
ever they are carried out.
It is of vital importance to Tethys Oil that
the Company maintains and further builds
on its reputation as a responsible and for-
ward-looking corporate citizen in all coun-
tries where Tethys Oil has a presence and
in relation to all stakeholders, may they be
shareholders, employees, contractors, part-
ners or someone else.
88
Expanding reserve and resource base
Tethys Oil’s net working interest Reserves in Blocks 3&4 Oman
as per 31 December 2018 amount to 25,357 thousand barrels of
oil (“mbo”) of proven and probable Reserves (2P). The 2P reserve
replacement ratio amounts to 177 percent. In addition, Tethys
Oil’s net working interest resources oil base in Oman amounts to
12,533 mbo of 2C contingent resources. The Company’s 2018 and
2017 year-end Reserves reports were audited by ERC Equipoise
Limited (“ERCE”) as independent qualified Reserves evaluator.
Development of Reserves, Blocks 3&4 (Audited)
mbo
1P
2P
3P
Total 31 December 2017
15,559
22,044
32,414
Production 2018
Additions and revisions
-4,295
5,471
-4,295
7,608
-4,295
7,765
Total 31 December 2018
16,735
25,357
35,884
Reserve replacement ratio, %
127
177
181
Additions and revisions include maturation of over 4 mmbo of
contingent resources to Reserves from the ongoing appraisal
program of the 2017 discoveries as well as upside revisions of
the Reserves on the Farha South, Shahd and Erfan fields and a
small amount of Reserves attributable to the Tibyan discovery, the
exploration well drilled in 2018.
Based on ERCE’s model, Tethys Oil’s net entitlement Reserves
(Reserves after government take) amount to 7,781 mbo of 1P,
10,477 mbo of 2P and 13,824 mbo of 3P.
In addition to Reserves, Tethys Oil also announces contingent
resources. The estimated contingent resources are contained in
the discoveries made in 2017. Development of the contingent
resources is contingent on the results of the on-going appraisal
programme and also a work programme and budget to access these
resources.
Contingent resources, Blocks 3&4 (Audited)
mbo
1C
2C
3C
Total 31 December 2018
5,472
12,533
24,767
The audit of the Reserves in Oman have been conducted using
2018 Petroleum Resources Management System (PRMS2018),
sponsored by the Society of Petroleum Engineers (SPE), World
Petroleum Council (WPC), American Association of Petroleum
Geologists (AAPG) and Society of Petroleum Evaluation Engi-
neers (SPEE).
99
Operations
Tethys Oil’s core area Oman
Oman – part of the oil fairway
The Sultanate of Oman, strategically
located in the southeastern 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’s neighbours include 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 over thousands of years. Modern
archaeological discoveries suggest that
humans settled in Oman during the Stone
Age, i.e. more than 10,000 years ago.
Oman as an oil country
Most importantly for Tethys Oil, Oman
is also a major oil nation, the largest in
the Middle East that is not a member of
OPEC. Oman has in excess of five billion
barrels of estimated proven oil reserves,
ranking Oman as the seventh largest
proved oil reserve holder in the Middle
East and the 22nd largest in the world (BP
Statistical Review of World Energy, June
2018). Oman’s crude oil and condensate
production amounted in 2017 to almost
1 mmbo per day.
The largest producer in Oman is PDO,
who holds Block 6. Block 6 covers an
area of 90,874 km2 in north, central and
south Oman. In 2018, 665,000 barrels
of oil and condensate per day were pro-
duced by PDO, corresponding to close
to 70 percent of the total production in
Oman. PDO is owned by the Omani gov-
ernment (60 percent), Shell (34 percent),
Total (four percent), and Partex (two per-
cent). Occidental Petroleum (Oxy), is the
second-largest producer in Oman, and
produced about 200,000 bopd in 2018.
Oxy is producing from Blocks 9, 27 and
62 in northern Oman and the Mukhaizna
field in Block 53 in the south.
Tethys Oil in Oman
With the desire and ambition to become
a dedicated and successful player in the
Omani oil and gas industry, Tethys Oil
acquired an interest in the licence for
Blocks 3&4 in 2007. The blocks now
cover an area of 29,130 km2 in the central-
eastern part of Oman. Tethys Oil, through
its wholly owned subsidiary Tethys Oil
Block 3 & 4 Ltd, has a 30 percent inter-
est in Blocks 3&4. Its partners are Mitsui
E&P Middle East B.V. with 20 percent
and the operator CC Energy Develop-
ment S.A.L. (Oman branch) holding the
remaining 50 percent.
In December 2017, Tethys Oil’s opera-
tions in Oman expanded when the explo-
ration Block 49 was awarded to Tethys
Oil as operator. Block 49 covers an area
of 15,439 km2 in the southwestern part of
Oman, bordering Saudi Arabia. Tethys Oil
holds 100 percent of Block 49. The com-
bined area of Blocks 3&4 and Block 49
amounts to almost 45,000 km2, one of
the largest concession holders in Oman in
terms of acreage.
The partner group on Blocks 3&4 pro-
duced 39,200 bopd in 2018, correspond-
ing to about four percent of Oman’s total
production. The produced oil is lifted
at the Mina Al Fahal Terminal in Mus-
cat, on the Sea of Oman, and it therefore
never needs to pass through the Strait of
Hormuz.
10
y
b
o
t
o
h
P
Muscat
SULTANATE
OF OMAN
Block 3
Block 4
Block 3
Block 49
Salalah
C
L
L
,
s
r
o
o
d
t
u
O
d
e
h
t
r
a
e
n
U
1111
The successful exploration and development of
Blocks 3&4
In 2009, the first commercial oil well
was drilled on Block 3&4. The year after,
in 2010, an early production system
was launched and the oil production on
Blocks 3&4 was launched. In 2012, the
Field Development Plan was approved
and the exploration and production terms
for the licence were extended until 2040.
Since 2010, Tethys Oil net production,
before government take, from Blocks 3&4
has amounted to 23 million barrels of oil.
First oil at Farha South
The drilling of the Farha South-3 well
on Block 3 in early 2009 was the starting
point for the successful exploration and
development of Blocks 3&4. Through the
Farha South-3 well, the Farha South oil
field was discovered, which has been the
star performer on the blocks ever since.
Oil on Farha South was originally discov-
ered 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, but a
long-term production test revealed a tight
reservoir. The Barik sandstone, at an aver-
age depth of 1,600 metres and overlaying
the Lower Al Bashir, also had excellent
oil shows in the Farha South-3 well. The
well was put on long-term production test
where the Barik sandstone proved itself to
be a reliable producer.
The oil of the Farha South is not trapped in
one large continuous reservoir. It is instead
trapped in a large number of smaller, usu-
ally adjacent fault blocks. The low content
of gas combined with the absence of a
water drive in the Barik layer make pumps
and water injection necessary. Water is
injected into the reservoir via injection
wells in order to increase the pressure and
thereby stimulate production. Almost 30
fault blocks have been drilled and put in
production. The major part of the field has
been developed with water injection. The
oil from the Barik layer is of high quality,
more than 40 degrees API, and contains
very limited sulphur.
Second early discovery
Shortly after the Farha South-3 well,
the Saiwan East-2 was drilled, marking
another successful well. At the Saiwan oil
Oil producing fault blocks
Oil producing fault blocks with water injection
Drilled fault blocks
Prospective fault blocks
field, the oil is produced from the Khufai
carbonate at depths ranging from 1,700 to
2,400 metres. This reservoir was previously
unknown as an oil producer in Oman. The
oil from the Khufai layer holds a quality of
approximately 32 degrees API.
Large quantities of oil with different gravi-
ties and viscosities, including heavy oil,
have also been found in different forma-
tions on the field. Any potential produc-
tion from the heavy oil in Saiwan East will
require enhanced oil recovery techniques.
The Shahd field
The Shahd field was discovered in 2013
in a previously unexplored area through
exploration on the Shahd B structure. At
the Shahd area, oil is mainly extracted from
12
the Lower Buah carbonate at 2,000 metres
but also from the Khufai carbonate and the
Lower al Bashir sandstone.
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 continu-
ous reservoir. The oil is instead trapped in
separate structures. Eight structures have
been put into production. Like the Farha
South field, water injection is required on
the Shahd oil field in order to reach a good
recovery rate.
Infrastructure development
Full production facilities have been con-
structed both on the Farha South field and
on Saiwan East field. At these facilities,
reservoir fluids are being processed in sepa-
rators and heater treaters to remove water,
gas and impurities in order to make the oil
ready for export. The facilities also include
large storage tanks, different pumps and
other necessary infrastructure, including
field camps for the oil field workers.
In addition, early production facilities (EPF)
has been constructed on Shahd and on Ulfa
fields. An EPF is a smaller production facil-
ity, which, to some extent rely on the infra-
structure on the Farha South and Saiwan
East fields. However, also at an EPF, the oil
can be processed to be ready for export.
structure located on trend with the Farha
South field on Block 3 and flowed oil to
surface from the Khufai formation. The
appraisal of the field started in 2018, and
five appraisal wells were drilled and com-
pleted by year-end. Both the Buah and
the Khufai reservoir sections are being
appraised, although the main present pro-
ducer in the field is the Khufai carbonate
formation.
BLOCK 3
BLOCK 3
The Samha field was discovered in the
fourth quarter 2017. Samha-1 was drilled
on a structure located five km south of the
Ulfa discovery on Block 3 and flowed oil to
surface from the Khufai and Buah forma-
tions. The Samha field has been appraised
by two further wells in 2018.
Some oil from these discoveries was added
to the reserves in the 2017 year-end reserve
report, but most of the oil was added to
contingent resources. The appraisal of
these discoveries has been a major part of
the 2018 work programme, and will con-
tinue to be so in 2019 with the aim to con-
tinue to mature the resources into reserves.
N
Late in 2018, the construction of the Ulfa
EPF was finalised and the facility was in
full production towards the very end of the
year. The EPF includes separators, heater
treaters and pipelines. Following the com-
missioning of the EPF, wells on Ulfa and
Samha were connected to Ulfa EPF and
put into production. The Erfan, Ulfa and
Samha discoveries are all undergoing long-
term production tests.
Export quality
Unprocessed
Alam Station &
Pipeline System
83 km
83 km
BLOCK 3
BLOCK 3
Farha
Farha
Ulfa EPF
Ulfa EPF
37 km
37 km
50 km
50 km
Shahd H
Shahd H
Shahd I
Shahd I
23 km
23 km
Shahd B
Shahd B
(D & F)
(D & F)
25 km
25 km
BLOCK 4
BLOCK 4
Saiwan station
Saiwan station
Saiwan
Saiwan
12 km
12 km
Erfan
Erfan
southwest of the Saiwan East field on
Block 4 and flowed oil to surface from
the Khufai formation. The discovery has
been further appraised by two successful
appraisal wells in 2017 and one in 2018.
Erfan is producing from the Khufai car-
bonate formation, at depths ranging from
1,700 to 2,400 metres, which is the same
producing formation as in neighbouring
Saiwan East field.
The Ulfa field was discovered in the sec-
ond quarter 2017. Ulfa-1 was drilled on a
All production is transported through pipe-
lines to the main exporting point at the Sai-
wan East facility. From Saiwan East, the oil is
pumped through an 83 km long 16 inch pipe-
line to Alam Station just west of Blocks 3&4,
for further transportation through the national
pipeline system to the export port in Muscat,
the Mina Al Fahal Terminal.
The new fields
After some years with focus on develop-
ment activities aiming at increasing pro-
duction, a number of exploration wells
were drilled in 2017, which resulted in the
discovery of significant amounts of oil in
three new structures near the existing pro-
ducing areas on Blocks 3&4 – the Erfan,
Ulfa and Samha discoveries.
The Erfan field was discovered in the first
quarter 2017. It was drilled some 6 km
Ulfa-1
Ulfa-2
Ulfa-4
Ulfa-6
Ulfa-3
Ulfa-5
Erfan-1
Erfan-3
Erfan-4
Erfan-2
Samha-1
Samha-2
Samha-3
13
Future exploration on Blocks 3&4
In hindsight it might seem like the explo-
ration, development and production initi-
ation of crude oil on Blocks 3&4 has been
a straightforward and understandable pro-
cess. However, numerous large companies
explored for oil and gas for 40 years and
drilled some 30 exploration wells in these
two blocks. Most of the wells encountered
oil, but none were deemed commercially
successful. There is no question about it –
vast amounts of oil have been formed on
the blocks. The trick is to find the traps,
where oil could have accumulated.
3D seismic surveys have been a key factor
to the development of the blocks. Seismic
data have revealed that many of the non-
commercial wells drilled by previous oper-
ators would not have been drilled if 3D
data had been available prior to drilling.
Despite intense exploration and develop-
ment activity for over ten years, large areas
on the blocks have yet to be explored.
Out of the total area of the blocks of
29,130 km2, some 9,000 km2 of seismic
data have been acquired so far, whereof
2,750 km2 were acquired in late 2017 and
2018.
tested. Although the well did not flow oil
to surface, it encountered oil and oil sam-
ples were taken. The results are positive
and confirm a live petroleum system in the
area. A comprehensive post drilling analy-
sis will be conducted in order to assess the
other leads identified in the southern part
of Block 4.
Tethys Oil is convinced that there is signif-
icant remaining potential on Blocks 3&4.
In the beginning of 2019, Tethys Oil
mapped some 25 leads and prospects.
Some of these will disappear, but new
prospects will also be added as new seismic
is interpreted and mapped. The leads and
prospects are located from the very south
of the blocks to the north.
In the northern part of the blocks, north-
west of the Farha South field and east of
the Ulfa field, some 2,000 km2 new 3D
seismic was acquired in 2018. In the cen-
tral part, 750 km2 3D seismic was acquired
south of the Shahd field. All new seismic
data will guide Tethys Oil and partners’
exploration drilling on the blocks in the
years to come.
In 2018, the Luja-1 exploration well,
drilled in the southern end of Block 4, was
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 metre 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.
1414
in
reservoirs
On Blocks 3&4,
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 Buah
formations.
Seismic mapping, prospects and leads,
Blocks 3&4, Oman
Alam Station &
Pipeline System
BLOCK 4
BLOCK 3
Farha South Field
Ulfa
Samah
Shahd
field
Saiwan East Field
Erfan
Tibyan
N
BLOCK 3
3D seismic programme 2017/2018
3D seismic area
2D seismic area
Discoveries 2017
(undergoing appraisal/development)
Fields / structures in production
Leads and prospects
1515
Exploration gears up on Block 49
Tethys Oil was awarded a new explora-
tion license by the Government of Sultan-
ate of Oman in the fourth quarter 2017.
Block 49, Montasar, is an onshore block
that covers a prospective but still rather
unexplored area in the Governorate of
Dhofar in the south-west of Oman bor-
dering Saudi Arabia. Tethys Oil holds 100
percent of the license interest and is the
operator.
The Block 49 licence covers an area of
15,439 km2. More than 11,000 km of 2D
seismic data that has been acquired by pre-
vious operators has been made available to
Tethys Oil. Nine wells have been drilled
by previous operators within the block
boundaries, several of which are reported
to have encountered oil shows. Among the
legacy wells is the first well ever drilled in
Oman in 1955 (Dauka-1).
the
reprocessing of
some
Through
1,464 km of older 2D seismic data,
acquired by previous operators, a number
of seismic anomalies have been identified,
which could be possible – primarily strati-
graphic – oil traps. The anomalies have
been identified within the deeper forma-
tions in the block at depths of 2,500 metres
or below. After integration of all available
data in Tethys Oil’s geological model, the
presence of source rock as well as potential
reservoir rocks have also been confirmed.
In the fourth quarter 2018, Tethys Oil
launched and completed a seismic cam-
paign on Block 49, whereby 253 km2 of
3D and 299 km of 2D seismic data was
acquired in the north-eastern part of the
license area. The purpose of the seismic
campaign is to further define possible oil
traps and to enhance the understanding
of the deeper parts of the block in general.
The data is being processed and will, when
interpreted, guide the continued work on
Block 49.
The EPSA for Block 49 covers an initial
exploration period of three years with an
optional extension period of another three
years. In the event of Declaration of Com-
merciality the term of the agreement shall
be extended for a period of 15 years which
can be extended for another five years. In
case of a commercial discovery, Oman gov-
ernment company has a back-in right of up
to 30 percent against refunding of pro rata
past expenditure. The initial work com-
mitments during the first period include
geological studies, seismic acquisition and
processing and exploratory drilling.
Vibrator truck
Receiver truck
Geophones (receivers)
GAS
OIL
WATER
WATER
Seismic studies
A key exploration activity is the use of 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 Blocks 3&4 is trapped in
smaller fault blocks or structures, 3D seismic
has been essential in the mapping of possible
oil bearing structures.
1616
Seismic mapping, prospects and leads,
Block 49, Oman
Vibrator truck
Receiver truck
Geophones (receivers)
GAS
OIL
WATER
WATER
3D seismic area
2D seismic area
N
0
40,000 m
1717
Transportation and sales (Blocks 3&4)
All oil produced at the fields is transported
through a pipeline to the Qarn Alam
metering station, to the west of the blocks.
At the metering station, the oil volumes are
recorded and the quality is measured. From
Qarn Alam, the oil is transported through
the national pipeline system to the Mina Al
Fahal terminal in Muscat. At this terminal,
the oil is lifted and loaded into oil tankers.
From Muscat, the oil is shipped to different
destinations primarily in Asia.
Licences in Oman are held through Explo-
ration and Production Sharing Agreements
(EPSA). The EPSA allows the joint opera-
tions partners to recover their costs from a
predetermined percentage of the value of
total oil production, referred to as cost oil.
After deducting any allowance for cost oil,
the remaining oil production is split, also
according to a predetermined percentage,
between the government and the partners.
The exact percentages differ from licence
to licence. Until oil has been found and
produced on a licence, no costs can be
recovered. If no commercial oil discovery
is made on an exploration licence, the
exploring oil company bears all the risk.
its oil from
Tethys Oil sells all of
Blocks 3&4 on a monthly basis to Mitsui
Energy Trading Singapore, which is part of
Mitsui & Co Ltd. Tethys Oil’s selling price
is based on the monthly average price of
the two-month future contract of Oman
blend as traded on the Dubai Mercantile
Exchange, including trading and quality
adjustments.
1818
Office and staff
Tethys Oil’s staff consist of 20 highly
motivated individuals from seven differ-
ent nationalities, ranging in age from early
twenties to mid seventies and with a bal-
anced gender representation (35 percent
female and 65 percent male). A majority of
the staff have graduated from universities
and colleges, primarily with geosciences,
engineering or business administration.
Muscat Office
A team of highly trained engineers and
subsurface specialists are based at Tethys
Oil’s office
in Muscat together with
finance and administration staff. As per the
Omani government directive related to the
employment, preference is given to Omani
nationals in recruiting new staff. The Mus-
cat office is the base for Tethys Oil’s CTO.
Stockholm Office
Tethys Oil head office is located in central
Stockholm, Sweden. The Stockholm office
is the base for the Managing Director and
the CFO, along with Tethys Oil’s finance,
legal, business development and commu-
nication staff.
Operational areas outside Oman
Tethys Oil’s portfolio also includes Euro-
pean licences, with indirect interests in
three onshore licenses in Lithuania and
one dormant onshore licence in France.
western part of the country. The Lithu-
ania tax regime is very attractive, so even
smaller amounts of oil can generate good
value.
Lithuania, on the Baltic Sea in the north-
eastern part of Europe, is a small oil pro-
ducer. Oil was discovered in Lithuania
some 60 years ago. From a peak at about
10,000 bopd around 20 years ago, the pro-
duction has now dropped to about 2,000
bopd. The production is located in the
Tethys Oil’s Lithuanian licences cover an
area of some 4,000 km2. The Gargzdai
licence is in production with 85 bopd net
to Tethys Oil in 2018. The oil produced
at the Gargzdai licence has an API of
about 42 degrees and is normally sold on a
weekly basis to a nearby refinery.
The Rietavas and the Raseiniai licences are
exploration licences. Since the acquisition
of the licence interests in 2012, several
exploration wells have been drilled, which
have confirmed the presence of oil in the
area, and seismic studies been conducted.
The Attila licence is located some 250 km
east of Paris. Tethys Oil is reviewing the
prospectivety and potential for additional
work at the licence.
19
Corporate Governance Report 2018
Corporate Governance practices
refer
to the decision-making systems through
which owners, directly or indirectly, control
a company. Tethys Oil is a publicly traded
company listed on Nasdaq Stockholm,
Mid Cap. Tethys Oil adheres to the Swed-
ish Code of Corporate Governance (“the
Code”). The Code is published on www.
bolagsstyrning.se, where a description of
the Swedish Corporate Governance model
can be found. This Corporate Governance
Report 2018 is submitted in accordance
with the Swedish Annual Accounts Act
and the Code. It explains how Tethys Oil
has conducted its corporate governance
activities during 2018. Tethys Oil does not
report any deviations from the Code, Nas-
daq Stockholm’s rule book for issuers, rec-
ommendations from the Swedish Securities
Council, decisions from Disciplinary Com-
mittee at Nasdaq Stockholm or statements
from the Swedish Securities Council. The
report has been examined by the Compa-
ny’s auditors, please see page 25.
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
• Internal control framework with Code
of Conduct, polices etc.
Shareholders
Tethys Oil’s shares are traded on Nasdaq
Stockholm. At year end 2018 the share
capital amounted to SEK 5,984,402, rep-
resented by 35,896,310 shares, each with a
par value of SEK 0.17. All shares represent
one vote each. At 31 December 2018, the
number of shareholders was 6,602 (5,043).
Of the total number of shares, foreign
shareholders accounted for approximately
68 percent. Lansdowne Partners LLP is the
only shareholder with a holding in excess
of 10 percent of shares and votes, with a
holding of 3,593,699 shares representing
10.1 percent of shares and votes. Tethys
Oil’s holding of its own shares amounted
to 1,644,163 (4.6 percent). For further
information on share, share capital devel-
opment and shareholders, see pages 29–31
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 register 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 9 May 2018.
158 shareholders were represented at the
AGM, representing 42 percent of the votes
and share capital in the company. The reso-
lutions passed by the meeting included the
following:
• Adoption of the income statements and
balance sheets for 2017 and discharge of
liability for the Board of Directors and
the Managing Director;
• Re-election of Robert Anderson, Alexan-
dra Herger, Magnus Nordin, Per Seime
and Geoffrey Turbott. Geoffrey Turbott
was elected chairman of the Board;
• Remuneration of the members of the
Board of Directors and the chairman of
the Board of Directors, including Board
committee membership, to be as fol-
lows: (i) annual fees of the members of
the Board of Directors of SEK 300,000
(excluding the); (ii) annual fees of the
chairman of the Board of Directors
of SEK 630,000; (iii) annual fees for
committee members of SEK 35,000
per committee assignment, annual fees
for the chairmen of the remuneration
committee and technical committee, if
applicable, of SEK 65,000 each and an
annual fee for the chairman of the audit
committee of SEK 90,000, unless the
committee is chaired by the chairman of
the Board of Directors in which case an
annual fee of SEK 65,000. The total fees
for committee work, including com-
mittee chairmen fees shall not exceed
SEK 360,000; and (iv) if a member of
the Board of Directors, following a reso-
lution by the Board of Directors, per-
forms tasks which are outside the regu-
lar Board work, separate remuneration
in the form of hourly fees on market
20
terms, within a frame of SEK 250,000,
may be paid by resolution of the Board
of Directors;
• Re-election of PricewaterhouseCoopers
AB as auditors. Auditors will be paid as
invoices are approved;
• Guidelines for compensation of 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 during the
period 1 June 2021 up to an including
2 October 2021. Subscription price for
the warrants is SEK 89.00 per share;
• Authorisation for the Board to resolve on
repurchasing own shares up to not more
than one-tenth of all outstanding shares
and to resolve on transfer of own shares;
• Rules for the appointment and work of
the nomination committee; and
• Authorisation 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.
The minutes recorded at the AGM can be
found at Tethys Oil’s website, www.tethys-
oil.com.
Nomination process
In accordance with the nomination com-
mittee process approved by the AGM
2018, the nomination committee for the
AGM 2019 consists of members appointed
by three of the largest shareholders of the
Company based on shareholdings as per
30 September 2018 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
14 November 2018, i.e. six months before
the AGM as prescribed by the Code.
The nomination committee for the AGM
2019 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 2019, is published
on the Company’s website together with
the notice of the AGM.
management, and five Board members are
independent from larger shareholders.
For further information on the Board
members, please see pages 26–27.
Board of Directors elected at the AGM 2018
Member
Elected
Position
Year of
birth
Nationality
Independent in
relation to the
Company
Geoffrey Turbott
2015
Chairman
1963
New Zealand
Robert Anderson
2017
Member
1953 United Kingdom
Alexandra Herger
2017
Member
1957
United States
Magnus Nordin
2001
Member
1956
Sweden
Per Seime
2017
Member
1946
Norway
Yes
Yes
Yes
No
Yes
Independent
in relation to
the Company’s
larger
shareholders
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, administra-
tion and controls are properly managed.
The Board of Directors adopts strategies
and goals and resolves on larger invest-
ments, acquisitions and disposals of busi-
ness activities or assets. It 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 following AGM
May
August
Constituting meeting
Second quarter report
September–November
Strategy and discussion investment plan/budget
November
December
February
March–April
April–May
Third quarter report and time/place for AGM
Investment plan and budget, liquidity and forecast
Fourth quarter and year-end report, allocation of profit
Annual report and AGM
First quarter report
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: and
• Proposal regarding procedures and prin-
ciples for establishing a nomination
committee and issues pertaining thereto
for the AGM 2020.
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
nomination committee also considered
other criteria such as the background and
experience and has also taken part in the
Board evaluation. Further, the nomination
committee has considered the Company’s
Board diversity policy in its proposal for
Board members. The Board diversity pol-
icy is available on the Company’s website.
The nomination committee for the AGM
2019 consisted of the following members:
• Viktor Modigh, chairman of the nomi-
nation committee, representing Magnus
Nordin;
• Mikael Petersson, representing Lans-
downe Investment Company Limited
and Coeli Asset Management AB;
• Johan Strandberg, representing SEB
Investment Management AB; and
• Geoffrey Turbott, 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
consist of no less than three and no more
than ten Board members with no more
than three deputy Board members. Board
members are elected for a maximum of one
year at a time. The Board of Directors of
Tethys Oil since the AGM 2018 has con-
sisted of five members and no deputies.
Geoffrey Turbott has been chairman of the
Board. Four Board members are independ-
ent from the Company and the Company’s
21
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
Board members. The assessment focuses on
such factors as the Board’s way of working,
number of meetings and effectiveness, time
for preparation, available competence and
individual Board members influence of the
Board’s work. The nomination committee
takes part in assessing the results, and it is
a component in the nomination commit-
tee’s work to submit a proposal to the AGM
concerning Board members.
The Board’s work in 2018
During 2018, the Board held 15 meetings
of which eight were ordinary and seven
extraordinary, in person, via telephone
and per capsulam meetings. Attendance at
the meetings are shown in the table below.
Board secretary was CFO Jesper Alm. Prior
to each meeting, Board members were pro-
vided with an agenda and written informa-
tion on the matters to be covered. Each
meeting has included the possibility to dis-
cuss without management representatives
being present.
Board of Directors and committee attendance in 2018
Board member
Board
Member
Audit
Committee
Member
Remuneration
Committee
Member of
Technical
Committee
Board
meetings
Audit
Committee
meetings
Remuneration
Committee
meetings
Technical
Committee
meetings
Geoffrey Turbott
Chairman
Yes (Chairman)
Robert Andersson
Member
Alexandra Herger
Member
Magnus Nordin
Member
–
–
–
–
–
Yes
–
Per Seime
Member
Yes
Yes (Chairman)
Stepped down at or prior to AGM 2018
Dennis Harlin
Chairman
Per Brilioth
Member
–
–
Katherine Støvring
Member
Yes
Yes
–
Yes
–
15/15
6/6
Yes (Chairman)
15/15
Yes
–
–
–
–
–
15/15
15/15
15/15
3/5
2/5
0/2
–
–
–
6/6
–
–
0/1
–
–
2/2
–
4/4
1/2
–
0/1
3/4
6/6
5/5
–
–
–
–
–
Board committees
In order to increase the efficiency of its
work and enable a more detailed analysis
of certain matters, the Board has formed
committees: Audit, Remuneration and
Technical. Committee members
are
appointed within the Board for the period
until the next AGM. The committee’s
duties and authorities are regulated in the
annually approved rules of procedure for
each committee. The committees perform
monitoring and evaluations, resulting in
recommendations to the Board of Direc-
tors, where all decision making takes place.
Audit Committee
The Board has established an Audit Com-
mittee for the period up to and including
the AGM 2019, consisting of Geoffrey
Turbott as chairman and Per Seime as
a member of the committee. The Audit
Committee convened six times in 2018.
The work has mainly focused on supervis-
ing the Company’s financial reporting and
assessing the efficiency of the Company’s
financial internal controls, with the pri-
mary objective being providing support
to the Board in the decision making pro-
cesses regarding such matters. The Audit
Committee also regularly liaises with the
Group’s statutory auditor as part of the
annual audit process and reviews the audit
fees and the auditor’s independence and
impartiality. The Audit Committee reports
to the Board, normally in conjunction with
the following Board meeting. Members of
the committee during 2018 prior to AGM
2018 consisted of Geoffrey Turbott (chair-
man), Per Seime and Katherine Støvring.
Remuneration Committee
The Board has established a Remunera-
tion Committee for the period up to and
including the AGM 2019, consisting of Per
Seime as chairman and Alexandra Herger
as a member of the committee. The Remu-
neration Committee convened four times
in 2018. The work has mainly focused on
establishing principles for remuneration
to management, establishing key perfor-
mance indicators, to monitor and evaluate
variable remuneration and the application
of the guidelines for remuneration as well
as to construct and propose the share based
incentive programme. The Remuneration
Committee reports to the Board, normally
in conjunction with the following Board
meeting. Members of the committee dur-
ing 2018 prior to AGM 2018 consisted of
Per Seime (chairman), Dennis Harlin and
Katherine Støvring.
Technical Committee
The Board has established a Techni-
cal Committee for the period up to and
including the AGM 2019, consisting of
Robert Anderson as chairman and Alexan-
dra Herger as a member of the commit-
tee. The Technical Committee convened
six times in 2018. The work has mainly
focused on following up on work pro-
grams, budgets and investment propos-
als, evaluation of and recommendation
on appointment of independent qualified
reserve auditor, oversight of the reserves
audit process, review of operations man-
agement systems and technical review
of new ventures projects. The Technical
22
Committee reports to the Board, normally
in conjunction with the following Board
meeting. Members of the committee dur-
ing 2018 prior to AGM 2018 consisted of
Robert Anderson (chairman), Alexandra
Herger and Geoffrey Turbott.
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 audi-
tor is PricewaterhouseCoopers AB with
Ulrika Ramsvik as lead partner and Bo
Hjalmarsson as co-signing auditor. Price-
waterhouseCoopers AB was elected as the
Company’s auditor at the AGM 2018.
Tethys Oil’s auditor: Pricewaterhouse-
Coopers AB
Ulrika
Ramsvik
Bo
Hjalmarsson
Role
Lead partner
Co-signing
auditor
Company auditor
since
2014
2018
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 the audit. Remuneration to
the auditors of Tethys Oil is paid in accord-
ance with approved current accounts. In
2018, remuneration to Pricewaterhouse-
Coopers AB amounted to MUSD 0.1
(MUSD 0.2). 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 and resources, although such assets
are not included in the Company’s balance
sheet. The independent qualified reserves
auditor for the 2018 report was ERC Equi-
poise Limited (“ERCE”), that also audited
the 2017 report. For further information,
see Reserves on page 9.
Managing Director and executive
management
The executive management in Tethys Oil
throughout 2018 has consisted of the
Managing Director (Magnus Nordin),
CFO (Jesper Alm) and the CTO (Fre-
drik Robelius). The Board of Directors
has adopted an instruction for the Man-
aging Director which clarifies the respon-
sibilities and authority of the Managing
Director. According to the instruction,
the Managing 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 activi-
ties for the year. The Managing Director
is responsible for the day to day business
of the Company and shall take the deci-
sions needed for developing the business
– within the legal framework, the busi-
ness plan, the budget and the instruction
for the Managing Director adopted by the
Board of Directors as well as in accordance
with other guidelines and instructions
communicated by the Board of Directors.
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; and
• Severance arrangements
The Board has the right to deviate from the
remuneration policy if there are particular
reasons.
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.
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
variable remuneration systems payable in
cash and/or in combination with a right
to acquire warrants in the Company in a
long-term incentive programs.
Senior executives may have the right to
participate in share based long-term incen-
tive programs. When allocating warrants
the same financial and operational key
indicators as for variable cash salary shall
be considered.
The yearly variable cash salary shall be
within the range of 1–12 monthly sala-
ries per person and year. The targets for
variable cash remuneration shall be deter-
mined by the Board prior to each finan-
cial year and individual agreements shall
be arranged with each participant, the
content of which depends on the partici-
pant’s position at the time the agreement
is arranged. The targets shall be objectively
quantifiable and related to budget. The
targets shall consist of key performance
indicators both for the group’s overall and
financial performance as well as individual
performance. 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 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 during
the term of the programme in the case
of, for example, extraordinary increases
or decreases in the Group’s earnings.
The variable remuneration shall not be
pensionable.
Pension arrangements
The pension benefits comprise a defined
contribution scheme with premiums cal-
culated on the full basic salary. The pen-
Other benefits
Non-financial benefits shall be based on
market terms and shall facilitate the duties
of each senior executive.
23
Severance arrangements
A mutual termination period of 12 months
applies between the Company and the
Managing Director and up to six months
between the Company and other senior
executives. Severance pay shall be paid to
the Managing Director of up to 12 months
fixed salary and up to 12 months fixed sal-
ary for other senior executives if the Com-
pany terminates their employment.
Remuneration to executive management 2018
(TSEK)
Basic salary
Pension
arrange ments
Variable
salary
Share based long-
term incentive
Other
benefits
Managing Director
2,842
729
536
Other executive
management
Total
3,671
6,513
377
1,106
991
1,526
1,120
1,025
2,145
25
428
453
Total
2018
5,252
6,491
11,743
Total
2017
4,704
6,155
10,860
The increase in remuneration to executive
management primarily relate to increased
base salaries. For further
information,
please see note 12.
Remuneration to the Board 2018
Remuneration to be paid to the Board
of Directors for the period between the
AGMs of 2018 and 2019 amounts to a
total of TSEK 1,830, allocated among
the Board members in the way shown in
the below table. The annual general meet-
ing 2018 resolved that remuneration of
the chairman of the Board of Directors
shall be TSEK 630 per annum and of the
other members TSEK 300 per member
per annum. Remuneration is not paid for
service of the Boards or directors of sub-
sidiaries. Magnus Nordin, who is employed
by Tethys Oil, does not receive any remu-
neration for his service on the Board of
Directors.
Annual fee for committee members is
TSEK 35 per committee assignment and
annual fees for the chairman of the the
remuneration and technical committees are
TSEK 65. The annual fee for the chairman
of the audit committee is TSEK 90, unless
the committee is chaired by the Chairman
of the Board in which case the annual fee
is TSEK 65. Further, if a member of the
Board of Directors, following a resolution
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 resolu-
tion of the Board of Directors, for which
purpose a frame of TSEK 250 was allowed.
Remuneration to board and committee members for the period between the AGMs of 2018 and 2019 (in their capacity as board members)
(TSEK)
Member
Geoffrey Turbott
Robert Anderson
Alexandra Herger
Magnus Nordin
Per Seime
Total
Board of
directors
Audit
Committee
Technical
Committee
Remuneration
Committee
630
300
300
–
300
1,530
65
–
–
–
35
100
–
65
35
–
–
100
–
–
35
–
65
100
Total
695
365
370
–
400
1,830
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. The focus of internal control is
therefore to ensure reliability and accuracy
of the operator’s financial 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
24
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 minimises the
risks for errors in the financial reporting.
The control activities also include fol-
lowing up on the authorisation 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 reports
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
interests or early stage operated explora-
tion interests, 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, 3 April 2019
Tethys Oil AB (publ)
The Board of Directors
This is a literal translation of the Swedish original report
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 2018 on pages 20–25 and that
it has been prepared in accordance 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 cor-
porate governance statement. This means that our examination of
the corporate governance statement is different and substantially
less in scope than an audit conducted in accordance with Inter-
national Standards on Auditing and generally accepted auditing
standards in Sweden. We believe that the examination has pro-
vided us with sufficient basis for our opinions.
Opinion
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, 3 April 2019
PricewaterhouseCoopers AB
Ulrika Ramsvik
Authorized Public Accountant
Lead Partner
Bo Hjalmarsson
Authorized Public Accountant
25
Board of Directors
Member
Function
Elected
Year of birth
Nationality
Geoffrey Turbott
Rob Anderson
Alexandra Herger
Chairman of the Board and chairman of
the Audit Committee
Board member and chairman of the
Technical Committee
Board member and member of the
Remuneration and Technical Committees
2015
1963
2017
1953
2017
1957
New Zealand
United Kingdom
United States
Education/background
Former member of New Zealand’s
institute of chartered accountants
Experience
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
MA Engineering, Christ's College,
Cambridge University. Chartered
Engineer & Fellow of the Institution of
Mechanical Engineers
VP Projects & Engineering at TNK-BP,
Head of Projects at BP. Engineer with
deep experience in oil installations and
major oil and gas field developments
BA Geology, Ohio Wesleyan University
and Master studies Geology, University
of Houston
VP Global Exploration at Marathon
Oil, executive positions at Shell and
Enterprise Oil
Board member: Panoro Energy ASA and
Tortoise Capital Advisors
Member: Women's Leadership
Committee, Oil Council and Leadership
Texas, Foundation for women's
resources
–
–
370
Yes
Yes
Other board duties
Board member: Tetbury Forestry Ltd. And
Progress Land Ltd.
–
Shares in Tethys Oil (per
31 December 2018)1
31,700
Warrants in Tethys Oil (per
31 December 2018)1
–
Board and committe
remuneration (TSEK)2
Independent in relation to
the Company
Independent in relation
to the Company's larger
shareholders
695
Yes
Yes
1 Privately, via company and insurance policy
2 Resolved upon at the AGM 2018
–
–
365
Yes
Yes
2626
Member
Function
Elected
Year of birth
Nationality
Magnus Nordin
Per Seime
Board member and Managing Director
Board member, chairman of the
Remuneration Committee and member
of the Audit Committee
2001
1956
Sweden
2017
1946
Norway
Education/background
Bachelor of Arts, University of Lund and
Master of Arts, University of California,
Los Angeles
Master of Law, University of Oslo. Master
of Comparative Law, University of Chicago
Law School (Oil & Gas)
Experience
Several executive positions in different
oil companies
Oil and gas lawyer with experience
from the Norwegian Continental Shelf
and internationally. 17 years as head
of the oil and gas group in the law firm
Simonsen Vogt Wiig, Oslo. Counsel/
General Counsel for Mobil Oil in Norway,
USA and Indonesia. Board chairman
for Premier Oil Norge (2004–2013) and
Nexen Exploration Norge (2005–2014).
General Counsel in Kongsberg Gruppen
for nine years.
Other board duties
Board member: Minotaurus AB,
including subsidiaries, and Minotaurus
Energi AS
–
5,000
–
400
Yes
Yes
Shares in Tethys Oil (per
31 December 2018)1
1,464,127
Warrants in Tethys Oil (per
31 December 2018)1
2016/19: 70,000
2017/20: 75,000
2018/21: 75,000
Board and committe
remuneration (TSEK)2
Independent in relation to
the Company
Independent in relation
to the Company's larger
shareholders
–
No
Yes
1 Privately, via company and insurance policy
2 Resolved upon at the AGM 2018
2727
Executive management
Magnus Nordin
Jesper Alm
Fredrik Robelius
Board member and Managing Director
Chief Financial Officer and secretary to the board
Chief Technical Officer
Employed since 2004
Employed since 2014
Employed since 2011
Education: Bachelor of Arts, University
of Lund and Master of Arts, University of
California Los Angeles
Education: M.Sc. Business Administration,
University of Lund
Education: PhD Engineering Physics, Uppsala
University; Postgraduate Diploma Petroleum
Engineering, Heriot-Watt University
Born 1956
Sweden
Born 1975
Sweden
Born 1973
Sweden
Experience: several executive positions in
different oil companies
Experience: various positions in Corporate
Finance at Pareto Securities and E. Öhman
J:or Fondkommission
Experience: energy engineering positions in
Fortum, petroleum engineering related positions
in Tanganyika Oil and Sinopec
Shares1: 1,464,127
Shares1: 7,000
Shares1: 8,500
Warrants1 2016/19: 70,000
Warrants1 2017/20: 75,000
Warrants1 2018/21: 75,000
Warrants1 2016/19: 47,000
Warrants1 2017/20: 48,000
Warrants1 2018/21: 48,000
Warrants1 2016/19: 45,000
Warrants1 2017/20: 48,000
Warrants1 2018/21: 48,000
1 in Tethys Oil (per 31 December 2018),
privately, via company and insurance policy.
2828
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 2018 amounts
to SEK 5,984,402 represented by 35,896,310 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 Decem-
ber 2018, the Board of Directors had remaining outstanding
authorisation from the AGM to issue up to 10 percent of the
shares up until the next AGM. As per 31 December 2018, Tethys
Oil held 1,644,163 (4.6 percent) of its own shares which were
purchased during 2014 to 2017 at an average price of SEK 58.12.
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, however not included in the num-
ber of shares in circulation, which amounts to 34,252,147.
Tethys Oil has a warrant programme as part of the remuneration
package to employees. Warrants currently outstanding have been
issued following the AGMs in 2016, 2017 and 2018. The terms
for each warrant series have been recalculated as a consequence of
recalculation events. The current terms are:
Warrant
program
2016/19
2017/20
2018/21
Issued
Allotted
350,000
335,000
350,000
324,000
350,000
329,000
Strike price,
SEK
No of shares
each warrant
entitle to
59.90
51.80
89.00
1.10
1.04
1.00
Share capital development
Since the company’s inception in September 2001 and up to 31 December 2018, 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
2007
2007
2007
2007
2008
2008
2008
2009
2009
2010
2010
2010
2011
2012
2015
2015
2015
2016
2016
2016
2018
2018
2018
2018
Formation of the company
Share issue
Share split 100:1
Share issue
Share split 2:1
Share issue
Non-cash issue
Share issues
Share issue
Exercise of warrants
Share issue
Set-off issue
Share split 3:1
Share issue
Exercise of warrants
Share issues
Exercise of warrants
Exercise of warrants
Share issue
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
Share split 1:2 (redemption shares)
Redemption
Bonus issue
Exercise of warrants
100.00
100.00
1.00
1.00
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.17
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
0.08
0.08
0.17
0.17
1,000
5,000
500,000
750,000
1,500,000
4,384,800
4,784,800
5,741,760
6,041,760
6,041,762
6,166,762
6,392,762
19,178,286
23,978,286
23,980,086
27,280,086
28,049,091
29,193,542
29,693,542
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
71,087,500
35,543,750
35,543,750
35,896,310
1,000
4,000
495,000
250,000
750,000
2,884,800
400,000
956,960
300,000
2
125,000
226,000
12,785,524
4,800,000
1,800
3,300,000
769,005
1,144,451
500,000
2,810,947
39,261
3,000,000
35,543,750
-35,543,750
0
35,543,750
-35,543,750
0
35,543,750
-35,543,750
0
352,560
29
100,000
400,000
0
250,000
0
1,442,400
200,000
478,480
150,000
1
62,500
113,000
0
800,000
300
550,000
128,167
190,742
83,334
468,491
6,544
501,667
0
-2,962,813
2,962,813
0
-2,962,813
2,962,813
0
-2,962,813
2,962,813
58,777
100,000
500,000
500,000
750,000
750,000
2,192,400
2,392,400
2,870,880
3,020,880
3,020,881
3,083,381
3,196,381
3,196,381
3,996,381
3,996,681
4,546,681
4,674,848
4,865,590
4,948,924
5,417,415
5,423,958
5,925,625
5,925,625
2,962,813
5,925,625
5,925,625
2,962,813
5,925,625
5,925,625
2,962,813
5,925,625
5,984,402
Capital structure target and dividend policy
Tethys Oil’s primary objective is to create shareholder value and
in so doing the company will have a balanced approach to growth
and shareholder distributions, with a long term capital structure
target of a zero net cash position.
For the financial year 2019, the Board of Directors proposes to
the AGM 2019 a total distribution of SEK 8.00 per share, cor-
responding to MSEK 274.0 in total. The distribution, subject to
approval by the AGM, is proposed to be made by a cash dividend
of SEK 2.00 per share and SEK 6.00 per share by a mandatory
share redemption programme. (AGM 2018 resolved on a total
distribution of SEK 6.00 per share, of which SEK 2.00 per share
as cash dividend and SEK 4.00 per share by a mandatory share
redemption programme, equal to MSEK 203.4).
Share ownership structure
The 15 largest shareholders in Tethys Oil as per 28 February 2019.
Name
Lansdowne Partners
Franklin Templeton
SEB Funds
Magnus Nordin
Grandeur Peak Global Advisors, LLC
Liontrust
JP Morgan Asset Management
Carl Erik Norman
Avanza Pension
Russell Investments
Schroders
Peder Månsson
Treasurer of the State of North Carolina
AXA
Wealins S.A.
Total, 15 largest shareholders
Summary, others appr. 7,200 shareholders
Outstanding shares
Tethys Oil AB
Total number of shares (incl. treasury shares)
Source: Modular Finance, 28 Feb 2019
Number of shares
Share of capital and votes
3,593,699
1,757,924
1,520,205
1,467,127
1,134,748
1,052,328
866,644
585,000
524,238
480,276
431,216
402,974
385,410
360,000
350,000
14,911,789
19,340,358
34,252,147
1,644,163
35,896,310
10.1%
4.9%
4.2%
4.1%
3.2%
2.9%
2.4%
1.6%
1.5%
1.3%
1.2%
1.1%
1.1%
1.0%
1.0%
41.5%
53.9%
95.4%
4.6%
100.0%
30
Distribution of shareholdings
Distribution of shareholdings per 28 February 2019.
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
Source: Euroclear, 28 Feb 2019
Number of
shares
540,115
525,730
1,276,841
626,751
488,465
379,860
32,058,548
35,896,310
Percentage of
shares
Number of
shareholders
Percentage of
shareholders
1,5%
1,5%
3,6%
1,8%
1,4%
1,1%
89,3%
100,0%
5,741
79.7%
637
540
86
38
21
141
7,204
8.8%
7.5%
1.2%
0.5%
0.3%
2.0%
100.0%
Share statistics 2018
The final transaction price in 2018 was SEK 64.77 correspond-
ing to a total market capitalization of MSEK 2,325. During the
year the price of Tethys Oil’s share decreased by 1.5 percent.
Based on data from NASDAQ Stockholm, the highest transaction
price in 2018 was SEK 113.00 on 13 August and the lowest was
SEK 58.80 on 9 February. The turnover velocity (annual turnover/
outstanding shares) was 97 percent on Nasdaq Stockholm.
Share price development and turnover 2018
120
90
60
30
0
SEK
Jan
2018
1,600,000
1,200,000
800,000
400,000
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Share price
Turnover
Jan
2019
Feb
0
Share volume
per day
31
Payments to authorities 2018
This report has been prepared in accordance with the law SFS
2015:812 (Lag 2015:812 om rapportering av betalningar till
myndigheter) regarding payments to authorities. The reported
amounts refer to direct payments in excess of the threshold amount
of SEK 860,000 and production sharing for the fiscal year 2018
for the group in which Tethys Oil AB (publ) (“Tethys Oil”) is the
parent company.
Per project
Project
Oman
Blocks 3&4
Block 49
Total Oman
Total
Per Authority
Production sharing
License costs
Barrels (’000)
USD (’000)
USD (’000)
2,062
–
2,062
2,062
144,873
–
144,873
144,873
–
250
250
250
Production sharing
License costs
Barrels (’000)
USD (’000)
USD (’000)
Sultanate of Oman – Ministry of Oil & Gas
Sultanate of Oman – Ministry of Finance
Total Oman
Total
2,062
–
2,062
2,062
144,873
–
144,873
144,873
100
150
250
250
Total
USD (’000)
144,873
250
145,123
145,123
Total
USD (’000)
144,973
150
145,123
145,123
Production sharing
The category includes non-cash taxes and compensation to receiv-
ing state/authority in barrels of oil from Tethys Oil’s working
interest share of production. The presented amounts are based on
net entitlement and have been valued using the reported average
price for the period.
License costs
This pertains to costs for maintaining the exploration license for
Oman Block 49 where payment was made to Oman’s Ministry of
Oil and Gas and Oman’s Ministry of Finance.
32
Key financial data
Group
Operational items
2018
2017
2016
2015
2014
Production before government take, Oman Blocks 3&4, bbl
4,294,852
4,439,119
4,436,438
3,539,632
2,765,653
Production per day, Oman Blocks 3&4, bbl
11,767
12,162
12,121
9,698
7,577
Net sales after government take, bbl
2,163,148
2,316,404
2,357,701
1,805,056
1,464,228
Achieved oil price, USD/bbl
70.5
51.8
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
Distribution per share, SEK
Cash flow from operations per share, USD
157.3
106.6
68%
60.7
39%
62.2
40%
73.1
267.6
291.4
92%
neg.
55.8
73.1
119.3
78.2
66%
38.4
32%
33.1
28%
42.0
228.5
244.7
93%
neg.
40.4
42.0
40.5
87.1
44.0
51%
-0.5
-1%
2.7
3%
39.0
196.9
239.0
82%
neg.
48.5
39.0
58.1
103.9
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
25.09%
26.66%
15.56%
18.97%
1.29%
4.20%
10.85%
25.82%
13.59%
30.87%
20
6.00
2.97
19
1.00
1.46
19
4.00
1.53
17
3.00
1.69
18
n.a.
2.89
Number of shares at year end, thousands
35,896
35,544
35,544
35,544
35,544
Of which repurchased shares at period end, thousands
1,644
1,644
1,329
1,084
298
Number of shares at year end (excluding repurchased shares), thousands
34,252
33,900
34,215
34,460
35,246
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
7.45
34,011
34,140
1.83
1.82
6.43
34,170
34,385
0.97
0.96
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
33
Tethys Oil discloses alternative performance
measures as part of its financial statements
prepared in accordance with ESMA’s (Euro-
pean Securities and Markets Authority)
guidelines. Tethys Oil believes that the alter-
native performance measures provide use-
ful supplemental information to manage-
ment, investors, security analysts and other
stakeholders. They are meant to provide an
enhanced insight into the financial devel-
opment of Tethys Oil’s business operations
and improve comparability between peri-
ods. Alternative performance measures are
not defined under IFRS and should not be
viewed as a substitute for financial informa-
tion presented in accordance with IFRS but
rather as a complement. Reconciliations of
relevant alternative performance measures
are provided on the following page. Defini-
tions of the performance measures are pro-
vided under the key ratio definitions below.
Definitions of key ratios
Relevant reconciliations of alternative performance measures
MUSD
Operating result
Add: Depreciation, depletion and amortization
Add: Exploration costs
EBITDA
Cash and bank
Less: Interest bearing debt
Net cash
2018
60.7
45.9
–
106.6
73.1
–
73.1
2017
2016
2015
38.4
39.5
0.3
78.2
42.0
–
42.0
-0.5
44.4
0.1
44.0
39.0
–
39.0
23.0
34.7
1.0
58.6
51.2
–
51.2
2014
57.1
31.1
19.8
108.0
47.8
–
47.8
Margins
Operating margin
Operating result as a percentage of yearly
turnover.
Net margin
Net result as a percentage of yearly turnover.
EBITDA-margin
EBITDA as a percentage of yearly turnover.
Capital structure
Equity ratio
Shareholders’ equity as a percentage of
total assets.
Leverage ratio
Net interest bearing debt as a percentage of
shareholders’ equity.
Other
Number of employees
Average number of employees full-time.
Net cash/net debt
Cash and equivalents less interest bearing debt.
Investments
Total investments during the year.
Profitability
Return on shareholders’ equity
Net result as percentage of average share-
holders’ equity.
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.
Return on capital employed
Net result plus financial costs as a per-
centage of average capital employed (total
assets less non interests-bearing liabilities).
n.a.
Not applicable.
n.m.
Not meaningful.
Definitions and abbreviations
SEK
TSEK
MSEK
USD
TUSD
Swedish krona
Thousands of Swedish kronor
Millions of Swedish kronor
US dollar
Thousands of US dollars
MUSD
Million US dollars
bbl
bopd
mbo
Oil production is often given in numbers of barrels
per day. One barrel of oil = 159 litres, Barrel Volume
measurement.
Barrels of Oil per Day
Thousand Barrels
mmbo
Million Barrels
34
Definitions and abbreviations
Administration report
(This is an English translation of the Swedish original)
Tethys Oil AB (publ)
Tethys Oil Block 3 & 4 Ltd.
Tethys Oil Montasar Ltd.
Tethys Oil Exploration AB
Tethys Oil France AB
Tethys Oil Oman Ltd.
Jyllands Olie ApS
Odin Energy A/S
40%
50%
Blocks 3&4, Oman
Block 49, Oman
Attila, France
UAB TAN Oil
Raseiniai, Lithuania
UAB LL Investicijos
Rietavas, Lithuania
UAB Minijos Nafta
Gargzdai, Lithuania
75%
50%
Ownership in subsidiary companies is 100% unless otherwise stated.
The consolidated financial statements of the Tethys Oil Group
(hereafter referred to as “Tethys Oil” or the “Group”), where
Tethys Oil AB (publ) (the “Company”) with organisational num-
ber 556615-8266 is the parent company, are hereby presented
for the twelve month period ending on 31 December 2018. The
amounts relating to the comparative period (equivalent period of
last year) are shown in parenthesis after the amount for the current
period. Segments of the Group are geographical markets.
OPERATIONS
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 Group holds interests in Blocks 3&4 and
Block 49. The reserve and resource base on Blocks 3&4 amounts
to 25.4 mmbo of 2P reserves and the 12.5 mmbo of 2C contin-
gent resources. The average oil production from Blocks 3&4 in
2018 amounted to 11,767 barrels per day. 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 Lithu-
ania and France and some production in Lithuania.
Production
Tethys Oil’s core area is onshore Oman, where Tethys Oil holds a
30 percent non-operated interest in exploration and production
licence Blocks 3&4 and a 100 percent operated interest in explora-
tion licence Block 49. Tethys Oil also has non-operated interests in
three licenses onshore Lithuania via associated companies and in
one license onshore France. The primary production comes from
Blocks 3&4. The production on Blocks 3&4 in 2018 was in line
with the production in 2017 and amounted to 4.3 million barrels
(4.4 million barrels). The existing production areas Farha South,
Shahd and Saiwan East are either at peak production or in decline.
New production from the discoveries made in 2017, the Erfan,
Ulfa and Samha areas, is expected to contribute an increasing
share of overall production. 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 range 20–52 percent,
depending on available recoverable cost. To date on Blocks 3&4,
the joint operations partners’ share of production after govern-
ment take has been in the high end of the range, 52 percent, as the
joint venture partners have continued to invest on Blocks 3&4.
The estimated recoverable costs as at 31 December 2018, net to
Tethys Oil, amounts to MUSD 14.7 (MUSD 44.2). Based on the
expected investment in 2019 and under market conditions as at 11
February 2019, Tethys Oil expects no change to its entitlement of
oil production during 2019.
Tethys Oil’s share of volumes, before government take
2018
2017
2016
2015
2014
Tethys Oil’s share of annual production, bbl
Oman, Blocks 3&4
Production
4,294,852
4,439,118
4,436,438
3,539,631
2,765,654
Average daily production, bopd
11,767
12,162
12,121
9,698
7,577
35
Average daily production net to Tethys Oil, yearly
bopd
12,000
10,000
8,000
6,000
4,000
2,000
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
Reserves and contingent resources
Oman, Blocks 3&4
Tethys Oil’s net working interest Reserves in Blocks 3&4 Oman
as at 31 December 2018 amount to 25,357 thousand barrels of
oil (“mbo”) of proven and probable Reserves (2P). The 2P reserve
replacement ratio amounts to 177 percent. In addition, Tethys
Oil’s net working interest resources oil base in Oman amounts to
12,533 mbo of 2C contingent resources. The Company’s 2018 and
2017 year-end Reserves reports were audited by ERC Equipoise
Limited (“ERCE”) as independent qualified Reserves evaluator.
Contingent resources Blocks 3&4 (audited)
mbo
1C
2C
3C
Total 31 December 2018
5,472
12,533
24,767
The audit of the Reserves in Oman have been conducted using 2018
Petroleum Resources Management System (PRMS2018), sponsored
by the Society of Petroleum Engineers (SPE), World Petroleum Coun-
cil (WPC), American Association of Petroleum Geologists (AAPG)
and Society of Petroleum Evaluation Engineers (SPEE).
Revenue and other income
Development of reserves, Blocks 3&4 (audited)
mbo
1P
2P
3P
Revenue and
other income
2018
2017
2016
2015
2014
Total 31 December 2017
15,559
22,044
32,414
Oil sold, bbl
2,163,148 2,316,404 2,357,701 1,805,056 1,464,228
Production 2018
Additions and revisions
-4,295
5,471
-4,295
7,608
-4,295
7,765
Total 31 December 2018
16,735
25,357
35,884
Reserve replacement ratio, %
127
177
181
Underlift (overlift)
movement, bbl
Net barrels
produced, after
government
take, bbl
70,174
-8,062
-50,754
35,552
-26,088
2,233,323 2,308,342 2,306,947 1,840,608 1,438,140
Additions and revisions include maturation of over 4 mmbo of con-
tingent resources to Reserves from the ongoing appraisal program
of the 2017 discoveries as well as upside revisions of the Reserves
on the Farha South, Shahd and Erfan fields and a small amount of
Reserves attributable to the Tibyan discovery, the exploration well
drilled in 2018.
Based on ERCE’s model, Tethys Oil’s net entitlement Reserves
(Reserves after government take) amount to 7,781 mbo of 1P,
10,477 mbo of 2P and 13,824 mbo of 3P.
In addition to Reserves, Tethys Oil also announces contingent
resources. The estimated contingent resources are contained in
the discoveries made in 2017. Development of the contingent
resources is contingent on the results of the on-going appraisal
programme and also a work programme and budget to access these
resources.
Oil price, USD/bbl
70.5
51.8
40.5
58.1
103.9
Revenue, MUSD
152.6
119.9
95.4
104.9
152.1
Underlift (overlift)
adjustments,
MUSD
Overlift adjustment
reporting error,
MUSD
Revenue and
other income,
MUSD
4.7
(0.6)
(2.4)
2.2
(2.8)
–
–
(5.9)
–
–
157.3
119.3
87.1
107.0
149.3
Revenue and other income for 2018 is up 32 percent compared
to 2017 and the main reason is the increase in the oil price which
is up 36 percent between the years. There has been a change from
overlift to underlift position from 2017 to 2018.
36
During 2018, Tethys Oil sold 2,163,148 barrels of oil from
Blocks 3&4, representing a seven percent decrease in comparison
with 2017 when 2,316,404 barrels of oil were sold. This resulted in
revenue during 2018 of MUSD 152.6 compared to MUSD 119.9
during 2017. In addition to revenue, there has been an adjust-
ment for underlift amounting to MUSD 4.7 which together with
revenue adds up to revenue and other income of MUSD 157.3
in 2018.
The average selling price amounted to USD 70.5 per barrel during
2018, 36 percent higher compared to 2017.
Sale quantities for oil sales are nominated two months in advance
and are not based upon the actual production in a month; as a
result, sales quantities can be above or below production quanti-
ties. Where the sales quantity exceeds the quantity of barrels pro-
duced an overlift position occurs and where it is less, an underlift
position occurs. There was a movement from overlift to underlift
between year-end 2018 and 2017. The total underlift position as
per 31 December 2018 is 34,083 barrels. The valuation of both
over and underlift is based on market price.
Tethys Oil sells all of its oil through Mitsui Energy Trading Singa-
pore, which is part of Mitsui & Co Ltd. All oil sales originate from
Blocks 3&4 and are made on a monthly basis. The selling price is
based on the monthly average price of the two-month future con-
tract of Oman blend as traded on the Dubai Mercantile Exchange,
including trading and quality adjustments.
Operating expenses
Operating expenses,
Blocks 3&4
2018
2017
2016
2015
2014
Production costs, MUSD
42.6
32.6
33.5
38.4
32.7
Well workovers, MUSD
3.4
2.3
3.1
4.5
4.4
Total operating
expenses, MUSD
Operating expenses per
barrel, USD
45.9
34.9
36.5
42.9
37.2
10.7
7.9
8.2
12.1
13.4
Production costs relate to oil production on Blocks 3&4, and
comprise expenses for throughput fees, energy, consumables, field
staff, maintenance, as well as administration, including operator
overhead. Well workovers and interventions relate to downhole
work and replacing of electric submersible pumps enabling shut-
in wells to restart production. The work programme for well work-
overs for the year was increased.
Production costs and well workover together make up operating
expenses, amounting to MUSD 45.9 in 2018, which were higher
than MUSD 34.9 during 2017. The majority of production comes
from mature fields where many wells have higher production costs,
compared to new production wells, due to increased maintenance,
water handling and energy requirements to maintain production.
The cost for rented equipment also increased in 2018.
Depletion, depreciation and amortisation
DD&A, Blocks 3&4
2018
2017
2016
2015
2014
DD&A, MUSD
45.9
39.5
44.4
34.6
31.0
DD&A per barrel, USD
10.7
8.9
10.0
9.8
11.2
Depletion, depreciation and amortisation (“DD&A”) for 2018
amounted to MUSD 45.9, which is higher than 2017 and attrib-
utable to an increased DD&A rate per barrel. The DD&A charge
relates to Blocks 3&4.
Netback
Netback, Blocks 3&4,
USD/bbl
Oil price achieved (sales
barrels)
Revenue (after
government take)
Operating expenses
Netback
2018
2017
2016
2015
2014
70.5
51.8
40.5
58.1
103.9
36.7
27.0
21.0
30.2
54.0
10.7
26.0
7.9
8.2
12.1
13.4
19.1
12.8
18.1
40.6
The increase in netback per barrel during 2018 has mainly been
driven by the oil price development.
Administrative expenses
Administrative expenses amounted to MUSD 5.7 for 2018 com-
pared to MUSD 5.9 during 2017. Administrative expenses are
mainly salaries, rents, listing costs and external services. Admin-
istrative expenses have been stable between years 2018 and 2017.
Net financial result
The net financial result for 2018 of MUSD 1.5 (MUSD -5.3)
has been impacted by gains and losses due to changes in foreign
exchange rates due to the USD strengthening against the SEK, net
MUSD 1.6, as well as interest income of MUSD 0.3 and other
financial expenses of MUSD -0.4. 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, which expired during the first quarter 2018, amounted to
MUSD 0.0.
Tax
Tethys Oil’s oil and gas operations in Oman are governed by an
Exploration and Production Sharing Agreement for each licence
(“EPSA”) whereby Tethys Oil receives its share of oil after govern-
ment take. Under the terms of each 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. The effect
of these taxes is netted against revenue and other income in the
income statement.
Result
Tethys Oil reports a net result after tax for 2018 of MUSD 62.2,
representing earnings per share of USD 1.82. The result for 2018
is up compared to 2017. Net result is mainly up due to the higher
oil prices.
37
Investments and work programme
Summary of oil and gas interests (MUSD):
Country/Asset
Book value
31 Dec
2018
Investments
Jan–Dec
2018
Book value
31 Dec
2017
Investments
Jan–Dec
2017
Oman Blocks 3&4
194.0
Oman Block 49
Lithuania
France
New ventures
Total
5.7
–
–
0.3
200.0
50.4
5.3
–
–
0.1
55.8
189.1
0.4
–
–
0.2
189.7
39.9
0.4
–
–
0.1
40.4
During 2018, total investments amounted to MUSD 55.8, of
which 50.4 relate to Blocks 3&4. Investments during the year
have been higher than investments in 2017 primarily due to more
activity within geology and geophysics on Blocks 3&4 as well as
the seismic acquisition on Block 49.
Blocks 3&4
Investments Blocks
3&4, MUSD
Drilling
G&G
Facilities
Total investments
Blocks 3&4
2018
2017
2016
2015
2014
25.5
11.2
13.7
26.6
30.3
20.5
19.8
4.2
9.1
4.5
8.9
6.6
13.4
11.3
11.9
50.4
39.9
48.2
40.7
38.3
Three rigs and one workover unit have been operating and a total
of 44 wells were completed on Blocks 3&4 during 2018.
Wells completed
2018 (primary
purpose)
Discoveries
made in
2017
Farha
South
Field
Shahd and
Saiwan East
Fields
Near and
far field
exploration
Total
Appraisal/
Production
Water injection
Water source
Exploration
Total
7
–
–
–
7
17
15
–
–
32
1
1
1
–
3
–
–
–
2
2
25
16
1
2
44
fai layer. Ulfa-4 and Ulfa-5 were successfully drilled in the fourth
quarter 2018 and encountered oil as expected. Ulfa-4 was drilled
to appraise and produce the eastern part of Ulfa discovery and
Ulfa-5 was drilled south of the discovery well in the central part
in order to produce from the Buah formation. One well was com-
pleted as producer in the Khufai and one in the Buah reservoirs.
The drilling of appraisal well Ulfa-6 also commenced in the fourth
quarter 2018.
Two new appraisal wells were drilled on Samha in 2018. The
Samha-2 well was successfully drilled in the third quarter 2018
and encountered oil as expected. The well was drilled to appraise
the southeastern part of Samha discovery. The Samha-3 well was
successfully drilled in the fourth quarter 2018 and encountered oil
as expected. The Samha-3 well was drilled south of the Samha-2
well and was completed as producers in the Khufai reservoir.
The construction of the Ulfa EPF was finalized in the fourth quar-
ter and the facility was in full production towards the very end of
the year. The EPF includes separators, heater treaters and pipe-
lines. A new pipeline has been constructed to connect the Ulfa
EPF with the Saiwan East production facility. Following the com-
missioning of the EPF, wells on Ulfa and Samha were connected
to Ulfa EPF and put into production. Some of the new wells at
Ulfa and Samha had previously been temporary connected to the
Farha South production facility. The commissioning of the EPF
has released capacity at the Farha South production facility.
The majority of the information gathered in 2018 from the
appraisal wells on Ulfa and Samha were as, or slightly better than,
expected. However, the revised time plan for the Ulfa EPF resulted
in a delay of the part of the appraisal programme that relates to
pressure data and production levels. This affected the proportion
of the contingent resources converted into reserves by year-end.
More comprehensive data is being gathered as the Ulfa EPF has
come on stream, which is important to continue the maturation
process.
The Erfan discovery was appraised by two wells in addition to the
discovery well already in 2017. A further appraisal well, Erfan-4,
was drilled during the second quarter 2018. Erfan-4 was drilled
centrally on the structure in order to drain and evaluate an area
between Erfan-2 and Erfan-3. The well encountered oil and was
connected to the Saiwan East production facilities.
Discoveries made in 2017
The appraisal programme of the Ulfa and Samha discoveries has
been one of the central components of the investments during
2018. It was initiated in the first quarter 2018 with the objec-
tive to mature contingent resources into reserves and to optimise
plans for future production by gathering data on volumes, reser-
voir quality and continuity, fluid levels and productivity. Both the
Buah and the Khufai reservoir sections are being appraised. Cores
are taken for analysis and advanced logging is being conducted.
Block 3: Farha South Field
Nine appraisal/production wells were drilled in previously
undrilled fault blocks on the Farha South oil field. All wells were
drilled vertically down to the targeted Barik sandstone. Four wells
encountered oil and were connected to the Farha South produc-
tion facility. Eight production wells were also drilled on producing
fault blocks on Farha South. The wells have been connected to the
Farha South production facility. In addition, 15 water injection
wells were drilled on the field.
In 2018, four appraisal wells were drilled on the Ulfa field. Ulfa-2
and Ulfa-3 were completed in the second quarter 2018. Ulfa-2
was drilled in the western part of Ulfa discovery and Ulfa-3 was
drilled even farther west to appraise the western flank in order to
define the reservoir’s extent/boundary and oil/water contact. Both
Ulfa-2 and Ulfa-3 were completed as producers from the Khu-
Block 4: Shahd and Saiwan East oil fields
One production well was drilled on the Shahd oil field in 2018.
The well encountered oil and was connected to the production
system. One side track was also drilled in an old well on the Shahd
field. In addition, one water injection well and one water source
well was drilled.
38
Exploration on Blocks 3&4
The testing of the exploration well Luja-1, that was drilled in the
southern part of Block 4 in the first quarter 2018, has been final-
ised. Luja-1 was drilled about 110 km southwest of the Shahd
field. The well reached a total depth (TVD) of 3,609 m. Since
the well is located far from the infrastructure facilities on the pro-
ducing fields, a supporting field camp was required in order to
enable comprehensive testing operations. Oil was encountered and
oil samples were taken from both the AbuMahara group and the
Khufai formation. However, the well did not flow oil to surface
during testing. The well has been plugged. The results are positive
and confirm a live petroleum system in the area. A comprehensive
post drilling analysis will be conducted in order to assess the other
leads identified in the Southern part of Block 4.
The exploration well Tibyan-1 was spudded and completed in the
first quarter. Tibyan-1 is located about nine km southwest of the
Erfan-1 discovery. The target of the well was the Khufai formation
which resulted in a new smaller oil discovery. The well was con-
nected to the production system during the second quarter 2018.
The drilling of two exploration wells commenced in the fourth
quarter 2018. One well is located about 11 km east of the Farha
South infrastructure to explore deeper sections of Block 3. The
second well, a near field Ulfa/Samha analogy well, is located about
10 km northeast of the Ulfa discovery.
Seismic acquisition
A seismic acquisition programme on Blocks 3&4 was launched in
the fourth quarter 2017. The programme covered three areas on
Blocks 3&4. On the first two areas, 1,200 km2 area east of the Ulfa
discovery and 800 km2 area north-west of the Farha South field,
seismic acquisition and processing were completed in the first half
of 2018. Interpretation and mapping of the processed data con-
tinues. The exploration well that was spudded in late 2018 east
of Farha South infrastructure is within this 3D seismic area and
the location is a result of the interpretation of the new seismic.
The seismic acquisition on the third area, 750 km2 south of the
Shahd field, was completed in September 2018 and the data is
being processed.
Block 49
Investments on Block 49 during 2018 amounted to MUSD 5.3,
compared to MUSD 0.4 during 2017. The investments primarily
relate to the seismic campaign that was launched and completed
during the fourth quarter 2018.
Tethys Oil was awarded the exploration license for Block 49 in
the fourth quarter 2017. Block 49 covers an area of 15,439 km2
in the south-west of Oman. More than 11,000 km of 2D seismic
acquired by previous operators has been made available to Tethys
Oil. Nine wells have been drilled within the block boundaries, sev-
eral of which are reported to have encountered oil shows.
In the fourth quarter 2018, Tethys Oil launched a seismic cam-
paign on Block 49, whereby 253 km2 of 3D and 299 km of 2D
seismic data were acquired in the north-eastern part of the license
area. The purpose of the seismic campaign is to further define
possible oil traps and to enhance the understanding of the deeper
parts of the block in general. The data is being processed and will,
when interpreted, guide the continued work on Block 49.
Through the reprocessing of some 1,464 km of older 2D seismic
data, acquired by previous operators, a number of seismic anoma-
lies have been identified, which could be possible – primarily
stratigraphic – oil traps. The anomalies have been identified within
the deeper formations in the block at depths of 2,500 metres or
below. After integration of all available data in Tethys Oil’s geologi-
cal model, the presence of source rock as well as potential reservoir
rocks have also been confirmed.
New ventures
In December 2018, Tethys Oil announced that it had entered into
an agreement to acquire a two percent participating interest in
Block 53 onshore Oman from Total E&P Oman, a wholly-owned
subsidiary of Total S.A. Block 53 holds the Mukhaizna oil field, the
single largest producing oil field in Oman. The Mukhaizna field is
a giant heavy-oil development operated by Occidental Petroleum,
with an average gross daily production in excess of 100,000 bopd.
The closing of the acquisition was subject to government approval
and the waiver of partner pre-emption rights. Tethys Oil was in the
first quarter 2019 informed by the seller that partner pre-emption
rights have been exercised, and as a result Tethys Oil will not be
able to complete the transaction.
A number of new venture projects have been reviewed in 2018 and
several continue to be evaluated.
Associated companies
Lithuania
The interest in the three Lithuanian licences is held indirectly
through a shareholding in two Danish private companies, which
in turn hold shares in Lithuanian companies holding 100 per-
cent of the licences. The two companies are consolidated through
a one-line consolidation in Tethys Oil’s financial statements and
are presented in the balance sheet under “Investments in associ-
ates” and in the income statement as “Share of net profit/loss from
associates”.
As at 31 December 2018, the value of the shareholding in the two
associated Danish companies holding the interests in Lithuanian
licenses, amounted to MUSD 0.0 compared to MUSD 0.0 at the
end of 2017. Share of net profit/loss from associated companies
amounted to MUSD 0.9 following receipt of dividends during
2018 (-0.3). The book value related to Minijos Nafta (Gargzdai)
is zero and as there are no formal or informal obligations related
to Minijos Nafta, Tethys Oil does not recognize any negative net
result from Minijos Nafta.
Production on the Gargzdai licence has decreased following natu-
ral decline of the wells. During 2018, an average of 15 wells were
in production on the license. A 100 km 2D seismic acquisition was
conducted during 2018 on Gargzdai licence in order to further
delineate the Kintai structure. The seismic data has been processed
and is being interpreted.
39
Tethys Oil’s share of volumes, before government take
2018
2017
2016
2015
2014
Tethys Oil’s share of annual production, bbl
Lithuania, Gargzdai
Production
Average daily production
31,149
36,196
41,684
38,857
42,000
85
99
114
106
115
Liquidity and financing
Cash and bank and Net cash as per 31 December 2018 amounted
to MUSD 73.1 compared to MUSD 42.0 as per 31 December
2017.
In May and November 2018 a dividend of SEK 1.00 per share
was paid to shareholders, which in total amounted to MUSD 7.5.
Furthermore, MUSD 15.1 was distributed to shareholders in a
share redemption programme.
During the twelve months ending 31 December 2018, the cash
flow from operations amounted to MUSD 105.4 and cash flow
used in investments in oil and gas amounted to MUSD 55.8. For
the twelve months of 2018 the cash flow from operations after
investments in oil and gas amounted to MUSD 49.6.
Tethys Oil’s operations on Blocks 3&4 and Block 49, including
investment programme, are expected to be funded from cash flow
from operations 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 2018
amounting to MSEK 244.4 compared to MSEK 85.0 for 2017.
Administrative expenses amounted to MSEK 32.8 for 2018 com-
pared to MSEK 31.2 for 2017. Net financial result amounted to
MSEK 259.5 during 2018 compared to MSEK 108.1 for 2017.
Dividends from subsidiaries amounting to MSEK 230.1 and cur-
rency exchange gains related to intercompany loans were the main
reason for the net financial result.
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 interests 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 relate to the different periods. Tethys Oil has
fulfilled its commitments on Blocks 3&4. On Block 49, the initial
work commitments during the first period include geological stud-
ies, seismic acquisition and processing and exploratory drilling. In
the other areas of operations the commitments are either fulfilled
or there are no commitments for which Tethys Oil can be held
liable. In some of Tethys Oil’s areas of interest there are require-
ments of work to be done or minimum expenditures in order to
retain the licences, but no commitments for which Tethys Oil can
be held liable.
The agreements that govern the relationship with partners are
referred to as Joint Operating Agreements (JOA). In all areas of
operation where Tethys Oil has partners, JOAs are in effect.
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.
Board of Directors
At the AGM of shareholders on 9 May 2018 Robert Anderson,
Alexandra Herger, Magnus Nordin, Per Seime and Geoffrey Tur-
bott were re-elected members of the Board. No deputy direc-
tors were appointed. At the same meeting, Geoffrey Turbott was
appointed chairman of the Board. The work of the board is subject
to an established work procedure that defines the distribution of
work between the board and the managing director. The work pro-
cedure is evaluated each year and revised if deemed appropriate.
The board had 15 meetings during 2018. The five members of
the board have consisted of four non-executive directors and the
managing director. The board has three committees – Audit Com-
mittee, Remuneration Committee and Technical Committee.
Geoffrey Turbott is chairman of the audit committee, Per Seime
is chairman of the remuneration committee and Rob Anderson is
chairman of the technical committee.
Organisation
At the end of the year, Tethys Oil had an average number of
full time employees of 20 (19). Of these, 7 (7) were women. In
addition, contractors and consultants are engaged in Tethys Oil’s
operations.
The environment
All oil and gas related operations impact the environment and
therefore entail risk. Directly or indirectly through joint opera-
tions, the Group complies with the environmental legislation and
regulations applicable in each country. Areas which are normally
regulated include air pollution, discharges to watercourses, water
use, handling of hazardous substances and waste, land and ground-
water contamination, and restoration of the environment around
the facilities after operations have ceased. Directly and indirectly
through partnerships, Tethys Oil strives to minimise the environ-
mental impact and avoid the occurrence of accidents.
Sustainability report
In accordance with the Swedish Annual Accounts Act (ÅRL chap-
ter 6 11§) Tethys Oil has opted to issue the sustainability report as
a document separate from the Annual Report.
40
Group structure
Tethys Oil AB (publ), with organizational number 556615-8266,
is the parent company in the Tethys Oil Group. Material subsidiar-
ies include Tethys Oil Block 3&4 Limited and Tethys Oil Mon-
tasar Limited. The Tethys Oil Group was established on 1 October
2003. The Group has branch offices in Muscat, Oman and Dubai,
the United Arab Emirates.
Share data
As at 31 December 2018, the number of outstanding shares in
Tethys Oil amount to 35,896,310, with a quota value of SEK 0.17.
All shares represent one vote each. The number of shares has
increased by 352,560 during 2018. Tethys Oil has a warrant based
incentive programme for employees which may increase the num-
ber of share depending on the share price during the exercise peri-
ods, for further information please see note 20.
As at 31 December 2018, Tethys Oil held 1,644,163 of its own
shares which have been purchased since commencement of the
programme during the fourth quarter 2014. The purpose of the
repurchasing program is to optimise the capital structure and to
enable any repurchased shares to be used as payment in connection
with, or financing of, acquisitions of companies or businesses. No
shares were purchased during 2018. 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 aver-
age number of shares in circulation during 2018 before dilution
is 34,010,616 and after dilution 34,140,318. After 31 December
2018 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
See note 23.
Risk and uncertainties
A statement of risks and uncertainties are presented in note 1.
Appropriation of profit
The Board of Directors proposes a dividend of SEK 2.00 per share
(AGM 2018: SEK 2.00) equal to MSEK 68.5 (MSEK 67.8). The
Board of Directors proposes that the dividend is to be paid in two
equal instalments of SEK 1.00 per share each, payable in May and
November 2019. Proposed record dates are 17 May 2019 and
18 November 2019. The Board of Directors proposes an extraor-
dinary distribution of SEK 6.00 per share (AGM 2018: SEK 4.00)
by way of a mandatory share redemption programme following
the AGM 2019 equal to MSEK 205.5 (135.6). 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
2018
128.9
244.4
373.3
2017
218.1
85.0
303.1
The Board of Directors proposes that these earnings be appropriated as follows:
To the shareholders, a distribution of SEK 2.00
per share (AGM 2018: SEK 2.00)
68.5
67.8
To the shareholders, an extraordinary distribution
of SEK 6.00 per share (AGM 2018: SEK 4.00)
To be retained in the business
205.5
135.6
99.3
99.7
373.3
303.1
Cash dividend
The Board of Directors’ proposal consists of a cash dividend of
SEK 2.00 per share amounting to SEK 68,504,294 at the current
number of shares and an extraordinary distribution of SEK 6.00 per
share amounting to SEK 205,512,882. The dividend and extraor-
dinary distribution are subject to approval at the AGM 2019.
The preliminary record day for the dividend is May 17, 2019 and
November 18, 2019. As per 31 December 2018, the Group’s and
the parent company’s equity ratio amounted to 91.8 percent and
96.5 percent, respectively. After the distribution, the Group’s and
the parent company’s equity ratio will amount to 90.9 percent
and 91.6 percent, respectively. Tethys Oil has generated signifi-
cant 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 possibilities to fulfil their com-
mitments 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 opera-
tions 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 dividend, is in reasonable propor-
tion to the scale of the parent company 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 atten-
tion, it is the board’s assessment that the parent company’s and
the Group’s financial position implies that the proposed dividend
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 bal-
ance 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 statements,
statements of changes in equity and related notes. Balance sheets
and income statements will be resolved at the AGM, 15 May 2019.
41
Financial statements for the group
Consolidated statement of comprehensive income
1 January – 31 December, MUSD
Revenue
Underlift/overlift adjustments
Revenue and other income
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
2018
152.6
4.7
157.3
-45.9
111.4
-45.9
–
0.9
-5.7
60.7
4.5
-3.0
1.5
62.2
–
62.2
-3.7
-3.7
58.4
58.4
2017
119.9
-0.6
119.3
-34.9
84.4
-39.5
-0.3
-0.3
-5.9
38.4
3.0
-8.3
-5.3
33.1
–
33.1
4.5
4.5
37.6
37.6
–
35,896,310
35,543,750
35,912,250
35,895,500
34,010,616
34,170,474
34,140,318
34,385,463
1.83
1.82
0.97
0.96
Note
3, 4
9
3, 8
8
6
10–12, 20
13
14
15
17
17
17
17
17
17
42
Consolidated balance sheet
As at 31 December, MUSD
Note
2018
2017
ASSETS
Non current assets
Oil and gas properties
Office equipment
Investment in associates
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
Current liabilities
Current provisions
Accounts payable and other current liabilities
Loan facility
Total liabilities
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES
200.0
0.1
–
200.1
17.9
0.3
73.1
91.3
189.7
0.0
0.0
189.7
12.7
0.3
42.0
55.0
291.4
244.7
0.8
74.0
-0.3
193.1
267.6
8.9
8.9
1.0
13.9
–
14.9
23.8
291.4
0.8
71.0
3.4
153.3
228.5
9.1
9.1
1.0
6.1
–
7.1
16.2
244.7
8
6
16
1
17
7
7
18
43
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 2017
0.8
71.0
-1.1
126.2
196.9
–
4.5
4.5
–
–
–
–
3.4
3.4
–
-3.7
-3.7
–
–
–
–
0.0
-0.3
33.1
–
33.1
-2.3
-3.9
0.3
-5.9
153.3
153.3
62.2
–
62.2
–
-7.5
-15.1
0.2
-22.4
193.1
33.1
4.5
37.6
-2.3
-3.9
0.3
-5.9
228.5
228.5
62.2
-3.7
58.5
2.9
-7.5
-15.1
0.2
-19.4
267.6
Comprehensive income
Result for the year 2017
Currency exchange differences for the year
2017
Total comprehensive income
Transactions with owners
Purchase of own shares
Dividends paid
Incentive programme
Total transactions with owners
Closing balance 31 December 2017
Opening balance 1 January 2018
Comprehensive income
Result for the year 2018
Currency exchange differences for the year
2018
Total comprehensive income
Transactions with owners
Share issue
Dividends paid
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2018
–
–
–
–
–
–
–
0.8
0.8
–
–
0.0
–
–
–
0.0
0.8
–
–
–
–
–
–
–
71.0
71.0
–
–
2.9
–
–
–
2.9
74.0
44
Consolidated cash flow statement
1 January – 31 December, MUSD
Note
2018
2017
13
14
8
8
8
17
Cash flow from operations
Operating result
Interest received
Interest paid
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 office equipment
Cash from associated companies, net
Cash flow from investment activity
Financing activity
Purchase of own shares
Share redemption
Dividend
Proceeds from share issue
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
60.7
0.3
0.0
–
41.7
102.7
-7.2
9.9
105.4
-55.8
-0.1
0.9
-55.0
–
-15.1
-7.5
2.9
-19.7
30.7
42.0
0.5
73.1
38.4
–
-0.2
0.3
38.2
76.7
-5.4
-21.2
50.1
-40.4
–
–
-40.4
-2.3
–
-3.9
–
-6.2
3.5
39.0
-0.5
42.0
45
Financial statements for the parent company
Parent company income statement
1 January – 31 December, 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
Result before tax
Income tax
Result for the year1
Note
5
6
10–12, 20
13
14
19
15
2018
9.7
8.0
-32.8
-15.1
282.7
-23.2
-0.0
259.5
244.4
–
244.4
2017
10.9
-2.8
-31.2
-23.1
164.6
-53.6
-2.9
108.1
85.0
–
85.0
1 As there are no items in the parent company’s other comprehensive income, no separate report on total comprehensive income is presented.
46
Parent company balance sheet
As at 31 December, MSEK
Note
2018
2017
0.0
1.0
222.0
–
223.0
2.3
0.9
240.2
243.4
466.5
5.9
71.1
481.0
-352.1
244.4
450.3
3.9
12.2
16.2
466.5
0.1
0.9
355.6
0.0
356.6
5.5
0.7
58.2
64.4
421.0
5.9
71.1
481.0
-262.9
85.0
380.1
5.7
35.2
40.9
421.0
19
6
16
1
17
ASSETS
Non-current assets
Other fixed assets
Shares in subsidiaries
Long term receivables from subsidiaries
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 and other current liabilities
18
Other current liabilities to subsidiaries
Total liabilities
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES
47
Parent company statement of changes in equity
Restricted equity
Unrestricted equity
MSEK
Share
capital
Statutory
reserve
Share
premium
reserve
Opening balance 1 January 2017
5.9
71.1
481.0
Transfer of prior year net result
Comprehensive income
Result for the year 2017
Period result
Total comprehensive income
Transactions with owners
Purchase of own shares
Dividends paid
Incentive programme
Total transactions with owners
Closing balance 31 December 2017
Opening balance 1 January 2018
Transfer of prior year net result
Comprehensive income
Result for the year 2018
Period result
Total comprehensive income
Transactions with owners
Impacting share issue
Dividends paid
Share redemption
Incentive programme
Total transactions with owners
Merger difference
–
–
–
–
–
–
–
–
5.9
5.9
–
–
–
–
0.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
71.1
71.1
481.0
481.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
-235.2
23.4
–
–
–
-19.3
-34.2
2.4
-51.1
-262.9
-262.9
85.0
–
–
–
25.9
-68.1
-135.6
2.1
-175.7
1.5
Net
result
23.4
-23.4
85.0
85.0
85.0
–
–
–
–
85.0
85.0
-85.0
244.4
244.4
244.4
–
–
–
–
–
–
Closing balance 31 December 2018
5.9
71.1
481.0
-352.1
245.9
Total equity
346.2
–
85.0
85.0
85.0
-19.3
-34.2
2.4
-51.1
380.1
380.1
–
244.4
244.4
244.4
25.9
-68.1
-135.6
2.1
-175.7
1.5
450.3
48
Parent company cash flow statement
1 January – 31 December, MSEK
Note
2018
2017
Cash flow from operations
Operating result
Interest received
Interest paid
Adjustment for non cash related items
Total cash flow from operations before change in working capital
Change in receivables
Change in liabilities
Cash flow from operations
Investment activity
Dividend from subsidiaries
Investment in long term receivables
Cash flow from investment activity
Financing activity
Purchase of own shares
Issuance of 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
13
14
17
17
-15.1
0.2
0.0
-3.0
-17.9
3.0
-4.4
-19.3
210.0
164.0
374.0
–
25.9
-68.1
-135.6
-177.8
176.9
58.2
5.1
240.2
-23.1
0.0
0.0
-3.1
-26.2
-2.7
-0.2
-29.1
–
43.4
43.4
-19.3
–
-34.2
–
-53.5
-39.2
104.6
-7.2
58.2
49
Notes
General information
Tethys Oil AB (publ) (“the Company”), corporate identity number 556615-
8266, and its subsidiaries (together “the Group” or “Tethys Oil”) are
focused on exploration for and production of oil and natural gas. The Group
has interests in exploration licences in Oman, France and Lithuania. The
Company is a limited liability company incorporated and domiciled in Stock-
holm, Sweden. The Company is listed on Nasdaq Stockholm.
These consolidated financial statements have been approved for issue by
the Board of Directors on 3 April 2019.
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 2017 Annual report, save for the implementation of IFRS 9
and 15 which came into effect on 1 January 2018, and have been consist-
ently 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 com-
pany has been prepared in accordance with the Annual Accounts Act and
Swedish Financial Accounting Standards Council’s RFR 2 “Accounting for
legal entities”. RFR 2 means that the parent company in the annual report
for the legal entity shall apply IFRS’ rules and statements as adopted by
the EU, so far this is possible within the framework of the Annual Accounts
Act and with regard to the connection between accounting and taxation. The
recommendation states which exceptions and additions that shall be or are
allowed to be made from IFRS. The accounting principles of the parent com-
pany 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 2018
IFRS 9 has come into effect with effective date 1 January 2018. IFRS 9
Financial instruments, addresses the classification, measurement and rec-
ognition of financial assets and financial liabilities, introduced new rules for
hedge accounting and a new impairment model for financial assets. IFRS
9 has not had any material effect on the financial reporting. IFRS 15 has
come into effect with effective date 1 January 2018. IFRS 15 Revenue from
contract with customers addresses revenue recognition and established
principles for reporting useful information to users of financial statements.
Based on this standard, certain transactions are no longer reported as rev-
enue but as other income instead. IFRS 15 has not had any material effect
on the financial reporting apart from changes in presentation.
New standards and interpretations not yet adopted
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 recognised on the balance sheet. This
model reflects that, at the start of a lease, the lessee obtains the right to
use an asset for a period of time and has an obligation to pay for that right.
The accounting for lessors will in all material aspects be unchanged. The
standard is effective for annual periods beginning on or after 1 January
2019.
Tethys Oil has chosen the modified retrospective method, applying the
short-term lease and the asset of low value exceptions. The standard will
primarily impact the accounting of the group’s operational leases. The cur-
rent interpretation is that IFRS 16 does not relate to leases within the
group’s joint operations and at present the group only has office leases and
IT-servers/-programs and other leases concerning items of lesser value.
Considering the few leases in the group, the preliminary assessment is that
the standard will have no material impact on the Group.
Closing balance
Estimated
31 Dec 2018
reclassifications
Estimated
Estimated
before transi-
due to transi-
adjustment due
adjusted open-
tion to IFRS 16
tion to IFRS 16
to transition
ing balance
Leases
Leases
IFRS 16 Leases
1 Jan 2019
–
–
–
–
0.7
0.7
0.7
0.7
MUSD
Right-of-use
assets
Lease liabilities,
interest bearing
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the Group.
Principles of consolidation
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed
to, or has rights to variable returns from, its involvement with the entity and
has the ability to affect those returns through its power over the entity. Sub-
sidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for busi-
ness combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabili-
ties assumed in a business combination are measured initially at their
fair values at the acquisition date. On an acquisition-by-acquisition basis,
the Group recognises any non-controlling interest in the acquiree either
at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net assets.
Inter-company transactions, balances and unrealised gains on transac-
tions between subsidiaries are eliminated. Unrealised losses are also
eliminated. Accounting policies of subsidiaries have been changed where
necessary 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 sepa-
rate legal entity status through licenses which are held jointly with other
companies. The Groups financial statements reflect the Group’s share of
production, capital costs, operational costs, current assets and liabilities
in the joint operations.
50
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 recognised 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 accumulated
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 asso-
ciate. Dividends from associated companies are presented in the balance
sheet under ”Investments in associates” and in the income statement as
“Share of net profit/loss from associates”.
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.
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 subsidiaries 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 trans-
actions where it is more relevant to use the rate of the day of the trans-
action. The translation differences that 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 2018
31 December 2017
Currency
2018 Average
2018 Period end
2017 Average
2017 Period end
SEK/USD
SEK/EUR
8.75
10.32
9.14
10.42
8.67
9.73
9.42
9.80
Segment reporting
Operating segments are based on geographic perspective and reported in
a manner consistent with the internal reporting provided to the Executive
Management.
Classification of assets and liabilities
Non-current assets, long-term liabilities and provisions consist for the most
part solely of amounts that are expected to be recovered or paid more than
twelve months after the balance sheet date. Current assets and current
liabilities consist solely of amounts that are expected to be recovered or
paid within twelve months after the balance sheet date.
Oil and gas properties
Oil and gas properties are initially recorded at historical cost, where it is
probable that they will generate future economic benefits. All costs for
acquiring concessions, licences or interests in production sharing con-
tracts and for the survey, drilling and development of such interests are
capitalised on a field area cost centre basis. This includes capitalisation
of decommissioning and restoration costs associated with provisions
for asset retirement (see “Provisions”). Oil and gas properties are sub-
sequently carried at cost less accumulated depreciation, depletion and
amortisation (including any impairment). Gains and losses on disposals
are determined by comparing the proceeds with the carrying amounts of
assets sold and are recognised in income.
Routine maintenance and repair costs for producing assets are expensed
to the income statement when they occur.
Proceeds from the sale or farm-out of oil and gas concessions in the explo-
ration stage are off set against the related capitalised costs of each cost
centre with any excess of net proceeds over all costs capitalised included
in the income statement. In the event of a sale in the exploration stage any
deficit is included in the income statement.
Oil and gas properties are categorised as either producing or non-producing.
Depreciation, depletion and amortisation
Producing oil and gas properties are depleted on a unit-of-production basis
over the proved and probable reserves of the field concerned, except in the
case of assets whose useful lives differ from the lifetime of the field, in
which case the straight-line method is applied.
In accordance with the unit of production method, net capitalised costs to
reporting date, together with anticipated future capital costs for the devel-
opment of the proved and probable reserves determined at the balance
sheet date price levels, are depleted based on the year’s production in rela-
tion to estimated total proved and probable reserves of oil and gas. Deple-
tion of a field area is charged to the income statement once commercial
production commences, under Depletion, depreciation and amortisation.
Proved reserves are those quantities of petroleum which, by analysis of
geological and engineering data, can be estimated with reasonable cer-
tainty to be commercially recoverable, from a given date forward, from
known reservoirs and under current economic conditions, operating meth-
ods and governmental regulations. Proved reserves can be categorised as
developed or undeveloped. If deterministic methods are used, the term
reasonable certainty is intended to express a high degree of confidence
that the quantities will be recovered. If probabilistic methods are used,
there should be at least a 90 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.
51
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.
Interest
Interest on borrowings to finance the acquisition of producing oil and gas
properties is charged to income as incurred. Interest on borrowings to
finance fields under development is capitalized within oil and gas proper-
ties until production commences.
Valuation principles financial items
The Group classifies its financial assets in the following categories: at fair
value through profit or loss, loans and receivables and other liabilities. The
classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets
at initial recognition.
Tethys Oil reports a financial asset or a financial liability in the balance
sheet when it becomes a party to the instrument’s contractual terms.
Tethys Oil derecognises a financial liability or part thereof when the obli-
gation 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. Financial assets 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. The Group did not have any
financial assets held for trading during 2018.
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.
in current liabilities, except for maturities greater than 12 months after the
end of the reporting period. These are classified as non-current liabilities.
Other liabilities are recognised initially at fair value and subsequently meas-
ured at amortised cost using the effective interest method.
d) Impairment of financial assets
The group assesses at the end of each reporting period whether there
is objective evidence that a financial asset or group of financial assets
is impaired. A financial asset or a group of financial assets is impaired
and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss event (or events) has
an impact on the estimated future cash flows of the financial asset or group
of financial assets that can be reliably estimated. For loans and receivables
category, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) dis-
counted at the financial asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is recognised in
the consolidated income statement.
Fixed assets other than oil and gas
Other tangible fixed assets are stated at cost less accumulated depre-
ciation. Depreciation is based on cost and is calculated on a straight line
basis over the estimated economic life of 3 to 5 years for office equipment
and other assets.
Additional costs to existing assets are included in the assets’ net book
value or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably.
The net book value of any replaced parts is written off. Other additional
expenses are deemed to be repair and maintenance costs and are charged
to the income statement when they are incurred. The net book value is writ-
ten down immediately to its recoverable amount when the net book value
is higher. The recoverable amount is the higher of an asset’s fair value less
cost to sell and value in use.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, 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.
Should any Group company purchase parent company shares (repurchase
of own shares) the proceeds including any directly attributable transaction
costs (net after tax) will reduce equity attributable to the shareholders of
the parent company until the shares are annulled or realized. If the shares
are realized, proceeds net after directly attributable transaction costs and
tax effects are shown in equity attributable to the shareholders of the par-
ent company.
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 Tethys Oil has a legal or constructive obligation
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 reliable esti-
mate can be made of the amount. Provisions are measured at the present
value of the expenditures expected to be required to settle the obligation
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.
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
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
52
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.
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.
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 recognised 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 Tethys
Oil 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 Tethys Oil’s
working interest share in the related oil and gas property, results in produc-
tion underliftings, or overliftings. Underliftings are recorded as Other receiv-
ables valued at market value, and overliftings are recorded in Other cur-
rent liabilities and accrued at the market value. Underliftings are reversed
from Other receivables when the crude oil is lifted and sold. Overliftings
are reversed from Other current liabilities when sufficient volumes are pro-
duced 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 generally to
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.
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 pre-
sent value.
Related party transactions
Tethys Oil recognises the following related parties: associated companies,
jointly controlled entities, members or the family of the key management
personnel or other parties that are partly, directly or indirectly, controlled by
key management personnel or of its family or of any individual that controls,
or has joint control or significant influence over the entity.
Parent company accounting principles
The parent company has prepared its Annual Report in compliance with
Swedish Annual Accounts Act and recommendation RFR 2, Accounting for
Legal Entities of the Swedish Financial Reporting Board. The implementa-
tion of IFRS 9 Financial assets and IFRS 15 Revenue from contracts with
customers had only limited impact of the accounting of the parent company.
The effects are considered immaterial and there has not been a transition
impact to the opening balances for 2018. See Note “New accounting prin-
ciples for 2018” for more information.
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.
Subsidiaries
Holdings in subsidiaries are recognised 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 recognise untaxed reserves
including deferred tax. The consolidated financial statements, however,
reclassify untaxed reserves to deferred tax liability and equity.
53
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 countries,
for example licenses or production sharing agreements. These agreements
are often limited in time and there are no guarantees that the agreements
can be extended when a time limit is reached.
Operational risk management
Technical and geological risk
At its current stage of development Tethys Oil is partly commercially produc-
ing oil and partly exploring for and appraising undeveloped known oil and/
or natural gas accumulations. The operational risk is different in these
different parts of Tethys Oil’s operations. The main operational risk in explo-
ration and appraisal activities is that the activities and investments made
by Tethys Oil and its partners will not evolve into commercial reserves of
oil and gas.
Oil price
The oil price is of significant importance to Tethys Oil in all parts of opera-
tions as income and profitability is and will be dependent on prices pre-
vailing from time to time. Significantly lower oil prices will reduce current
and expected profitability in projects and can make projects sub economic.
Lower oil prices could also decrease the industry interest in Tethys Oil’s
projects regarding farmout or sale of assets. There were no oil price hedges
in place as at 31 December 2018.
Tethys Oil’s has a flexible approach towards oil price hedging, based on
an assessment of the benefits of the hedge contract in specific circum-
stances. Based on analysis of the circumstances Tethys Oil will assess the
benefits of forward hedging sales contracts for the purpose of establishing
a secured cash flow. If Tethys Oil believes that the hedging contract will
provide an enhanced cash flow or if the risk of not being able to meet
investment commitments is high, then Tethys Oil may choose to enter into
an oil price hedge.
Net result in financial statements (MUSD)
Shift in oil price (USD/barrel)
Total effect on net result (MUSD)
62.2
+5
10.9
62.2
-5
-10.9
Access to equipment
An operational risk factor is access to equipment in Tethys Oil’s project. Espe-
cially in the drilling/development phase of a project, the Group is dependent
on advanced equipment such as rigs, casing, pipes etc. A shortage of the-
ses supplies can present difficulties for Tethys Oil to fulfil projects. Limited
access to drilling rigs has in the past led to cost increases and has in part
been the cause of project delays.
Political risk
Tethys Oil has operations, alone or with partners, in several different coun-
tries and can therefore be subject to political risk. The political risks are
monitored and factored in when evaluating possible projects. Asset diversi-
fication is again Tethys Oil’s principal approach to deal with this risk. Specifi-
cally, 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 busi-
ness is highly sensitive to political changes.
Environment
Oil and gas operations can be environmentally sensitive. Tethys Oil devotes
considerable effort and expense to identify and mitigate any perceived envi-
ronmental risk. The operations are subject to extensive regulatory control
with regard to environmental matters, both on national and international lev-
els. Environmental legislation regulates inter alia the control of water and air
contamination, waste material, licensing requirements, restrictions on carry-
ing 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 Com-
pany actively tries to strike an optimal balance between its dependence of
key personnel and its methods for retaining these.
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 international oil
and gas discoveries valued in USD and which generate revenues in USD.
During 2018, all of Tethys Oil’s oil sales and operative expenditures were
denominated in USD. The exchange risk affects the Group by transaction risk
and translation risk.
Transaction risk
Transaction exposure arises in the cash flow when invoicing or the costs of
invoiced goods and services are not in the local currency. The Group only has
limited costs in currencies other than USD, primarily relating to the SEK costs
in the parent company. Presented below is the exposure to currencies with
reference to items in the financial statements:
Revenue
Investments
2018
2017
100% in USD
100% in USD
99,8% in USD
99,9% in USD
External financing at year end
None
None
Tethys Oil does not currently hedge exchange rates. The Group policy is that
cash held in bank should be held in USD, with the exception of the relatively
minor amounts in SEK held in the Parent company, in order to reduce the
exchange rate exposure.
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-
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.
Liquidity risks and capital risk
By operating in several countries, Tethys Oil is exposed to currency fluctua-
tions. Income is and will also most likely be denominated in foreign curren-
cies, US dollars in particular. Furthermore, Tethys Oil has since inception
been equity and debt financed through share and bond issues, 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 bal-
ances are maintained in order to cover day to day operations. Management
relies on cash forecasting to assess Tethys Oil’s cash position based on
expected future cash flows.
Fall due profile on Tethys Oil’s
financial liabilities
31 December 2018
31 December 2017
MUSD
<1 year
1–3 year
<1 year
1–3 year
Accounts payables and other
liabilities
Total
13.9
13.9
–
–
6.1
6.1
–
–
54
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 2018 the Group’s receivables on oil sales amounted
to MUSD 14.9 (MUSD 12.1), this also represents the maximal exposure
on accounts receivable. There is no history of default and the Group does
currently not anticipate future credit losses. Cash and cash equivalents
are maintained with banks having strong long-term credit ratings. Maximal
exposure regarding other financial assets is those presented in the bal-
ance sheet.
It is the responsibility of the Board of Directors to overview the Group’s
capital structure and financial management, approve certain business
regarding acquisition, investments, possible lending as well as on-going
monitoring exposure to financial risks.
IFRS 9 valuation categories and related balance sheet items
31 December 2018
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 payable and
other current liabilities
17.9
73.1
–
–
–
31 December 2017
13.9
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 payable and
other current liabilities
–
–
–
12.7
42.0
–
–
–
6.1
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
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 impair-
ment testing, the anticipated date of site decommissioning and restora-
tion and the depletion charges in accordance with the unit of production
method. Estimates in oil and gas reserves and resources may change fol-
lowing for instance new wells, long term production data and changes in
macro economic data.
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
Tethys Oil continuously assesses its producing oil and gas properties for
any need for impairment testing. This is performed in conjunction with each
balance 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 oil prices leading to lower revenues and, for oil and gas proper-
ties, downward revisions of estimated reserve quantities.
Testing for impairment losses is performed when necessary for each cash
generating unit, which corresponds to licence right, production sharing
agreement or equivalent 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.
Tax
Tethys Oil 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.
55
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. 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
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
Net profit/loss from associates
Administrative expenses
Operating result
Total financial items
Result before tax
Income tax
Result for the period
Oman
157.3
-45.9
-45.9
–
–
-2.3
63.2
Oman
119.3
-34.9
-39.5
–
–
-2.0
42.9
Group income statement Jan–Dec 2018
Lithuania
Sweden
Other
–
–
–
–
0.9
–
0.9
–
–
–
–
–
-2.7
-2.7
–
–
–
–
-0.7
-0.7
Group income statement Jan–Dec 2017
Lithuania
Sweden
Other
–
–
–
–
-0.3
–
-0.3
–
–
–
–
–
-3.5
-3.5
–
–
–
-0.3
–
-0.4
-0.7
Total
157.3
-45.9
-45.9
0.0
0.9
-5.7
60.7
1.5
62.2
–
62.2
Total
119.3
-34.9
-39.5
-0.3
-0.3
-5.9
38.4
-5.3
33.1
–
33.1
Oman is Tethys Oil’s only oil producing area from which revenue is recorded
as at 31 December 2018 (and comparative periods). 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 1 regarding Credit risk exposure on accounts
receivables.
Note 4, Revenue
MUSD
Revenue
Underlift/overlift adjustments
Revenue and other income
2018
152.6
4.7
157.3
2017
119.9
-0.6
119.3
Tethys Oil sells all of its oil to Mitsui Energy Trading Singapore, which is
part of Mitsui & Co Ltd. All oil sales come from Blocks 3&4 Oman and are
made on a monthly basis. Tethys Oil’s average selling price is based on
the monthly average price of the two month future contract of Oman blend
as traded on the Dubai Mercantile Exchange, including trading and quality
adjustments.
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 2018
amounted to MSEK 9.7 compared to MSEK 10.9 in 2017. In case of Tethys
Oil being the operator in joint operations, these administrative expendi-
tures are, through the above, also funded by the partners if such partners
exist. The chargeout to joint operations projects where Tethys Oil is opera-
tor is presented in the consolidated income statement as Other income
to the extent related to interest not held by Tethys Oil. All other internal
chargeouts are eliminated in the consolidated financial statements. Tethys
Oil is as at 31 December 2018 operator in Block 49, Oman and hold 100%
of the license interest.
56
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 2018.
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 licence
100%
Raseiniai licence
100%
UAB LL Investicijos
100%
Rietavas licence
MUSD
Tethys Oil’s share of net profit from associated companies
2018
0.9
Tethys Oil’s
indirect interest
25%
30%
30%
2017
-0.3
Note 7, Provisions
Tethys Oil estimates that Tethys Oil’s share of site restoration regarding
Blocks 3&4 at year end 2018 amounts to MUSD 6.9 (6.1). As a conse-
quence of this provision, oil and gas properties have increased with an
equal amount. The change in provision follows an annual review of the site
restoration calculation where the number of wells drilled is one of the main
components that affect the provision’s net present value.
Tethys Oil has a non-current provision of MUSD 2.0 (3.0) from of the esti-
mated total error amount of MUSD 5.9 from the Export Reporting Error
on Blocks 3&4. Tethys Oil also has a current provision of 1.0 (1.0) MUSD
related to the Export Reporting Error.
MUSD
1 January 2018
Additions
Payments
Changes in estimates
Unwinding of discount
31 December 2018
Current
Non-current
Total
Abandonment
Other
provision
provisions
Total
MUSD
Abandonment
Other
provision
provisions
6.1
–
–
0.4
0.4
6.9
–
6.9
6.9
4.0
–
-1.0
–
–
3.0
1.0
2.0
3.0
10.1
1 January 2017
–
Additions
-1.0
Payments
0.4
0.4
9.9
1.0
8.9
9.9
Changes in estimates
Unwinding of discount
31 December 2017
Current
Non-current
Total
4.8
–
–
1.0
0.3
6.1
–
6.1
6.1
5.9
–
-1.9
–
–
4.0
1.0
3.0
4.0
Total
10.7
–
-1.9
1.0
0.3
10.1
1.0
9.1
10.1
Note 8, Oil and gas properties
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 commitments normally relates to the different periods. Tethys
Oil has fulfilled its commitments on Blocks 3&4. In Block 49 the initial
work commitments during the first period include geological studies, seis-
mic acquisition and processing and exploratory drilling. In the other areas
of operations the commitments are either fulfilled or there are no commit-
ments 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.
Licence
Blocks 3 & 4
Blocks 49
Attila2
Gargzdai3
Rietavas3
Raseiniai3
Phase
Production
Exploration1
Exploration
Production
Exploration
Exploration
Expiration date
Tethys Oil
Partners (operator in bold)
July 2040
Nov 20201
Feb 2019
No expiration date
No expiration date
Sep 2022
30%
100%
40%
25%
30%
30%
CCED, Mitsui, Tethys Oil
Tethys Oil
Galli Coz, Tethys Oil
Odin, GeoNafta, Tethys Oil
Odin, Tethys Oil, private investors
Odin, Tethys Oil, private investors
Country
Oman
Oman
France
Lithuania
Lithuania
Lithuania
MUSD
Producing cost pools
Non-producing cost pools
Total oil and gas properties
31 Dec 2018
31 Dec 2017
194.0
6.0
200.0
189.1
0.6
189.7
1 The exploration and production sharing agreement (EPSA) for Block 49 covers an initial exploration period of three years with an optional extension period of another three years. In case
of a commercial oil or gas discovery, the EPSA will be transformed in to a 15 year production license which can be extended for another five years. In case of a commercial discovery Oman
Government Company, has a right to acquire up to a 30% interest in Block 49 against refunding of past expenditure. The initial work commitments during the first period include geological
studies, seismic acquisition and processing and exploratory drilling.
2 The Attila licence had an expiry date in February 2019. Tethys Oil is currently reviewing further measures.
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.
57
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 2018
1 Jan–31 Dec 2018
194.0
5.7
0.0
0.3
200.0
0.4
–
–
–
0.4
2018
-45.9
–
–
–
-45.9
2018
–
–
–
–
–
2018
50.4
5.3
–
0.1
55.8
Oman Blocks 3&4
Producing
Oman Block 49
Non-producing
France Attila
Non-producing
New ventures
Non-producing
Total
MUSD
Country
Asset type
31 Dec 2017
1 Jan–31 Dec 2017
Book value
adjustments
1 Jan–31 Dec
1 Jan–31 Dec
Other non–cash
DD&A
Exploration costs
Investments
1 Jan–31 Dec
Oman Blocks 3&4
Producing
Oman Block 49
Non-producing
France Attila
Non-producing
New ventures
Non-producing
Total
MUSD
Depletion
1 January 2018
Depletion charge for the year
31 December 2018
MUSD
Depletion
1 January 2017
Depletion charge for the year
31 December 2017
189.1
0.4
–
0.2
189.7
Oman Blocks 3&4
-178.4
-45.9
-224.3
Oman Blocks 3&4
-138.9
-39.5
-178.4
-2.0
–
–
–
2017
-39.5
–
–
–
-2.0
-39.5
2017
–
–
–
-0.3
-0.3
2017
39.9
0.4
–
0.2
40.4
Exploration costs during 2018 amounted to MUSD 0.0 (MUSD 0.3).
Total
-178.4
-45.9
-224.3
Total
-138.9
-39.5
-178.4
MUSD
Investments Block 3&4
Categories
Drilling
G&G
Facilities
Total
MUSD
Oil & gas properties Block 3&4
Impairment testing
In Tethys Oil’s assessment of the need for impairment testing, the Com-
pany 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 2018 was used. There
has been no impairment of assets during 2018 or 2017.
Categories
Drilling
G&G
Facilities
Total
Book value
1 Jan 2018
189.1
0.4
–
0.2
189.7
Book value
1 Jan 2017
190.8
–
–
0.3
191.1
98.9
24.4
65.8
189.1
2017
-16.5
-1.9
-0.3
-0.7
-1.4
-10.4
-31.2
2018
25.5
11.2
13.7
50.4
2017
26.6
4.2
9.1
39.9
31 Dec 2018
31 Dec 2017
101.1
27.3
65.7
194.1
-3.1
-0.5
-0.1
-0.1
-0.2
-1.7
-5.7
-3.6
-0.4
-0.1
-0.1
-0.2
-1.5
-5.9
2018
-16.5
-1.9
-0.6
-1.1
-1.3
-11.4
-32.8
Note 9, Operating expenditures
Note 11, Administrative expenses
Group MUSD
Parent MSEK
Group MUSD
Parent MSEK
2018
2017
Administrative expenses
2018
2017
Operating expenditures
Production costs
Well workovers
Total
2018
-42.6
-3.4
-45.9
2017
-32.6
-2.3
-34.9
–
–
–
–
–
–
Personnel costs
Rent
Other office costs
Listing costs
Note 10, Remuneration to Company auditor
Group MUSD
Parent MSEK
Remuneration to company
auditor include:
2018
2017
2018
2017
Costs of external communication
Other costs
Total
PwC:
Audit fee
Audit-related fees
Tax consultation
Other
Total
-0.1
-0.0
–
–
-0.2
-0.0
–
–
-1.0
-0.0
–
–
-1.0
-0.0
–
–
-0.1
-0.2
-1.0
-1.0
Of the Group total during 2018, MUSD 0.1 (MUSD 0.2) has been in relation
to PwC Sweden.
58
Note 12, Employees
Average number of full time
2018
2017
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
–
12
1
13
20
4
4
–
9
0
9
13
7
7
–
11
1
12
19
4
4
–
8
0
8
12
MUSD
2018
2017
Salaries,
other
remune-
ration
Salaries,
other
Social
remune-
costs
ration
Social
costs
Salaries and other
remuneration to
Pension
Share based
executive management
Basic
arrange-
Variable
during 2018, MSEK
salary
ments
Salary
long term
incentive1
Other
benefits
Total
2018
Managing Director
2.842
0.729
0.536
1.120
0.025
5.252
Other executive manage-
ment
3.847
0.377
0.875
1.164
0.156
6.420
Total
6.689
1.106
1.411
2.284
0.181 11.672
Salaries and other
remuneration to
Pension
Share based
executive management
Basic
arrange-
Variable
during 2017, MSEK
salary
ments
Salary
long term
incentive1
Other
benefits
Total
2017
Managing Director
2.186
0.549
0.680
1.277
0.012
4.704
Other executive manage-
ment
3.548
0.317
0.967
1.161
0.162
6.155
Total
5.734
0.866
1.648
2.438
0.174 10.860
1 The Managing director received 75,000 (75,000) and Other executive management
received 96,000 (96,000) warrants in the 2018 incentive programme, totalling
171,000 (171,000) warrants.
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
–
-1.6
-0.2
-1.8
-3.2
-0.5
-0.5
–
–
–
–
-0.5
-1.4
-1.4
–
-1.5
-0.2
-1.7
-3.1
Remuneration to board members AGM 2018 to AGM 2019
Geoffrey Turbott
Robert Anderson
Alexandra Herger
Magnus Nordin
Per Seime
Total
-0.5
-0.5
–
–
–
–
Remuneration to board members AGM 2017 to AGM 2018
-0.5
Dennis Harlin
Robert Anderson
Per Brilioth
Alexandra Herger
Magnus Nordin
Per Seime
Katherine Støvring
Geoffrey Turbott
Total
MUSD
2018
2017
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
-0.6
-0.6
–
–
–
–
Total group
-0.6
-0.8
-0.8
–
-1.6
-0.2
-1.8
-2.6
-0.5
-0.5
–
–
–
–
-0.5
-0.9
-0.9
–
-1.5
-0.2
-1.7
-2.6
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 arrangements
MSEK
0.695
0.365
0.370
–
0.400
1.830
MSEK
0.630
0.330
0.265
0.300
–
0.365
0.335
0.390
2.615
A termination period of twelve months applies between the Company and
Managing Director and three to six months between the Company and other
members of executive management. The Managing Director is entitled to
twelve month’s payments if the Company terminates the contract and other
members of executive management are entitled to six to twelve month’s
payments. Executive management consists of three members of which the
Managing Director is one.
During 2018, one woman has been members of the Board of Directors,
compared to two in 2017. No women have been members of the executive
management. At the AGM of shareholders on 9 May 2018 Robert Ander-
son, Alexandra Herger, Magnus Nordin, Per Seime and Geoffrey Turbott were
re-elected members of the board. No deputy directors were appointed. At
the same meeting, Geoffrey Turbott 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. The increase in remuneration to executive man-
agement primarily relate to increased base salaries.
The Board has the right to deviate from the remuneration policy if there are
particular reasons.
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.
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.
59
Senior executives may have the right to participate in share based long-
term incentive programs. When allocating warrants the same financial and
operational key indicators as for variable cash salary shall be considered.
in the case of, for example, extraordinary increases or decreases in the
Group’s earnings. The variable remuneration shall not be pensionable.
The yearly variable cash salary shall be within the range of 1-12 monthly
salaries per person and year. The targets for variable cash remuneration
shall be determined by the Board prior to each financial year and individ-
ual 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 key performance indicators both for
the Group’s overall and financial performance as well as individual perfor-
mance. The yearly variable salary will be determined annually in connec-
tion 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 individual agreements.
Payment of variable cash remuneration shall be conditional upon the partici-
pant remaining employed for the duration of the programme. The Board has
the right to adjust the incentive program during the term of the programme
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 mutual termination period of 12 months applies between the Company
and the Managing Director and up to six months between the Company
and other senior executives. Severance pay shall be paid to the Managing
Director of up to 12 months fixed salary and up to 12 months fixed salary
for other senior executives if the Company terminates their employment.
Note 13, Financial income and similar items
Note 16, Other receivables
Group MUSD
Parent MSEK
Group MUSD
Parent MSEK
2018
2017
2018
2017
Other receivables
2018
2017
2018
2017
Interest income
Gain on currency exchange rates
Dividend from subsidiaries
Total
0.3
4.2
–
4.5
–
3.0
–
3.0
15.8
36.9
230.1
282.8
15.0
23.1
VAT
Receivables Oil sales
126.5
Other
164.6
Total
0.3
17.6
–
0.6
12.1
–
17.9
12.7
2.3
–
0.0
2.3
5.4
–
0.1
5.5
Note 14, Financial expenses and similar items
Interest expenses
Currency exchange losses
Other financial expenses
Total
Group MUSD
Parent MSEK
2018
2017
0.0
-2.6
-0.4
-3.0
-0.2
-6.9
-1.2
-8.3
2018
-0.2
-23.1
0.0
-23.3
2017
–
-53.6
–
-53.6
Note 15, Tax
The Group’s income tax charge amount to MUSD 0.0 (MUSD 0.0). Tethys Oil
has not recorded a deferred tax asset in relation to the tax losses carried
forward since there is uncertainty as to if the tax losses may be utilised.
The tax losses are in another jurisdiction than where main profits are gener-
ated. Tax losses carried forward amounted to MSEK 236.3 (MSEK 242.8).
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
Utilized (+) / Built up (–) tax loss carry forwards previously not
recorded as deferred tax assets
Tax expense
2018
244.4
-53.8
-0.1
52.4
1.5
0.0
2017
85.0
-18.7
-1.4
27.8
-7.7
0.0
Tethys Oil’s oil and gas operations in Oman are governed by an Explora-
tion and Production Sharing Agreement for each licence (“EPSA”) whereby
Tethys Oil receives its share of oil after government take. Under the terms
of each 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. The effect of these taxes is netted against revenue and other income
in the income statement.
Note 17, Shareholders’ equity
As at 31 December 2018, the number of outstanding shares in Tethys Oil
amount to 35,896,310, with a quota value of SEK 0.17. All shares represent
one vote each. During 2018, the number of outstanding shares increased
by 352,560 share, from 35,543,750 to 35,896,310. Tethys Oil has a war-
rant based incentive programme for employees, for further information
please see note 20. As the average subscription price for three tranches of
the incentive programme were partly below the average share price during
2018, dilution effects of the warrants are included in the weighted average
number of shares after dilution, which amounted to 34,140 thousand dur-
ing 2018.If the subscription prices have been below the share price during
the reporting period, the dilution effects have been included in the weighted
average number of shares in circulation after dilution.
As at 31 December 2018, Tethys Oil held 1,644,163 of its own shares
which have been purchased since commencement of the programme dur-
ing the fourth quarter 2014. The purpose of the repurchasing program is to
optimize the capital structure and to enable any repurchased shares to be
used as payment in connection with, or financing of, acquisitions of com-
panies or businesses. No shares were purchased during 2018 (314,939).
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 2018 before dilu-
tion is 34,010,616 and after dilution 34,140,318.
After 31 December 2018 and up to the date of publication for this report,
Tethys Oil has not acquired any further shares.
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 1,644,163 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.
60
Appropriation of profit
The Board of Directors proposes a dividend of SEK 2.00 per share (AGM
2018: SEK 2.00). The Board of Directors proposes that the dividend is to
be paid in two equal instalments of SEK 1.00 per share each, payable in
May and November 2019. Proposed record dates are 17 May 2019 and 18
November 2019.
The Board of Directors proposes an extraordinary distribution of SEK 6.00
per share by way of a mandatory share redemption programme following the
AGM 2019 (AGM 2018: SEK 4.00). Further details to follow in the proposal
to the 2019 AGM.
Note 18, Accounts payable and other current
liabilities
Accounts payable and
other current liabilities
Accounts payable
Overlift position
Operator balance, Blocks 3&4 Oman
Other current liabilities
Total
Group MUSD
Parent MSEK
2018
2017
0.1
–
9.9
3.9
13.9
0.1
2.0
3.2
0.8
6.1
2018
1.1
–
–
2.8
3.9
2017
0.5
–
–
5.2
5.7
Note 19, Shares in subsidiaries
Company
Tethys Oil Invest AB
Tethys Oil Turkey AB
Tethys Oil Exploration AB
Tethys Oil France AB
Tethys Oil Oman Ltd
Tethys Oil Block 3&4 Ltd
Tethys Oil Montasar Ltd
Tethys Oil Oman Onshore, Ltd
Reg. Number
556658-1442
556658-1913
556658-1483
556658-1491
95212
101981
115710
118203
Sweden
Sweden
Sweden
Sweden
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Reg. office
Number of shares
Percentage
per share
Nominal value
1,000
1,000
1,000
1,000
100
1,000
1,000
1,000
1
100%
100%
100%
100%
100%
100%
100%
100%
100%
SEK 100
SEK 100
SEK 100
SEK 100
GBP 1
USD 1
USD 1
USD 1
USD 1
Windsor Petroleum (Spain) Inc.
549 282
British Virgin Islands
On 25 October 2018 Tethys Oil Denmark AB (556658-1467) was merged with the parent company. Tethys Oil Denmark AB had no operations at the time of
the merger. The effect on the parent company’s financial statements and position resulting from the merger are immaterial.
MSEK
Shares in subsidiaries
1 January 2018
Acquisitions/Relinquishments
Shareholder’s contribution
Merger, net
Write down of shares in subsidiaries
31 December 2018
Parent
Parent
31 December 2018
31 December 2017
0.9
0.0
–
0.1
–
1.0
1.0
-0.1
2.9
–
-2.9
0.9
61
Note 20, Incentive programme
Tethys Oil has an incentive programme as part of the remuneration package
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 no vesting period or other restrictions and have been trans-
ferred 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 Stockholm during
approximately a two week period prior to the date of allocation.
Warrants were issued 2018 and 2017 following a decision by the respective
AGM. The number of issued warrants during 2018 was 350,000 (350,000)
and the number of warrants allocated during 2018 was 329,000. Issued
but not allocated warrants are held by the Company. Warrants exercised
during the year were 312,000 and expired 44,000.
Warrant incentive
Subscription
Shares per
Number of warrants
programme
Exercise period
price, SEK
warrant
1 Jan 2018
Issued 2018
Exercised 2018
Expired 2018
31 Dec 2018
2015 incentive programme
23 May – 5 Oct, 2018
2016 incentive programme
28 May – 4 Oct, 2019
2017 incentive programme
30 May – 2 Oct, 2020
2018 incentive programme
1 Jun – 2 Oct, 2021
73.50
59.90
81.80
89.00
1.13
1.10
1.04
1.00
Total
356,000
350,000
350,000
1,056,000
0
0
0
350,000
350,000
-312,000
-44,000
0
0
0
0
0
0
0
350,000
350,000
350,000
-312,000
-44,000
1,050,000
Warrant incentive
Subscription
Shares per
Number of warrants
programme
Exercise period
price, SEK
warrant
1 Jan 2017
Issued 2017
Exercised 2017
Expired 2017
31 Dec 2017
2015 incentive programme
23 May – 5 Oct, 2018
2016 incentive programme
28 May – 4 Oct, 2019
2017 incentive programme
30 May – 2 Oct, 2020
76.80
62.60
85.50
1.08
1.05
1.00
Total
356,000
350,000
0
706,000
0
0
350,000
350,000
0
0
0
0
0
0
0
0
356,000
350,000
350,000
1,056,000
Group MUSD
Parent MSEK
Warrant incentive programme
2018
2017
2018
2017
Incentive programme cost
Total
-0.5
-0.5
-0.5
-0.5
-2.1
-2.1
-3.6
-3.6
As the average subscription price for three tranches of the incentive pro-
gramme were partly below the average share price during 2018, dilution
effects of the warrants are included in the weighted average number of
shares after dilution, which amounted to 34,140 thousand during 2018.
The cost is calculated in accordance with the Black & Scholes formula
where the main inputs are the factors in the above table, expected volatility,
share price at valuation and an equity discount rate. The cost for the incen-
tive programme is included as part of administrative expenses and includes
tax and social charges where applicable.
Note 21, Pledged assets
As at 31 December 2018, pledged assets amounted to MUSD 0.1 related
to a pledge in relation to office rental in the parent company (214.9). In
2017 all shares in the subsidiary Tethys Oil Block 3&4 Ltd was included
related to a credit facility.
Note 22, Contingent liabilities
There are no outstanding contingent liabilities as at 31 December 2018,
nor for the comparative period.
Balance with related parties, MSEK
Payable to subsidiaries
Total
2018
12.2
12.2
2017
35.2
35.2
The receivables or payables from related parties arise from the net of
purchased services and upstreamed or downstreamed funds between par-
ent and subsidiaries. The interest rates on receivables are in the range of
LIBOR +4-6% per annum. Receivables are long term in duration and unse-
cured in nature. Payables are short term in duration, unsecured in nature
and bear no interest.
Note 23, Related party transactions
In the Tethys Oil Group, Tethys Oil AB (publ) with organisational number
556615-8266 is the parent company. Material subsidiaries include Tethys
Oil Block 3&4 Limited and Tethys Oil Montasar Limited
Note, 24 Subsequent events
Tethys Oil’s share of the production, before government take, from
Blocks 3&4 amounted during January and February 2019 to 380,340
and 326,656 barrels of oil, respectively, corresponding to 12,269 and
11,666 barrels of oil per day, respectively.
During the year, the Company entered into the following significant transac-
tions with related parties:
Transactions with subsidiaries, MSEK
Interest income
Other income
Dividends received
Group contributions
Shareholder contributions
Total
Balance with related parties, MSEK
Receivable from subsidiaries
Total
2018
15.6
9.7
230.1
–
-0.0
255.4
2018
222.0
222.0
2017
15.0
10.9
126.5
–
-2.9
149.5
2017
355.6
355.6
Tethys Oil announced on 23 December 2018 an agreement to acquire a
two percent participating interest in Block 53 onshore Oman from Total E&P
Oman, a wholly-owned subsidiary of Total S.A, for a cash consideration of
MUSD 32 with an effective date of 1 January 2018 with customary cash
adjustment to be made at closing. The closing of the acquisition was sub-
ject to government approval and the waiver of partner pre-emption rights.
Tethys Oil announced on 25 January 2019 that partner pre-emption rights
had been exercised, and as a result, Tethys Oil will not be able to complete
the transaction.
62
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, 3 April 2019
Geoffrey Turbott
Chairman of the board
Rob Anderson
Director
Magnus Nordin
Managing Director
Alexandra Herger
Director
Per Seime
Director
Auditor’s endorsement
Our audit report was submitted on 3 April 2019.
PricewaterhouseCoopers AB
Ulrika Ramsvik
Authorized Public Accountant
Lead Partner
Bo Hjalmarsson
Authorized Public Accountant
63
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 2018. The annual accounts
and consolidated accounts of the company are included on pages
35–63 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 mate-
rial respects, the financial position of parent company and the
group as of 31 December 2018 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 2018 and their financial performance and cash flow
for the year then ended in accordance with International Finan-
cial Reporting Standards (IFRS), as adopted by the EU, and the
Annual Accounts Act. The statutory administration report is con-
sistent with the other parts of the annual accounts and consoli-
dated accounts.
We therefore recommend that the general meeting of sharehold-
ers adopts the income statement and balance sheet for the parent
company and the group.
Our opinions in this report on the annual accounts and consoli-
dated accounts are consistent with the content of the additional
report that has been submitted to the parent company’s audit
committee in accordance with the Audit Regulation (537/2014)
Article 11.
Basis for Opinions
We conducted our audit in accordance with International Stand-
ards on Auditing (ISA) and generally accepted auditing standards
in Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are inde-
pendent of the parent company and the group in accordance with
professional ethics for accountants in Sweden and have other-
wise fulfilled our ethical responsibilities in accordance with these
requirements. This includes that, based on the best of our knowl-
edge and belief, no prohibited services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided to the
audited company or, where applicable, its parent company or its
controlled companies within the EU.
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
operations located in Oman. The operations in Oman represented
100% of the group’s revenue for the financial year 2018 and 69%
of the group’s assets as per 31 December 2018. We designed our
audit by determining materiality and assessing the risks of mate-
rial misstatement in the consolidated financial statements. In par-
ticular, we considered where the management and the Managing
Director made subjective judgements; for example, in respect of
significant accounting estimates that involved making assump-
tions 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 con-
sideration 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 finan-
cial 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 are performed outside the
group’s headquarter which means that we as a group audit team
performed our audit work at the group’s headquarters but we also
obtained reporting from specified procedures performed by our
audit team in Oman.
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 September, 2018 and after the year-
end audit of the financial year 2018.
Materiality
The scope of our audit was influenced by our application of mate-
riality. An audit is designed to obtain reasonable assurance whether
the financial statements are free from material misstatement. Mis-
statements 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 consolidated financial statements.
Based on our professional judgement, we determined certain
quantitative thresholds for materiality, including the overall group
64
materiality for the consolidated financial statements as a whole.
These, together with qualitative considerations, helped us to deter-
mine 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.
Key audit matters
Key audit matters of the audit are those matters that, in our pro-
fessional judgment, were of most significance in our audit of the
annual accounts and consolidated accounts of the current period.
These matters were addressed in the context of our audit of, and
in forming our opinion thereon, the annual accounts and con-
solidated accounts as a whole, but we do not provide a separate
opinion on these matters.
Key audit matter
Recoverability of the carrying value of oil and gas
properties
The carrying value of oil and gas properties amounted to
$200.0 million as per 31 December 2018 and the major part
represented by the producing assets in Blocks 3&4 in Oman.
The oil and gas properties relating to Blocks 3&4 in Oman
amounted to $194.0 million by 31 December 2018.
During the year management follows a process to identify
potential indicators of impairment and to the extent that indi-
cators are identified impairment tests are prepared.
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).
The assessment to identify potential impairment indicators and
to perform impairment tests requires management to exercise
significant judgement 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 fac-
tors, including but not limited to, the Group’s intention to pro-
ceed with a future work programme, the probability of success
of future drilling, the size of proved, probable reserves as well
as prospective resources, short and long term oil prices, future
costs as well as the discount and inflation rates.
Following the analysis of potential impairment indicators
for Blocks 3&4 in it was concluded that no impairment was
recorded.
Refer to pages 38 in the Directors’ report, page 51 in the
Accounting Policies and note 2 and 8 in the financial state-
ments for more information.
How our audit addressed the Key audit matter
We have audited management’s assessment for determining the
impairment indicators and concluded that there are no impair-
ment indicators identified.
The assumptions that underpin management’s assessment are
inherently judgmental. Our audit work therefore assessed the
reasonableness of management’s key judgements of the recov-
erable amount of Blocks 3&4. Specifically our work included,
but was not limited to, the following procedures:
• comparison of management’s short-term oil price assump-
tions 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 rel-
evant third-party data points;
• reconciliation of hydrocarbon production profiles to the
combination of proved and probable reserves from reserve
reports from ERC Equipoise Limited and contingent
resources estimates prepared by in-house reservoir engineer;
• verification of estimated future costs by agreement to budg-
ets and where applicable, third party data;
• benchmarking of inflation and discount rates applied;
• testing of the mathematical accuracy of the model
We have obtained the estimation of proven and probable reserves
and contingent resources certified by the group’s external reserves
auditor and management’s in-house estimation of contingent
resources. Our work included but was not limited to:
• determining that the group’s process for collecting relevant
reports were sufficiently robust;
• assessing competence and objectivity of reserves audi-
tor ERC Equipoise Limited, to satisfy ourselves they were
appropriately qualified to carry out the volumes estimation;
• assessing the process for making in-house estimates of pro-
spective resources;
• validation of that the updated reserves and resources estimates
were included appropriately in management’s consideration
of impairment and in accounting for depletion charges.
65
Other Information than the annual accounts and
consolidated accounts
This document also contains other information than the annual
accounts and consolidated accounts and is found on pages 1–19
and 26–34. Other information those not include the Financial
statements, consolidated accounts and our audit report related to
the Financial statements. The Board of Directors and the Manag-
ing 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 iden-
tified above and consider whether the information is materially
inconsistent with the annual accounts and consolidated accounts.
In this procedure we also take into account our knowledge oth-
erwise 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 infor-
mation, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of the Board of Director’s and the
Managing Director
The Board of Directors and the Managing Director are responsi-
ble 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 accordance 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 misstatement, 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 intend to liqui-
date the company, to cease operations, or has no realistic alterna-
tive 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.
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 mis-
statement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggre-
gate, 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 Revi-
sorsinspektionen’s website: www.revisorsinspektionen.se/revisorn-
sansvar. 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
Director’s and the Managing Director of Tethys Oil AB for the
year 2018 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 stat-
utory administration report and that the members of the Board of
Director’s and the Managing Director be discharged from liability
for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted
auditing 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 fulfilled our ethical responsibilities in accord-
ance 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 Director’s and the
Managing Director
The Board of Directors is responsible for the proposal for appro-
priations of the company’s profit or loss. At the proposal of a
dividend, this includes an assessment of whether the dividend is
justifiable considering the requirements which the company’s and
the group’s type of operations, size and risks place on the size of
66
the parent company’s and the group’ equity, consolidation require-
ments, liquidity and position in general.
• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
The Board of Directors is responsible for the company’s organiza-
tion 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
organization 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 administration according to the Board of Direc-
tors’ guidelines and instructions 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
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
guarantee 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 Revisorsinspektionen’s website:
www.revisorsinspektionen.se/revisornsansvar. This description is
part of the auditor’s report.
PricewaterhouseCoopers AB, 405 32 Göteborg, was appointed
auditor of Tethys Oil AB by the general meeting of the sharehold-
ers on the 9 maj 2018 and has been the company’s auditor since
the 2001. The company has been listed at NasdaqOMX since the
2 May 2013.
Stockholm, 3 April 2019
PricewaterhouseCoopers AB
Ulrika Ramsvik
Authorized Public Accountant
Lead Partner
Bo Hjalmarsson
Authorized Public Accountant
Financial information
The company plans to publish the following financial reports:
Three month report 2019 (January – March 2019) on 7 May 2019
Six month report 2019 (January – June 2019) on 13 August 2019
Nine month report 2019 (January – September 2019) on 5 November 2019
Year-end report 2019 (January – December 2019) on 11 February 2020
67
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
www.tethysoil.com
.
n
e
d
e
w
S
n
i
d
e
t
n
i
r
P
.
g
r
e
b
m
ö
r
t
S
k
i
r
n
e
H
n
g
s
e
D
i
l
.
9
1
0
2
m
a
k
e
R
n
e
t
s
d
n
a
L