Tethys Oil
Annual Report
2021
Tethys Oil
Tethys Oil is an oil exploration and produc-
tion company with focus on onshore areas
with known oil discoveries. The company’s
core area is the Sultanate of Oman, where it
has been present since 2006 and currently
holds interests in Blocks 3&4, Block 49,
Block 56 and Block 58. Tethys Oil has 2P
reserves of 26.2 mmbo and 2C Contingent
Resources of 15.6 mmbo and had an aver-
age oil production of 11,136 barrels per
day during 2021. The company’s shares are
listed on Nasdaq Stockholm (TETY).
Licences,
Oman
Area
(km²)
Interest
Phase
Blocks 3&4
29,130
30%
Production/
exploration
Block 49
Block 56
Block 58
15,439
100%*
Exploration
5,808
4,557
65%
100%
Exploration
Exploration
2P Reserves
(mmbo)
2C Contingent
Resources
(mmbo)
Average daily
production
2021 (bbl)
26.2
15.6
11,136
–
–
–
–
–
–
–
–
–
* Interest percentage reflects a change that occurred as EOG withdrew from Block 49. The withdrawal was announced in 2021 and Tethys Oil is currently in the formal process to receive
final government approval to again have a 100 percent interest share in the Block.
This spread
Tethys Oil’s Board of Directors visits the drill site of
the Al Jumd-2 well at Block 56.
Front cover
In the mountain picture, black oil can be seen seep-
ing out of the limestone. The geological formations
reflect similar oil-bearing sediments, separated by
rocks, in the shallow boreholes that Tethys has iden-
tified through 3D seismic on Block 56.
Back cover
Power lines along a desert road. The operator on
Blocks 3&4 is working together with its partner,
Tethys Oil, to electrify their joint production facilities.
The goal is to reduce the flaring of the gas produced
as a by-product of oil extraction and instead convert
it into electricity in gas-powered generators directly
in the fields.
Contents
The year in brief
Letter to shareholders
Mission, Vision and Values
Operations
Reserves and contingent resources
Blocks 3&4
Block 49
Block 56
Block 58
Definitions and key financial data
The Tethys Oil share
Corporate Governance Report
Board of Directors
Executive management
Payments to authorities
Administration report
Financial statements for the group
Financial statements for the parent company
Notes
Assurance
Auditor’s report
Address
4
6
7
8
12
14
17
18
20
21
23
27
35
37
38
39
47
51
55
69
70
74
The Sustainability Report is published as a separate
document, available on www.tethysoil.com.
Financial information
The company plans to publish the following
financial reports:
Report for first quarter 2022 (January – March 2022)
on 10 May 2022
Report for second quarter 2022 (January – June 2022)
on 9 August 2022
Report for third quarter 2022 (January – September
2022) on 8 November 2022
Report for fourth quarter/year-end report 2022 (January
– December 2022) on 7 February 2023
Annual General Meeting
The Annual General Meeting will be held on 18 May
2022, 15:00, at Grand Hotel, Södra Blasieholms-
hamnen 8, in Stockholm. Tethys Oil is closely moni-
toring the development around the Coronavirus,
and precautionary measures related to the Annual
General Meeting 2022 might be taken to ensure the
health and safety of all shareholders, employees
and other stakeholders. To attend the AGM, please
visit Tethys Oil’s website, www.tethysoil.com, for
more information.
The year in brief
Operational and financial summary
MUSD (unless specifically stated)
2021
2020
2019
2018
2017
Average daily production Blocks 3&4, before government take, bbl
11,136
11,336
12,832
11,767
12,162
Achieved selling price per barrel, USD
Revenue and other income
EBITDA
Net cash
Investments in oil and gas properties
Dividend, SEK per share – proposed
Extraordinary distribution to shareholders, SEK per share – proposed
Market capitalisation at the end of the period, MSEK
2P Reserves in Oman (million barrels of oil)
2C Contingent Resources in Oman (million barrels of oil)
2021 in brief
• Improved financial performance as the oil prices
reached their highest levels since 2014. The strong
net cash position will be used to increase invest-
ments in 2022 and the Board has proposed that
distribution to shareholders will be increased to a
total of SEK 7.00 for 2021. The proposed distri-
bution includes SEK 2.00 (SEK 2.00) of ordinary
dividend and SEK 5.00 (SEK 2.00) by a mandatory
share redemption programme.
• Production and reserve replacement was negatively
impacted by the effects of reduced investments in
2020 and operational issues impacting ramp up
in 2021. Over the course of the year activity levels
increased again on Blocks 3&4, and by July all three
drilling rigs were again operational after that two of
them had been put on standby a year previous.
• The Tethys Oil operated Thameen-1 exploration
well on Block 49 was successfully drilled during
the first quarter of 2021. Logs and well-analysis
showed a 40 metres gross hydrocarbon column and
decent porosity but low permeability and no flows
to surface. Tethys Oil has extended the first explo-
ration phase on Block 49 by six months to June
2022, under which time further studies will deter-
mine on how to best move forward with the Block.
62.8
112.7
61.4
67.8
35.2
2.00
5.00
2,059
26.2
15.6
47.7
101.1
50.4
55.1
45.4
2.00
2.00
64.2
150.8
92.9
75.1
65.2
2.00
6.00
70.5
157.3
106.6
73.1
55.8
2.00
4.00
51.8
119.3
78.2
42.0
40.4
1.00
–
1,626
3,063
2,325
2,337
26.9
13.9
26.1
13.5
25.4
12.5
22.0
17.3
• The farmin transaction with Medco on Block 56
was concluded in the first quarter of 2021. With
this Tethys Oil increased the Group’s interest share
to 65 percent and assumed the operatorship of the
Block. As the year progressed, the preparations
for the launch of the three-well exploration and
appraisal drilling campaign in the Al Jumd trend
intensified. The campaign commenced in early
2022. In parallel, a 3D seismic acquisition cam-
paign covering more than 2,000 km2 in the central
part of the Block commenced in the fourth quarter
of 2021.
• On Block 58 preparations for exploration progressed
during the year. During the fourth quarter 450 km2
of 3D seismic was acquired in the South Lahan area
on the basis of which Tethys Oil expects to identify
drillable prospects by early 2023. Legacy 3D seismic
data over the Fahd area is being interpreted. Tethys
Oil aims to drill an exploration well in the Fahd area
of Block 58 by the end of 2022.
• In the fourth quarter of 2021, Tethys Oil’s partner
on Block 49 notified Tethys Oil of their intention
to withdraw from the Block. The formal process
of reassigning EOG’s 50 percent interest share to
Tethys Oil is currently ongoing.
44
Production per day, barrels
Total Net Reserves and Resource, million of barrels
13,000
12,000
11,000
10,000
9,000
2017
2018
2019
2020
2021
44
33
22
11
0
17.3
12.5
13.5
13.9
15.6
22.0
25.4
26.1
26.9
26.2
2017
2018
2019
2020
2021
n bopd (bbl)
n 2P (mmboe)
n 2C (mmboe)
Financials, MUSD
Dividend and distribution per share, SEK
160
120
80
40
0
2017
2018
2019
2020
2021
n Revenue and other income
n EBITDA
8
6
4
2
0
4
2
6
2
1
5
2
3
2
2
2
2017
2018
2019
2020
2021
2022*
n Ordinary dividend
n Extraordinary distribution
* Proposed dividend and distribution
Tethys Oil’s Dividend Policy
Tethys Oil aims to provide a long-term sustainable and growing
ordinary dividend funded by cash flow from its producing assets.
Distributions to the shareholders must always be aligned with the
Company’s long term operational and financial commitments,
market conditions and access to external funding. In order to
enable the company to optimise its capital structure, further share-
holder distribution may be carried out by various methods such as
redemption shares or share repurchases.
55
Letter to shareholders
Letter to shareholders
Dear friends and investors,
A year ago, we were still in the grip of the
Covid pandemic. There were signs of opti-
mism as vaccines started to be rolled out
and understanding of the virus increased
but uncertainty remained high. Our focus
was to maintain the health and safety of
our people and continue our operations as
close to normal as possible while following
the continued implementation of strenu-
ous Covid protocols in the field and at the
office. On all these counts we were thank-
fully successful.
Yet again however, events on the world
stage have dramatically affected the word-
ing of this letter to our shareholders.
We have always known that as an oil
company, in the business of providing
the global market with energy, we oper-
ate close to world affairs. Oil remains the
world’s most traded commodity and the
price readily reflects political changes but
what we saw two years ago with the out-
break of the Pandemic and what we see
today in response to the political situation
in Europe is extreme even in this arena.
The Pandemic forced us to adjust to con-
traction and falling prices, the current situ-
ation is the opposite.
However events play out, we have shown
our readiness to respond to black swan
events and while maintaining fiscal disci-
pline we have, and will continue to, main-
tain our long term focus.
Resilient and adaptable social and environ-
mental awareness as well as loyalty are cen-
tral to implementing our growth strategy.
Oil prices will fluctuate, and world events
will ebb and flow, but Tethys will continue
its journey, holding firm on this unruly sea.
Given the circumstances we also had quite
an active year not least in our operated
areas. In fact, we became operator of yet
another Block, Block 56, after having con-
cluded a farmin which took us to a 65 per-
cent interest in the Block.
On our producing area Blocks 3&4 we
continued to have a positive cash flow
for the year and as oil prices
picked up towards the end of
the year our overall finances
came out very well.
Blocks 3&4 started to show
signs of ‘corona fatigue’ by
fourth quarter when
the
return to full operations was
achieved more slowly than
planned for but again most
importantly safety and secu-
rity was maintained through-
out the year.
Looking forward to 2022 I would like to
summarise our outlook in a few points:
• We are well placed to see substantial
growth in 2022.
• On our non-operated Blocks 3&4 the work
programme calls for drilling almost double
the number of wells drilled in 2021. This
catch up investment aims to increase both
production and reserves.
• On Tethys’ operated Blocks 56, 58 and 49
we expect various levels of activity.
• Block 49 is in low spend study mode as
we continue to evaluate the results of the
Thameen well. We must decide the way for-
ward during the second quarter.
• Block 58 will see the bulk of its activity
towards the end of 2022 when we expect
to have defined a number of drillable pros-
pects of various sizes and chances of
success.
• Block 56 will see quite a flurry of activity
throughout the year with some very impor-
tant milestones to be reached during the
first and second quarters.
• First out is the three well programme to
evaluate the Al Jumd-trend of prospects
in the north-western part of the Block.
Success here will establish a new source
of reserves and production for Tethys in
Oman.
• Second out, but potentially more important
size wise, is the evaluation of the central
parts of Block 56 where we have just com-
pleted a high visibility 3D seismic study.
We have very high hopes for the mapping
of this area where existing older seismic
suggest the presence of potentially very
significant future oil fields.
6
Which brings us to the question of – is it
worth it? How much oil does the world
need and for how long?
We believe we have a mission to do what
we do best – to deliver this source of energy
to an energy hungry world for as long as
there will be a demand for this product.
And of course, we aim to do this in an as
transparent and environmentally friendly
way as possible, where Tethys contributes
to development, education and social well-
being wherever we operate.
As fossil fuels will eventually be phased
out, we aim to provide a product that will
be produced in such a fashion as to stay
competitive until the end of the fossil era,
whenever that occurs.
As we watch the world return from the
shadow of Covid, we see oil demand rap-
idly return to pre pandemic levels. As we
further watch with concern how invest-
ment into the upstream sector remain at
a fraction of historical levels, we believe we
will have an important role to play both for
our investors and the users of our product
for the foreseeable future.
So, stay with us, we believe we will have
reasons to stay around for some time.
Stockholm, April 2022
Magnus Nordin
Managing Director
Mission, Vision and Values
SOCIAL
We invest in our
local communities
To contribute
positively to
quality of life in
communities where
we operate by
reducing impacts and
creating benefits
ENVIRONMENTAL
We use natural resources
responsibly
Tethys Oil’s
commitments
To conduct
operational activities
in ways that create
minimal disturbance
to the environment
and people
GOVERNANCE
We live by high
ethical standards
To have management
procedures in
place that promote
honesty, integrity,
transparency and
accountability
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
long-term. Sustain-
profitable business
ability means running a business that is
not only profitable but is aligned with
the requirements and expectations of
stakeholders both within and outside the
Group.
Values
Tethys Oil’s corporate culture emanates
from the Company’s Scandinavian roots.
It is the responsibility of Tethys Oil’s
management to foster a corporate culture
which 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 Group 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 Group maintains and further builds on
its reputation as a responsible and forward-
looking corporate citizen in all countries
where Tethys Oil has a presence and in
relation to all stakeholders, may they be
shareholders, employees, contractors, part-
ners or someone else.
7
Operations
Operations
Tethys Oil’s core area Oman
Oman – on the tip of the Arabian
Peninsula
The Sultanate of Oman, located in the
south-eastern part of the Arabian Penin-
sula, overlooks the Arabian Sea, the Sea of
Oman and the Arabian Gulf. It also over-
looks the strategic Strait of Hormuz at the
point of entry to the Arabian Gulf. Oman’s
neighbours include the United Arab Emir-
ates, 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 – an oil nation
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 just below five and a half billion
barrels of proved oil reserves, ranking Oman
as the seventh largest proved oil reserve
holder in the Middle East and the 21st larg-
est in the world (BP Statistical Review of
World Energy, July 2021). Oman’s crude oil
and condensate production amounted in
2020 to 951,000 barrels per day.
The largest producer in Oman is Petro-
leum Development Oman
(“PDO”),
which holds Block 6. Block 6 covers an
area of 75,119 km2 in north, central and
south Oman. PDO produces in excess of
600,000 barrels of oil per day, correspond-
ing to over 60 percent of the total pro-
duction in Oman. PDO is owned by the
Omani government (60 percent), Shell (34
percent), Total (4 percent), and PTTEP (2
percent). Occidental Petroleum (Oxy), is
the second-largest producer in Oman, with
a production of some 245,000 bopd. Oxy
is producing from Blocks 9, 27 and 62 in
northern Oman and the Mukhaizna field
in Block 53 in the south.
The total exports of oil and condensates
during 2020 amounted to 287 million
barrels. The People’s Republic of China
topped the list of the countries importing
crude oil from Oman, with 86.4 percent,
followed by India with 6.2 percent. Other
countries combined represented 7.4 per-
cent of the total exports of crude oil and
condensates in 2020.
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. 15 years later, Tethys
has grown a strong presence in the coun-
try holding interests in five blocks, three
of which are since 2021 operated. With a
skilled technical team in Muscat, Tethys is
looking to capitalise on its long explora-
tion and production experience in the Sul-
tanate of Oman.
Blocks 3&4 cover an area of 29,130 km2 in
the central-eastern part of Oman. Tethys
Oil has a 30 percent interest in Blocks
3&4. Its partners are Mitsui E&P Middle
East B.V. with 20 percent and the operator
CC Energy Development S.A.L. (Oman
branch) holding the remaining 50 percent.
In 2017, Tethys Oil’s operations expanded
with the award of the exploration licence
for Block 49. Block 49 covers an area of
8
15,439 km2 in the south-western part of
Oman, bordering Saudi Arabia. In Novem-
ber 2020, Tethys Oil entered into an agree-
ment with EOG Resources Inc. (“EOG”)
for EOG to obtain a 50 percent interest
in Block 49. In December 2021, EOG
decided to leave the Block and Tethys Oil
will again hold a 100 percent interest in
Block 49 going forward.
In October 2019, Tethys Oil’s operations in
Oman expanded even further with the 20
percent farm-in to the exploration licence
Block 56. In 2020, Tethys Oil entered into
an agreement to increase its stake to 65
percent through another farm-in and also
assume operatorship of the block. Block 56
covers an area of 5,808 km2 in the south-
eastern part of Oman some 200 km south
of Blocks 3&4. Partners are Medco (5
percent), Biyaq (25 percent) and Intaj (5
percent).
In July 2020, Tethys Oil was awarded the
exploration licence for Block 58. The block
covers an area of 4,557 km2 in the south-
ern part of Oman adjacent to Tethys Oil’s
Block 49. Tethys holds 100 percent inter-
est in the licence and is the operator. The
combined area of Blocks 3&4, Block 49,
Block 56 and Block 58 amounts to over
54,934 km2, corresponding to 18 percent
of Oman’s total area. That makes Tethys
Oil one of the largest concession holders in
Oman in terms of acreage.
The partner group on Blocks 3&4 pro-
duced around 37,121 bopd in 2021,
corresponding to around four percent of
Oman’s total production. The produced oil
is lifted at the Mina Al Fahal Terminal in
Muscat, on the Sea of Oman, and it there-
fore never needs to pass through the Strait
of Hormuz.
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Musandam
Sohar
SULTANATE
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Muscat
Sur
Block 3
Block 3
Block 4
Dhqum
Block 49
Block 58
Block 56
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Salalah
99
Transportation and sales from Blocks 3&4
All oil produced at the fields is trans-
ported 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. Throughout 2021, the
export terminal experienced logistical dif-
ficulties which were later compounded by
the effects of the cyclone Shaheen. These
difficulties caused delays and affected sales
figures between the quarters of the year. By
year-end the issues were resolved, and full
year sales were not affected.
Oil exploration and production in Oman
is governed by Exploration and Produc-
tion Sharing Agreements (EPSA). The
EPSA allows the joint operations partners
to recover their costs from a predetermined
percentage of the value of total oil produc-
tion, 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 com-
pany bears all the risk.
Tethys Oil sells all of its oil from Blocks
3&4 on a monthly basis to Mitsui Energy
Trading Singapore, which is part of Mit-
sui & Co Ltd. Tethys Oil’s selling price
is based on the monthly average price of
the front-month future contract of Oman
export blend (with 2 months to delivery) as
traded on the Dubai Mercantile Exchange,
including trading and quality adjustments.
Office and staff
During 2021, Tethys Oil had an average
of 26 full-time employees of several dif-
ferent nationalities, in a broad age range,
of which 38 percent were female and 62
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. Tethys
Oil had an average of 19 employees based
in Muscat in 2021, of which 37 percent
were female and 63 percent male. As per
the Omani government directive related to
employment, preference is given to Omani
nationals in recruiting new staff and per
year-end, 80 percent of the employees at
the Muscat office were Omani nationals.
The Muscat office is the base for Tethys
Oil’s Chief Technical Officer (CTO).
Stockholm Office
Tethys Oil’s head office is located in Stock-
holm, Sweden. The Stockholm office is the
base for the Managing Director and the
Chief Financial Officer (CFO), along with
Tethys Oil’s finance, legal, business develop-
ment and communications staff. In 2021,
Tethys Oil had an average of 7 employees
based in Stockholm, of which 43 percent
were female and 57 percent male.
10
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. As rocks have different compositions,
it is possible, based on variations in the speed
of the sound wave and angle, to estimate the
location of structures that could hold oil and/
or natural gas reserves in an exploration area.
Single linear lines of seismic provide information
about the subsurface rocks directly beneath
the seismic equipment. This type of seismic
data is referred to as two-dimensional or 2D
seismic, because it provides data along two
axes, length and depth. If seismic acquisition
is done across multiple lines simultaneously,
the third dimension of width is gained, hence
referred to as three-dimensional seismic, or
3D seismic. 3D seismic offers much greater
density of information about the subsurface but
is much more costly and covers a smaller area.
As 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.
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.
in
On Blocks 3&4, reservoirs
formations
like Khufai, Barik, Lower Al Bashir, Buah and
Masirah Bay have been explored. Tethys Oil
has reserves and production in reservoirs in
the Khufai, Barik, Lower Al Bashir and Buah
formations.
1111
Reserves and contingent resources
Emission reduction initiatives
On Blocks 3&4, the partner group has
initiated a gas utilisation project. The
aim of the project is to reduce the routine
flaring of associated gas (produced as a
by-product of the produced crude oil) and
rather utilise it for local power generation
with permanent facilities, thus reducing the
use of diesel-powered generators. If the
project is successful, it would lead to an
overall reduction of emissions as well as
a reduction of operating cost. While there
will be some time before the full effect will
be known, the project is well underway. A
Front-End Engineering Design (FEED) study,
including the hazard and operability study
(HAZOP) is ongoing and is expected to be
completed during the initial months of 2022,
after which an Engineering, Procurement and
Construction (EPC) contract can be procured.
More
information about Tethys Oil’s
ESG activities can be found in Tethys
Oil’s Sustainability Report, available at
www.tethysoil.com.
Reserves and contingent resources
Oman, Blocks 3&4
Tethys Oil’s net working interest Reserves in Blocks 3&4 Oman
as per 31 December 2021 amount to 26,174 thousand barrels of
oil (“mbo”) of proven and probable Reserves (2P). The 2P reserve
replacement ratio amounts to 82 percent. In addition, Tethys Oil’s
net working interest resources oil base in Oman amounts to 15,600
mbo of 2C Contingent Resources. The Company’s 2021 and 2020
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 2020
17,948
26,922
37,874
Based on ERCE’s model and current oil price assumptions, Tethys
Oil’s net entitlement Reserves (Reserves after government take)
amount to 7,825 mbo of 1P, 10,786 mbo of 2P and 14,233 mbo
of 3P.
In addition to Reserves, Tethys Oil also announces net working
interest Contingent Resources. The bulk of the estimated Contin-
gent Resources are contained in the Ulfa, Samha and Erfan fields
with a contribution from extensions in the Shahd fields. Develop-
ment of the Contingent Resources in the discoveries is considered
contingent upon the on-going appraisal programme, a committed
work programme as well as budget to access these resources.
Contingent resources, Blocks 3&4 (Audited)
Production 2021
Additions and revisions
-4,064
2,761
-4,064
3,316
-4,064
4,639
mbo
1C
2C
3C
Total 31 December 2021
5,640
15,600
33,360
Total 31 December 2021
16,645
26,174
38,449
Reserve replacement ratio, %*
68%
82%
114%
* The reserve replacement ratios for 1P and 3P have been updated since the year-end
report 2021.
Additions and revisions include maturation of Contingent
Resources to Reserves from the ongoing appraisal programme
of Ulfa, Erfan and Anan fields as well as upside revisions of the
Reserves on the Farha South and Shahd fields.
Reserve replacement ratio, %
200
150
100
50
0
2017
2018
2019
2020
2021
The audit of the Reserves in Oman has 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).
Contingent resources
Total 31 December 2021, mmbo
36
27
18
9
0
12
1C
2C
3C
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 operator.
Tethys Oil holds 100* percent interest in and
is the operator of Block 49. Tethys Oil holds
a 65 percent interest in and is the operator of
Block 56. Tethys Oil also holds 100 percent
interest in and is the operator of Block 58.
These blocks cover an area of 54,934 km2,
corresponding to 18% of Oman’s total areal
extent, which makes Tethys Oil one of the
largest concession holders in Oman in terms
of acreage.
* Interest percentage reflects a change that occurred
as EOG withdrew from Block 49. The withdrawal was
announced in 2021 and Tethys Oil is currently in the
formal process to receive final government approval to
again have a 100 percent interest share in the Block.
3
CC Energy
3
4
CC Energy
49
Tethys Oil
58
Tethys Oil
56
Tethys Oil
100
50
0
100 kilometers
Source: Sultanate of Oman Ministry of Energy and Minerals
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52ENI6PDO59Open42Shell41Open18Open38Open36EOG43BOpen4CC Energy31ARA12Total49Tethys Oil47ENI39Petrotel55Shell43AOpen50Masirah Oil LtdNLS66Open51Occidental54Lasso61BP56Tethys Oil58Tethys Oil40Open 74Open73Open7HCF77ENI3CC Energy75Open9Occidental62 OilOpen72Occidental15HCF44ARA30Occidental48OQ17Petrotel 57Petroleb67Petrotel62Occidental60OQ5Daleel76Open27Occidental70Maha65OccidentalVacantOpen53Occidental71Majan8MOGC8MOGCMadha10BOpen11BOpen10AOpen11AOpenMuscatSalalahMusandam
Blocks 3&4
Blocks 3&4 – the backbone of Tethys Oil’s operations
Blocks 3&4 continue to be the reli-
able key to Tethys Oil’s operations,
exploration and shareholder value
creation. One of the main priorities
over the course of 2021 was to bring
the activity levels in the Blocks back
to those before the Covid-19 related
cutbacks of 2020. While these efforts
progressed slower than anticipated,
Tethys Oil’s Net entitlement for 2021
from the Blocks was over 1.8 million
barrels of oil.
Covering 29,130 km2 in the eastern parts
of Oman, Blocks 3&4 have been the
backbone of Tethys Oil’s operations since
the spudding of the Farha South-3 well
in early 2009. Since production started,
Tethys Oil’s share of production before
government take has been over 34 million
barrels of oil and the Reserves and Con-
tingent Resources figures remain strong.
Tethys Oil’s licence for exploration and
production is valid until 2040, and not
only do the proceeds from the Blocks cre-
ate shareholder values through dividend
and further development of Blocks 3&4,
they also allow Tethys Oil to explore and
expand on the other Blocks, where the
Company is the operator.
The fields
The Farha South field is located in the
northern part of the dual-licence and it
remains the star performer on the Blocks.
Rather than in one large continuous res-
ervoir, the oil is trapped in a series of
smaller, usually adjacent, fault blocks of
which about 30 have been drilled and put
into production. To maintain pressure and
stimulate production following a combina-
tion of a low content of gas and the absence
of a water drive, most production wells are
developed with water injected into the res-
ervoir via injection wells. The majority of
the oil is high-quality oil, more than 40
degrees API, produced in the Barik sand-
stone layer at an average depth of 1,600
metres, but some oil is also produced from
the underlying Lower Al Bashir layer.
Shortly after the Farha South oil field was
discovered, the second commercial discov-
ery was drilled in the Saiwan East oil field
in the central part of the Blocks. This reser-
voir was previously unknown as an oil pro-
ducer in Oman and is producing oil from
the Khufai carbonate at depths ranging
from 1,700 to 2,400 metres of a quality of
approximately 32 degrees API.
Export quality
Unprocessed
BLOCK 3
BLOCK 3
Farha
Farha
Alam Station &
Pipeline System
Ulfa EPF
Ulfa EPF
Samha
37 km
37 km
83 km
83 km
50 km
50 km
Shahd H
Shahd H
Shahd I
Shahd I
23 km
23 km
Saiwan station
Saiwan station
Saiwan
Saiwan
25 km
25 km
Anan
12 km
12 km
Erfan
Erfan
Shahd B
Shahd B
(D & F)
(D & F)
BLOCK 4
BLOCK 4
In 2013, the Shahd field was discovered
in a previously unexplored area west of
the Saiwan East field. As with the Farha
South field, the area here is highly faulted
and the oil is trapped in separate struc-
tures, of which eight have been put into
production. The oil holds a quality of
35–38 degrees API and is extracted from
the Lower Buah and the Khufai carbonates
at a depth of 2,000–2,400 metres with the
aid of water injections to reach good recov-
ery rates.
Following a few years focused on develop-
ment activities aiming at increasing pro-
duction of the producing fields, a number
of exploration wells were drilled in 2017.
The exploration campaign resulted in the
discovery of the Ulfa, Samha and Erfan oil
fields.
The Erfan oil field is a single structure pro-
ducing from the Khufai carbonate forma-
tion, the same producing formation as in
neighbouring Saiwan East field, at depths
ranging from 1,700 to 2,400 metres. The
Ulfa oil field is also a single structure. It
is located on trend with the Farha South
field. The majority of the production in the
field comes from the Khufai carbonate for-
mation, but also the Buah is in production.
The Samha oil field is located adjacent to
the Ulfa field and produces from the same
formations. The oil from both Ulfa and
Samha is of high quality, about 45 degrees
API, and contains a high proportion of
associated gas.
In 2020, the Anan field was discovered
some 9 km west of the Erfan field. The
first exploration well, Anan-1, was drilled
during the fourth quarter of 2020 and was
in 2021 followed by the Anan-2 appraisal
well. Anan-2 was successfully tested with
good flows from the Khufai layer and has
subsequently been connected to the pro-
duction system.
BLOCK 3
BLOCK 3
14
N
Seismic mapping, prospects and leads,
Seismic mapping, prospects and leads,
Blocks 3&4, Oman
Blocks 3&4, Oman
Alam Station &
Pipeline System
BLOCK 4
BLOCK 3
Farha South Field
Ulfa
Samha
Shahd
field
Saiwan East Field
Anan
Erfan
BLOCK 3
3D seismic area
2D seismic area
Fields in production
Leads and prospects
Discoveries 2019
(undergoing appraisal/development)
1515
2021 and 2022
The primary operational focus of 2021
was to bring the production activity back
to the levels of pre-Covid-19 related cut-
backs and to perform long-term improve-
ments on the oil production infrastructure.
While these actions will continue over the
course of 2022 and have so far been suc-
cessful, production on the Blocks did not
reach the levels predicted as 2021 began.
The decreased production on the fields
was primarily due to operational issues
experienced earlier in 2021, which resulted
in a lower than planned contribution of
new production wells to offset the natural
decline in the increasingly mature fields.
The ongoing OPEC+ production limi-
tations however had less of an impact in
2021 than in 2020 and are not expected
to impact the production of 2022. A more
important factor will instead be the per-
formance and timing of new production
wells. In all, Tethys Oil expects the 2022
average production to be in the range of
11,000–11,500 barrels of oil per day.
The decreased investments and exploration
activities also had a negative effect on the
reserve replacement ratio, which for 2P
was 82 percent in 2021. The combined
2P reserves and 2C contingent resources,
however, increased over the year and with
the increasing activity levels, the replace-
ment ratio will hopefully return to above
100 percent in 2022.
Drilling activities were increased as the
two drilling rigs that were put on standby
in June of 2020 were reactivated in April
and July of 2021 respectively. By the end
of the year all three drilling rigs were active
and operated undisrupted. Operation-
ally, priority has been given to produc-
tion assurance initiatives such as improved
water handling capabilities, increased well
workovers and additional trunk lines to
provide redundancy. Overall, it is expected
that with all three drilling rigs active, the
new well count should increase around 30
percent in 2022.
In December, the 2021/2022 seismic
acquisition campaign commenced. The
campaign will cover an area of up to 3,500
km2 in the southern part of Block 4. The
acquisition is expected to be completed in
the third or fourth quarter of 2022 after
which data processing can begin. The first
exploration well of 2022, Hamdah-1, was
also spudded during the first quarter of
2022, with the aim of proving a Khufai
extension and opening a potential Abu
Mahara play in the area.
In summary, 2021 was a challenging year
following the 2020 cutbacks, with negative
effects on production and reserves. As the
year progressed however, activity picked up
speed and Blocks 3&4 entered 2022 from
a stronger position than they did 2021.
The drilling rig Schlum-
berger-279 during transport
to the drilling of the Al Jumd-2
well, in the north western
part of Block 56.
1616
Block 49
Block 49 and
Thameen-1
2021 was a landmark year for Block
49, following four years of prepara-
tions the Thameen-1 exploration well
was drilled!
The Block 49 licence covers an area of
15,439 km2 and has a rich industry his-
tory, reaching back to 1955 when the first
well in Oman, Dauka-1, was drilled here.
Tethys Oil has, since the company was
awarded the licence in 2017, reprocessed
around 1,500 km2 of 2D seismic data from
previous operators and conducted seismic
campaigns of over 250 km2 for new 3D
and almost 300 km of new 2D.
Based on these analyses, drilling operations
commenced at Thameen-1 in the north
eastern part of the Block on 31 December
Thameen
Block 49
2020 and reached its, over 4,000 meters,
final depth in late February 2021. The
drilling of Thameen-1 was the first solo-
operated drilling of Tethys Oil in over a
decade and its operational success included
zero incidents and reaffirms Tethys Oil’s
capabilities as an upstream operator.
3D seismic area
2D seismic area
Throughout the year, EOG Resources
Oman had a 50 percent interest in the
Block and their experience from adjacent
Blocks was a great source of support to
draw from. In line with the terms of the
farmout agreement, EOG also carried the
total cost of the Thameen-1 well.
40,000 m
No flows were recorded at surface, but the
logs indicated a gross hydrocarbon column
of close to forty metres in the primary tar-
get, the Hasirah Sandstone. Further tests
and analyses confirmed a decent porosity
but a low permeability and during the
later parts of 2021 the focus has been on
determining how to best pursue the Block’s
unconventional potential.
While EOG in late 2021 decided to leave
the EPSA and Tethys Oil is again the sole
interest holder, Tethys Oil still sees poten-
tial in Block 49 and has extended the first
exploration phase by six months to June
2022. During this time a feasibility study
of the application of unconventional com-
pletion and production techniques on the
Thameen-1 well will continue and the
results from this study will determine the
way forward.
17
Block 56
Block 56 – a smorgasbord of exploration opportunities
has the potential to become an important
future addition to Tethys Oil’s production
from Blocks 3&4. In all, the three wells
have an unrisked gross prospective resource
potential of 7 million barrels of oil and the
trend has over 10 identified leads and pros-
pects with modest volumes but potentially
good development economics in generally
shallow structural targets in proven plays.
The campaign is designed to explore and
appraise the prospectivity of the various
plays in the Al Jumd area with focus on the
Al Jumd discovery.
The first well spudded was the Al Jumd-2
appraisal well located in the northern part
of the campaign area. The well targeted a
horizontal section of over 200 metres in
the Al Khalata sandstone layer at a depth
of 1,300 metres. The Al Jumd-1 well tested
at rates around 100 barrels of oil per day in
early 2020 and the new well, with its hori-
zontal section is expected to significantly
improve on those previous rates. The final
decision will await the outcome of the
ongoing well-analysis, but the Al Jumd-2
well is expected to be put on a long-term
production test later in 2022.
Al Jumd-2 was followed by Sahab-1, an
exploration well in a previously undrilled
structure within the Al Jumd trend about
28 km southwest of Al Jumd-2. Sahab was
identified on existing 3D seismic, and the
well is targeting Al Khalata and Kareem
sandstones as well as the Huqf carbonates.
The top of Huqf is estimated to be at a
depth of 1,600 metres and is in produc-
tion on other Blocks.
The third well, Sarha-3, is an appraisal/
exploration well in the Sarha discovery
24 km southwest of Al Jumd. Sarha was
discovered in 2007 by a previous operator
and flowed close to 100 bopd on test from
the Al Khalata layer. A secondary target for
Sarha-3 will be the Kareem sandstone at a
depth of 1,200 metres. Both the Al Kha-
lata and Kareem layers are in production at
the nearby Karim small fields in Block 6.
While Sahab-1 and Sarha-3 are interesting
prospects that are expected to establish the
reserve base in the area, the Al Jumd-2 pro-
duction test remains the primary target of
the campaign in the short term.
In early 2021, Tethys Oil assumed a total of 65 percent interest and operatorship
of this exciting Block, making Block 56 the third Block for which Tethys Oil is the
operator. The Block includes several points of interest, primarily so in the central
area and in the Al Jumd area to the north, where the first well of a three-well
campaign was spudded in early 2022.
The Block 56 licence covers an area of
5,808 km2 and is located in the southern
part of Oman, some 200 km south of
Blocks 3&4. Tethys Oil originally acquired
a 20 percent interest in late 2019 and after
being encouraged by the positive results
from the 2020 work programme, the
Company acquired an additional 45 per-
cent from Medco Arabia Ltd and assumed
operatorship of the field in the first quarter
of 2021.
during most of 2021, the 3D seismic acqui-
sition campaign covering more than 2,000
km2 of the central area of the Block com-
menced in the fourth quarter. The acquisi-
tion campaign is expected to be completed
in mid-March and includes state-of-the-art
3D seismic data for three promising petro-
leum plays and more than a dozen leads.
Following the acquisition, data processing
will begin with the ambition of having
drillable prospects available in 2023.
Under Tethys Oil’s operatorship the part-
nership entered its first year in the second
exploration phase. This first year focused
on primarily two things; the continued
preparations for seismic acquisition in the
central area of the Block and preparing for
the three-well drilling campaign in the Al
Jumd area.
The central area holds several attractive
leads identified on legacy 2D seismic that
warranted further investigation and more
detailed data. After planning and tendering
The preparations for the three-well drilling
campaign in the Al Jumd area intensified
over the year until drilling commenced in
early 2022, when the Schlumberger-279
drilling rig was mobilised. The Al Jumd
trend is a continuation of a trend of struc-
tures that constitutes the nearby oil pro-
ducing Kareem small fields area in the
adjacent Block 6 and Block 56’s part was
originally drilled in 2008 when a previous
operator encountered oil shows in the Al
Jumd-1 well. The trend covers a smaller
area in Block 56 than in Block 6, but it
18
Seismic mapping, prospects and leads,
Block 56, Oman
Al Jumd
Central
area
1919
Block 58
Block 58’s promising exploration potential
Fahd
Block 58
South
Lahan
Block 58 is Tethys Oil’s latest addition
to the exploration portfolio, for which
the Company is the operator and has
a 100 percent interest share. Tethys
Oil’s focus for the Block in 2021 have
been on reviewing and processing
legacy data and the acquisition of
new seismic data. This will continue
in 2022 with the aim of finding a
suitable location for the Block’s first
exploration well and begin drilling by
the end of the year.
The Block 58 licence covers an area of
4,557 km2 and is located in the Dhofar
Governorate in the south-western part of
Oman, adjacent to the Tethys Oil operated
Block 49. Upon being awarded the licence
in July 2020, Tethys Oil was provided a
data set covering 7,600 km of 2D seismic
and 1,100 km2 of 3D seismic data from
previous operators as well as raw logs and
well reports from two wells drilled within
the Block. During the first year the focus
was on reviewing, and to a certain extent
reprocessing, this data. The Block has sev-
eral promising aspects, including that both
wells encountered hydrocarbon shows and
that multiple play concepts are believed to
exist with several leads identified.
In parallel, Tethys Oil procured a seismic
survey that was conducted during the
fourth quarter of 2021 in the South Lahan
area, located in the central and eastern por-
tion of the Block bordering with PDO’s
Block 6. Over 450 km2 of 3D seismic was
acquired in South Lahan where Tethys Oil
had previously identified leads based on
data from previous operators. The process-
ing of the 3D data is expected to take sev-
eral months and to be available in the third
quarter of 2022. Following processing,
interpretation and prospect maturation
will start with the aim of having drillable
prospects ready in early 2023.
Another interesting area is Fahd, in the
north eastern corner of the Block. Here,
seismic interpretation is ongoing, and a
cluster of leads identified on legacy 3D
seismic are being matured to prospects.
The goal of these efforts is to by the end
of 2022 drill Tethys Oil’s first exploration
well on Block 58.
20
Definitions and key financial data
Key financial data
Group
Operational items
2021
2020
2019
2018
2017
Production before government take, Oman Blocks 3&4, bbl
4,064,803
4,148,818
4,683,754
4,294,852
4,439,119
Production per day, Oman Blocks 3&4, bbl
11,136
11,336
12,832
11,767
12,162
Oil sales, bbl
Achieved oil price, USD/bbl
Income statement and balance sheet
1,808,857
2,317,875
2,259,849
2,163,148
2,316,404
62.8
47.7
64.2
70.5
51.8
Revenue and other income, MUSD
112.7
101.1
150.8
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 in oil and gas properties, 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
61.4
54%
16.1
14%
16.7
15%
68.6
256.6
284.5
90%
neg.
35.2
67.8
6.46%
5.92%
26
4.0
1.96
50.4
50%
5.8
6%
3.3
3%
55.4
257.7
280.3
92%
neg.
45.4
55.1
1.23%
2.12%
23
5.0
1.59
92.9
62%
37.1
25%
38.3
25%
75.6
276.3
300.2
92%
neg.
65.2
75.1
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
14.10%
25.09%
15.56%
14.66%
26.66%
18.97%
23
8.0
2.64
20
6.0
2.97
19
1.0
1.46
Number of shares at period end, thousands
33,057
33,057
36,295
35,896
35,544
Of which repurchased shares at period end, thousands
474
316
1,954
1,644
1,644
Number of shares at year end (excluding repurchased shares), thousands
32,583
32,741
34,341
34,252
33,900
Shareholders' equity per share, USD
Weighted average number of shares (before dilution), thousands
Weighted average number of shares (after dilution), thousands
Earnings per share before dilution, USD
Earnings per share after dilution, USD
7.76
32,619
32,661
0.51
0.51
7.87
33,321
33,328
0.10
0.10
7.61
34,223
34,303
1.12
1.12
7.45
34,011
34,140
1.83
1.82
6.43
34,170
34,385
0.97
0.96
21
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
Margins
EBITDA-margin
EBITDA as a percentage of yearly revenue
and other income.
Operating margin
Operating result as a percentage of yearly
revenue and other income.
Net margin
Net result as a percentage of yearly revenue
and other income.
Capital structure
Equity ratio
Shareholders’ equity as a percentage of
total assets.
2021
2020
2019
16.1
41.2
4.1
61.4
68.6
-0.8
67.8
5.8
44.5
0.0
50.4
55.4
-0.3
55.1
37.1
47.6
8.2
92.9
75.6
-0.5
75.1
2018
60.7
45.9
–
106.6
73.1
–
73.1
2017
38.4
39.5
0.3
78.2
42.0
–
42.0
Leverage ratio
Net interest bearing debt as a percentage of
shareholders’ equity.
Other
Number of employees
Average number of employees fulltime.
Investments
Total net amount of investments during
the year.
Shareholders’ equity per share
Shareholders’ equity divided by the num-
ber of outstanding shares.
Net cash
Cash and equivalents less interest bearing debt.
Profitability
Return on shareholders’ equity
Net result as percentage of average share-
holders’ equity.
Return on capital employed
Net result plus financial net result as a per-
centage of average capital employed (total
assets less non-interest-bearing liabilities).
Weighted average number of shares
Number of shares at the beginning of the
year with newly issued shares time weighted
for the period on issue.
Earnings per share
Net result divided by the weighted number
of shares.
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
One barrel of oil = 159 litres, 0.159 cubic meters
Oil production is often given in numbers of Barrels of
Oil per Day
Thousand Barrels
Million Barrels
Exploration and Production Sharing Agreement
bbl
bopd
mbo
mmbo
EPSA
22
The Tethys Oil share
The Tethys Oil share
Tethys Oil’s shares are traded on Nasdaq
Stockholm. With the purpose of improv-
ing liquidity and reducing the spread
between buyers and sellers of Tethys Oil
shares, the Company has contracted 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 2021 amounts to SEK
6,050,862 represented by 33,056,608
shares with a quota value of SEK 0.18.
All shares in Tethys Oil represent one vote
each. All outstanding shares are common
shares and carry equal rights to participa-
tion in Tethys Oil’s assets and earnings.
As per 31 December 2021, 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 2021, Tethys
Oil held 474,673 (1.4 percent) of its own
shares which was purchased at an average
price of SEK 50.82. In June 2020, and as
resolved by the AGM 2020, Tethys Oil
cancelled its entire then current holding
of treasury shares (3,238,352) which were
purchased from 2014 to April 2020 at an
average price of SEK 55.48. As a result of
the cancellation of treasury shares, the total
number of shares and votes decreased from
36,294,960 shares and votes to 33,056,608
shares and votes. The share repurchase pro-
gramme is based on a mandate from the
respective AGM.
Tethys Oil has a warrant programme
as part of the remuneration package to
employees. Warrants currently outstand-
ing have been issued following the AGMs
in 2019, 2020 and 2021. In October 2021
the exercise period for the 2018 incentive
programme expired without any warrants
having been exercised. The terms for each
warrant series have been recalculated as
a consequence of recalculation events,
according to the terms and conditions for
the warrants approved by the AGMs. The
current terms are:
Warrant programme
2019/22
2020/23
2021/24
Issued
350,000
350,000
200,000
Allotted
350,000
349,000
160,000
Strike price, SEK
No of shares each warrant entitle to
69.70
51.70
76.00
1.13
1.04
1.00
23
Share capital development
Since the Company’s inception in September 2001 and up to 31 December 2020, 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
2019
2019
2019
2019
2020
2020
2020
2020
2020
2021
2021
2021
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
Share split 1:2 (redemption shares)
Redemption
Bonus issue
Exercise of warrants
Share split 1:2 (redemption shares)
Redemption
Bonus issue
Redemption of treasury shares
Bonus issue
Share split 1:2 (redemption shares)
Redemption
Bonus issue
100.00
100.00
1.00
1.00
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.17
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
0.08
0.08
0.17
0.17
0.08
0.08
0.17
0.17
0.18
0.09
0.08
0.18
1,000
4,000
495,000
250,000
750,000
2,884,800
400,000
956,960
300,000
2
125,000
226,000
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
12,785,524
19,178,286
4,800,000
23,978,286
1,800
23,980,086
3,300,000
27,280,086
769,005
28,049,091
1,144,451
29,193,542
500,000
29,693,542
2,810,947
32,504,489
39,261
32,543,750
3,000,000
35,543,750
35,543,750
71,087,500
-35,543,750
35,543,750
0
35,543,750
35,543,750
71,087,500
-35,543,750
35,543,750
0
35,543,750
35,543,750
71,087,500
-35,543,750
35,543,750
0
35,543,750
352,560
35,896,310
35,896,310
71,792,620
-35,896,310
35,896,310
0
35,896,310
398,650
36,294,960
36,294,960
72,589,920
-36,294,960
36,294,960
0
36,294,960
-3,238,352
33,056,608
0
33,056,608
33,056,608
66,113,216
-33,056,608
33,056,608
0
33,056,608
24
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
0
-2,992,201
2,992,201
66,460
0
-3,025,431
3,025,431
-539,877
539,877
0
-3,025,431
3,025,431
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
5,984,402
2,992,201
5,984,402
6,050,862
6,050,862
3,025,431
6,050,862
5,510,985
6,050,862
6,050,862
3,025,431
6,050,862
Dividend policy
Tethys Oil has in 2021 adopted a new divi-
dend policy. The new policy replaces the
prior “Capital structure target and divi-
dend policy”. The new policy reads:
Tethys Oil aims to provide a long-term
sustainable and growing ordinary dividend
funded by cash flow from its producing
assets. Distributions to the shareholders
must always be aligned with the Company’s
long term operational and financial com-
mitments, market conditions and access
to external funding. In order to enable the
company to optimise its capital structure,
further shareholder distribution may be
carried out by various methods such as
redemption shares or share repurchases.
Dividend
For the financial year 2021, the Board of
Directors proposes to the AGM 2022 a
total distribution of SEK 7.00 per share,
corresponding to MSEK 228.1 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 5.00 per share by a mandatory share
redemption programme. (The AGM 2021
resolved on a total distribution of SEK
4.00 per share, of which SEK 2.00 per
share as cash dividend and SEK 2.00 per
share by a mandatory share redemption
programme, equal to MSEK 130.4).
Share ownership structure
The 15 largest shareholders in Tethys Oil as per 28 February 2022.
Name
Lansdowne Partners Austria
Magnus Nordin
Avanza Pension
Liontrust
Adage Capital Management
Nordnet Pension Insurance
Carl Erik Norman
Jan Risberg
Dimensional Fund Advisors
Daniel Hägerlöf
AXA
Schroders
Grandeur Peak Global Advisors, LLC
Bengt Karlsson
Missouri Local Government Employees Retirement
Total, 15 largest shareholders
Summary, others appr 8,260 shareholders
Total number of shares
Tethys Oil AB
Number of shares
Share of capital and votes
3,633,699
1,555,427
1,346,942
1,093,100
1,050,000
806,336
719,081
625,000
498,700
461,800
443,661
375,854
366,946
345,000
316,880
13,638,426
19,418,182
33,056,608
474 673
11.0%
4.7%
4.1%
3.3%
3.2%
2.4%
2.2%
1.7%
1.5%
1.4%
1.3%
1.1%
1.1%
1.0%
1.0%
41.0%
59.0%
100.0%
1,4%
Source: Monitor by Modular Finance as per 28 February 2022. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory
The verification date may vary for certain shareholders.
25
Distribution of shareholdings
Distribution of shareholdings per 31 January 2022.
Owner distribution by holdings
Number of shares
Capital and votes
Number of owners
Part of owners
1 – 500
501 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 20,000
20,001 – 50,000
50,001 – 100,000
100 001 – 500 000
500 001 – 1 000 000
1 000 001 –
Anonymous ownership
Total
Source: Monitor by Modular Finance
613,737
697,133
755,269
1,188,598
941,594
2,721,136
1,438,282
7,000,045
2,065,542
8,547,760
7,087,512
1.90%
2.10%
2.30%
3.60%
2.80%
8.20%
4.30%
21.20%
6.10%
25.90%
21.60%
33,056,608
100.00%
5,231
839
490
353
129
119
20
29
3
5
N/A
7,218
72.50%
11.60%
6.80%
4.90%
1.80%
1.60%
0.30%
0.40%
0.00%
0.10%
N/A
100.00%
Share statistics 2021
The final transaction price in 2021 was SEK 62.3 corresponding
to a total market capitalization of MSEK 2,059. During the year
the price of Tethys Oil’s share increased by 27 percent. Based on
data from NASDAQ Stockholm, the highest transaction price in
2021 was SEK 70.6 on 15 March and the lowest was SEK 47.65
on 19 August. The turnover velocity (annual turnover/ outstand-
ing shares) was 124 percent on Nasdaq Stockholm.
Share price development and turnover 2021
80
70
60
50
40
30
20
10
0
SEK
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Tethys Oil
Tethys Oil
OMX Stockholm PI
OMX Stockholm PI
Turnover
26
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Share volume
per days
(10 days
moving
average)
Corporate Governance Report
Corporate Governance Report 2021
Corporate Governance practices
refer
to the decision-making systems through
which owners, directly or indirectly, con-
trol a company. Tethys Oil is a publicly
traded company listed on Nasdaq Stock-
holm, Mid Cap. Tethys Oil adheres to the
Swedish Code of Corporate Governance
(“the Code”). The Code is published on
www.bolagsstyrning.se, where a descrip-
tion of the Swedish Corporate Govern-
ance model can be found. This Corporate
Governance Report 2021 is submitted
in accordance with the Swedish Annual
Accounts Act and the Code. It explains
how Tethys Oil has conducted its corpo-
rate governance activities during 2021.
Tethys Oil does not report any deviations
from the Code, Nasdaq Stockholm’s rule
book for issuers, recommendations from
the Swedish Securities Council, decisions
from Disciplinary Committee at Nasdaq
Stockholm or statements from the Swed-
ish Securities Council. The report has been
examined by the Company’s auditors,
please see page 34.
External and internal framework
for governance in Tethys Oil
External:
• Swedish Companies Act
(eg Swedish
legislation
• Accounting
Book-keeping 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 procedure
• Internal control framework with Code
of Conduct, polices etc.
Shareholders
Tethys Oil’s shares are traded on Nasdaq
Stockholm. At year-end 2021 the share
capital amounted to SEK 6,050,862, rep-
resented by 33,056,608 shares, each with a
par value of SEK 0.18. All shares represent
one vote each. At 31 December 2021, the
number of shareholders was 7,218 (9,666).
Of the total number of shares, foreign
shareholders accounted for approximately
61 percent. Lansdowne Partners Austria
is the only shareholder with a holding in
excess of 10 percent of shares and votes,
with a holding of 3,633,699 shares repre-
senting 11.0 percent of shares and votes.
Tethys Oil’s holding of its own shares,
amounted to 474,673 shares.
For further information on share, share
capital development and shareholders, see
pages 23–26 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 at the AGM. The AGM
was held in Stockholm on 19 May 2021.
114 shareholders were represented at the
AGM, representing 35 percent of the votes
and share capital in the Company. In order
to safeguard the health of shareholders and
personnel, the AGM was conducted with
precautionary measures in accordance with
the special implementing regulations due
to Covid-19 which were introduced in the
Code during the year 2021. The resolu-
tions passed by the meeting included the
following:
• Adoption of the income statements and
balance sheets for 2020 and discharge of
liability for the Board of Directors and
the Managing Director;
• Re-election of Robert Anderson, Alex-
andra Herger, Magnus Nordin, Per
Seime and Klas Brand. Per Seime 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 330,000
(excluding the Managing Director);
(ii) annual fees of the chairman of the
Board of Directors of SEK 700,000;
(iii) annual fees to committee members
of SEK 35,000 per committee assign-
ment, annual fees for the chairmen of
the Remuneration Committee and the
Technical Committee of SEK 65,000
each, annual fee for the chairman of the
Audit Committee of SEK 90,000, unless
27
the committee is chaired by the chair-
man of the Board of Directors in which
case the annual fee is SEK 65,000. The
total fees for committee work, includ-
ing committee chairmen fees, shall not
exceed SEK 360,000;
• Re-election of PricewaterhouseCoopers
AB as auditors with authorised pub-
lic accountant Johan Malmqvist as the
auditor in charge. Auditors will be paid
as invoices are approved;
• Guidelines for compensation of senior
executives;
• Payment of a dividend of SEK 2.00 per
share to the Company’s shareholders to
be paid in May 2021 with record date
20 May 2021;
• An extraordinary distribution of SEK
2.00 per outstanding share through a
share split, a reduction of the share capi-
tal with redemption of shares from the
share split and an increase of the share
capital by way of a bonus issue. The
record date for the share split is 26 May
2021;
• To effect a reduction of the share capital
with redemption of shares held by the
company and an increase of the share
capital by way of a bonus issue equalling
the amount of the reduced share capital.
• Approval of an incentive programme
as part of the remuneration package to
employees. Issuance of 200,000 war-
rants where each warrant is entitled to
subscription to one new share in Tethys
Oil during the period 12 June 2024 up
to and including 4 October 2024. Sub-
scription price for the warrants is SEK
76.00 per share;
• Authorisation for the Board to resolve
on repurchasing own shares, up until the
AGM 2022, up to but 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;
• Authorisation for the Board to resolve
to issue new shares or convertibles with
consideration in cash and, in kind or
by set-off and with the right to deviate
from the shareholders’ preferential rights
up to but not more than one-tenth of all
outstanding shares, to enable the Com-
pany to facilitate the raising of capital
for acquisitions and the Company’s
operations;
• Amendment of the Articles of Associa-
tion to reduce the minimum and maxi-
mum number of shares and make cer-
tain other formal changes;
The minutes recorded at the AGM
can be found at Tethys Oil’s website,
www.tethysoil.com.
The Annual General Meeting 2022 is
scheduled to be held in Stockholm on 18
May 2022 at CEST 15:00. The meeting
will be held with the physical presence
of shareholders, representatives or third
parties.
Nomination process
In accordance with the Nomination Com-
mittee process approved by the AGM
2021, the Nomination Committee for the
AGM 2022 consists of members appointed
by three of the largest shareholders of the
Company based on shareholdings as per 30
September 2021 and the chairman of the
Board. The names of the members of the
Nomination Committee were announced
and posted on the Company’s website on
16 November 2021.
The Nomination Committee
for the
AGM 2022 has held four meetings during
its mandate and informal contacts have
taken place between such meetings. Viktor
Modigh was at the first meeting appointed
Chairman of the Nomination Commit-
tee. The Nomination Committee report,
including the final proposals to the AGM
2022, will be published on the Com-
pany’s website together with the notice of
the AGM. The Nomination Committee’s
assignment is to produce proposals for the
following matters, which will be presented
to the AGM for resolution:
• Number of directors of the board;
• Remuneration to the Chairman of the
Board of Directors, the other directors of
the board and the auditors respectively;
• Remuneration, if any, for committee
work;
• Composition of the Board of Directors;
• Chairman of the Board of Directors;
• Resolution regarding the process of the
Nomination Committee 2023;
• Chairman at the annual general meet-
ing; and
• Election of auditors.
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
2022 consisted of the following members:
• Viktor Modigh, Chairman of the Nomi-
nation Committee, representing Mag-
nus Nordin;
• Mikael Petersson, representing Lans-
downe Partners Austria GmbH;
• Jan Risberg, representing himself; and
• Per Seime, Chairman of Tethys Oil
Shareholders who wish to present a motion
to the Nomination Committee can do so
to the chairman of the nomination com-
mittee: nomcom@tethysoil.com or by let-
ter to Tethys Oil AB, Nomination Com-
mittee, Hovslagargatan 5B, SE-111 48
Stockholm.
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 and chairman of the Board are
elected for a maximum of one year at a
time. The Board of Directors of Tethys Oil
since the AGM 2021 has consisted of five
members and no deputies. Per Seime has
been chairman of the Board. Four Board
members are independent from the Com-
pany and the Company’s management,
and five Board members are independent
from larger shareholders. For further infor-
mation on the Board members, please see
pages 35–36.
Board of Directors elected at the AGM 2021
Member
Elected
Position
Year of
birth
Nationality
Independent in
relation to the
Company
Per Seime
2017
Member
1946
Norway
Robert Anderson
2017
Member
1953 United Kingdom
Klas Brand
2020
Member
1956
Sweden
Alexandra Herger
2017
Member
1957
United States
Magnus Nordin
2001
Member
1956
Sweden
Yes
Yes
Yes
Yes
No
Independent
in relation to
the Company’s
larger
shareholders
Yes
Yes
Yes
Yes
Yes
Rules of procedure
The Board of Directors at Tethys Oil
establishes the overall goals and strategy
of the Company and resolves on larger
investments, acquisitions and disposals
of business activities or assets. The Board
ensures that there is an appropriate system
for follow-up and control of the Com-
pany’s operations, including evaluating
the risks associated with its operations
and that there is a satisfactory process for
monitoring the Company’s compliance
with applicable laws, other regulations and
internal guidelines. The board identifies
how sustainability issues impact risks to
and business opportunities for the Com-
pany and also defines appropriate guide-
lines to govern the Company’s conduct in
society, with the aim of ensuring its long-
term value creation capability. It appoints
and evaluates the Managing Director and
determines the Managing Director’s salary
and other compensation.
The Board further ensures that the Com-
pany’s external communications are char-
28
acterised by openness, and that they are
accurate, reliable and relevant. The Board
of Directors’ work is governed by annu-
ally adopted rules of procedure. The chair-
man 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 respon-
sible for other Board members receiv-
ing the information and documentation
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 Direc-
tors’ 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 five 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
December
Investment plan and budget, liquidity and forecast
January–February
Fourth quarter and year-end report, allocation of profit, review auditors’ report
March–-April
Annual report and AGM
Assessment of the board’s work
The chairman of the Board is responsible
for assessing the Board’s work includ-
ing the performance of individual Board
members. This is done on an annual basis
through a questionnaire which is anony-
mous for the Board members. The assess-
ment focuses on such factors as the Board’s
way of working, number of meetings and
effectiveness, time for preparation, avail-
able 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 committee’s work to
submit a proposal to the AGM concerning
Board members.
The Board’s work in 2021
During 2021, the Board held 13 meet-
ings of which five were ordinary and eight
extraordinary, in person, via telephone
and per capsulam meetings. Attendance at
the meetings is shown in the table below.
Board secretary was the Company’s CFO
Petter Hjertstedt. Prior to each meeting,
Board members were provided with an
agenda and written information on the
matters to be covered. Each meeting has
included the possibility to discuss without
management representatives being present.
Board of Directors and committee attendance in 2021
Member
Audit
Committee
Member
Remuneration
Committee
Member of
Technical
Committee
Board
meetings
Audit
Committee
meetings
Remuneration
Committee
meetings
Technical
Committee
meetings
Board member
Board
Per Seime
Geoffrey Turbott*
Chair
Chair
Yes
Yes
Klas Brand
Member
Yes (chair)
Robert Anderson
Member
Alexandra Herger
Member
Magnus Nordin
Member
–
–
–
Yes (chair)
–
–
–
Yes
–
–
–
–
Yes (chair)
Yes
–
13/13
4/4
13/13
13/13
12/13
13/13
5/5
2/2
5/5
–
–
4/5
3/3
–
–
–
3/3
–
–
–
–
5/5
5/5
–
* Geoffrey Turbott declined re-election and resigned from the Board of Directors following the AGM in May 2021. He attended all 2021 Board and Committee meetings prior the AGM.
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 2022, consisting of Klas Brand
as Chairman and Per Seime as member of
the committee. Members of the committee
during 2021 prior to AGM 2021 consisted
of Klas Brand (Chairman) and Per Seime.
29
The Audit Committee convened five times
in 2021. The work has mainly focused
on supervising the Company’s financial
reporting and assessing the efficiency of
the Company’s financial internal controls,
with the primary objective being provid-
ing support to the Board in the decision-
making processes regarding such matters.
The Audit Committee also regularly liaises
with the Group’s statutory auditors as part
of the annual audit process and reviews the
audit fees and the auditors’ independence
and impartiality. The Audit Committee
also assists the Nomination Committee
with proposals for resolutions on the elec-
tion and remuneration of the auditor. The
Audit Committee reports to the Board,
normally in conjunction with the follow-
ing Board meeting.
Remuneration Committee
The Board has established a Remunera-
tion Committee for the period up to and
including the AGM 2022, consisting of
Per Seime as Chairman and Alexandra
Herger as a member of the Commit-
tee. The committee remained unchanged
throughout the year. The Remuneration
Committee convened three times in 2021.
The work has mainly focused on prepar-
ing the Board’s decisions on principles for
remuneration to management, establish-
ing key performance indicators, to moni-
tor and evaluate variable remuneration
and the application of the guidelines for
remuneration as well as to construct and
propose the share-based incentive pro-
gramme to the AGM. The Remuneration
Committee reports to the Board, normally
in conjunction with the following Board
meeting.
Technical Committee
The Board has established a Techni-
cal Committee for the period up to and
including the AGM 2022, consisting of
Robert Anderson as Chairman and Alex-
andra Herger as a member of the Com-
mittee. Members of the Committee dur-
ing 2021 prior to AGM 2021 consisted of
Robert Anderson (Chairman), Alexandra
Herger and Gavin Graham. The Technical
Committee convened six times in 2021.
The work has mainly focused on follow-
ing up on work programmes, budgets and
investment proposals, evaluation of and
recommendation on appointment of inde-
pendent qualified reserve auditor, over-
sight of the reserves audit process, review
of operations management systems and
technical review of new ventures projects.
The Technical Committee reports to the
Board, normally in conjunction with the
following Board meeting.
External auditors of the Company
Statutory auditors
Pursuant to its Articles of Association,
Tethys Oil must have one or two auditors,
and no more than two deputies. A regis-
tered firm of auditors may be appointed
as the Company’s auditor. Tethys Oil’s
auditor
is PricewaterhouseCoopers AB
with Johan Malmqvist as lead partner and
Sophie Damborg as co-signing auditor.
PricewaterhouseCoopers AB was elected as
the Company’s auditor at the AGM 2021.
At least once a year, the Board meets the
Company’s auditor without the Managing
Director or any other member of the exec-
utive management present. Tethys Oil’s
auditors reviewed the Company’s second
quarter and six months report 2021.
Tethys Oil’s auditor:
Pricewaterhouse Coopers AB
Johan
Malmqvist
Sophie
Damborg
Lead
partner
Co-signing
Auditor
2021
2020
Role
Company auditor
since
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
2021, remuneration to Pricewaterhouse-
Coopers AB amounted to MUSD 0.2
(MUSD 0.2). For details on remuneration
to auditors, see note 9, Auditor’s fees. Dur-
ing 2021 the auditor’s advisory business
was engaged to provide consultancy ser-
vices within process efficiency and inter-
nal controls within Tethys Oil’s finance
function.
30
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 2021 report was ERC Equi-
poise Limited (“ERCE”), the same that
also audited the 2020 report. For further
information, see Reserves on page 12.
Managing Director and executive
management
The executive management in Tethys Oil
throughout 2021 has consisted of the
Managing Director (Magnus Nordin),
CFO (Petter Hjertstedt) and the CTO
(Fredrik 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 business
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 com-
municated by the Board of Directors. The
Board evaluates the work of the Managing
Director. The Board examines this issue
formally at least once a year, and without
any member of the executive management
present during this evaluation process.
Guidelines for remuneration to
senior executives
The guidelines for remuneration to senior
executives were approved by the Annual
General Meeting 2021. It is the Boards
opinion that there exists no need for any
changes to the remuneration guidelines to
be proposed for the AGM in 2022.
Application of guidelines
These guidelines apply to remuneration to
senior executives and to members of the
Board of Directors if remuneration is paid
for work performed outside the scope of
the ordinary board work (eg pursuant to an
employment or consultancy agreement).
For the purposes of these guidelines, senior
executives include the Managing Direc-
tor, the Deputy Managing Director (if
applicable) and certain other executives
who, from time to time, are members of
the Group Executive Management. These
guidelines do not apply to any remunera-
tion resolved upon or approved by the
General Meeting and are only applicable
to remuneration agreed, and amendments
to remuneration already agreed, after the
adoption of these guidelines by the Annual
General Meeting 2021.
These guidelines constitute a framework
within which remuneration to senior exec-
utives may be decided on by the Board of
Directors.
General remuneration principles
In short, the Group’s business strategy is
to create shareholder value working across
the whole upstream oil and gas industry
lifecycle of exploration, appraisal, develop-
ment and production. A central objective
in the Group’s business model is to explore
for and produce oil and gas in an economi-
cally, socially, and environmentally respon-
sible way.
The Company’s remuneration principles
are to ensure responsible and sustainable
remuneration decisions that support the
Company’s strategy, long-term interests
and sustainable business practices and fur-
ther enhance the Group’s market position
as well as increase the shareholder value. To
this end, salaries and other employment
terms shall enable the Group to retain and
recruit skilled senior executives at a reason-
able cost. Remuneration shall be on mar-
ket terms and based on the principles of
performance, competitiveness and fairness.
When evaluating whether these guidelines
and the limitations set out herein are rea-
sonable, the Board of Directors (including
the Remuneration Committee) has con-
sidered the total income of all employees
of the Company, including the various
components of their remuneration as
well as the increase and growth rate over
time. In order to comply with mandatory
rules or established local practice, remu-
neration which is subject to rules outside
Sweden may be adjusted to comply with
such local rules, taking into account, to the
extent possible, the overall purpose of these
guidelines.
Elements of remuneration
The remuneration covered by these guide-
lines may consist of basic salary, variable
cash salary, pension, non-financial benefits
and severance pay. In addition hereto, the
General Meeting may decide on, inter alia,
long-term incentive programmes in which
senior executives can participate.
Principles for 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 each
senior executive. On the assumption of
payment of full variable cash salary, pen-
sion benefits and other benefits, the basic
salary is expected to amount to no more
than 45 percent of the total remuneration.
If there is no variable cash salary, pension
benefits or other benefits, the basic salary
will constitute the entire remuneration.
Principles for variable cash salary
Variable cash salary, i.e. cash bonuses, shall
be based on a set of predetermined and
measurable performance criteria that reflect
the key drivers for pursuing the Company’s
strategy, long-term interests and sustain-
able business practices. Such performance
criteria include (but are not limited to)
HSE, production, reserves replacement,
business development and financial perfor-
mance as well as individual performance.
To which extent the criteria for awarding
variable cash salary have been satisfied shall
be determined annually in connection
with the preparation of the year-end report
for the respective financial year based on
an evaluation of the senior executive’s
achievement of the performance indica-
tors as described in the agreed individual
performance targets. Payment of variable
cash salary shall be conditional upon the
senior executive remaining employed for
the duration of the qualification period.
The Board of Directors is entitled to adjust
the incentive programme during the term
31
of the programme in the case of, for exam-
ple, extraordinary increases or decreases in
the Group’s earnings. Variable cash remu-
neration shall qualify for pension benefits
only to the extent it is required pursuant
to mandatory provisions of applicable col-
lective bargaining agreements. The annual
variable cash salary may not amount to
more than 12 months’ basic salary, and is
therefore expected to amount to no more
than 50 percent of the total remuneration.
Principles for pension benefits
Pension benefits shall comprise a defined
contribution scheme with premiums cal-
culated on the full basic salary and be set
on an individual basis, however, provided
that mandatory provisions of applicable
collective bargaining agreements do not
require otherwise. Pension benefits may
not amount to more than 30 percent of
the basic salary, and is therefore expected
to amount to no more than 25 percent of
total remuneration.
Principles for non-financial benefits
Non-financial benefits shall be based
on market terms and shall facilitate the
duties of senior executives. Non-financial
benefits may include, inter alia, life insur-
ance, medical insurance etc. Premiums and
other costs relating to nonfinancial benefits
may not amount to more than five percent
of the basic salary and is therefore expected
to amount to no more than five percent of
the total remuneration.
Remuneration during notice period
and severance pay
The notice period for termination of the
Managing Director shall not exceed 12
months and the notice period for termi-
nation of other senior executives shall not
exceed nine months. A mutual termina-
tion period of 12 months applies between
the Company and the Managing Director
and of up to nine months between the
Company and other senior executives.
Severance pay to the Managing Direc-
tor and other senior executives shall not
exceed 12 months’ basic salary, provided
that the employment is terminated by the
Company. In the event the senior execu-
tive terminates his or her employment, no
severance shall be payable.
Principles for certain remuneration to
members of the Board of Directors
To the extent members of the Board of
Directors perform work for the Com-
pany outside the scope of the ordinary
board work, consultancy fees on market
terms may be paid in addition to any
board fees resolved upon by the General
Meeting. The Nomination Committee is
tasked with proposing a frame, if any, for
such remuneration, to be approved by the
Annual General Meeting.
Long-term incentive programmes
Any remuneration resolved upon by the
General Meeting is not covered by the
guidelines. Accordingly, these guidelines
do not apply to the Company’s long-term
incentive programs resolved upon by the
General Meeting. The Company’s exist-
ing long-term incentive programmes are
directed to certain key employees of the
Group and designed to create conditions
for retaining and recruiting competent and
committed personnel to the Group. More
information on the Company’s existing
and proposed incentive programmes from
time to time is available on the Company’s
website, www.tethysoil.com.
The role of the Remuneration
Committee
The Board of Directors has established a
Remuneration Committee to deal with
matters of executive compensation and
wider Group remuneration. Specifically, it
is tasked to:
• Recommend and review remuneration
guidelines for the Managing Director,
the executive management and other
employees in the Group to the Board of
Directors;
amended guidelines is to be prepared by
the Board of Directors when the need for
material amendments arises, but at least
every four years.
• Recommend Company Performance
Targets for each year to the Board of
Directors;
The guidelines may also be amended by
way of a resolution by other General Meet-
ings than Annual General Meetings.
• Recommend Managing Director Perfor-
mance Targets for each year to the Board
of Directors, and inform the Board of
Directors of the Performance Targets
agreed between the Managing Director
and the executive management;
• Recommend remuneration (salary and
benefits) for the Managing Director to
the Board of Directors and inform the
Board of Directors of the remuneration
(salaries and benefits) for the executive
management;
• Recommend allocation of bonus and
warrants to the Managing Director
to the Board of Directors and inform
the Board of Directors of allocation of
bonus and warrants to the executive
management; and
• Recommend incentive programme guid-
ance relating to employees to the Board
of Directors.
Preparation and review of the compli-
ance of these guidelines
These guidelines have been prepared by the
Remuneration Committee of the Board
of Directors and the Board of Directors.
The Remuneration Committee is respon-
sible for preparation of updated proposals
in respect of guidelines for remuneration
to the senior executives. A proposal for
Within the scope and on the basis of these
guidelines, the Board of Directors shall,
based on the Remuneration Committee’s
preparation and recommendations, annu-
ally decide on the specific revised remu-
neration terms for each senior executive
and make such other decisions in respect
of remuneration for senior executives that
may be required.
The members of the Remuneration Com-
mittee are independent in relation to the
Company and the senior executives. The
Managing Director and the other senior
executives do not participate in the Board
of Directors’ handling of, or resolutions
regarding, remuneration-related matters if
they are affected by such matters.
Principles for derogations from these
guidelines
The Board of Directors may temporarily
resolve to derogate from these guidelines,
in whole or in part, if in a specific case
there is special cause for such derogation
and a derogation is necessary to serve the
Company’s long-term interests, including
its sustainability, or to ensure the Com-
pany’s financial viability.
Remuneration to executive management 2021
MSEK
Managing director
Other executive management
Total
Basic
salary
Pension
arrangements
Variable
salary
Share-based
long-term
incentive
3.559
4.264
7.823
0.496
0.492
0.989
0.942
1.077
2.019
1.462
1.743
3.205
Other
benefits
0.026
0.031
0.056
Total
2021
6.485
7.607
14.092
Total
2020
7.061
12.711
19.772
32
Remuneration to the Board 2021
Remuneration to be paid to the Board of
Directors for the period between the AGMs
of 2021 and 2022 amounts to a total of
MSEK 2.015, allocated among the Board
members in the way shown in the below
table. The Annual General Meeting 2021
resolved that remuneration of the chairman
of the Board of Directors shall be MSEK
0.700 per annum and of the other mem-
bers MSEK 0.330 per member per annum.
Remuneration is not paid for service of the
Boards or directors of subsidiaries. Magnus
Nordin, who is employed by Tethys Oil,
does not receive any remuneration for his
service on the Board of Directors.
Annual fee for committee members is
TSEK 35 per committee assignment and
annual fees for the chairman of the Remu-
neration and Technical Committees are
TSEK 65. The annual fee for the chair-
man 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.
Remuneration to board and commit-
tee members for the period between
the AGMs of 2021 and 2022 (in their
capacity as board members)
Per Seime
Robert Anderson
Alexandra Herger
Magnus Nordin
Klas Brand
Total
MSEK
0.800
0.395
0.400
0.000
0.420
2.015
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 minimise risks
involved in the financial reporting pro-
cess and ensure a high level of reliability
in financial reporting. Furthermore, the
system of internal control ensures compli-
ance with applicable accounting 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 operators to
understand and explain deviations.
Internal control
Tethys Oil continually works on improving
financial reporting through evaluating the
risk of errors in the financial reporting and
related control activities. Control activities
include following up on instructions and
the application of accounting principles.
The Board of Directors is responsible for
and monitors the control activities, which
involve all levels of the organisation. The
activities limit the identified risks and
ensure correct and reliable financial report-
ing. The Company’s financial department
analyses and follows up on budget devia-
tions, draws up forecasts, follows up on
significant variations between periods and
reports to the Board of Directors, which
minimises the risks for errors in the finan-
cial reporting. The control activities also
include following up on the authorisation
manual and accounting principles. These
control activities also include the operators
in partnerships. The Board of Directors
further decides on specific control activi-
ties and auditing of operators in partner-
ship. The financial department regularly
follows up on deviations and irregularities
and reports to the Audit Committee. This
structure is considered sufficient and suit-
able given the size and nature of the Com-
pany’s business. With the Company’s cur-
rent size, and as the Company’s interests in
producing assets are non-operated, Tethys
Oil currently does not consider it necessary
to have a dedicated internal audit 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, 8 April 2022
Tethys Oil AB (publ)
The Board of Directors
33
Auditor’s report on the Corporate Governance Statement
To the general meeting of the shareholders of Tethys Oil AB (publ), corporate identity number 556615-8266
Engagement and responsibility
It is the board of directors who is responsi-
ble for the corporate governance statement
for the year 2021 on pages 27–33 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 corporate governance statement. This
means that our examination of the corpo-
rate governance statement is different and
substantially less in scope than an audit
conducted in accordance with Interna-
tional Standards on Auditing and generally
accepted auditing standards in Sweden. We
believe that the examination has provided
us with sufficient basis for our opinions.
Opinions
A corporate governance statement has
been prepared. Disclosures in accordance
with chapter 6 section 6 the second para-
graph 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.
Gothenburg, 8 April 2022
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Sophie Damborg
Authorized Public Accountant
34
Board of Directors
Board of Directors
Member
Function
Elected
Year of birth
Nationality
Education/background
Experience
Other board duties
Shares in Tethys Oil (per
31 December 2021)1
5,000
Warrants in Tethys Oil (per
31 December 2021)1
–
Board and committe
remuneration (MSEK)2
0.800
Independent in relation to
the Company
Independent in relation
to the Company's larger
shareholders
Yes
Yes
1 Privately or via company
2 Resolved upon at the AGM 2021
Per Seime
Rob Anderson
Klas Brand
Chairman of the Board, Chairman of the
Remuneration Committee and member
of the Audit Committee
Board member and Chairman of the
Technical Committee
Board member and Chairman of the
Audit Committee
2017
1946
Norway
2017
1953
United Kingdom
2020
1956
Sweden
Master of Law, University of Oslo.
Master of Comparative Law, University of
Chicago Law School. Norwegian School
of Economic (NHH) Executive Board
Programme.
Oil and gas lawyer with more than 30
years’ experience. Lawyer for Mobil Oil
(Norway, USA and Indonesia). Previously
chair of the board of Premier Oil Norge
and Nexen Exploration Norge.
MA Engineering, Christ's College,
Cambridge University. Chartered
Engineer & Fellow of the Institution of
Mechanical Engineers
Bachelor’s Degree in Business
Administration and Economics,
Gothenburg University
Former Authorized Public Accountant and
partner at PwC’s Assurance practice in
Gothenburg, Sweden. Consultant to listed
and private companies within e.g. internal
controls and financial reporting. Senior
adviser to and member of the advisory
board at Corptrade.
Board member and responsible for
the property and finances of Göta Par
Bricole, Gothenburg, Board member of
1BC3 Brand AB
8,000
–
0.420
Yes
Yes
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
–
–
–
0.395
Yes
Yes
3535
Member
Function
Elected
Year of birth
Nationality
Alexandra Herger
Magnus Nordin
Board member of the Remuneration and
Technical Committees
Board member and Managing Director
2017
1957
United States
2001
1956
Sweden
Education/background
BA Geology, Ohio Wesleyan University
and Master studies Geology, University
of Houston
Bachelor of Arts, University of Lund and
Master of Arts, University of California,
Los Angeles
Experience
Other board duties
Several executive positions in different
oil companies
Board member: Minotaurus AB,
including subsidiaries, and Minotaurus
Energi AS
VP Global Exploration at Marathon
Oil, executive positions at Shell and
Enterprise Oil
Board member: Panoro Energy ASA,
Electromagnetic Geoservices ASA
(EMGS) and Tortoise Capital Advisors
Member: Women's Leadership
Committee, Oil Council and Leadership
Texas, Foundation for women's
resources, member of the PGS ASA’s
Nomination Committee
Shares in Tethys Oil (per
31 December 2021)1
Warrants in Tethys Oil (per
31 December 2021)1
–
–
Board and committe
remuneration (MSEK)2
0.400
Independent in relation to
the Company
Independent in relation
to the Company's larger
shareholders
Yes
Yes
1 Privately or via company
2 Resolved upon at the AGM 2021
1,555,427
2019/22: 60,000
2020/23: 60,000
2021/24: 60,000
–
No
Yes
3636
Executive management
Executive management
Magnus Nordin
Petter Hjertstedt
Fredrik Robelius
Function
Board member and Managing Director
Chief Financial Officer
Chief Technical Officer
Employed since
2004
2016
2011
Education/background
Bachelor of Arts, University of Lund and
Master of Arts, University of California,
Los Angeles
Finance and accounting at Linköping
University, Sweden
Education: PhD Engineering Physics,
Uppsala University; Postgraduate Diploma
Petroleum Engineering, Heriot-Watt
University
Year of birth
Nationality
Experience
1956
Sweden
1979
Sweden
1973
Sweden
Several executive positions in different
oil companies
Equity research analyst at SEB, Pareto
Securities and Carnegie Investment
Bank. Finance and Investor Relations at
PA Resources
Energy engineering positions in Fortum,
petroleum engineering related positions
in Tanganyika Oil and Sinopec
Shares in Tethys Oil (per
31 December 2021)*
1,555,427
Warrants in Tethys Oil (per
31 December 2021)
2019/22: 60,000
2020/23: 60,000
2021/24: 60,000
* Privately, via company and insurance policy
8,275
14,742
2019/22: 25,000
2020/23: 50,000
2021/24: 50,000
2019/22: 50,000
2020/23: 50,000
2021/24: 50,000
3737
Payments to authorities
Payments to authorities 2021
This report has been prepared in accordance with the law SFS
2015:812 (Lag 2015:812 om rapportering av betalningar till myn-
digheter) 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 2021 for the
group in which Tethys Oil AB (publ) (“Tethys Oil”) is the parent
company.
Per project
Project
Oman
Blocks 3&4
Block 49
Block 56
Block 58
Total Oman
Total Tethys Oil
Per Authority
Production sharing
Income taxes
Licence costs
Total
Barrels (’000)
USD (’000)
USD ('000)
USD ('000)
USD (’000)
2,265
102,202
45,039
–
–
–
2,265
2,265
–
–
–
102,202
102,202
–
–
–
45,039
45,039
–
250
100
350
700
700
147,241
250
100
350
147,941
147,941
Production sharing
Income taxes
License costs
Total
Barrels (’000)
USD (’000)
USD ('000)
USD (’000)
USD (’000)
Sultanate of Oman – Ministry of Energy and
Minerals
Sultanate of Oman – Ministry of Finance
Total Oman
Total Tethys Oil
2,265
–
2,265
2,265
102,202
–
102,202
102,202
–
45,039
45,039
45,039
300
400
700
700
102,502
45,439
147,941
147,941
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.
Licence costs
This pertains to costs for maintaining the exploration licences for
Block 49, Block 56 and Block 58 in Oman where payment were
made to Oman’s Ministry of Energy and Minerals and Oman’s
Ministry of Finance.
Income Tax
Tethys Oil’s oil and gas operations in Oman are governed by an
Exploration and Production Sharing Agreement for each block
(“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, 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.
For further reference see note 14 of the Annual Report.
38
Administration report
Administration report
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 company registration number 556615-8266 is the parent company, are hereby
presented for the twelve-month period ended on 31 December 2021. The amounts relating to the comparative period
(equivalent period of last year) are shown in parenthesis after the amount for the current period.
Parent Company
Subsidiaries
Tethys Oil AB (publ)
Tethys Oil Block 3 & 4 Ltd.
Tethys Oil Montasar Ltd.
Tethys Oil Exploration AB
Tethys Oil France AB
Tethys Oil Invest AB
Tethys Oil Mena BV
Tethys Oil Oman Onshore Ltd.
Tethys Oil Oman Ltd.
Tethys Oil Qatbeet Ltd.
Odin Energy A/S
50%
UAB Minijos Nafta
50%
Licences
Blocks 3&4, Oman
Block 49, Oman
Block 56, Oman
Block 58, Oman
Gargzdai, Lituania
Ownership in subsidiary companies is 100% unless otherwise stated.
Tethys Oil is an oil and gas exploration and production company
with a focus on onshore areas with known oil discoveries. Tethys
Oil’s core area is the Sultanate of Oman, where it holds interests in
the Exploration and Production Agreements (“EPSA”) for Blocks
3&4, Block 49, Block 56 and Block 58. Tethys Oil holds a 30
percent non-operated interest in the EPSA for Blocks 3&4, a 100
percent operated interest in the EPSA for Block 49 and Block 58
as well as a 65 percent operated interest in the EPSA for Block 56.
Tethys Oil also has an indirect interest in a minor producing asset
in Lithuania.
The Group is headquartered in Sweden and the Company’s shares
are listed on Nasdaq Stockholm (TETY) since 2012.
The company is actively seeking to expand its operations in Oman,
and the surrounding region. Tethys Oil’s operational approach is
to explore, appraise and develop its assets concurrently allowing
for continued operations to be funded from cash flow from pro-
duction. This has resulted in continuous growth in both produc-
tion and reserves over time.
OPERATIONAL REVIEW
Production
The Group’s reported production comes from Blocks 3&4 in
Oman which averaged 11,136 barrels per day in 2021 compared
to 11,336 barrels per day in 2020. The Group’s reported produc-
Average daily production net to Tethys Oil, yearly
bopd
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
39
tion declined by 2 percent in 2021 compared to the year before
and amounted to 4.1 million barrels (4.1 million barrels). The
decline in production in 2021 is the result of a number of opera-
tional issues experienced during the year. The principal reason for
the weak production development was delays in the remobiliza-
tion of the two drilling rigs put on standby in 2020. One rig was
scheduled to be operational in early April and the second one in
the beginning of July, but both rigs took longer than expected
to reach full operational capacity. As a result of the delays fewer
production wells were drilled and thus resulting in a lower con-
tribution of new production wells to offset the natural decline in
mature fields. Other factors impacting production negatively were
surface operational issues such as leaks and bottlenecks in water
handling. A majority of the disruption factors were remedied by
the end of 2021.
Operations per Block
Blocks 3&4
During 2021 a total of 14 wells were completed during the year, 10
of which were production and appraisal wells and two were water
injection wells. In addition, two exploration wells were drilled.
The exploration well Safi-1 was spudded and reached its final
depth in the second quarter 2021. The well was a near field explo-
ration well drilled about 7.5 km north of Shahd H. Khufai layer,
the main target, did not flow any hydrocarbons to surface and has
been shut in for further evaluation.
The exploration well Suhail-1, located between the Erfan and
Anan discoveries, was drilled in the third quarter 2021. The main
target, the Khufai layer, flowed about 200 barrels of oil per day but
due to a rapid drop in pressure the flows could not be sustained.
Testing and evaluation are ongoing to see if higher and sustainable
flows can be achieved.
The Mubash’er exploration well was drilled during the quarter and
was found to be dry. Mubash’er, located 4 km east of the Shahd K
structure in the southern part of Block 3, was targeting an untested
play concept in the Ara group of formations. Post-well analysis is
ongoing to determine the impact of the result on future explora-
tion plans.
The 2021/2022 3D seismic acquisition campaign started in late
December 2021.The survey will cover a total of up to 3,500 km2
in the southern part of Block 4, including areas east of the 2018
exploration well Luja-1, and is expected to be completed in the
third or fourth quarter of 2022.
Block 49
The primary focus of the Block 49 work programme for 2021,
was the drilling of the Thameen-1 exploration well that began on
31 December 2020. By the end of February 2021 the Thameen-1
exploration well reached its final depth. Logs indicated a gross
hydrocarbon column of close to forty metres in the primary target,
the Hasirah Sandstone. Following completion of drilling opera-
tions, a testing programme was conducted but it was unable to
record any flows of hydrocarbon to surface. Sidewall cores, fluid
samples and pressure data has been further analysed together with
an extensive log analysis. The results confirm a decent porosity
but a low permeability. Extensive post drilling analysis points to
some form of stimulation as the most probable course of action
to achieve flows from the well, and an unconventional approach
could be considered.
In March 2021 the farmout transaction with EOG Resources Inc
(“EOG”), announced in November 2020, received government
approval and was finalised. In the fourth quarter 2021 EOG noti-
fied Tethys Oil of its intention to withdraw from the EPSA for
Block 49 and reassign its interest to Tethys Oil. As follows from
EOG’s decision Tethys Oil is now in the formal process of assum-
ing EOGs interest and thus becoming holder of 100 percent of
the Block 49 EPSA. Tethys Oil does not anticipate any immedi-
ate financial effects of EOG’s withdrawal from the EPSA but, as
the sole interest holder, exploration expenses going forward will be
funded solely by Tethys Oil.
In December 2021 Tethys Oil was notified by the Ministry of
Energy and Minerals (MEM) that it had been granted a further
six-month extension of the initial exploration phase of the EPSA,
until June 2022. Tethys Oil retains the option to enter into the
three-year second exploration phase of the EPSA and will in the
coming quarter conduct studies to evaluate the feasibility of the
application of unconventional completion and production meth-
ods to the Thameen-1 well. The outcome is expected to be a key
determinant in the company’s course of action with regards to a
potential entry into the second phase.
Block 56
In the first quarter 2021, the farmin agreement with Medco Ara-
bia Ltd (“Medco”), announced in October 2020, for a 45 percent
interest in the EPSA for Block 56 received government approval,
and the transaction was finalised. As a result of the transaction,
Tethys Oil increased its interest from 20 to 65 percent and assumed
operatorship of Block 56.
In the fourth quarter 2021 preparations for the three well drilling
campaign on the Al Jumd trend in the north-western part of the
block intensified. Main areas of focus included civil works, drill-
ing water supply wells in addition to procurement of services and
supplies for a potential long-term production test. The Schlum-
berger 279 drilling rig became available in late 2021 resulting in
mobilisation at the Al Jumd-2 drill site in late January 2022 when
drilling commenced.
The drilling campaign on the Al Jumd trend is aimed to explore
and appraise the various plays in the area with particular focus on
the Al Jumd discovery. In all, the trend holds 10 identified leads
and prospects with modest volumes but potentially good develop-
ment economics. The three well campaign includes the Al Jumd-2
and Sarha-3 appraisal wells, and the Sahab-1 exploration well. If
successful, the Al Jumd-2 well is expected to be put on a long-term
production test later in 2022. The three wells have a combined
gross unrisked prospective resource potential of 7 mmbo. Drilling
operations for each well is expected to last about 20 days.
During the fourth quarter the 3D seismic acquisition campaign
covering more than 2,000 km2 of the central area of the Block
commenced. The seismic is being acquired in the form of a data
purchase agreement with a subsidiary of PDO (Petroleum Devel-
opment Oman). The acquisition campaign is expected to be com-
pleted in mid-March with data processing to commence later in
2022 with the aim of having drillable prospects available in 2023
40
Block 58
A seismic survey on Block 58 was launched and completed dur-
ing the fourth quarter. Over 450 km2 of 3D seismic was acquired
in the South Lahan area in the central and eastern portion of the
Block bordering with PDO’s Block 6. Tethys Oil has earlier iden-
tified a number of leads in the South Lahan area on the basis of
2D seismic acquired by previous operators. Processed 3D data is
expected to be available to the company by the third quarter 2022
at which point interpretation and prospect maturation will start
with the aim of having drillable prospects ready in early 2023.
In the Fahd area, in the north eastern corner of Block 58, seismic
interpretation is ongoing. A cluster of leads, identified on legacy
3D seismic, are being matured to prospects. An exploration well in
the Fahd area is planned to be drilled at the end of 2022.
Reserves and contingent resources
Oman, Blocks 3&4
Tethys Oil’s net working interest Reserves in Blocks 3&4 Oman
as at 31 December 2021 amount to 26,174 thousand barrels of
oil (“mbo”) of Proven and Probable Reserves (2P). The 2P reserve
Replacement Ratio amounts to 82 percent. In addition, Tethys
Oil’s net working interest resources in Oman amounts to 15,600
mbo of 2C Contingent Resources. The Company’s 2021 and 2020
year-end Reserves reports were audited by ERC Equipoise Limited
(“ERCE”) as independent qualified reserves evaluator.
Additions and revisions include maturation of Contingent
Resources to Reserves from the ongoing appraisal programme of
Ulfa and Erfan fields as well as upside revisions of the Reserves on
the Farha South and Shahd fields.
Based on ERCE’s model and current oil price assumptions, Tethys
Oil’s net entitlement Reserves (Reserves after government take)
amount to 7,825 mbo of 1P, 10,786 mbo of 2P and 14,233 mbo
of 3P.
In addition to Reserves, Tethys Oil also announces net working
interest Contingent Resources. The bulk of the estimated Contin-
gent Resources are contained in the Ulfa, Samha and Erfan fields
with a contribution from extensions on the Shahd field. Develop-
ment of the Contingent Resources in the discoveries is continued
contingent upon the ongoing appraisal programme, a committed
work programme as well as budget to access these resources.
Development of reserves, Blocks 3&4 (audited)
mbo
1P
2P
3P
Total 31 December 2020
17,948
26,922
37,874
Production 2021
Additions and revisions
-4,064
2,761
-4,064
3,316
-4,064
4,639
Total 31 December 2021
16,645
26,174
38,449
Reserve replacement ratio, %
68%
82%
114%
Contingent resources Blocks 3&4 (audited)
mbo
1C
2C
3C
Total 31 December 2021
5,640
15,600
33,360
The audit of the Reserves in Oman has 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).
Production Guidance 2022
Tethys Oil expects full year 2022 average production to be in the
range of 11,000–11,500 barrels of oil per day with the outcome
dependent upon the performance and timing of the wells to be
drilled in the 2022 work programme. Under current circum-
stances, the OPEC+ production quotas are not expected to limit
production output. Monthly fluctuations outside of the yearly
average production range is to be expected.
FINANCIAL REVIEW
Production Entitlement
The terms of the Exploration and Production Sharing Agreement
(“EPSA”) for Blocks 3&4 allows the joint operations partners to
recover their costs from up to 40 percent of the value of total oil
production on an annual basis, this is referred to as ‘cost oil’. After
deducting any allowance for cost oil, the remaining production is
split 80/20 between the government (“government take”) and the
joint operations partners. If the costs incurred during the period
exceeds the maximum 40 percent of production, it is carried for-
ward to be recovered in future periods and is referred to as the
‘Cost Pool’. If there are no costs to be recovered, the joint opera-
tions partners receive 20 percent of the oil produced. The terms of
the EPSA thus dictates that the joint operations partners’ share of
production after government take to be in the range 20–52 per-
cent, depending on available recoverable cost.
During 2021 all recoverable cost incurred was recovered from pro-
duction and as per 31 December 2021 there was no unrecovered
cost in the Blocks 3&4 cost pool (31 December 2020: MUSD
1.8). Net entitlement for 2021 was 44 percent (2020: 52 percent)
of production. As per 31 December 2021 Tethys Oil’s net share of
the cost pool balance was MUSD – (MUSD 1.8).
Revenue and sales
During 2021, Tethys Oil sold 1,808,857 barrels of oil from Blocks
3&4, representing a 22 percent decrease compared to 2020 when
2,317,875 barrels of oil were sold. The decrease in oil sold is a
result of the lower production, lower net entitlement share off-
set by an increase in the overlift position compared to the end of
2020.
Revenue from oil sales in 2021 was MUSD 113.5 (MUSD 110.7),
a 3 percent increase compared to 2020. The increase in revenue
was driven by a 32 percent increase in achieved oil price, offsetting
the lower sales volumes. Achieved oil price was USD 62.8 per bar-
rel (USD 47.7).
The increased overlift position, 11,886 barrels compared to 3,169
at the end of 2020, and an increased oil price resulted an adjust-
ment of MUSD -0.8 (MUSD -9.6) which together with revenue
adds up to revenue and other income of MUSD 112.7, a 11 per-
cent increase in 2021 compared to MUSD 101.1 in 2020.
41
Revenue and other income
Oil sold, bbl
1,808,857
2,317,875
2,259,849
2,163,148
2,316,404
Underlift (overlift) movement, bbl
-8,717
-160,490
123,238
70,174
-8,062
Net barrels produced, after government take, bbl
1,800,140
2,157,385
2,383,086
2,233,322
2,308,342
2021
2020
2019
2018
2017
Achieved oil price, USD/bbl
Revenue, MUSD
Underlift (overlift) adjustments, MUSD
Revenue and other income, MUSD
62.8
113.5
-0.8
112.7
47.7
110.7
-9.6
101.1
64.2
145.0
5.8
150.8
70.5
152.6
4.7
157.3
51.8
119.9
-0.6
119.3
Volumes for oil sales are nominated two to three months in advance
and are not based upon the actual production in a month; as a
result, sales volumes can be above or below production volumes.
Where the sales volume exceeds the quantity of barrels produced,
an overlift position occurs and where it is less, an underlift position
occurs. During the year, the group expand its overlift position of
3,169 barrels at the end of 2020 to an overlift position of 11,886
barrels at the 31 December 2021. The valuation of both over- and
underlift is based on market price at the balance sheet date.
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. Tethys Oil’s selling
price is based on the Official Selling Price (OSP) as set by the Sul-
tanate of Oman’s Ministry of Energy and Minerals, in addition to
trading and quality adjustments. The OSP is calculated using the
monthly average price of the front month future contract of Oman
Export blend (with 2 months to delivery) as traded on the Dubai
Mercantile Exchange.
Operating expenses
2021
2020
2019
2018
2017
Production costs, MUSD
-40.6
-40.3
-47.2
-42.6
-32.6
Well workovers, MUSD
-3.2
-3.1
-4.4
-3.4
-2.3
Total operating
expenses, MUSD
Operating expenses per
barrel, USD
-43.8
-43.4
-51.6
-45.9
-34.9
-10.8
-10.5
-11.0
-10.7
-7.9
Production costs relate to oil production on Blocks 3&4, and com-
prise expenses for throughput fees, energy, consumables, field staff,
maintenance, as well as administration, including operator over-
head. Well workovers and interventions relate to downhole work
including replacing of electric submersible pumps. Expenditure
related to well workovers and interventions was almost unchanged
compared to 2020.
Production costs, well workovers and interventions together com-
prise operating expenses, amounting to MUSD 43.8 in 2021
(MUSD 43.4), an increase of one percent compared to 2020.
Depletion, depreciation and amortisation
2021
2020
2019
2018
2017
DD&A, MUSD
-41.2
-44.5
-47.6
-45.9
-39.5
DD&A per barrel, USD
-10.1
-10.7
-10.2
-10.7
-8.9
Depletion, depreciation and amortisation (“DD&A”) is com-
prised of two components; a straight-line depreciation component
and unit of production component. DD&A in 2021 amounted to
MUSD 41.2 (MUSD 44.5). The lower DD&A is a result of lower
calculated unit of depletion costs combined with lower produc-
tion. The DD&A charge relates to Blocks 3&4 and a depreciation
relating to leases under IFRS 16 of MUSD 0.1.
Netback
USD/bbl
2021
2020
2019
2018
2017
Achieved oil price
62.8
47.7
64.2
70.5
51.8
Revenue (after
government take)
27.8
24.8
31.1
36.7
27.0
Operating expenses
-10.8
-10.5
-11.1
-10.7
-7.9
Netback
17.0
14.4
22.3
26.0
19.1
The increase in netback per barrel during 2021 is a result of the
higher achieved oil price.
Exploration Costs
Exploration costs recorded in 2021 was MUSD 4.1 (2020: MUSD
0.0) and are related to the write down of the remaining capitalised
costs from the drilling of the Thameen-1 well on Block 49. Explo-
ration and appraisal costs are capitalised as they are incurred and
subject to regular review. Dry or uneconomic wells are expensed
when the recoverability of the costs is deemed unlikely.
Administrative expenses
Administrative expenses amounted to MUSD 7.5 for 2021 com-
pared to MUSD 7.3 during 2020 with the increase driven by an
increase in staff and consultancy costs. Administrative expenses are
mainly salaries, rents, listing costs and external services.
42
Net financial result
The net financial result for 2021 of MUSD 0.6 (MUSD -2.5) has
been impacted by net gain due to changes in foreign exchange
rates resulting from the appreciation of SEK against USD. Cur-
rency translation differences recorded on loans between the parent
company and subsidiaries are non-cash related items.
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.
Currently, Blocks 3&4 is the only Omani EPSA in a tax paying
position. As the final amount of income tax is determined after the
end of the calendar year, Tethys Oil’s preliminary assessment of the
amount of Omani income tax paid on behalf of Tethys Oil in 2021
is MUSD 45.0 (2020: MUSD 30.8).
Result
Tethys Oil reports a net result after tax for 2021 of MUSD 16.7
(MUSD 3.3), representing earnings per share of USD 0.51 (USD
0.1). The result for 2021 was increased compared to 2020 due to
higher oil prices.
Liquidity and financing
Cash and bank as per 31 December 2021 amounted to MUSD
68.6 compared to MUSD 55.4 as per 31 December 2020.
In May 2021, a dividend of SEK 2.00 per share was paid to share-
holders, which in total amounted to MUSD 7.8. Furthermore, an
extraordinary distribution of 2.00 SEK per share, MUSD 7.7 was
distributed to shareholders through a mandatory share redemption
programme.
For the twelve months ended 31 December 2021, the cash flow
from operations amounted to MUSD 64.9 (MUSD 52.1) and
cash flow used in investments in oil and gas amounted to MUSD
35.2 (MUSD 45.4). For the twelve months of 2021, free cash flow
(cash flow from operations less investments) amounted to MUSD
29.7 (MUSD 6.7).
Tethys Oil’s ongoing operations on Blocks 3&4, Block 49, Block
56, and Block 58 and elsewhere in Oman, including investment
programme, are expected to be funded from cash flow from opera-
tions and from available funds.
Investments and work programme
During 2021, total investments in oil and gas properties amounted
to MUSD 35.2 compared to MUSD 45.4 in 2020. In 2021,
investments of MUSD 30.4 related to Blocks 3&4, MUSD -7.9
to Block 49, MUSD 7.9 to Block 56, MUSD 4.8 to Block 58 and
MUSD 0.0 to New venture.
Country/Asset,
MUSD
Book value
31 Dec
2021
Investments
Jan–Dec
2021
Book value
31 Dec
2020
Investments
Jan–Dec
2020
Oman Blocks 3&4
180.9
Oman Block 49
Oman Block 56
Oman Block 58
New ventures
0.4
16.7
6.6
0.3
30.4
-7.9
7.9
4.8
0.0
191.9
12.6
8.8
1.8
0.3
38.8
4.6
0.2
1.8
–
Total
204.9
35.2
215.3
45.4
Investments Blocks
3&4, MUSD
Drilling
G&G
Facilities
Total investments
Blocks 3&4
2021
2020
2019
2018
2017
17.6
19.4
25.0
25.5
26.6
4.1
8.7
9.2
10.1
11.2
10.2
18.9
13.7
4.2
9.1
30.4
38.8
54.0
50.4
39.9
Operating expenditure, investments and work programme
2022
Tethys Oil’s investments in oil and gas properties for 2022 is
expected to amount to MUSD 91. The increase in oil and gas
investments compared to 2021 (MUSD: 35.2) is a result of a
combination of deferred spending from 2021 as well as increased
work programmes. 2021 oil and gas investments were positively
impacted by the effect of the farmout proceeds and carry from
EOG on Block 49 (MUSD 15.2). The majority of oil and gas
investments relating on the Blocks operated by Tethys Oil are
expected to be incurred in the first half of 2022 with resulting cash
flow impact.
Investments on Blocks 3&4 are expected to be MUSD 62 (2021:
MUSD 30.3). The increased expenditure is due to the full year
operation of three drilling rigs, upgrade and expansion of produc-
tion facilities, field infrastructure improvements and 3D seismic
acquisition.
2022 spending on Block 49 is expected to be MUSD 0.5 (2021:
MUSD -7.9) with expenditure focusing on a feasibility study of
the application of unconventional completion and production
techniques on the Thameen-1 well.
On Block 56, Tethys Oil’s 2022 investments, including carry
arrangements, are expected to amount to a total of MUSD 20
(2021: MUSD 7.9). The expenditure includes the drilling of the
three wells in the Al Jumd area, subsequent well testing and the 3D
seismic survey on the central area of the Block.
On Block 58 Tethys Oil’s 2022 investments are expected to amount
to MUSD 8.5 (2021: MUSD 4.8) to cover the expense related to
seismic processing and the drilling of one exploration well.
43
Parent company
The parent company reports a net result after tax for 2021
amounting to MSEK 360.9 compared to MSEK 22.7 for 2020.
Administrative expenses amounted to MSEK 40.2 for 2021 com-
pared to MSEK 48.2 for 2020. Net financial result amounted to
MSEK 386.5 during 2021 compared to MSEK 58.1 for 2020.
Dividends from subsidiaries amounting to MSEK 350.0 and cur-
rency exchange gains related to intercompany loans were the main
components of the net financial result.
OTHER INFORMATION
Impact of Covid-19 pandemic
The impact of the initial spread of the coronavirus in 2020 on
oil industry was dramatic. During the first half of 2020, as coun-
tries implemented mitigating actions such as lockdowns and
travel restrictions, demand for oil dropped by more than 20 per-
cent according to industry statistics. This resulted in a significant
oversupply and increase in oil inventories globally which resulted
in a rapid decrease in oil prices. The decrease in demand in turn
negatively affected revenues, net results. To mitigate these effects
oil producers reduced and deferred investments and long-term
improvement initiatives. One such response was the OPEC+
agreement where countries voluntarily agreed to curtail produc-
tion output. In 2021, the trend reversed with the industry unable
to increase supply at the same rate as the growth in demand with
reduced inventories and increased oil prices as a result. Tethys Oil’s
production, having initially been reduced in response to OPEC+
production limitations, was slow to recover following the reduced
investment in production wells during 2020 and early 2021.
Tethys Oil is run by a small, specialized staff and with limited back
up if key personnel fall ill with the viral disease Covid-19. To ensure
the wellbeing of Tethys Oil staff and operations, the risk mitiga-
tion and reduction concerning Covid-19 continued to be of high
priority in 2021. Tethys Oil has encouraged employees to work
from home when possible and has implemented virtual meetings
to minimize unnecessary physical contact and limit exposure from
public transport travel. Strict measures are also applied for work
in the field. In all Tethys Oil’s measures to safeguard its employees
has proved successful and the effects on the day to day operations
have been limited.
Tethys Oil will continue to monitor the development of the
pandemic and react accordingly but as of the publication of this
report, the Guidance for 2022 published on 8 February 2022
remains Tethys Oil’s official outlook on 2022.
Significant agreements and commitments
In Tethys Oil’s oil and gas operations, there are two main catego-
ries 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
can take different forms depending on the licensing and fiscal
regime of the country. In the case of Tethys Oil and Oman the
relationship is governed by Exploration and Production Sharing
Agreements (EPSA or PSA). Tethys Oil holds its interests directly
through aforementioned agreements in Oman. The agreements
with host countries have a time limit and are normally divided
into clearly defined time periods. Financial commitments and/or
work commitments normally relate to the different periods. Tethys
Oil has fulfilled its commitments on Blocks 3&4 and Block 49.
On Block 58, the initial work commitments during the first period
includes geological studies, seismic acquisition and processing and
exploratory drilling. On Block 56, the second exploration period
includes a 3D seismic commitment and the drilling of one explo-
ration well.
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.
There are, other than the aforementioned agreements, 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 on 19 May 2021 Robert Anderson, Alexandra Herger,
Magnus Nordin, Per Seime and Klas Brand were re-elected. No
deputy directors were appointed. At the same meeting, Per Seime
was appointed chairman of the Board. The work of the board is
subject to an established work procedure that defines the distri-
bution of work between the board and the Managing Director.
The work procedure is evaluated each year and revised if deemed
appropriate. The board held 13 meetings during 2021. The five
members of the board have consisted of four non-executive direc-
tors and the managing director. The board has three committees
– Audit Committee, Remuneration Committee and Technical
Committee. Klas Brand 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 the equivalent of 26 full time
employees (23). Of these, 8 (8) were women. In addition, Tethys
Oil has a number of contractors and consultants are engaged in the
group’s operations.
Remuneration policy
The guidelines for executive remuneration as agreed by the Annual
General Meeting 2021 can be found in Note 11 and in the corpo-
rate governance report.
Group structure
Tethys Oil AB (publ), with organizational number 556615-8266,
is the parent company in the Tethys Oil Group. Material subsidi-
aries include Tethys Oil Block 3&4 Limited, Tethys Oil Mon-
tasar Limited, Tethys Oil Qatbeet Limited and Tethys Oil Oman
Onshore 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.
Associated companies
Tethys Oil’s interest in the production licence Garzdai is held indi-
rectly through a Danish limited liability company which holds
shares in the Lithuanian operating company which holds 100 per-
cent of the licence. Consequently, Tethys Oil has an effective 25
percent interest in the Gargzdai licence.
44
As at 31 December 2021, the value of the shareholding in the asso-
ciated Danish company holding the interests in the Lithuanian
Gargzdai licences, amounted to MUSD – compared to MUSD
– at the end of 2020. Share of net profit/loss from associated com-
panies amounted to MUSD – as no dividends were received in
2021 (2020: MUSD: –). The book value related to Minijos Nafta
(Gargzdai) is zero, and as there are no formal or informal obliga-
tions related to Minijos Nafta, Tethys Oil does not recognize, any
net result from Minijos Nafta.
Share data
As of 31 December 2021, the number of issued shares in Tethys
Oil AB amount to 33,056,608 with a quota value of SEK 0.18. All
shares represent one vote each.
As of 31 December 2021, Tethys Oil held 474,673 of its own
shares which were purchased since the commencement of the
share repurchase programme in the fourth quarter 2021. The main
purpose of the share repurchase programme is to give the company
flexibility regarding its equity and thereby optimize the capital
structure of the company. Repurchased shares may also be used
as payment for, or financing of, acquisitions of companies or busi-
nesses or in connection with handling of incentive programmes. A
total of 159,121 shares were purchased by the company in 2021.
The repurchased shares are still included in the total number of
shares but are not included in the average number of shares out-
standing. The weighted average number of shares outstanding
during 2021 before dilution was 33,619,054 and after dilution
33,660,948. After 31 December 2021 and up to the date of pub-
lication for this report, Tethys Oil has not acquired any additional
shares.
Tethys Oil has a warrant-based incentive programme for employ-
ees which may increase the number of shares depending on the
share price during the exercise periods, for further information
please see note 20. More information on Tethys Oil’s share can be
found on page 23 in the Annual Report.
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 on
page 59.
Appropriation of profit
The Board of Directors proposes a dividend of SEK 2.00 per share
(AGM 2021: SEK 2.00) equal to MSEK 66.1 (MSEK 65.2). The
Board of Directors proposes an extraordinary distribution of SEK
5.00 per share (AGM 2021: SEK 2.00) by way of a mandatory
share redemption programme following the AGM 2022 equal to
MSEK 165.3 (MSEK 65.2). 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
2021
25.3
360.9
386.2
2020
140.1
22.7
162.8
The Board of Directors proposes that these earnings be appropriated as follows:
To the shareholders, a distribution of SEK 2.00
per share (AGM 2021: SEK 2.00)
65.2
65.2
To the shareholders, an extraordinary distribution
of SEK 5.00 per share (AGM 2021: SEK 2.00)
To be retained in the business
162.9
158.1
386.2
65.2
32.4
162.8
Dividend and Distribution
The Board of Directors has proposed a cash dividend of SEK 2.00
per share amounting to SEK 65,163,870 at the current number
of shares outstanding (net of treasury shares) and an extraordi-
nary distribution of SEK 5.00 per share amounting to SEK
162,909,675. The dividend and extraordinary distribution are
subject to approval at the AGM 2022. This is a total distribution
of SEK 228,073,545. The preliminary record date for the dividend
is 21 May 2022.
The parent company has distributable earnings (unrestricted
equity) of MSEK 386.2 per 31 December 2021. After the divi-
dend and cash distribution of MSEK 228.1, the Parent Company
will have retained earnings of MSEK 158.1.
As per 31 December 2021, the Group’s and the Parent Company’s
equity ratio amounted to 90 percent and 78 percent, respectively.
After the dividend and distribution, the Group’s and the parent
company’s equity ratio will amount to 89 percent and 65 percent,
respectively.
Tethys Oil has generated significant cash flows in recent years
and the Group’s financial position is strong. The Board has con-
sidered the parent company and the consolidated Group’s needs
through a comprehensive evaluation of the parent company’s and
the Group’s financial position and the parent company’s and the
Group’s possibilities to fulfil their commitments in the long term.
The Board of Directors has concluded that despite uncertainties in
the company’s operating environment, the parent company’s and
the Group’s financial position gives rise to the conclusion that the
parent company and the Group can continue its operations and
meet its obligations in the short and long term and continue to
make investments. The Board believes that the size of the equity,
even after the proposed dividend, is in reasonable proportion to
the scale of the parent company’s and the Group’s business as well
as the risks associated with conducting the business.
With reference to the above, and what has come to the Board’s
attention, it is the Board’s assessment that the Parent Company’s
and the Group’s financial position implies that the proposed divi-
dend is justifiable pursuant to Chapter 17, Section 3 second and
third paragraph of the Swedish Companies Act, i.e. with reference
to the requirements that the nature, scope and risks of business
45
put on the size of the parent company’s and the Group’s equity as
well as the parent company’s and the Group’s need to strengthen
its balance sheet, liquidity and financial position.
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. The sustainability
report is available on the corporate website, www.tethysoil.com.
Financial statements
The result of the Group’s and parent company’s operations and
the financial position at the end of the financial year is shown in
the following income statements, balance sheets, cash flow state-
ments, statements of changes in equity and related notes. Balance
sheets and income statements will be resolved at the AGM, 18
May 2022.
46
Financial statements for the group
Consolidated statement of comprehensive income
1 January – 31 December, MUSD
Revenue
Underlift / overlift adjustment
Revenue and other income
Operating expenses
Gross profit
Depreciation, depletion and amortisation
Exploration costs
Administrative expenses
Operating result
Financial income and similar items
Financial expenses and similar items
Net financial result
Result before tax
Income tax
Net Result
Other comprehensive result
Items that may be subsequently reclassified to profit or loss:
Currency exchange differences
Other comprehensive result
Total comprehensive result
Attributable to:
Shareholders in the parent company
Non-controlling interest
Total number of shares at the end of the period
Weighted average number of shares (before dilution)
Weighted average number of shares (after dilution)
Earnings per share (before dilution), USD
Earnings per share (after dilution), USD
Note
4
4
3
8
3,7
7
9–11,20
12
13
14
16
16
16
16
16
2021
113.5
-0.8
112.7
-43.8
68.9
-41.2
-4.1
-7.5
16.1
15.2
-14.6
0.6
16.7
–
16.7
-1.5
-1.5
15.2
15.2
–
2020
110.7
-9.6
101.1
-43.4
57.7
-44.5
0.0
-7.4
5.8
7.8
-10.3
-2.5
3.3
0.0
3.3
3.7
3.7
7.0
7.0
–
33,056,608
33,056,608
32,619,054
33,321,353
32,660,948
33,328,099
0.51
0.51
0.10
0.10
47
Consolidated balance sheet
As at 31 December, MUSD
Note
2021
2020
ASSETS
Non-current assets
Oil and gas properties
Other fixed assets
Current assets
Trade and 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
Other non-current liabilities
Current liabilities
Current provisions
Accounts payable and other current liabilities
Total liabilities
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES
7
15
16
6
17
6
18
204.9
1.1
206.0
9.2
0.7
68.6
78.5
215.3
0.3
215.6
9.1
0.2
55.4
64.7
284.5
280.3
0.8
76.3
0.3
179.2
256.6
12.8
0.8
13.6
0.2
14.1
14.3
27.9
284.5
0.8
76.3
1.8
178.8
257.7
12.5
0.3
12.8
–
9.8
9.8
22.6
280.3
48
Consolidated statement of changes in equity
in summary
MUSD
Share capital
Paid in capital
Reserves
Retained earnings
Total equity
Attributable to shareholders of the parent company
Opening balance 1 January 2020
0.8
76.3
Net result 2020
Other comprehensive income 2020
Total comprehensive income
Transactions with owners
Repurchase of shares
Dividend
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2020
Opening balance 1 January 2021
Net result 2021
Other comprehensive income 2021
Total comprehensive income
Transactions with owners
Repurchase of shares
Dividend
Share redemption
Incentive programme
Total transactions with owners
–
–
–
–
–
–
–
–
0.8
0.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76.3
76.3
–
–
–
–
–
–
–
–
-1.9
–
3.7
3.7
–
–
–
–
–
1.8
1.8
–
-1.5
-1.5
–
–
–
–
–
Closing balance 31 December 2021
0.8
76.3
0.3
201.1
276.3
3.3
–
3.3
-8.3
-7.0
-10.6
0.3
-25.6
178.8
178.8
16.7
–
16.7
-1.0
-7.8
-7.7
0.2
-16.3
179.2
3.3
3.7
7.0
-8.3
-7.0
-10.6
0.3
-25.6
257.7
257.7
16.7
-1.5
15.2
-1.0
-7.8
-7.7
0.2
-16.3
256.6
49
Consolidated cash flow statement
1 January – 31 December, MUSD
Note
2021
2020
12
13
7
7
7
16
Cash flow from operations
Profit before tax
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
Cash flow from investment activity
Financing activity
Repurchase of shares
Dividend
Share redemption
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
16.7
–
–
4.1
40.4
61.2
-0.6
4.3
64.9
-35.2
-35.2
-1.0
-7.8
-7.7
-16.5
13.2
55.4
0.0
68.6
3.3
0.1
0.0
–
48.8
52.2
3.0
-3.1
52.1
-45.4
-45.4
-8.3
-7.0
-10.6
-25.9
-19.2
75.6
-1.0
55.4
50
Financial statements for the parent company
Parent company income statement
1 January – 31 December, MSEK
Other income
Administrative expenses
Operating result
Financial income and similar items
Financial expenses and similar items
Net financial result
Result before tax
Income tax
Net result1
Note
5
9–11,20
12
13
14
2021
14.6
-40.2
-25.6
505.2
-118.7
386.5
360.9
-0.0
360.9
2020
12.8
-48.2
-35.4
146.8
-88.7
58.1
22.7
-0.0
22.7
1 As there are no items in the parent company’s other comprehensive income, no separate report on total comprehensive income is presented.
51
Parent company balance sheet
As at 31 December, MSEK
Note
2021
2020
ASSETS
Non-current assets
Oil and gas properties
Shares in subsidiaries
Long term receivables from subsidiaries
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
Net result
Total shareholders' equity
Current liabilities
Accounts payable and other current liabilities
Other current liabilities to group companies
Total liabilities
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES
7
19
23
15
16
18
23
0.4
1.0
509.1
510.5
2.3
0.8
76.8
79.9
590.4
6.0
71.1
530.3
-505.0
360.9
463.3
7.9
119.2
127.1
590.4
–
1.0
338.0
339.0
2.1
0.7
36.2
39.0
378.0
6.0
71.1
530.3
-390.2
22.7
239.9
9.8
128.3
138.1
378.0
52
Parent company statement of changes in equity
MSEK
Restricted equity
Unrestricted equity
Share
capital
Statutory
reserve
Share
premium
reserve
Retained
earnings
Opening balance 1 January 2020
6.0
71.1
530.3
Transfer of prior year net result
Net result 2020
Net result
Transactions with owners
Repurchase of shares
Dividend
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2020
Opening balance 1 January 2021
Transfer of prior year net result
Net result 2021
Net result
Transactions with owners
Repurchase of shares
Dividend
Share redemption
Incentive programme
Total transactions with owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.0
6.0
71.1
71.1
530.3
530.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Closing balance 31 December 2021
6.0
71.1
530.3
* As the parent company does not recognise any Other comprehensive income, no such report is presented.
-425.5
277.6
–
–
-79.6
-66.1
-99.2
2.6
-242.3
-390.2
-390.2
22.7
–
–
-8.7
-65.2
-65.2
1.7
-137.5
-505.0
Net
result
277.6
-277.6
22.7
22.7
–
–
–
–
–
22.7
22.7
-22.7
360.9
360.9
–
–
–
–
–
360.9
Total equity
459.5
0.0
22.7
22.7
-79.6
-66.1
-99.2
2.6
-242.3
239.9
239.9
0.0
360.9
360.9
-8.7
-65.2
-65.2
1.7
-137.5
463.3
53
Parent company cash flow statement
1 January – 31 December, MSEK
Note
2021
2020
Cash flow from operations
Profit before tax
Dividend from group company
Interest received
Adjustment for 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
Cash flow from investment activity
Financing activity
Financing from long term receivables
Repurchased shares
Dividend payment
Share redemption
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
12
12
7
16
360.9
-350.0
-24.9
-41.3
-55.3
-0.2
-1.9
-57.4
-0.4
-0.4
237.1
-8.7
-65.2
-65.2
98.0
40.2
36.2
0.4
76.8
22.7
-57.3
-18.8
45.5
-7.9
-2.0
4.4
-5.5
–
–
271.6
-79.6
-66.1
-99.2
26.7
21.2
25.4
-10.4
36.2
54
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 and Lithuania. The Company
is a limited liability company incorporated and domiciled in Stockholm, Swe-
den. The Company is listed on Nasdaq Stockholm.
These consolidated and parent company financial statements have been
approved for issue by the Board of Directors on 8 April 2022.
Basis of preparation
The annual report of the Group and the parent company Tethys Oil AB has
been prepared in accordance with prevailing International Financial Report-
ing Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpreta-
tions adopted by the EU Commission and the Swedish Annual Accounts Act
(1995:1554). In addition, 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 unless 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 2020 annual report. The annual report of the Group has
been prepared in accordance with International Financial Reporting Stand-
ards (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 2021 and 2022
IASB issued several amended accounting standards that were endorsed
by EU, effective date 1 January 2021. None of these had a material effect
on the Group financial statements 2021. New accounting principles 2022,
issued by IASB with effective date 1 January 2022, is not expected to have
a material effect on the Group financial statements 2022.
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 recognizes any non-controlling interest in the acquired asset either
at fair value or at the non-controlling interest’s proportionate share of the
acquired net assets.
Inter-company transactions, balances and unrealized gains and losses on
transactions between subsidiaries are 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 recognizes 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 licences 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.
Associated companies
An investment in an associated company is an investment in an undertak-
ing where the Group exercises significant influence but not control, gener-
ally accompanying a shareholding of at least 20 percent but not more than
50 percent of the voting rights. Such investments are accounted for in the
consolidated financial statements in accordance with the equity method
and are initially recognized at cost. The difference between the acquisi-
tion cost of shares in an associated company and the net fair value of
the assets, liabilities and contingent liabilities of the associated company
recognized at the date of acquisition is recognized 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 recognized in the income
statement and the Group’s share in post-acquisition movements in other
comprehensive income of the associated company is recognized 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 recognize 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”.
Unrealized gains on transactions between the Group and its associates are
eliminated to the extent of the Group’s percentage in the associates. Unre-
alized 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 trans-
lated at the rates of exchange prevailing at the balance sheet date and
foreign exchange currency differences are recognized in the income state-
ment. 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, except for deferred
55
exchange differences relating to hedge accounting, which are accounted for
in other comprehensive income. 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.
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.
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 2021
31 December 2020
Currency
Average
Period end
Average
Period end
SEK/USD
SEK/EUR
8.56
10.14
9.04
10.23
9.19
10.49
8.19
10.04
Segment reporting
According to the group accounting principles the operating segments are
reported based on Producing assets, Non-producing assets and Other,
where producing and non-producing assets are represented by Oman and
other by Sweden, and reported in a manner consistent with the internal
reporting 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
amortization (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 are incurred.
Proceeds from the sale or farm-out of oil and gas concessions in the explo-
ration stage are offset 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 amortization
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.
Proved reserves are those quantities of petroleum which, by analysis of
geological and engineering data, can be estimated with reasonable cer-
tainty to be commercially recoverable, from a given date forward, from
known reservoirs and under current economic conditions, operating meth-
ods and governmental regulations. Proved reserves can be categorised as
developed or undeveloped. If deterministic methods are used, the term
reasonable certainty is intended to express a high degree of confidence
that the quantities will be recovered. If probabilistic methods are used,
there should be at least a 90 percent probability that the quantities actually
recovered will equal or exceed the estimates.
Probable reserves are those unproved reserves which analysis of geologi-
cal and engineering data suggests are more likely than not to be recover-
able. In this context, when probabilistic methods are used, there should
be at least a 50 percent probability that the quantities actually recovered
will equal or exceed the sum of estimated proved plus probable reserves.
Exploration costs
Exploration costs relate to non-producing oil and gas properties and are
recognised in the income statement when a decision is made not to pro-
ceed with an oil and gas project, or when expected future economic benefits
of an oil and gas project are less than capitalised costs. No depletion is
charged to non-producing oil and gas properties.
Costs related to non-producing oil and gas properties and directly asso-
ciated with an exploration well are capitalised until the determination of
reserves is evaluated. If it is determined that a commercial discovery has
not been achieved, these exploration costs are charged to the income
statement as exploration costs.
The field will be transferred from the non-production cost pool to the pro-
duction cost pool within oil and gas properties once commercial production
commences and accounted for as a producing asset.
Impairment
Tethys Oil continuously assesses its producing oil and gas properties for
any need for impairment. This is performed in conjunction with each bal-
ance sheet date or if there are events or changes in circumstances that
indicate that carrying values of assets may not be recoverable. Such indica-
tors include changes in the Group’s business plans, relinquished licences,
changes in raw materials prices leading to lower revenues and, for oil and
gas properties, downward revisions of estimated reserve quantities.
Testing for impairment losses is performed for each cash generating unit,
which corresponds to licence right, production sharing agreement or equiva-
lent owned by Tethys Oil. A cash generating unit thus usually corresponds
to each acquired asset in each country in which Tethys Oil carries out 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 7 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 capitalised 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.
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
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.
56
Tethys Oil derecognises a financial liability or part thereof when the obli-
gation stated in the relevant contract is fulfilled or otherwise terminated.
the case of joint operations operated by Tethys Oil, the group recognises its
interest share of the value of the underlying assets and corresponding lia-
bilities of the leases in its consolidated group accounts. At present Tethys
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 2020.
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
receivables’ in the balance sheet. Receivables and other receivables are
recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method. Assets are also measured less
provision for impairment.
c) Other liabilities
Other liabilities are non-derivative financial liabilities with fixed or determi-
nable payments that are not quoted in an active market. They are included
in current liabilities, except for maturities greater than 12 months after the
end of the reporting period. These are classified as non-current liabilities.
Other liabilities are recognised initially at fair value and subsequently meas-
ured at amortised cost using the effective interest method.
d) Impairment of financial assets
The group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost and FVOCI.
The impairment methodology applied depends on whether there has been
a significant increase in credit risk. For trade receivables, the group applies
the simplified approach permitted by IFRS 9, which requires expected life-
time losses to be recognised from initial recognition of the receivables.
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 deprecia-
tion. Depreciation is based on cost and is calculated on a straightline 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.
Leasing
Tethys Oil recognizes right of use assets and lease liabilities arising from
all leases in the balance sheet, with some exceptions. This model reflects
that, at the start of a lease, the lessee always obtains the right to use an
asset for a period of time and has an obligation to pay for that right.
The right of use asset is initially measured at cost, which equals the
amount of the initial measurement of the lease liability adjusted for any
lease payments made at or before the commencement date. The lease
liability is initially measured at the present value of the lease payments that
are not paid at the commencement date, discounted at the rate implicit in
the lease or if it cannot be determined at the incremental borrowing rate.
Under IFRS 16 Tethys Oil applies the exceptions for short-term leases and
leases for which the underlying asset is of low value. The standard applies
primarily to the accounting of the Group’s operational leases. IFRS 16
Leases does not apply to joint operations unless operated by Tethys Oil. In
Oil does not have any leases under IFRS 16 from joint operations in its
group accounts. The short-term leases and the leases for which the under-
lying asset is of low value are office leases and IT servers/programmes and
other leases of shorter duration or lesser value.
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 issue costs and tax
effects are shown in equity attributable to the shareholders of the parent
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.
On fields where the Group is required to contribute to site restoration costs,
a provision is recorded to recognise the future commitment. An asset is
created, as part of the oil and gas properties, to represent the discounted
value of the anticipated site restoration liability and depleted over the life
of the field on a unit of production basis. The corresponding accounting
entry to the creation of the asset recognises the discounted value of the
future liability. The discount applied to the anticipated site restoration
liability is subsequently released over the life of the field and is charged
to financial expenses. Changes in site restoration costs and reserves are
treated prospectively and consistent with the treatment applied upon initial
recognition.
Revenue
Revenue from the sale of oil and gas are recognised in the income state-
ment net of royalties in kind or in cash (government take). Revenue associ-
ated with the sale of crude oil are recognised at the fair value of the con-
sideration 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. Revenue is only recognised to the extent
that it is highly probable that a significant reversal will not occur.
Underlift and overlift
Oil sale volumes are nominated in advance and are not based upon the
actual production in a month; as a result, the Company’s oil sales volumes
can be above or below production entitlement volumes. Where the oil sales
volume exceeds the volume of entitlement barrels produced, an overlift
position occurs and where it is less, an underlift position occurs. Underlift/
overlift positions are taken into account for future oil sales nominations,
aiming at balancing the position. Underlifts are recorded as Other receiva-
bles valued at market value, and overlifts are recorded in Other current lia-
bilities and accrued at the market value. Underlifts are reversed from Other
57
extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Employee benefits
Short-term employee benefits such as salaries, social premiums and holi-
day pay, are expensed when incurred.
Pension obligations
The majority of the pension obligations of the Group are governed by legally
required social costs. Additional pension schemes exist which are funded
through payments to insurance companies. These are defined contribution
plans. A defined contribution plan is a pension plan under which the group
pays fixed contributions into a separate entity. The Group has no legal or
constructive obligations to pay further contributions should this legal entity
not hold sufficient assets to pay all employees the benefits relating to
employee service in the current or prior periods.
Share based incentive programme
Equity-settled share-based payments are recognized in the income state-
ment as administrative expenses and as equity in the balance sheet. The
option is recognised at fair value at the date of grant using the Black &
Scholes options pricing model and is charged to the income statement.
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
the Swedish Annual Accounts Act, recommendation RFR 2, Accounting
for Legal Entities of the Swedish Financial Reporting Board. IFRS 9 is not
applied in the financial reporting. The accounting principles of the parent
company deviate from the accounting principles of the group in respect of
IFRS 16 Leasing, since the parent company accounts for leasing agree-
ments as operating leases. The Parent company only has office leases and
IT-servers/-programmes and other leases concerning items of lesser value.
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.
receivables when the crude oil is lifted and sold. Overlifts are reversed from
Other current liabilities when sufficient volumes are produced to make up
the overlifted volume.
Profit oil and cost recovery
Blocks 3&4, Tethys Oil’s only producing oil and gas property, is governed
by an Exploration and Production Sharing Contract (EPSA). Under the EPSA,
revenues are derived from cost recovery oil and gas and profit oil and gas.
Cost recovery oil and gas allows Tethys Oil to recover a majority of invest-
ments and operating expenses (CAPEX and OPEX) incurred. Profit oil and
gas is split between the host government and join operations parties in
accordance with a fixed percentage. The joint operations partners split the
cost recovery oil and gas and profit oil and gas 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.
Impact of Covid-19 pandemic
A global pandemic such as the coronavirus (Covid-19) can have a severe
negative impact on the group and its ability to conduct operations. Given
that Tethys Oil is run by a small, specialised staff there is limited redun-
dancy if key staff was to fall ill as a result of a viral infection. The group
has aimed to mitigate the risk by encouraging staff to work from home, the
implementation of virtual meetings and minimising any non-critical physical
meetings and interactions as well as limit exposure from travel on public
transport.
The travel restrictions and lockdown measures implemented by govern-
ments across the world can impact supply chains, movement of key person-
nel and ability to utilise external contractors and consultants.
The impact of the Covid-19 pandemic and the restrictions on movement and
travel that have been implemented has had a significant effect on global
economic activity and demand for oil during 2020 and continued to do so in
2021. At the beginning of the pandemic, in 2020, oil producers were unable
to reduce output at the same pace as demand fell resulting in a significant
imbalance in supply and demand for oil. As a result of the supply/demand
imbalance, oil prices fell significantly during the first six months of the year
and certain crude oil qualities traded at negative prices, albeit for short
periods of time. Following the production limitations imposed by OPEC+, the
oil price has gradually strengthened since early June 2020. Since the start
of 2021, oil prices have risen from USD 50 to over USD 80 per barrel and
closed 31 December 2021 at USD 77.89 per barrel.
The Covid-19 pandemic’s impact on the economy and energy prices, and
the risk to Tethys Oil’s ability to conduct its operations profitably and without
disruption is currently subject to significant uncertainty. The lower oil prices
impacted Tethys Oil’s profitability and cash flows in 2020. Given the uncer-
tainty surrounding the development of the pandemic it cannot be ruled out
that oil prices will, once again fall significantly and thus have a longer-term
impact on the group’s profitability and financial standing. Should oil prices
decline to the levels experience in 2020s and remain low, the risk of a
future impairment of the Group’s oil and gas assets cannot be ruled out.
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 are 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
58
Note 1, Risk management
The Group’s activities expose it to a number of risks and uncertainties
which are continuously monitored and reviewed. Presented below are the
main risks and uncertainties of the group as identified by the directors and
how the group handles these risks.
Operational risk management
Technical and geological risk
Tethys Oil is producing and exploring for oil and appraising undeveloped
oil and/or natural gas accumulations. The operational risk is different in
the different parts of Tethys Oil’s operations. The main operational risk in
exploration and appraisal activities is that the activities and investments
made by Tethys Oil and its partners will not evolve into commercial reserves
of oil and gas.
Oil price
The oil price is of significant importance to Tethys Oil in all parts of opera-
tions as income and profitability is and will be dependent on prices pre-
vailing from time to time. Significantly lower oil prices will reduce current
and expected profitability in projects and can make projects sub economic.
Lower oil prices could also decrease the industry interest in Tethys Oil’s
projects regarding farmout or sale of assets. There were no oil price hedges
in place as at 31 December 2021.
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.
Net result in financial statements (MUSD)
Shift in oil price (USD/barrel)
Total effect on net result (MUSD)
16.7
5.0
9.1
16.7
-5.0
-9.1
Access to equipment
An operational risk factor is access to equipment in Tethys Oil’s projects.
Especially in the drilling/development phase of a project, the Group is
dependent on advanced equipment such as rigs, casing, pipes etc. A short-
age of these 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. Spe-
cifically, Tethys Oil also deals with political risk by emphasising continuous
close dialog with host country authorities and interest groups, nationally
as well as locally. Tethys Oil holds its oil and gas interest through licences,
directly or indirectly, which are granted by national governments. Tethys Oil’s
operations are often also subject to local permits. Therefore, Tethys Oil and
the industry are subject to a wide range of political risks on different levels
and the business is highly sensitive to political changes.
In recent years OPEC and associated countries have, from time to time,
agreed to voluntary production limitations. Oman has in the past partici-
pated in such agreements. As of May 2020, oil production in Oman is
subject to production limitations under the OPEC+ agreement. As a con-
sequence of the OPEC+ agreement Tethys Oil’s production on Blocks 3&4
is subject to production limitations until December 2021. Going forward
Tethys Oil cannot rule out the risk of prolonged or new such limitations
impacting its oil and gas production and sales.
Environment
Oil and gas operations can be environmentally sensitive. Tethys Oil devotes
considerable effort and expense to identify and mitigate any perceived envi-
ronmental risk. The operations are subject to extensive regulatory control
with regard to environmental matters, both on national and international
levels. Environmental legislation regulates inter alia the control of water
and air contamination, waste material, licensing requirements, restrictions
on carrying out operations in environmentally sensitive and littoral areas.
Key personnel
Tethys Oil is dependent on certain key personnel, one of whom has founded
the Company at the same time as they are among the existing sharehold-
ers and a member of the Board of Directors of the Company. These people
are important for the successful development of Tethys Oil. The Company
actively tries to strike an optimal balance between its dependence of key
personnel and its methods for retaining these.
Licences
Tethys Oil’s direct interests are held through agreements with host coun-
tries, for example licences or production sharing agreements. These agree-
ments are often limited in time and there are no guarantees that the agree-
ments can be extended when a time limit is reached.
Financial risk management
The Group’s activities expose it to a variety of financial risks, mainly catego-
rized as exchange rate risk and liquidity risk. The Group’s risks are continu-
ously monitored and analysed by the Board of Directors and management.
The aim is to minimise potential adverse effects on the Group’s financial
performance.
Foreign currency risk
The Group is exposed to fluctuations in the foreign exchange markets as
fluctuations in exchange rates can negatively affect the result, cash flow
and equity. The major proportion of the Group’s assets relate to interna-
tional oil and gas discoveries valued in USD and which generate revenues
in USD. During 2021, all of Tethys Oil’s oil sales and operative expendi-
tures were denominated in USD with a share of general and administrative
expenses being denominated in SEK. 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:
Revenues
Investments
2021
2020
100% in USD
100% in USD
99.8% in USD
99.8% in USD
External financing at year end
No
No
Tethys Oil does not currently use derivative contracts to hedge exchange
rates. The Group policy is that cash held in bank should be in USD, except
for a short period in order to have sufficient amounts of SEK in the Parent
company to pay dividend and share redemption. Furthermore, there are
relatively minor amounts in SEK held in the Parent company, in order to
reduce exchange rate exposure.
Translation risk
Exchange-rate changes affect the Group’s operating profit in conjunction
with the translation of the income statements of Group entities to USD.
When net assets are translated into USD the translation can negatively
affect the Group’s statement of financial position. The parent company
has issued loans to its subsidiaries denominated 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 risk 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.
59
Fall due profile on Tethys Oil’s financial
liabilities
MUSD
Accounts payable and other liabilities
Total
31 December 2021
31 December 2020
< 1 year
< 1 year
14.1
14.1
9.8
9.8
Group’s receivables on oil sales amounted to MUSD 7.2 (MUSD 8.9), this
also represents the maximum 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 balance sheet.
Credit risk
Tethys Oil’s policy is to limit credit risk by limiting the counterparties 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.,
with 30 days payment from bill of lading. As at 31 December 2021 the
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 2021
31 December 2020
MUSD
through profit or loss
amortised cost
amortised cost
through profit or loss
amortised cost
amortised cost
Financial assets and
liabilities at fair value
Financial
assets at
Financial
Financial assets and
liabilities at
liabilities at fair value
Financial
assets at
Financial
liabilities at
Trade and other receivables
Cash and bank
Other non-current liabilities
Accounts payables and other current
liabilities
–
–
–
–
9.2
68.6
–
–
–
–
0.8
14.1
–
–
–
–
9.1
55.4
–
–
–
–
0.3
9.8
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-
elling 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
macroeconomic 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 7 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.
Income 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 14).
60
Note 3, Segment information
The Group accounting principles for segment describes that the operating
segment are reported based in Producing assets, Non-Producing assets
and Other, as well as geographic perspective, where Producing and Non-Pro-
ducing assets are represented by Oman and Other by Sweden, and reported
in a manner consistent with the internal reporting which is primarily based
in income statement ratios and provided to the executive management,
which is considered 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 and costumers. Oman is Tethys Oil´s
only oil producing area from which revenue is recorded as at 31 December
2021 and comparative period. Revenue, depletion and operating expenses,
which is presented in notes 4, 7 and 8, therefore only related to Oman and
Block 3&4 in particular. Regarding Oil and gas properties segment reporting
is provided in note 7. Please refer to note 1 regarding credit risk exposure
on accounts receivables.
Group income statement Jan–Dec 2021, MUSD
Total
Revenue and other income
Operating expenses
Depreciation, depletion and amortisation
Exploration costs
Administrative expenses
Operating result
Group income statement Jan–Dec 2020, MUSD
Total
Revenue and other income
Operating expenses
Depreciation, depletion and amortisation
Exploration costs
Administrative expenses
Operating result
Producing assets
Non-producing assets
Other
112.7
-43.8
-41.1
–
-2.6
25.2
–
–
–
-4.1
–
-4.1
–
–
-0.1
–
-4.9
-5.0
Producing assets
Non-producing assets
Other
101.1
-43.4
-44.3
–
-2.5
10.8
–
–
–
–
–
–
–
–
-0.2
-0.0
-4.8
-5.0
Total
112.7
-43.8
-41.2
-4.1
-7.5
16.1
Total
101.1
-43.4
-44.5
-0.0
-7.4
5.8
Note 4, Revenue and other income
MUSD
Revenue
Underlift (+) / overlift (–), adjustment
Revenue and other income
2021
113.5
-0.8
112.7
2020
110.7
-9.6
101.1
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 in 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, have been charged out to oil and gas projects within
the group. Other income in the parent company during 2021 amounted
to MSEK 14.6 (12.8). In case of Tethys Oil being the operator in joint
operations, these administrative expenditures are, through the above, also
funded by the partner if such partners exist. The charge out to joint opera-
tions projects where Tethys Oil is operator is presented in the consolidated
income statement as other income to the extent it is related to interest
not held by Tethys Oil. All other internal charge outs are eliminated in the
consolidated financial statements. Tethys Oil is as at 31 December 2021
operators in Blocks 49, 56 and 58 in Oman and hold 100% of the licenses
interest.
Note 6, Provisions
Tethys Oil estimates that Tethys Oil’s share of site restoration regarding Blocks
3&4 at year end 2021 amounts to MUSD 12.8 (MUSD 12.5) and for Block 49
to MUSD 0.2 (MUSD –). As a consequence of the revised site restoration pro-
vision, oil and gas properties have decreased for Blocks 3&4. Site restoration
provision for Block 49 was calculated for the first time in 2021. 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.
MUSD
1 January 2021
Changes in estimates
Unwinding of discount
31 december 2021
Current
Non-current
Total
Block 3&4
Block 49
Total
MUSD
Block 3&4
Block 49
12.5
-0.4
0.7
12.8
–
12.8
12.8
–
0.2
–
0.2
0.2
–
0.2
12.5
1 January 2020
-0.2
0.7
Changes in estimates
Unwinding of discount
13.0
31 december 2020
0.2
Current
12.8
13.0
Non-current
Total
9.6
2.3
0.6
12.5
–
12.5
12.5
–
–
–
–
–
–
–
Total
9.6
2.3
0.6
12.5
–
12.5
12.5
61
Note 7, Oil and gas properties
The agreements that govern the relationship with host countries are
referred to as licenses or Exploration and Production Sharing Agreements
(EPSA or PSA). Tethys Oil holds its interest directly through aforementioned
agreements in Oman. 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 ful-
filled its commitments on Blocks 3&4. In Block 49, 56 and 58 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 com-
mitments 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 license, but no commitments of which
Tethys Oil can be held liable for. The Parent company's oil and gas proper-
ties are part of the new venture category.
Country
Licence
Phase
Expiration date
Tethys Oil
Partners (operator in bold)
Oman
Oman
Oman
Oman
Blocks 3&4
Production
Block 491
Block 562
Block 583
Exploration
Exploration
Exploration
July 2040
June 20221
Dec 2023
July 2023
Lithuania
Gargzdai4
Production
No expiration date
30%
100%
65%
100%
25%
CCED, Mitsui, Tethys Oil
Tethys Oil
Tethys Oil, Medco Arabia Ltd, Intaj LLC, and Biyaq Oil Field Services
Tethys Oil
Odin, GeoNafta, Tethys Oil
1 The one year extended exploration period for the exploration and production sharing
agreement (EPSA) for Block 49 was, in 2021, extended by 6 month period to June
2022. At expiration of the initial period Tethys Oil has the right to enter into a second
three year exploration period. In case of a commercial oil or gas discovery, the EPSA
will be trans- formed in to a 15 year production licence with the option of a further five
year extension. 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 initial exploration period for the EPSA for Block 56 expired in December 2020,
whereby the partners elected to enter into the second exploration period, which expires
in December 2023. In case of a commercial oil or gas discovery, the EPSA will be
trans- formed in to a 20 year production licence with the option of a further five year
extension. In case of a commercial discovery Oman Government Company, has a right
to acquire up to a 25% interest in Block 56 against refunding of past expenditure. The
work com- mitments during the second period include geological studies, seismic acqui-
sition and processing and exploratory drilling.
3 Tethys Oil entered into the initial three year exploration period of the EPSA for Block 58
in July 2020. At expiration of the initial period in July 2023, Tethys Oil has the right to
enter into a second three year exploration period. In case of a commercial oil or gas dis-
covery, the EPSA will be transformed in to a 15 year production licence with the option
of a further five year extension. In case of a commercial discovery Oman Government
Company, has a right to acquire up to a 30% interest in Block 58 against refunding of
past expenditure. The initial work commitments during the first period include geological
studies, seismic acquisition and processing and exploratory drilling.
4 The interest in the Lithuanian Gargzdai licence is held indirectly through a 50 percent
shareholding in a Danish private company, which in turn holds 50 percent of the shares
in the Lithuanian company which holds 100 percent of the licence interest. The Danish
company Odin Energi is not consolidated in Tethys Oils financial statements due to the
ownership structure, which is why there is no oil and gas property related to the licence.
The ownership of Odin Energi is presented in the balance sheet under Investment in
associates
MUSD
Producing cost pools
Non-producing cost pools
Total oil and gas properties
MUSD
Licence
Phase
Blocks 3&4
Production
Block 49
Exploration
Block 56
Exploration
Block 58
Exploration
New ventures
Total
MUSD
Licence
Phase
Blocks 3&4
Production
Block 49
Exploration
Block 56
Exploration
Block 58
Exploration
New ventures
Total
31 December 2021
31 December 2020
180.9
24.0
204.9
191.9
23.4
215.3
Tethys Oil’s
31 December
share
30%
100%
65%
100%
2021
180.9
0.4
16.7
6.6
0.3
204.9
Investments
DD&A
Site restoration Exploration costs
1 January 2021
30.4
-7.9
7.9
4.8
0.0
35.2
-41.1
–
–
–
–
-0.4
-0.2
–
–
–
–
-4.1
–
–
–
191.9
12.6
8.8
1.8
0.3
-41.1
-0.5
-4.1
215.3
Tethys Oil’s
31 December
share
30%
100%
20%
100%
2020
191.9
12.6
8.8
1.8
0.3
215.3
Investments
DD&A
Site restoration Exploration costs
1 January 2020
38.8
4.6
0.2
1.8
–
45.4
-44.0
–
–
–
–
-44.0
2.3
–
–
–
0.0
2.3
–
–
–
–
-0.0
0.0
194.8
8.0
8.6
–
0.3
211.7
62
MUSD
Producing cost pools
Cost 1 Jan 2021
Investments
Change in estimates
Cost 31 Dec 2021
Accumulated depreciation and depletion
1 Jan 2021
Depreciation and depletion charge for the year
Accumulated depreciation and depletion
31 Dec 2021
Net book value 31 Dec 2021
Oman Blocks 3&4
Total
Producing cost pools
Oman Blocks 3&4
MUSD
507.7
30.4
-0.4
537.7
-315.7
-41.1
-356.8
180.9
507.7
Cost 1 Jan 2020
30.4
Investments
-0.4
Change in estimates
537.7
Cost 31 Dec 2020
-315.7
Accumulated depreciation and depletion
1 jan 2020
-41.1
Depreciation and depletion charge for the year
-356.8
Accumulated depreciation and depletion
31 Dec 2020
180.9
Net book value 31 Dec 2020
466.6
38.8
2.3
507.7
-271.7
-44.0
-315.7
191.9
Total
466.6
38.8
2.3
507.7
-271.7
-44.0
-315.7
191.9
MUSD
Investments Blocks 3&4
Categories
Drilling
G&G
Facilities
Total
MUSD
Oil & gas properties Blocks 3&4
Categories
Drilling
G&G
Facilities
Total
2021
17.6
4.1
8.7
30.4
2021
93.8
27.5
59.5
180.9
2020
19.4
9.2
10.2
38.8
2020
98.9
29.4
63.6
191.9
Impairment testing
Tethys Oil assesses the need for an impairment test of its producing oil
and gas properties through the performing of an impairment trigger test. In
the impairment trigger test the Company uses its best efforts to estimate
future production, operational costs and investments needs. In order to
calculate estimated future cash flows various oil price scenarios have been
used, including ERCE’s year-end price forecast and the oil price forward
curve.
An impairment trigger test was conducted as per 31 December 2021, it was
concluded that no full impairment test was necessary.
Exploration costs related to the write-down of the Thameen-1 well on Block
49 of MUSD 4.1 (MUSD 0.0) were recorded in 2021.
Note 8, Operating expenses
Note 10, Administrative expenses
Group MUSD
Parent MSEK
Group MUSD
Parent MSEK
2021
2020
2021
2020
-4.0
-0.4
-0.7
-0.2
-0.1
-2.1
-7.5
-5.1
-0.4
-0.1
-0.1
-0.1
-1.6
-7.4
2021
-19.4
-2.4
-2.9
-1.3
-0.5
-13.7
-40.2
2020
-22.1
-2.5
-0.6
-0.7
-1.1
-21.2
-48.2
Production costs
Well Workovers
Total
2021
-40.9
-2.9
-43.8
2020
-40.3
-3.1
-43.4
–
–
–
–
–
–
Personnel costs
Rent
Other office costs
Listing costs
Costs of external relations
Other costs
Total
Note 9, Remuneration to Company auditor
PwC:
Audit fee
Audit-related fees
Other
Audit fees to other audit company
Total
Group MUSD
Parent MSEK
2021
2020
2021
2020
-0.2
0.0
0.0
0.0
-0.2
-0.1
0.0
-0.1
–
-0.2
-1.7
-0.1
-0.4
–
-2.2
-1.2
-0.1
-0.6
–
-1.9
Of the Group total during 2021, MUSD 0.2 (MUSD 0.2) has been in relation
to PwC Sweden.
63
Note 11, Employees
Average number of full time
2021
2020
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
United Kingdom
Total subsidiary companies foreign
Total group
7
7
0
18
1
–
19
26
4
4
0
12
–
–
12
16
6
6
0
15
1
1
17
23
3
3
0
10
–
1
11
14
MUSD
2021
2020
Salaries, other remuneration
and social costs
Parent company
Sweden
Total parent company
Subsidiary companies in Sweden
Subsidiary companies foreign
Oman
United Arab Emirates
United Kingdom
Total subsidiary companies foreign
Total group
Salaries,
other
remune-
ration
Salaries,
other
Social
remune-
costs
ration
Social
costs
-1.6
-1.6
–
-2.7
-0.1
–
-2.8
-4.4
-0.7
-0.7
–
–
–
–
–
-0.7
-1.8
-1.8
–
-2.5
-0.1
-0.6
-3.2
-5.0
-0.6
-0.6
–
0
0
-0.1
-0.1
-0.7
MUSD
2021
2020
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
United Kingdom
Total subsidiary companies foreign
-0.8
-0.8
–
–
–
–
–
Total group
-0.8
-0.8
-0.8
–
-2.7
-0.1
–
-2.8
-3.6
-0.7
-0.7
–
–
–
–
–
-0.7
-1.1
-1.1
–
-2.5
-0.1
-0.6
-3.2
-4.3
During 2021 one woman has been a member of the Board of Directors,
compared to one in 2020. No women have been members of the executive
management. At the AGM of shareholders on 19 May 2021, Klas Brand,
Robert Anderson, Alexandra Herger, Magnus Nordin and Per Seime were
re-elected members of the board. No deputy directors were appointed. At
the same meeting, Per Seime was appointed to new 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.
Salaries and other
remuneration to
Pension
Share based
executive management
Basic
arrange-
Variable
during 2021, MSEK
salary
ments
Salary
long term
incentive1
Other
benefits
Total
2021
Managing director
3.559
0.496
0.942
1.462
0.026
6.485
Other executive
management
4.264
0.492
1.077
1.743
0.031
7.607
Total
7.823
0.989
2.019
3.205
0.056 14.092
Salaries and other
remuneration to
Pension
Share based
executive management
Basic
arrange-
Variable
long term
Other
during 2020, MSEK
salary
ments
Salary
incentive
benefits
Total
2020
Managing director
3.494
0.436
2.057
1.045
0.029
7.061
Other executive
management
8.985
0.632
1.833
1.245
0.016 12.711
Total
12.479
1.067
3.890
2.291
0.045 19.772
Total remuneration to executive management decreased in 2021 compared
to 2020 and are related to final expense recognition of former executive
management member within 2020. During 2021, the basic salary for the
managing director increased while remuneration to other members of
executive management decreased as there was no severance pay recog-
nised. Starting 2020, variable salary is recognised the same year as it is
earned, previously it was recognised the following year. Because of this
change, variable salary recognised in 2020 consists of both variable salary
for the years 2019 and 2020. For the Managing Director the variable salary
for 2019 was MSEK 1.114 and for 2020 MSEK 0.942. For Other execu-
tive management variable salary for 2019 was MSEK 0.706 and for 2020
MSEK 1.127. For executive management pension costs follow a defined
contribution plan.
Remuneration to board members AGM 2021 to AGM 2022
Per Seime
Robert Anderson
Alexandra Herger
Magnus Nordin
Klas Brand
Total
Remuneration to board members AGM 2020 to AGM 2021
Geoffrey Turbott
Robert Anderson
Alexandra Herger
Magnus Nordin
Per Seime
Klas Brand
Total
MSEK
0.800
0.395
0.400
–
0.420
2.015
MSEK
0.735
0.395
0.400
–
0.430
0.420
2.380
Guidelines for remuneration to senior executives
The guidelines for remuneration to senior executives were approved by the
Annual General Meeting 2021.
Application of guidelines
These guidelines apply to remuneration to senior executives and to mem-
bers of the Board of Directors if remuneration is paid for work performed
outside the scope of the ordinary board work (e.g. pursuant to an employ-
ment or consultancy agreement). For the purposes of these guidelines, sen-
ior executives include the Managing Director, the Deputy Managing Director
(if applicable) and certain other executives who, from time to time, are
members of the Group Executive Management.
These guidelines do not apply to any remuneration resolved upon or
approved by the General Meeting and are only applicable to remuneration
agreed, and amendments to remuneration already agreed, after the adop-
tion of these guidelines by the Annual General Meeting 2021.
1 The Managing director received 60,000 warrants (60,000) and Other executive manage-
ment received 100,000 (100,000) warrants in the 2021 incentive programme, totalling
160,000 (160,000) warrants.
These guidelines constitute a framework within which remuneration to sen-
ior executives may be decided on by the Board of Directors.
64
General remuneration principles
In short, the Group’s business strategy is to create shareholder value work-
ing across the whole upstream oil and gas industry lifecycle of exploration,
appraisal, development and production. A central objective in the Group’s
business model is to explore for and produce oil and gas in an economi-
cally, socially, and environmentally responsible way.
however, provided that mandatory provisions of applicable collective bar-
gaining agreements do not require otherwise.
Pension benefits may not amount to more than 30 percent of the basic
salary, and is therefore expected to amount to no more than 25 percent of
total remuneration.
The Company’s remuneration principles are to ensure responsible and sus-
tainable remuneration decisions that support the Company’s strategy, long-
term interests and sustainable business practices and further enhance the
Group’s market position as well as increase the shareholder value. To this
end, salaries and other employment terms shall enable the Group to retain
and recruit skilled senior executives at a reasonable cost. Remuneration
shall be on market terms and based on the principles of performance,
competitiveness and fairness.
Principles for non-financial benefits
Non-financial benefits shall be based on market terms and shall facilitate
the duties of senior executives. Non-financial benefits may include, inter
alia, life insurance, medical insurance etc.
Premiums and other costs relating to non-financial benefits may not amount
to more than five percent of the basic salary, and is therefore expected to
amount to no more than five percent of the total remuneration.
When evaluating whether these guidelines and the limitations set out
herein are reasonable, the Board of Directors (including the Remuneration
Committee) has considered the total income of all employees of the Com-
pany, including the various components of their remuneration as well as the
increase and growth rate over time.
In order to comply with mandatory rules or established local practice, remu-
neration which is subject to rules outside Sweden may be adjusted to com-
ply with such local rules, taking into account, to the extent possible, the
overall purpose of these guidelines.
Elements of remuneration
The remuneration covered by these guidelines may consist of basic salary,
variable cash salary, pension, non-financial benefits and severance pay. In
addition hereto, the General Meeting may decide on, inter alia, long-term
incentive programs in which senior executives can participate.
Principles for 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 each
senior executive.
On the assumption of payment of full variable cash salary, pension benefits
and other benefits, the basic salary is expected to amount to no more than
45 percent of the total remuneration. If there is no variable cash salary,
pension benefits or other benefits, the basic salary will constitute the entire
remuneration.
Principles for variable cash salary
Variable cash salary, i.e. cash bonuses, shall be based on a set of prede-
termined and measurable performance criteria that reflect the key drivers
for pursuing the Company’s strategy, long-term interests and sustainable
business practices. Such performance criteria include (but are not limited
to) HSE, production, reserves replacement, business development and
financial performance as well as individual performance.
To which extent the criteria for awarding variable cash salary have been
satisfied shall be determined annually in connection with the publication of
the year-end report for the respective financial year based on an evaluation
of the senior executive’s achievement of the performance indicators as
described in the agreed individual performance targets.
Payment of variable cash salary shall be conditional upon the senior execu-
tive remaining employed for the duration of the qualification period. The
Board of Directors is entitled to adjust the incentive programme during the
term of the programme in the case of, for example, extraordinary increases
or decreases in the Group’s earnings.
Variable cash remuneration shall qualify for pension benefits only to the
extent it is required pursuant to mandatory provisions of applicable collec-
tive bargaining agreements.
The annual variable cash salary may not amount to more than 12 months’
basic salary, and is therefore expected to amount to no more than 50 per-
cent of the total remuneration.
Remuneration during notice period and severance pay
The notice period for termination of the Managing Director shall not exceed
twelve months and the notice period for termination of other senior execu-
tives shall not exceed nine months.
A mutual termination period of twelve months applies between the Com-
pany and the Managing Director and of up to nine months between the
Company and other senior executives.
Severance pay to the Managing Director and other senior executives shall
not exceed twelve months’ basic salary, provided that the employment is
terminated by the Company. In the event the senior executive terminates
his or her employment, no severance shall be payable.
Principles for certain remuneration to members of the Board of Directors
To the extent members of the Board of Directors perform work for the Com-
pany outside the scope of the ordinary board work, consultancy fees on
market terms may be paid in addition to any board fees resolved upon by
the General Meeting. The Nomination Committee is tasked with proposing
a frame, if any, for such remuneration, to be approved by the Annual General
Meeting.
Long-term incentive programmes
Any remuneration resolved upon by the General Meeting is not covered by
these guidelines. Accordingly, these guidelines do not apply to the Compa-
ny’s long-term incentive programmes resolved upon by the General Meeting.
The Company’s existing long-term incentive programmes are directed to
certain key employees of the Group and designed to create conditions for
retaining and recruiting competent and committed personnel to the Group.
More information on the Company’s existing and proposed incentive pro-
grammes from time to time is available on the Company’s website, www.
tethysoil.com.
The role of the Remuneration Committee
The Board of Directors has established a Remuneration Committee to deal
with matters of executive compensation and wider Group remuneration.
Specifically, it is tasked to:
• Recommend and review remuneration guidelines for the Managing Direc-
tor, the executive management and other employees in the Group to the
Board of Directors;
• Recommend Company Performance Targets for each year to the Board of
Directors;
• Recommend Managing Director Performance Targets for each year to
the Board of Directors, and inform the Board of Directors of the Perfor-
mance Targets agreed between the Managing Director and the executive
management;
• Recommend remuneration (salary and benefits) for the Managing Direc-
tor to the Board of Directors and inform the Board of Directors of the
remuneration (salaries and benefits) for the executive management;
• Recommend allocation of bonus and warrants to the Managing Director
to the Board of Directors and inform the Board of Directors of allocation
of bonus and warrants to the executive management; and
• Recommend incentive programme guidance relating to employees to the
Board of Directors.
Principles for pension benefits
Pension benefits shall comprise a defined contribution scheme with premi-
ums calculated on the full basic salary and be set on an individual basis,
Preparation and review of the compliance of these guidelines
These guidelines have been prepared by the Remuneration Committee
of the Board of Directors and the Board of Directors. The Remuneration
65
Committee is responsible for preparation of updated proposals in respect
of guidelines for remuneration to the senior executives. A proposal for
amended guidelines is to be prepared by the Board of Directors when the
need for material amendments arises, but at least every four years.
The members of the Remuneration Committee are independent in relation
to the Company and the senior executives. The Managing Director and the
other senior executives do not participate in the Board of Directors’ han-
dling of, or resolutions regarding, remuneration-related matters if they are
affected by such matters.
The guidelines may also be amended by way of a resolution by other Gen-
eral Meetings than Annual General Meetings.
Within the scope and on the basis of these guidelines, the Board of Direc-
tors shall, based on the Remuneration Committee’s preparation and recom-
mendations, annually decide on the specific revised remuneration terms
for each senior executive and make such other decisions in respect of
remuneration for senior executives that may be required.
Principles for derogations from these guidelines
The Board of Directors may temporarily resolve to derogate from these
guidelines, in whole or in part, if in a specific case there is special cause
for such derogation and a derogation is necessary to serve the Company’s
long-term interests, including its sustainability, or to ensure the Company’s
financial viability.
Note 12, Financial income and similar items
Note 15, Trade and other receivables
Interest income
Currency exchange gains
Dividend from group companies
Total
Group MUSD
Parent MSEK
2021
2020
–
15.2
–
15.2
0.1
7.7
–
7.8
2021
24.9
130.3
350.0
505.2
2020
18.8
70.7
57.3
VAT
Trade receivables oil sales
Joint operation receivable
146.8
Other
Total
Group MUSD
Parent MSEK
2021
2020
2021
0.3
7.2
1.7
–
9.2
0.2
8.9
–
–
9.1
2.2
–
0.0
0.1
2.3
2020
2.0
–
–
0.1
2.1
Note 13, Financial expenses and similar items
Interest expenses
Currency exchange loss
Other financial expenses
Total
Group MUSD
Parent MSEK
2021
2020
2021
2020
–
-13.9
-0.7
-14.6
-0.0
-9.7
-0.6
–
-118.7
-0.0
-10.3
-118.7
–
-88.6
-0.1
-88.7
Note 14, Tax
The Group's income tax charge amounts to MUSD – (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 262.2 (MSEK 273.4).
There are no time limits for the utilization of tax losses.
The tax losses on the parent company's result before tax differs from the
theoretical amount that would arise using the Swedish tax rate as follows:
Parent MSEK
Result before tax
Tax at applicable tax rate 20.6% (2020: 21.4%)
Non-deductible expenses
Non-taxable income
Utilized (+) / Built up (–) tax loss carry forwards previously not
recorded as deferred tax assets
Tax expense
2021
360.9
-74.3
-0.1
72.1
2.3
0.0
2020
22.7
-4.9
-0.1
12.3
-7.3
0.0
Tethys Oil's oil and gas operations in Oman are governed by separate Explo-
ration and Production Sharing Agreements (“EPSA”) for each contract area.
Under the terms of each EPSA, Tethys Oil is subject to Omani income taxes,
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. Currently Blocks 3&4 is the only Omani EPSA in
a tax paying position.
As the final amount of income tax is determined after the end of the cal-
endar year, Tethys Oil’s preliminary assessment of the amount of Omani
income tax paid on behalf of Tethys Oil in 2021 is MUSD 45.0 (MUSD
30.8).
Note 16, Shareholders’ equity
As at 31 December 2021, the number of issued shares in Tethys Oil
amounted to 33,056,608, with a quota value of SEK 0.18 (SEK 0.18). All
shares represent one vote each. Tethys Oil has a warrant-based incentive
programme for Employees. When the share price is above the exercise
price of the warrants a potential dilution effect arises. During the most
part of 2021 the share price was below the exercise price of the three
tranches of the warrant programme, thus the weighted average number of
shares outstanding after dilution was 32,660,948. For for further informa-
tion please see note 20.
As at 31 December 2021, Tethys Oil held 474,673 of its own shares which
were purchased since the commencement of the share repurchase pro-
gramme initiated in the fourth quarter 2020 and third quarter 2021. The
main purpose of the share repurchase programme is to give the company
flexibility regarding its equity and thereby optimize the capital structure of
the company. Repurchased shares may also be used as payment for, or
financing of, acquisitions of companies or businesses or in connection with
handling of incentive programmes. A total 159,121 shares were purchased
by the company in 2021. The repurchased shares are still included in the
total number of shares, but are not included in the average number of
shares outstanding. The weighted average number of shares outstanding
during 2021 before dilution is 33,619,054 and after dilution 33,660,948.
Earnings per share
Earnings per share before dilution is calculated by dividing profit for the year
attributable to ordinary shareholders of the parent company by the weighted
average number of ordinary shares outstanding during the year.
Earnings per share after dilution is calculated by dividing the profit for
the year attributable to ordinary shareholders of the parent company by
weighted average number of ordinary shares outstanding during the year
while also including the dilution effect of warrants where the subscription
price is below the share price.
Appropriation of profit
The Board of Directors proposes a dividend of SEK 2.00 per share (AGM
2021: SEK 2.00). Proposed record date is 21 May 2022. The Board of
Directors proposes an extraordinary distribution of SEK 5.00 per share by
way of a mandatory share redemption programme following the AGM 2022
(AGM 2021: SEK 2.00). Further details to follow in the proposal to the
2022 AGM.
66
Note 17, Leasing
MUSD
31 december 2020
1 January 2021
Jan–Dec 2021
31 december 2021
Right
of use
assets
Lease
liabilities,
interest
bearing
Lease
Right
liabilities,
Adjustments
Payment
of use
assets
interest
of Right of
of leasing
Depre-
Interest
bearing
use assets
debt
ciation
costs
Fixed assets (incl. in Other fixed assets)
0.3
–
0.3
Short term leasing debt (incl. Accounts
payable and other current liabilities)
Long term leasing debt (incl. in Other
non-current liabilities)
Interest costs
Total
–
–
–
0.3
0.0
-0.3
-0.0
-0.3
–
–
–
0.3
–
-0.3
0.0
-0.0
-0.3
1.2
–
-0.3
–
–
–
1.2
-0.1
-0.8
–
-0.9
–
–
–
-0.3
–
–
–
-0.0
0.0
Note 18, Accounts payable and other current liabilities
Lease
Right
liabilities,
interest
bearing
of use
assets
1.2
–
–
–
1.2
-0.4
-0.8
-0.0
-1.2
Accounts payable
Operator balance
Overlift position
Short term leasing
Other current liabilities
Total
Note 19, Shares in subsidiaries
Company
Tethys Oil Invest AB
Tethys Oil Exploration AB
Tethys Oil France AB
Reg. Number
556658-1442
556658-1483
556658-1491
Sweden
Sweden
Sweden
Tethys Oil Middle East North Africa B.V.
27306813
Netherlands
95212
101981
115710
118203
119982
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Gibraltar
Tethys Oil Oman Ltd
Tethys Oil Block 3&4 Ltd
Tethys Oil Montasar Ltd
Tethys Oil Oman Onshore Ltd
Tethys Oil Oman Qatbeet Ltd
Shares in subsidiaries, MSEK
1 January
Acquisitions/Relinquishments
31 December
Group MUSD
Parent MSEK
31 December 2021
31 December 2020
31 December 2021
31 December 2020
0.3
11.6
1.0
0.3
0.9
14.1
0.6
5.3
0.1
–
3.8
9.8
2.2
–
–
–
5.7
7.9
1.9
–
–
–
7.9
9.8
Reg. office
(thousands)
Percentage
per share
Number of shares
Nominal value
1.0
1.0
1.0
18.0
0.1
1.0
1.0
1.0
1.0
100%
100%
100%
100%
100%
100%
100%
100%
100%
Parent
2021
1.0
–
1.0
SEK 100
SEK 100
SEK 100
EUR 1
GBP 1
USD 1
USD 1
USD 1
USD 1
Parent
2020
1.0
0.0
1.0
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 2021 and 2020 following a decision by the respec-
tive AGM. The number of issued warrants during 2021 was 200,000
(350,000) and the number of warrants allocated during 2021 was 160,000
(349,000). Issued but not allocated warrants are held by the Company.
Warrants expired during the year were 350,000. During 2021 the 2018
incentive programme expired without exercise.
67
Total
Warrant incentive
programme
Warrant incentive
Subscription
Shares per
Number of warrants
programme
Exercise period
price, SEK
warrant
1 Jan 2021
Issued 2021
Exercised 2021
Expired 2021
31 Dec 2021
2018 incentive programme
1 Jun – 2 Oct 2021
2019 incentive programme
1 Jun – 7 Oct 2022
2020 incentive programme
13 Jun – 6 Oct 2023
2021 incentive programme
12 Jun – 4 Oct 2024
72.00
69.70
51.70
76.00
1.24
1.13
1.04
1.00
350,000
350,000
350,000
–
1,050,000
–
–
–
200,000
200,000
–
–
–
–
–
350,000
–
–
–
350,000
–
350,000
350,000
200,000
900,000
Subscription
Shares per
Number of warrants
Exercise period
price, SEK
warrant
1 Jan 2020
Issued 2020
Exercised 2020
Expired 2020
31 Dec 2020
2017 incentive programme
30 May – 2 Oct 2020
2018 incentive programme
1 Jun – 2 Oct 2021
2019 incentive programme
1 Jun – 7 Oct 2022
2020 incentive programme
13 Jun – 6 Oct 2023
69.30
75.40
72.80
54.00
1.24
1.18
1.08
1.00
Total
350,000
350,000
350,000
–
1,050,000
–
–
–
350,000
350,000
–
–
–
–
–
350,000
–
–
–
–
350,000
350,000
350,000
350,000
1,050,000
Group MUSD
Parent MSEK
Warrant incentive programme
2021
2020
2021
2020
Incentive programme cost
Total
0.5
0.5
0.5
0.5
4.0
4.0
3.3
3.3
As the share price was below the subscription price for all the active
tranches of the incentive programme for most of 2021, there was limited
dilution effects of the warrants included in the weighted average number
of shares after dilution, which amounted to 32,660,498 during 2021. 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 incentive
programme is included as part of administrative expenses and includes tax
and social charges where applicable.
During the year, the Parent Company entered into the following significant
transactions with related parties:
Note 21, Pledged assets
As at 31 December 2021, pledged assets amounted to MSEK 0.5 related
to a pledge in relation to office rental in parent company (MSEK 0.5).
Note 22, Contingent liabilities
The farmin agreement with Medco Arabia Ltd for a 45 percent interest in
the EPSA for Block 56 was concluded in the first quarter 2021 following the
receipt of government approval. Upon completion Tethys Oil paid the MUSD
5.0 initial consideration which has been recorded as oil and gas properties.
As a part of the consideration Tethys Oil will carry Medco’s 5 percent inter-
est up to a value of MUSD 2.0. In addition, the agreement includes further,
contingent, consideration in the case of a declaration of commerciality.
Transactions with group companies, MSEK
Interest income
Other income
Dividend income
Total
Balance with related parties, MSEK
Receivable from group companies
Total
Note 23, Related party transactions
In the Tethys Oil Group, Tethys Oil AB (publ) with organizational number
556615-8266 is the parent company. Material subsidiaries include Tethys
Oil Block 3&4 Limited, Tethys Oil Montasar Limited, Tethys Oil Oman Qat-
beet Limited and Tethys Oil Oman Onshore Limited.
Balance with related parties, MSEK
Payable to group companies
Total
2021
24.9
14.6
350.0
389.5
2021
509.1
509.1
2021
119.2
119.2
2020
18.8
12.8
57.3
88.9
2020
338.0
338.0
2020
128.3
128.3
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 24, Subsequent events
As of the publication of this annual report, the ongoing conflict in East-
ern Europe has directly and indirectly had a significant effect on the world
and the oil price. Tethys Oil will currently not forecast the long-term effects
on the oil price based on these difficult to assess events. Tethys Oil’s oil
production in Oman is not predicted to be impacted, nor is Tethys Oil’s
other operations as the Group has no activity in, or connection to, the geo-
graphical areas concerned. Tethys Oil will follow the development and act
accordingly but presently, the production guidance published on 7 February
remains Tethys Oil’s view on the operations for the full-year 2022.
68
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, 8 April 2022
Per Seime
Chairman of the board
Rob Anderson
Director
Alexandra Herger
Director
Klas Brand
Director
Magnus Nordin
Managing Director
Auditor’s endorsement
Our audit report was submitted on 8 April 2022.
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Sophie Damborg
Authorized Public Accountant
69
Auditor’s report
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 2021. The annual accounts
and consolidated accounts of the company are included on pages
39–69 in this document. In our opinion, the annual accounts
have been prepared in accordance with the Annual Accounts Act
and present fairly, in all material respects, the financial position of
parent company and the group as of 31 December 2021 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
2021 and their financial performance and cash flow for the year
then ended in accordance with International Financial Reporting
Standards (IFRS), as adopted by the EU, and the Annual Accounts
Act. The statutory administration report is consistent with the
other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of share-
holders adopts the income statement and balance sheet for the par-
ent company and the group.
Our opinions in this report on the annual accounts and consol-
idated 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 AB (publ) is a Swedish Oil and Gas company with its
primary operations located in Oman. The operations in Oman
represented 100 percent of the group’s revenue for the financial
year 2021 and 72 percent of the group’s assets as per 31 Decem-
ber 2021. We designed our audit by determining materiality and
assessing the risks of material misstatement in the consolidated
financial statements. In particular, we considered where the man-
agement and the Managing Director made subjective judgements;
for example, in respect of significant accounting estimates that
involved making assumptions and considering future events that
are inherently uncertain. As in all of our audits, we also addressed
the risk of management override of internal controls, including
among other matters consideration of whether there was evidence
of bias that represented a risk of material misstatement due to
fraud.
We tailored the scope of our audit in order to perform sufficient
work to enable us to provide an opinion on the consolidated 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 manage-
ment and the Audit Committee after the review of the Report for
the six months period ended 30 June, 2021 and after the year-end
audit of the financial year 2021.
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
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.
70
Key audit matter
Recoverability of the carrying value of oil and gas
properties
The carrying value of oil and gas properties amounted to
MUSD 204.9 as per 31 December 2021 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 MUSD 180.9 by 31 December 2021.
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 exer-
cise significant judgement where there is a risk that the valu-
ation of oil and gas properties and any potential impairment
charge or reversal of impairment may be incorrect.
Management’s test requires consideration of a number of
factors, including but not limited to, the Group’s intention to
proceed with a future work programme, the probability of suc-
cess 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 40–43 in the Directors’ report, page 56 in
the Accounting Policies and note 2 and 7 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
recoverable 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 and contingent
resources from reserve reports from ERC Equipoise Limited;
• 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 exter-
nal reserves auditor. 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;
• validation of that the updated reserves and resources esti-
mates were included appropriately in management’s con-
sideration of impairment and in accounting for depletion
charges.
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 1–38.
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 Managing Director
are responsible for this other information. The information in the
“Remuneration report 2021”, which will be published on Tethys
Oils webpage at the same time as this report is also considered
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 con-
solidated accounts, our responsibility is to read the information
identified above and consider whether the information is mate-
rially inconsistent with the annual accounts and consolidated
accounts. In this procedure we also take into account our knowl-
edge otherwise obtained in the audit and assess whether the infor-
mation otherwise appears to be materially misstated.
If we, based on the work performed concerning this informa-
tion, conclude that there is a material misstatement of this other
information, 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 respon-
sible for the assessment of the company’s and the group’s ability
to continue as a going concern. They disclose, as applicable, mat-
ters 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 liquidate the company, to cease operations, or has no
realistic alternative but to do so.
71
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
Revisorsinspektionen’s website: www.revisorsinspektionen.se/
revisornsansvar. 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 (publ) for
the year 2021 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 suf-
ficient 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
the parent company’s and the group’ equity, consolidation require-
ments, liquidity and position in general.
The Board of Directors is responsible for the company’s
organization and the administration of the company’s affairs. This
includes among other things continuous assessment of the com-
pany’s and the group’s financial situation and ensuring that the
company´s organization is designed so that the accounting, man-
agement 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
Directors’ guidelines and instructions and among other matters
take measures that are necessary to fulfill the company’s account-
ing in accordance with law and handle the management of assets
in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, and
thereby our opinion about discharge from liability, is to obtain
audit evidence to assess with a reasonable degree of assurance
whether any member of the Board of Directors or the Managing
Director in any material respect:
• has undertaken any action or been guilty of any omission which
can give rise to liability to the company, or
• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations
of the company’s profit or loss, and thereby our opinion about
this, is to assess with reasonable degree of assurance whether the
proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a
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.
The auditor’s examination of the
ESEF report
Opinion
In addition to our audit of the annual accounts and consolidated
accounts, we have also examined that the Board of Directors and
the Managing Director have prepared the annual accounts and
consolidated accounts in a format that enables uniform electronic
reporting (the Esef report) pursuant to Chapter 16, Section 4(a) of
the Swedish Securities Market Act (2007:528) for ABC AB (publ)
for the financial year 2021.
Our examination and our opinion relate only to the statutory
requirements.
72
the Esef
In our opinion,
report #[dedc4db3084f5b
7cc9aa50f5a11fe6e17975eb51f6178d91ebc3216e6b2f5db1] has
been prepared in a format that, in all material respects, enables
uniform electronic reporting.
Basis for Opinions
We have performed the examination in accordance with FAR’s
recommendation RevR 18 Examination of the Esef report. Our
responsibility under this recommendation is described in more
detail in the Auditors’ responsibility section. We are independent
of Tethys Oil AB (publ) in accordance with professional ethics for
accountants in Sweden and have otherwise fulfilled our ethical
responsibilities in accordance with these requirements.
We believe that the evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Responsibilities of the Board of Director’s and the
Managing Director
The Board of Directors and the Managing Director are responsible
for ensuring that the Esef report has been prepared in accordance
with the Chapter 16, Section 4(a) of the Swedish Securities Market
Act (2007:528), and for such internal control that the Board of
Directors and the Managing Director determine is necessary to
prepare the Esef report without material misstatements, whether
due to fraud or error.
Auditor’s responsibility
Our responsibility is to form an opinion with reasonable assurance
whether the Esef report is in all material respects prepared in a
format that meets the requirements of Chapter 16, Section 4(a)
of the Swedish Securities Market Act (2007:528), based on the
procedures performed.
RevR 18 requires us to plan and execute procedures to achieve
reasonable assurance that the Esef report is prepared in a format
that meets these requirements.
Reasonable assurance is a high level of assurance, but it is not
a guarantee that an engagement carried out according to RevR 18
and generally accepted auditing standards in Sweden will always
detect a material misstatement when it exists. Misstatements can
arise from fraud or error and 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 ESEF report.
The audit firm applies ISQC 1 Quality Control for Firms that
Perform Audits and Reviews of Financial Statements, and other
Assurance and Related Services Engagements and accordingly
maintains a comprehensive system of quality control, including
documented policies and procedures regarding compliance with
professional ethical requirements, professional standards and legal
and regulatory requirements.
The reasonable assurance engagement involves obtaining evi-
dence, through various procedures, that the Esef report has been
prepared in a format that enables uniform electronic reporting of
the annual accounts. The procedures selected depend on the audi-
tor’s judgment, including the assessment of the risks of material
misstatement in the report, whether due to fraud or error. In carry-
ing out this risk assessment, and in order to design procedures that
are appropriate in the circumstances, the auditor considers those
elements of internal control that are relevant to the preparation
of the Esef report by the Board of Directors and the Managing
Director, but not for the purpose of expressing an opinion on the
effectiveness of those internal controls. The reasonable assurance
engagement also includes an evaluation of the appropriateness and
reasonableness of assumptions made by the Board of Directors and
the Managing Director.
The procedures mainly include a technical validation of the
Esef report, i.e. if the file containing the Esef report meets the
technical specification set out in the Commission’s Delegated Reg-
ulation (EU) 2019/815 and a reconciliation of the Esef report with
the audited annual accounts and consolidated accounts.
Furthermore, the procedures also include an assessment of
whether the Esef report has been marked with iXBRL which enables
a fair and complete machine-readable version of the consolidated
statement of financial performance, statement of financial position,
statement of changes in equity and the statement of cash flow.
PricewaterhouseCoopers AB, 405 32 Göteborg, was appointed
auditor of Tethys Oil AB (publ) by the general meeting of the
shareholders on the 19 May 2021 and has been the company’s
auditor since the 2001. The company has been listed at Nas-
daqOMX since the 2 May 2013.
Gothenburg, 8 April 2022
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Sophie Damborg
Authorized Public Accountant
73
Address
Corporate Head Office
Corporate Head Office
Tethys Oil AB (publ)
Tethys Oil AB (publ)
Hovslagargatan 5B
Hovslagargatan 5B
SE-111 48 Stockholm
SE-111 48 Stockholm
Sweden
Sweden
Telephone: +46 8 505 947 00
Telephone: +46 8 505 947 00
Fax: +46 8 505 947 99
Fax: +46 8 505 947 99
E-mail: info@tethysoil.com
E-mail: info@tethysoil.com
www.tethysoil.com
www.tethysoil.com
.
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