Tethys Oil
Annual Report
2022
Contents
The year in brief
Mission, Vision and Values
Letter to shareholders
Business model
Operations
Blocks 3&4
Block 49
Block 56
Block 58
Key financial data and definitions
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
Tethys Oil’s history
Address
4
6
7
8
11
15
19
20
22
24
26
29
34
36
37
38
49
53
57
72
73
77
78
The Sustainability Report is published as a separate
document, available on www.tethysoil.com.
Financial calendar
Report for first quarter 2023
(January – March 2023) on 9 May 2023
Report for second quarter 2023
(January – June 2023) on 8 August 2023
Report for third quarter 2023
(January – September 2023) on 7 November 2023
Annual General Meeting
The Annual General Meeting will be held on 10 May 2023,
15:00, at Grand Hôtel, Södra Blasieholmshamnen 8, in
Stockholm. To attend the AGM, please visit Tethys Oil’s
website, www.tethysoil.com, for more information.
Tethys Oil
Tethys Oil is an oil exploration and production
company with focus on onshore areas with known
oil discoveries. The Company’s core area is the
Sultanate of Oman, where it has been active since
2006 and currently holds interests in the Explora-
tion and Production Sharing Agreements (EPSA)
for Blocks 3&4, Block 49, Block 56 and Block 58.
The Blocks cover 54,934 km2, corresponding to 18
percent of Oman’s total area and making Tethys Oil
one of the largest acreage holders in Oman. Tethys
Oil has 2P reserves of 23.9 mmbo and 2C Contin-
gent Resources of 14.6 mmbo and had an average
oil production of 9,940 barrels of oil per day from
Blocks 3&4 during 2022. The Company’s shares are
listed on Nasdaq Stockholm (TETY) and are held
by more than 10,000 shareholders.
Front cover
The Al Jumd-2 well and oil tanks on the produc-
tion site for the extended well test of the Al Jumd
discovery.
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Musandam
Sohar
SULTANATE
OF OMAN
Muscat
Sur
Block 3
Block 3
Block 4
Dhqum
Block 49
Block 58
Block 56
Salalah
Area,
km²
29,130
15,439
5,808
4,557
Tethys Oil
interest
30%
100%1
65%
100%
Phase
Expiry date
Partners
(operator in bold)
Production phase
July 2040
CCED, Tethys Oil, Mitsui
Initial exploration phase
December 2023
Tethys Oil
Second exploration phase
December 2023
Tethys Oil, Medco, Biyaq, Intaj
Initial exploration phase
July 2024
Tethys Oil
Licences & agreements
Blocks 3&4, Oman
Block 49, Oman
Block 56, Oman
Block 58, Oman
1 Contingent government approval.
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The year in brief
Operational and financial summary
MUSD (unless specifically stated)
2022
2021
2020
2019
2018
Average daily production Blocks 3&4, before government take, bbl
9,940
11,136
11,336
12,832
11,767
Achieved oil price per barrel, USD
Revenue and other income
EBITDA
Cash and cash equivalents
Investments in oil and gas properties
Free cash flow
Dividend, SEK per share – proposed
Extraordinary distribution to shareholders, SEK per share (2022
proposed)
Market capitalisation at the end of the year, MSEK
2P Reserves in Oman (million barrels of oil)
2C Contingent Resources in Oman (million barrels of oil)
2022 in brief
• Tethys Oil’s financial result for the year 2022 was the
strongest in five years as high oil prices bolstered rev-
enues and profits. The strong operational cash flows
funded the highest investments in oil & gas prop-
erties in the Company’s history and the continued
significant returns to shareholders in the forms of
dividend, distribution and share buybacks.
• Production, stemming from Tethys Oil’s interest in
Blocks 3&4, declined in the year due to constraints
in processing facilities, including water handling
systems, and the underperformance of the Anan
field. To stabilise the decreasing production going
forward, a full remedial action programme has been
launched, including the addition of a fourth drilling
rig to increase the number of wells drilled.
• The year-end reserve replacement ratio reached 37
percent of production. The reserve development in
2022 was primarily a result of low levels of explo-
ration and appraisal drilling on Blocks 3&4 where
only two exploration wells were drilled, neither of
which were successful. In 2023 more exploration
and appraisal drilling is expected, bolstered by the
fourth drilling rig.
94.2
156.5
99.1
41.5
89.1
-2.3
2.00
3.00
1,955
23.9
14.6
62.8
112.7
61.4
68.6
35.2
29.7
2.00
5.00
2,059
26.2
15.6
47.7
101.1
50.4
55.4
45.4
6.7
2.00
2.00
1,626
26.9
13.9
64.2
150.8
92.2
75.6
65.2
31.4
2.00
3.00
3,063
26.1
13.5
70.5
157.3
105.7
73.1
55.8
50.4
2.00
6.00
2,325
25.4
12.5
• Three appraisal wells were drilled on the Al Jumd
discovery on Block 56 with positive results. To
further analyse the potential of the discovery, an
extended well test of up to six months with the pri-
mary purpose to establish the resource volume and
production capability is expected to start by the end
of March 2023. A further two wells were drilled in
the vicinity of the Al Jumd discovery to define the
potential of the area.
• In the central area of Block 56 a 2,000 km2 3D seis-
mic survey was completed in order to prepare for
the drilling of an exploration well in the area during
2023.
• On Block 49 the focus in 2022 was on preparations
for the re-entry and re-testing of the Thameen-1
well, planned to start in the second quarter 2023.
The coming test will include hydraulic fracture oper-
ations and, if successful, this would turn the incon-
clusive Thameen-1 well into a discovery.
4
Production per day, barrels
Total Net Reserves and Resource, million of barrels
12,000
9,000
6,000
3,000
0
2018
2019
2020
2021
2022
44
33
22
11
0
12.5
13.5
13.9
15.6
14.6
25.4
26.1
26.9
26.2
23.9
2018
2019
2020
2021
2022
n bopd (bbl)
n 2P (mmboe)
n 2C (mmboe)
Financials, MUSD
Investments oil & gas per block, MUSD
160
120
80
40
0
2018
2019
2020
2021
2022
88
66
44
22
0
2018
2019
2020
2021*
2022
n Revenue and other income
n EBITDA
n Blocks 3&4
n Block 49
n Block 56
n Block 58
* 2021 investments for Block 49 are presented
adjusted for effects of the farmout to EOG
Netback & Netback (Net of Capex), MUSD
Dividend and distribution per share, SEK
32
24
16
8
0
2018
2019
2020
2021
2022
n Netback
n Netback (Net of Capex)
8
6
4
2
0
4
2
6
2
3
2
2
2
5
2
3
2
2018
2019
2020
2021
2022
2023*
n Ordinary dividend
n Extraordinary distribution
* Proposed dividend and distribution
5
Mission, Vision and Values
Mission, Vision and Values
Vision
Tethys Oil’s vision is that growth con-
tinues through its exploration success.
It seeks to build, maintain and expand a
well-balanced and self-financed portfolio
of oil assets, offering a measured expo-
sure to onshore production, development,
appraisal and exploration potential. The
focus of 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.
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 life-
cycle of exploration, appraisal, develop-
ment, and production. A central belief in
the 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
in accordance with the Company’s Code
of Conduct. Tethys Oil seeks to be a sus-
tainable and profitable business long-term.
Sustainability 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 Group’s Scandinavian roots. It is
the responsibility of Tethys Oil’s manage-
ment to foster a corporate culture that pro-
motes the values and principles outlined
in the Group’s Code of Conduct. Tethys
Oil aims to act in all respects in a respon-
sible, fair, accountable and ethical manner
towards all aspects of the environment
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 wherever
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.
Tethys Oil’s
commitments
Environment
Tethys Oil uses natural
resources responsibly
To conduct operational activities
in ways that create minimal
disturbance to the environment
and people
Social and safety
Tethys Oil invests in
local communities
To contribute positively to quality
of life in communities where it
operates by reducing impacts and
creating benefits
Governance
Tethys Oil lives by high
ethical standards
To have management procedures in
place that promote honesty, integrity,
transparency and accountability
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Safety
Governance
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6
Letter to shareholders
Letter to shareholders
Dear friends and investors,
2022 was a rather eventful year. On the
global stage energy supply and security
came to the forefront of agendas as the
global order’s acceptance of national sover-
eignty was challenged. A challenge that is
still unsettled at the time of writing.
profitability from our 30 percent share in
Blocks 3&4 increased sharply compared
to 2021. Cash distribution to our share-
holders was the second highest since we
started paying out cash in 2014 at SEK
7 per share, exceeding a total amount of
MUSD 20.
Global supply chains were disrupted and
sometimes rearranged and in the aftermath
of the Covid pandemic the supply and
demand balance for the world economy
was, at least temporarily, unbalanced.
Oil prices responded to these challenges
and uncertainties by entering a period of
increasing price levels and increasing vola-
tility. The underlying demand and sup-
ply uncertainties currently driving the oil
price remain as we have entered 2023, so
we would expect volatility to remain high
but firmly believe that price risk is on the
upside. Capacity constraints, energy secu-
rity considerations, OPEC policy, capital
discipline among US oil producers cou-
pled with pent up demand after the ‘shut
in’ years is a powerful mix underpinning
the price of oil in the short to medium
term.
The higher oil price levels are reflected
in Tethys Oil’s financial results for 2022
where EBITDA, operating cash flow and
We also witnessed record investments in
potential future growth with more than
MUSD 25 invested in seismic surveys and
appraisal drilling in our operated Blocks
56 and 58 onshore Oman. If these invest-
ments are successful, we will, over the next
couple of years, be able to add further
production streams to the almost 10,000
BOPD we received from Blocks 3&4 in
2022.
While we wait for the exploration results
it is worth noting that our Board of Direc-
tors has proposed a cash distribution of
SEK 5 per share (MUSD 17 in total) to be
voted on by our shareholder at the AGM
on 10 May.
The achievements of 2022 would not have
been possible without the support of all of
Tethys Oil’s dedicated co-workers as well
as a host of other stakeholder in many dif-
ferent ways. CSR activities have primarily
been centered around Blocks 3&4 where
the operator CCED has an active program
of cooperation with local stakeholders. In
our operated Blocks 49, 56 and 58 we are
very grateful for all assistance and posi-
tive engagement from among others The
Ministry of Energy and Minerals, the Gov-
ernates of Dhofar and Al Wustan and the
Wilyats of Moqshin, Thumraite, Shaleem
and Jazir Al Halaniyat. We are hopeful that
with exploration success that cooperation
will deepen, and Tethys Oil will be able to
engage further in local projects. For details
on CSR and other sustainability related
information such as biodiversity and emis-
sions, I refer our readers to Tethys Oil’s
comprehensive Sustainability Report for
2022.
As we have left 2022 behind, we are excited
that during 2023 we may be able to see the
fruits of our exploration investments.
So stay with us. For in 2023 Tethys is
offering the most exciting and potentially
rewarding exploration program for the last
ten years, coupled with continued cash dis-
tribution to our loyal shareholders!
Stockholm, April 2023
Magnus Nordin
Managing Director
7
Business model
Business model and value chain
Upstream
Tethys Oil
Midstream
Downstream
Exploration, seismic studies,
drilling, development,
production and sales.
Storage, transportation
and distribution.
Tethys Oil uses existing
infrastructure in Oman.
Refining of crude oil and
processing and purifying
of gas.
Tethys Oil
is active throughout the
upstream oil & gas industry value chain,
from exploration to production and sales,
with the Sultanate of Oman as the core area
of operations. Value is created by focusing
on the high potential, yet underexplored
areas on the flanks of Oman’s central salt
basins. Tethys Oil aims to explore, appraise
and develop the blocks to bring them to
commercial production.
The main success story so far is Blocks 3&4
with some 40 mmbo produced for Tethys
Oil and with continued significant explora-
tion potential remaining. Tethys Oil’s oper-
ated exploration and appraisal portfolio
contains three promising blocks with high
potential. In 2023, Tethys Oil’s explora-
tion drilling will target a potential of more
than 200 mmbo of unrisked prospective
resources and the Company will conduct
an extended well test on the Al Jumd dis-
covery on Block 56, taking the discovery
one step closer to commercial production.
Exploration
Production
Appraisal
Development
88
Tethys Oil’s core area 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 from
where it has been part of the world’s oldest
trade routes. Oman’s neighbours include
the United Arab Emirates, Saudi Arabia
and Yemen.
Oman is a beautiful country, combining
white sand beaches, rolling desert dunes
and expansive mountain ranges. Oman
is also the oldest independent state in the
Arab world with a long and rich history
over thousands of years. Modern archaeo-
logical discoveries suggest that humans set-
tled in Oman during the Stone Age, i.e.
more than 10,000 years ago.
Oman as 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 some 5.2 billion bar-
rels of proved oil reserves1 and ranks as the
seventh largest proved oil reserve holder in
the Middle East and the 21st largest in the
world.2 Oman’s crude oil and condensate
production amounted to 971,000 barrels
per day in 2021.3
The largest producer in Oman is Petro-
(“PDO”),
leum Development Oman
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). Other majors active in Oman
include Occidental Petroleum, Shell, BP,
ENI and Total.
The total exports of oil and condensates
during 2022 amounted to 289 million
barrels. The People’s Republic of China
topped the list of the countries importing
crude oil from Oman with 81.6 percent,
followed by India with 9.8 percent. South
Korea and Japan both increased their
imports from Oman in 2022 and com-
bined they account for 7.6 percent of the
export.
1 Ministry of Minerals and Energy, 2022
2 BP Statistical Review of World Energy, 2021
3 BP Statistical Review of World Energy, 2022
99
Tethys Oil in Oman
Tethys Oil began its journey in Oman in
2006 with the acquisition of an interest
share in Block 15. In 2007 Tethys deep-
ened its commitment to Oman with the
acquisition of 50 percent of the EPSA for
Blocks 3&4. Since that time, Blocks 3&4
has been successfully explored, appraised
and developed and has produced more
than 130 million barrels since 2010. Start-
ing in 2017, Tethys Oil has built up a port-
folio of operated exploration blocks focus-
ing on the underexplored flanks of the pro-
lific central Omani salt basins. Block 49,
Block 56 and Block 58 all offer a variety
of exploration opportunities across a mul-
titude of geological settings. With a port-
folio of high potential blocks and a skilled
exploration team in Muscat, Tethys Oil is
positioned for a continued exciting jour-
ney in the Sultanate of Oman for many
years to come.
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
1010
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52ENI6PDO59Open42Shell41Open18Open38Open36EOG43BOpen4CC Energy31ARA12Total49Tethys Oil47ENI39Petrotel55Shell43AOpen50Masirah Oil LtdNLS66Open51Occidental54Lasso61BP56Tethys Oil58Tethys Oil40Open 74Open73Open7HCF77ENI3CC Energy75Open9Occidental62 OilOpen72Occidental15HCF44ARA30Occidental48OQ17Petrotel 57Petroleb67Petrotel62Occidental60OQ5Daleel76Open27Occidental70Maha65OccidentalVacantOpen53Occidental71Majan8MOGC8MOGCMadha10BOpen11BOpen10AOpen11AOpenMuscatSalalahMusandam
Operations
Operations
Exploration and appraisal
Tethys Oil is engaged in exploration and/
or appraisal activities on all blocks in
which the Company has an interest share.
These activities are the key components in
building reserves and resources for future
production and is hence ongoing through-
out all phases of an EPSA. The activities
come in many forms, but the primary ele-
ments include seismic data acquisition and
studies of that data with the goal of finding
the most promising sites for drilling.
In recent years Tethys Oil has increased
its exploration portfolio in blocks sur-
rounding PDO’s Block 6 where most of
Oman’s oil production takes place. Tethys
Oil focuses on blocks that have promising
legacy seismic data from previous opera-
tors, which the Company can then refine
or add to with additional seismic acquisi-
tion and studies.
In 2022, Tethys Oil made significant pro-
gress on its operated exploration phased
blocks with five wells drilled on Block
56’s Al Jumd area and promising inter-
pretation of seismic data on both Block
56 and Block 58. In 2023 the results of
these efforts should be made apparent as;
an extended well test will start in Al Jumd,
exploration wells targeting more than 200
mmbo of unrisked prospective resources
will be drilled on Block 58 and Block 56,
and the Thameen-1 well on Block 49 will
be re-entered and re-tested.
3
CC Energy
3
4
CC Energy
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.
1111
49
Tethys Oil
58
Tethys Oil
56
Tethys Oil
100
50
0
100 kilometers
52ENI6PDO59Open42Shell41Open18Open38Open36EOG43BOpen4CC Energy31ARA12Total49Tethys Oil47ENI39Petrotel55Shell43AOpen50Masirah Oil LtdNLS66Open51Occidental54Lasso61BP56Tethys Oil58Tethys Oil40Open 74Open73Open7HCF77ENI3CC Energy75Open9Occidental62 OilOpen72Occidental15HCF44ARA30Occidental48OQ17Petrotel 57Petroleb67Petrotel62Occidental60OQ5Daleel76Open27Occidental70Maha65OccidentalVacantOpen53Occidental71Majan8MOGC8MOGCMadha10BOpen11BOpen10AOpen11AOpenMuscatSalalahMusandam 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.
12
Production, transportation and sales
China
South
Korea
Japan
India
Oman
Oil exploration and production in Oman
is governed by Exploration and Produc-
tion Sharing Agreements (EPSA), a com-
pany may hold such an agreement alone
or together with partners. The EPSA for
Blocks 3&4 is currently Tethys Oil’s only
EPSA with commercial production. Tethys
Oil has a 30 percent interest share in the
EPSA, the partner group also includes Mit-
sui E&P Middle East B.V. with 20 percent
and the operator CC Energy Development
S.A.L. (Oman branch) holding 50 percent.
mined percentage of the value of total oil
production, referred to as cost oil. After
deducting any allowance for cost oil, the
remaining oil production is split, also
according to a predetermined percentage
individual per agreement, between the gov-
ernment and the partners. Tethys Oil’s net
entitlement after government take in 2022
was 1,664,363 barrels of oil. Cost can only
be recovered once oil has been found and
produced on a licence. This means that if
no commercial oil discovery is made on an
exploration phased block, the exploring oil
company bears all the risk.
Tethys Oil sells all of its net entitled oil
from Blocks 3&4 on a monthly basis to
Mitsui Energy Trading Singapore, which is
part of Mitsui & Co Ltd. Tethys Oil’s sell-
ing 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 Mercan-
tile Exchange, including trading and qual-
ity adjustments
Tethys Oil’s production of 9,940 bopd
from Blocks 3&4 corresponds to its 30
percent interest share in the EPSA. The
partner group on Blocks 3&4 produced
around 31,133 bopd in 2022, correspond-
ing to about three and a half percent of
Oman’s total production.
All oil produced at the fields is transported
through a pipeline to the Qarn Alam
metering station, to the west of the Blocks.
At the metering station, the oil volumes
are recorded, and the quality is measured.
From Qarn Alam, the oil is transported
through the national pipeline system to the
Mina Al Fahal terminal in Muscat, on the
Sea of Oman, and it therefore never needs
to pass through the Strait of Hormuz. At
this terminal, the oil is lifted and loaded
into oil tankers.
The EPSA allows the joint operations part-
ners to recover their costs from a predeter-
Export quality
Unprocessed
BLOCK 3
BLOCK 3
Farha
Farha
Qarn 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
13
BLOCK 3
BLOCK 3
N
Office and staff
During 2022, Tethys Oil had an average
of 29 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
The Muscat office is the base for Tethys
Oil’s Chief Technical Officer (CTO) and
consists of a team of engineers and subsur-
face specialists together with finance and
administration staff. Tethys Oil had an
average of 20 employees based in Muscat
in 2022, of which 35 percent were female
and 65 percent male.
Stockholm Office
Tethys Oil’s head office is located in Stock-
holm, Sweden. The Stockholm office is the
base for the Managing Director, the Chief
Financial Officer (CFO) and the Head
of Legal, along with Tethys Oil’s finance,
legal, business development and commu-
nications staff. In 2022, Tethys Oil had
an average of 8 employees based in Stock-
holm, of which 40 percent were female
and 60 percent male.
More information on Tethys Oil’s employ-
ees can be found in the Sustainability
Report 2022.
1414
Blocks 3&4
Blocks 3&4
– the source of Tethys Oil’s production
Since 2007 Tethys Oil’s interest in
Blocks 3&4 has been at the core
of its presence in Oman. Following
more than ten years of continuous
production and reserves growth the
pandemic and its mitigating actions
broke the trend. The aim of the 2022
investment programme was a return
to growth by focus on investments in
production, asset integrity and main-
tenance. While the catch-up invest-
ments have yet to bear fruit, Blocks
3&4 continues to be profitable and
yield significant cash flows.
Covering 29,130 km2 in the eastern parts
of Oman, Blocks 3&4 has been the back-
bone of Tethys Oil’s presence in the Sultan-
ate since the drilling of the Farha South-3
well in early 2009. At the time of writing
40 million barrels of oil have been pro-
duced and up to 38.5 million barrels of
Reserves (2P) and Contingent Resources
(2C) remain, net to Tethys Oil. With large
areas unexplored and a EPSA expiry in
2040, plenty of time and potential remain.
In 2023 the work programme is one of
the most ambitious since inception with
exploration and appraisal in the forefront.
The fields
The Farha South field is located in the
northern part of the licence area, and it
remains a staple of production. Rather
than in one large continuous reservoir, 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 pro-
duction following a combination of a low
content of gas and the absence of a water
drive, most production wells are developed
with water injected into the reservoir via
injection wells. The majority of the oil is
high-quality oil, more than 40 degrees
API, produced in the Barik sandstone layer
at an average depth of 1,600 metres, with
some oil also produced from the underly-
ing 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.
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 structures, 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 recovery rates.
Following a few years focusing on devel-
opment 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
15
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.
2022 and 2023
The primary focus of 2022 was to continue
to increase the operational activities and
investments following the slow down dur-
ing the pandemic years as well as to stabilise
the decreasing production over the year.
The full year average production was 9,940
barrels of oil per day, 11 percent lower
than in 2021. The decline was primarily
an effect of constraints in the performance
of processing facilities, particularly those
related to water handling, and flow lines.
The constraints disallowed newly drilled
wells to contribute effectively to the overall
production. The overall production from
the blocks were also negatively affected
by the performance of the Anan field and
some newly drilled wells on Block 4 that
contributed less than expected.
A full remedial actions programme was
implemented during the year to counter
the various production related issues and
to increase the number of wells. Since
2021, the number of active drilling rigs
has again increased after the industry slow
down during the Covid-19 pandemic.
Entering 2021, only one well rig was active
whereas four rigs were active by year-end
2022. This allowed for 36 wells being
drilled on the blocks in 2022 compared to
14 in 2021. In 2023 this figure is expected
to increase further to 47 new wells as all
four rigs will be active throughout the year.
Another key component of the programme
was to improve the water handling in wells
with high water cut and as such allow for
higher production from these wells. Espe-
cially significant for this part of the pro-
gramme was a debottlenecking upgrade
to the produced water re-injection system
(PWRI) at the Saiwan central processing
facility on Block 4. The upgrade process
included a temporary decline in produc-
tion as a number of wells were periodically
shut in while new pumps were installed
and water pipes were replaced. The
upgrades target greater production rates
from existing high water cut wells and
newer wells. The results of the efforts are
expected throughout the course of 2023.
Exploration activities on the blocks were in
2022 focused on seismic acquisition rather
than exploration drilling activities. A large
area of some 3,500 km2 in the southern
part of Block 4 is being covered by 3D seis-
mic. By 31 December 2022, the acquisi-
tion was almost halfway complete and is to
be finished in 2023. The long-term goal is
to have covered 100 percent of the poten-
tially prospective areas of the blocks with
3D seismic by the end of 2024.
16
Seismic mapping, prospects and leads,
Seismic mapping, prospects and leads,
Blocks 3&4, Oman
Blocks 3&4, Oman
Alam Station &
Pipeline System
Jari-1
BLOCK 4
BLOCK 3
Farha South Field
Ulfa
Samha
Shahd
field
Saiwan East Field
Anan
Erfan
BLOCK 3
2022/23 3D seismic acquisition
3D seismic area
2D seismic area
Fields in production
Leads and prospects
1717
Two exploration wells were drilled in 2022
on Blocks 3&4, Hamdah-1 and Ahad-1.
Hamdah-1 was the first exploration well of
the year and was drilled in the first quar-
ter and aimed at proving an extension of a
Khufai play but did not encounter any oil.
The second exploration well of the year,
Ahad-1, was drilled in the fourth quarter.
It is located some five kilometres southeast
of the Shahd B field on Block 4, where it
targeted the Barik and Lower Al Bashair
formations, but like Hamdah-1 earlier in
the year it encountered no oil.
The disappointing results from exploration
drilling, in combination with the lower
production from some wells and certain
appraisal wells, affected the reserves and
resource figures negatively. The blocks’
total 2P reserves of 23.9 mmbo and 2C
resources of 14.6 mmbo at year-end 2022
are however still strong as net revisions
added to the resource base.
In 2023 an increase of the number of
exploration wells is planned. Four new
exploration wells are already planned,
three of which will spud in the first quar-
ter; Elaf-1, Rahbah-1 and Jari-1. Jari-1 is
the most exciting of the three new wells. It
will be drilled in the southern part of Block
4 and will target a Cryogenian age forma-
tion near where the Luja-1 well was drilled,
and confirmed the presence of a working
petroleum system, in the area in 2019. A
successful drilling result will likely upgrade
several prospects in an area that holds sig-
nificant volume potential.
Elaf-1,
located some eight kilometres
northwest of Ulfa-1, is targeting the Khu-
fai and Buah formations while Rahbah-1 is
located about seven kilometres southeast of
the Ulfa field, where it will be targeting the
Khufai, Buah and Barik formations.
Gas to power emission reduction
project
An exciting project to utilise the associated
gas, produced as a by-product of the pro-
duced crude oil, on Blocks 3&4 is ongo-
ing. The gas will be used for local power
generation with permanent facilities and
distributed by overhead lines, thus reduc-
ing the use of diesel-powered generators at
the well sites and production facilities. The
result is expected to be an overall reduction
of emissions as well as a reduction of diesel
consumption and related rental costs. For
more details about the project and Tethys
Oil’s other sustainability engagements
please read Tethys Oil’s Sustainability
Report 2022.
18
Block 49
Block 49 and Thameen-1
Thameen-1
Block 49
In 2021, Thameen-1 on Block 49 became Tethys Oil’s first oper-
ated exploration drilling in Oman. In 2022, the groundwork for a
2023 re-entry and re-testing of the well was laid.
The Block 49 license
covers an area of 15,439
km2. Nine wells have been
drilled by previous operators within
the block boundaries, several of which are
reported to have encountered oil shows.
Among the legacy wells, Dauka-1 was the
first well ever drilled in Oman in 1955.
Tethys Oil has, since the Company was
awarded the licence in 2017, reprocessed
around 1,500 km 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 com-
menced at Thameen-1 in the north eastern
part of the block on 31 December 2020
and reached its final depth of over 4,000
metres 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 inci-
dents and reaffirms Tethys Oil’s capabilities
as an upstream operator.
2D seismic area
3D seismic area
40,000 m
While achieving no hydrocarbon flows to
surface when tested, the logs from Tha-
meen-1 indicated a more than 30-metre
thick hydrocarbon bearing zone in the
Hasirah sandstone formation. Subsequent
analysis of, among others, samples of the
reservoir rock obtained from side wall cores
suggest that the Hasirah reservoir rock is
tight and virtually impermeable despite hav-
ing good porosity. Further studies have later
suggested that hydrocarbons could flow if
the reservoir rock is artificially fractured.
19
In the second quarter 2022, Tethys Oil was
granted an extension of the initial explo-
ration phase on Block 49 by 18 months,
expiring in December 2023. Following the
extension Tethys Oil focused on how to
best move forward with its operations on
the block. Based on the analysis of the data
gathered, the well is to be re-entered and re-
tested late in the second quarter 2023. Dur-
ing the re-testing a hydraulic fracture opera-
tion will be carried out to circumvent the
well’s naturally low permeability. Through-
out late 2022 and early 2023 the ongoing
preparations have focused on the hydraulic
fracture design, procurement and site prep-
aration. Successfully flowing hydrocarbons
to surface through this operation would
turn the inconclusive Thameen-1 well into
a discovery and thus determine the Com-
pany’s further course of action in relation to
a second exploration phase.
Block 56
Block 56
– in the midst of promising appraisal and exploration
Block 56 is a promising exploration
and appraisal block for which Tethys
Oil has been the operator since 2021
with a 65 percent interest share.
In 2022, five wells were drilled in Al
Jumd ahead of a 2023 extended well
test and in the “Central Area” seismic
studies continued in preparation for
a 2023 exploration drilling targeting
some 50 mmbo unrisked resources.
Block 56 covers an area of 5,808 km2 in
the south-eastern part of Oman some 200
km south of Blocks 3&4, adjacent to the
south-east of Block 6 where PDO produce
oil from the Kareem small fields. The block
lies at the intersection of different geologi-
cal provinces including the prolific South
Oman Salt Basin. It offers exploration
potential in multiple play concepts, both
proven and unproven, many of which are
familiar to Tethys Oil from its other opera-
tions in Oman. In total, there had been
eleven wells drilled on the block prior to
Tethys Oil assuming operatorship in 2021,
ten of which encountered oil or oil shows.
Under Tethys Oil’s operatorship the focus
of the exploration and appraisal activities
has been on two different areas of Block
56, Al Jumd and the Central Area.
Seismic mapping, prospects and leads,
Block 56, Oman
Al Jumd
Central
Area
2020
Al Jumd
Al Jumd is located in the north-western
part of the block and it is here where most
of Tethys Oil’s appraisal activities have
been conducted in 2022. In earlier parts of
the year, Tethys Oil drilled three appraisal
wells in the area, Al Jumd-2, Sahab-1 and
Sarha-3. The most promising of the three
by far was the horizontal Al Jumd-2 with
an initial flowrate of some 700 barrels of
oil per day, confirming the Company’s
model of the discovery. Following the posi-
tive results from Al Jumd-2, the area sur-
rounding the discovery was prioritised and
further testing on Sahab-1 and Sarha-3
was halted. In the third quarter, the dis-
covery’s appraisal programme was instead
expanded by an additional two wells, Al
Jumd-3 and -4. In total, Al Jumd-2, -3
and -4 are targeting the structure’s north-
western, north-eastern and southern areas
respectively and cover a significant portion
of the discovery.
In parallel with the drilling of Al Jumd-3
and -4, preparations commenced for an
extended well test (“EWT”) with the pri-
mary purpose of establishing the resource
volume and production capability of
the Al Jumd discovery. The EWT has a
planned duration of three to six months
and is after some delay expected to start
at the end of March 2023. Initial produc-
tion is expected to be around 400 barrels of
oil per day and then increase to 800. The
production rate from the test is expected
to vary over time and will be governed
by test consideration and data gathering
objectives. As it is produced, the oil from
the EWT is transported by truck from the
production facility at Al Jumd to Simsim,
some 15 kilometres away from Al Jumd on
Block 6, where it is measured and trans-
ferred into the national pipeline system.
Central area
The Central area is located further to the
south and was together with Block 58
the main focus of Tethys Oils exploration
activities in 2022. The area is, based on
legacy seismic data and results from previ-
ously drilled exploration wells, estimated
to hold some 50 million barrels of unrisked
resources. To further investigate the poten-
tial of the area, a seismic acquisition cam-
paign of some 2,000 km2 was completed
in the first quarter of 2022 after which pro-
cessing and, later on, interpretation of the
3D data commenced. The interpretation
will establish more details on the prospec-
tive volumes of the area and is expected
to be completed in the second quarter of
2023. From the interpreted data, a detailed
prospect maturation process will take place
from which several drillable prospects will
be established ahead of exploratory drilling
in the latter half of 2023.
21
Block 58
Block 58 – high-potential exploration
Fahd
Block 58
South
Lahan
Awarded in 2020 with a 100 percent
interest share, Block 58 is Tethys Oil’s
latest addition to the portfolio. The
block has several high-potential leads
spread over the South Lahan and Fahd
areas. In 2022, significant explora-
tion steps were taken, culminating
in the identification of three drillable
prospects with a total of 184 mmbo
unrisked prospective resources in Fahd.
Block 58 is located in the Dhofar Gover-
norate in the southern part of Oman and
covers an area of 4,557 km2. Adjacent to
Block 6’s Harweel cluster with producing
fields and infrastructure some 4–10 kilo-
metres to the east of the block, Block 58
straddles the western flank of the South
Oman Salt Basin and the Western Defor-
mation Front. A total of 7,600 km of 2D
seismic and 1,100 km2 of 3D seismic
data acquired by previous operators was
made available to Tethys Oil as it assumed
operatorship in addition to raw logs and
well reports from two wells drilled within
the block boundaries. The block showed
potential as both previous wells had
encountered hydrocarbon shows and mul-
tiple play concepts were believed to exist
within the block boundaries, including
plays familiar to Tethys Oil, with several
leads identified. Based on further analysis
of the legacy data, Tethys Oil has focused
its exploration activities on two areas of the
block, Fahd and South Lahan.
Fahd
In the Fahd area, located in the north-east-
ern corner of the block, a prospect matu-
ration process was ongoing throughout
2022. The process concluded in the fourth
quarter with the identification and volu-
metrics of three prospects, holding a com-
bined estimate of unrisked mean prospec-
tive resource potential of 184 mmbo with
targets in the Buah, Khufai and Ara for-
mations. Analysis of the finalised prospect
inventory will continue in 2023 and based
on the findings the location of Tethys Oil’s
first exploration well on the block will be
selected for a planned spud in the second
half of the year.
mmbo
Fahd
South Fahd
Pmean
40.1
123.4
South-West Fahd
20.9
Total
184.4
Pg
17%
21%
21%
Risked
mean
6.9
26.1
4.4
37.4
South Lahan
In South Lahan, located in the eastern and
central part of the block, some 450 km2
3D seismic were acquired in late 2021. The
processing and interpretation work of the
3D seismic started in 2022 and over the
course of the year it yielded encouraging
results that reinforced Tethys Oil’s view of
the areas prospectivity. The South Lahan
area contains several leads based on proven
plays that are in production in the sur-
rounding areas and from the new seismic
several new leads have been identified. As
the interpretation work continues in 2023,
it is expected that drillable prospects will
be matured in the first half of the year.
22
2323
Key financial data and definitions
Key financial data
Group
Operational items
2022
2021
2020
2019
2018
Production before government take, Oman Blocks 3&4, bbl
3,628,074
4,064,803
4,148,818
4,683,754
4,294,852
Production per day, Oman Blocks 3&4, bbl
9,940
11,136
11,336
12,832
11,767
Oil sales, bbl
Achieved oil price, USD/bbl
Income statement and balance sheet
Revenue and other income, MUSD
EBITDA, MUSD
EBITDA-margin
Operating result, MUSD
Operating margin
Net result, MUSD
Net margin
Cash and cash equivalents, MUSD
Shareholders' equity, MUSD
Balance sheet total, MUSD
Capital structure
Equity ratio
Leverage ratio
Investments 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
1,585,534
1,808,857
2,317,875
2,259,849
2,163,148
94.2
62.8
47.7
64.2
70.5
156.5
112.7
99.1
63%
54.2
35%
58.3
37%
41.5
285.2
316.0
90%
neg.
89.1
41.0
21.53%
19.14%
29
7.00
2.63
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
4.00
1.96
101.1
50.4
50%
5.8
6%
3.3
3%
55.4
257.7
280.3
92%
neg.
45.4
55.1
150.8
92.2
61%
37.1
25%
38.3
25%
75.6
276.3
300.2
92%
neg.
65.2
75.1
157.3
105.7
67%
60.7
39%
62.2
40%
73.1
267.6
291.4
92%
neg.
55.8
73.1
1.23%
2.12%
14.10%
14.66%
25.09%
26.66%
22
5.00
1.59
23
8.00
2.64
20
6.00
2.97
Number of shares at period end
33,056,608
33,056,608
33,056,608
36,294,960
35,896,310
Of which repurchased shares at period end
738,351
474,673
315,552
1,954,163
1,644,163
Number of shares at year end (excluding repurchased shares)
32,318,257
32,581,935
32,741,056
34,340,797
34,252,147
Shareholders' equity per share, USD
8.63
7.76
7.87
7.61
7.45
Weighted average number of shares (before dilution),
32,543,670
32,619,054
33,321,353
34,222,434
34,093,820
Weighted average number of shares (after dilution),
32,664,523
32,660,948
33,328,099
34,302,768
34,224,839
Earnings per share before dilution, USD
Earnings per share after dilution, USD
EBITDA and Net cash, MUSD
Operating result
Add: Depreciation. depletion and amortisation
Add: Exploration costs
Less: Share of net result from associate
EBITDA
Cash and cash equivalents
Less: Interest bearing debt
Net cash
0.51
0.51
2021
16.1
41.2
4.1
–
61.4
68.6
-0.8
67.8
0.10
0.10
2020
5.8
44.5
–
–
50.3
55.4
-0.3
55.1
1.12
1.12
2019
37.1
47.6
8.2
-0.7
92.2
75.6
-0.5
75.1
1.83
1.82
2018
60.7
45.9
–
-0.9
105.7
73.1
–
73.1
1.79
1.78
2022
54.2
40.5
4.5
-0.1
99.1
41.5
-0.5
41.0
24
Alternative performance measures: glossary and definitions
The Company applies the European Secu-
rities and Markets Authority’s (ESMA)
guidelines on alternative performance
measures. The alternative key financial
performance indicators are defined as
financial measures of historical or future
earnings trends, financial position, finan-
cial performance, or cash flows that are not
defined or specified in the applicable regu-
lations for financial reporting, IFRS, and
the Annual Accounts Act. These measures
should not be regarded as a substitute for
measures defined in accordance with IFRS.
If an alternative performance measure can-
not be identified directly from the financial
statements, a reconciliation is required.
EBITDA-margin
Equity ratio
EBITDA as a percentage of revenue and other income.
Shareholders’ equity as a percentage of total assets.
Return on shareholders’ equity,
rolling 12 months
Return on shareholders’ equity is calculated by dividing the net result for the past 12 months by the average of the
ingoing and outgoing shareholders’ equity for the same period.
Return on capital employed,
rolling 12 months
Return on capital employed is calculated dividing the operating result for the past 12 months by the average capital
employed (equity plus non-current liabilities) for the same period.
Net entitlement
Net entitlement share
Cost Oil
Profit Oil
Cost pool
Volumes and share of oil production from Joint operation, which the Company is entitled to sell expressed in barrels.
Calculated monthly based on EPSA. Consist of two components: Cost oil and Profit oil.
The oil production from Joint operation, which the Company is entitled to sell expressed as a percentage of the
Company’s total share of the oil produced. Calculated as Cost oil plus Profit Oil divided by Production.
The Cost Oil is the value of recoverable costs incurred in the period and any outstanding balance of unrecovered
historical cost from previous periods (“the Cost Pool”) The total amount of Cost Oil for a given period is capped to a
fixed share of total production, after conversion to barrels using the Official Selling Price (“OSP").
Profit Oil remains after the deduction of Cost Oil. Most of the Profit Oil is the government’s take according to a fixed
percentage.
Any outstanding balance of unrecovered historical cost from previous periods.
Production before government take Net share of total production.
Underlift/ Overlift
Netback
Calculation of net from Net Entitlement barrels and lifted barrels. Lifting more barrels than entitlement barrels results
in an overlift and the opposite in an underlift.
Gross profit per barrel of oil. Average OSP reduced by royalties/government take and operating and transport
expenses per barrel.
Achieved Oil Price
Achieved Oil Price is calculated with revenue from oil sales within the period divided by sold barrels of oil.
Average OSP
Oman OSP
Net cash
The Average OSP is calculated as the production weighted average of the monthly Official Selling Price (OSP) for
Omani Export Blend in the quarter and does not take into consideration the timing of monthly liftings or any trading
and quality adjustments (as is the case with the Achieved oil price).
Oman’s Official Selling Price (OSP) is calculated using the monthly average price of the front month futures contract of
Oman blend (with 2 months to delivery) as traded on the Dubai Mercantile Exchange.
Cash and equivalents less interest-bearing debt.
Number of employees
Average number of fulltime employees during the period.
Shareholders’ equity per share
Shareholders’ equity divided by the number of outstanding shares.
Weighted average number of shares
(after dilution)
Number of shares at the beginning of the year with newly issued shares time weighted for the period on issue.
Dilution effects include potential shares that may be converted to shares under favourable conditions, primarily
warrants with subscription prices lower than the share price.
Treasury shares
Own shares held by Tethys Oil following share repurchases.
Earnings per share
Net result for the period divided by the weighted number of shares.
SEK
MSEK
USD
MUSD
Bbl
Bopd
Mbo
Mmbo
EPSA
Swedish krona.
Millions of Swedish kronor.
US dollar.
Millions of US dollars.
One barrel of oil = 159 litres, 0.159 cubic meters.
Barrels of Oil per Day.
Thousand Barrels.
Million Barrels.
Exploration and Production Sharing Agreement.
Prospective resources (2U)
Like reserves and contingent resources, prospective resources volume estimates are defined probabilistically. 1U is
the low estimate, 2U is the best estimate and 3U the high.
25
The Tethys Oil share
The Tethys Oil share
Shares outstanding
Tethys Oil’s shares are traded on Nasdaq
Stockholm and the Company’s regis-
tered share capital at 31 December 2022
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 repre-
sent one vote each. All outstanding shares
are common shares and carry equal rights
to participation in Tethys Oil’s assets and
earnings. As per 31 December 2022, the
Board of Directors had remaining out-
standing authorisation from the Tethys
Oil’s Annual General Meeting (“AGM”)
on 18 May 2022 to resolve on the issue of
up to 10 percent of new shares up until the
next AGM. In addition the AGM 2022
resolved to grant the Board of Directors
the authorisation to repurchase up to 10
percent of the Company’s share capital. As
per 31 December 2022, Tethys Oil held
738,351 (2.2 percent of total shares) of
its own shares which was purchased at an
average price of SEK 54.14. 263,678 of
the treasury shares were bought back dur-
ing 2022 at an average price of SEK 60.12
per share.
Numbers of shares
Full year 2022
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Full year 2021
Shares in issue, end of the period
33,056,608
33,056,608
33,056,608
33,056,608
33,056,608
33,056,608
Shares issued, during the period
Shares repurchased, during the period
Treasury shares, end of the period
––
263,678
738,351
–
186,778
738,351
–
76,900
551,573
–
–
–
–
474,673
474,673
–
159,121
474,673
Shares outstanding, end of the period
32,318,257
32,318,257
32,505,035
32,581,935
32,581,935
32,581,935
Weighted average outstanding before dilution,
during the period
Weighted average outstanding after dilution,
during the period
32,543,670
32,435,616
32,577,137
32,581,935
32,581,935
32,619,054
32,664,523
32,531,314
32,670,830
32,780,953
32,682,353
32,660,948
Shareholders per 31 December 2022, or latest know update
Number of shares
Proportion capital/votes
Lansdowne Partners
Avanza Pension
Magnus Nordin
Liontrust
Dimensional Fund Advisors
Nordnet Pensionsförsäkring
Adage Capital Management
Carl Erik Norman
Tethys Oil AB
Jan Risberg
Daniel Hägerlöf
Missouri Local Government Employees Retirement
Acadian Asset Management
Bengt Karlsson
Ensign Peak Advisors Inc.
Other shareholders, appr. 10,300
Total number of shares
3,633,699
1,687,917
1,555,427
1,102,871
958,711
840,874
810,000
740,000
738,351
625,000
540,130
396,833
374,112
360,000
310,019
18,382,664
33,056,608
11.0%
5.1%
4.7%
3.3%
2.9%
2.5%
2.5%
2.2%
2.2%
1.9%
1.6%
1.2%
1.1%
1.1%
0.9%
55.6%
100%
Source: Monitor by Modular Finance as per 31 December 2022. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial
Supervisory. The verification date may vary for certain shareholders.
26
Tethys Oil has an incentive program as part
of the remuneration package to employees.
Warrants have been issued annually since
2015, following a decision by the respec-
tive AGM. Since 2021 warrants are only
issued to the Executive Management. In
the third quarter 2022 160,000 new war-
rants were issued. In October 2022 the
exercise period for the 2019 incentive pro-
gramme expired without any warrants hav-
ing been exercised.
In 2022, Tethys Oil introduced the Tethys
Incentive Programme
Oil Long-Term
2022–2024
(“LTIP 2022”) dedicated
to all employees, except for Executive
Management.
Number of warrants
Warrant incentive
programme
Exercise period
Subscription
price, SEK
Shares per
warrant
1 Jan
2022
Issued
2022
Exercised
2022
2019 programme
1 Jun – 7 Oct 2022
2020 programme
13 Jun – 6 Oct 2023
2021 programme
12 Jun – 4 Oct 2024
2022 programme
11 Jun – 6 Oct 2025
Total
64.9
48.2
70.8
99.5
1.21
1.12
1.07
1.00
350,000
350,000
200,000
–
–
–
–
160,000
900,000
160,000
–
–
–
–
–
Expired
2022
350,000
–
–
–
31 Dec
2022
–
350,000
200,000
160,000
350,000
710,000
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 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.
Shareholder distribution proposal
For the financial year 2022, the Board of
Directors proposes to the AGM 2023 a
total distribution of SEK 5.00 per share,
corresponding to MSEK 161.6 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 3.00 per share by a mandatory
share redemption programme. (The AGM
2022 resolved on a total distribution of
SEK 7.00 per share, of which SEK 2.00
per share as cash dividend and SEK 5.00
per share by a mandatory share redemp-
tion programme, equal to MSEK 228.1).
Distribution of shareholdings
Distribution of shareholdings per 31 January 2023.
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 – 200,000
200,001 –
Shareholders with unknown amounts
Source: Monitor by Modular Finance
816,427
781,696
2,296,318
1,071,985
1,176,802
1,457,778
1,118,593
1,488,668
16,799,287
6,049,054
2.47%
2.36%
6.95%
3.24%
3.56%
4.41%
3.38%
4.50%
50.82%
18.30%
8,131
78.33%
952
976
145
78
49
16
10
23
9.17%
9.40%
1.40%
0.75%
0.47%
0.15%
0.10%
0.22%
27
Share statistics 2022
The final transaction price in 2022 was
SEK 60.50 corresponding to a total mar-
ket capitalization of MSEK 1,955. Dur-
ing the year the price of Tethys Oil’s share
decreased by 2.9 percent. Based on data
from NASDAQ Stockholm, the highest
transaction price in 2022 was SEK 104.00
on 6 May and the lowest was SEK 57.10
on 26 September. The turnover velocity
(annual turnover/ outstanding shares) was
168 percent on Nasdaq Stockholm. Tethys
Oil’s share capital development is found on
tethysoil.com.
Share price development and turnover 2022
120
100
80
60
40
20
0
SEK/share
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Tethys Oil
OMX Stockholm PI
Turnover
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Traded volume,
shares
28
Corporate Governance Report
Corporate Governance Report 2022
Corporate Governance refers to the frame-
work of policies and guidelines through
which the Company is run accountably,
sustainably, transparently and efficiently
on behalf of its shareholders. Tethys Oil
adheres to Swedish legislation, NASDAQ
Stockholm’s rule book for issuers and the
Swedish Code of Corporate Governance
(“the Code”). In addition, Tethys Oil has
established governance rules and proce-
dures decided by the Board and which are
available on the Company’s website.
This Corporate Governance Report
2022 is submitted in accordance with
the Swedish Annual Accounts Act and
the Code (the Code is published on
www.bolagsstyrning.se). It explains how
Tethys Oil has conducted its corporate
governance activities during 2022. Tethys
Oil does not report any deviations from
the Code. The report has been examined
by the Company’s auditors, please see page
33.
External Auditor
Shareholders
Tethys Oil’s shares are listed on Nasdaq
Stockholm. Of the total number of shares,
foreign shareholders accounted for approx-
imately 55 percent. Lansdowne Partners
Austria is the only shareholder with a hold-
ing in excess of 10 percent of shares and
votes, with a holding of 3,633,699 shares
representing 11.0 percent of shares and
votes.
Tethys Oil’s holding of its own shares
amounted to 738,351 shares as per 31
December 2022.
For further information on share, share
capital development and shareholders, see
pages 26-28 and Tethys Oil’s website.
Annual General Meeting
The general meeting is the highest deci-
sion making body. 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 participa-
tion in due time are entitled to participate
at the AGM. There are no restrictions on
Shareholders
General Meeting
Elects the Board and Auditor
Board of Directors
Appoints the Managing Director
Managing Director
Nomination Committee
Remuneration Committee
Technical Committee
Audit Committee
Group Executive Management
the number of votes each shareholder may
cast at the general meeting.
The AGM 2022 authorised the Board
to, on one or several occasions before the
AGM 2023, resolve on issues of new shares
and/or convertibles against payment in
cash, in kind or through set-off or subject
to other conditions and with the right to
deviate from the shareholders’ preferential
rights. The purpose of the authorisation
and the reason for a possible deviation
from the shareholders’ preferential rights is
to facilitate the raising of capital for acqui-
sitions and the Company’s operations. The
AGM resolved to amend the Articles of
Association in accordance withe Board of
Directors’ proposal, the full proposal can
be found on the Company’s website.
Nomination process
In accordance with the Nomination Com-
mittee process approved by the AGM
2022, the Nomination Committee for the
AGM 2023 consists of members appointed
by three of the largest shareholders of the
Company based on shareholdings as per 30
September 2022 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
10 November 2022.
The Nomination Committee for the
AGM 2023 consists of the following
members:
• Viktor Modigh, Chairman of the Nomi-
nation Committee, representing Mag-
nus Nordin;
• Mikael Petersson, representing Lans-
The minutes recorded at the AGM
can be found at Tethys Oil’s website,
www.tethysoil.com.
downe Partners Austria GmbH;
• Jan Risberg, representing himself; and
• Per Seime, Chairman of Tethys Oil
The Annual General Meeting 2023 is
scheduled to be held in Stockholm on 10
May 2023 at CEST 15:00. The meeting
will be held with the physical presence of
shareholders, representatives and author-
ised third parties.
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-
29
Board of Directors elected at the AGM 2022
Member
Elected
Position
Year of
birth
Nationality
Independent
in relation to
the Company
Independent
in relation to
the Company’s
larger
shareholders
Per Seime
2017
Chairman
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
Yes
Yes
Yes
Yes
Yes
The work of the Board of Directors
The Board of Directors at Tethys Oil estab-
lishes the overall goals and strategy of the
Company and resolves on larger invest-
ments, acquisitions and disposals of busi-
ness activities or assets. The Board ensures
that there is an appropriate system for
follow-up and control of the Company’s
operations, including evaluating the risks
associated with its operations and that
there is a satisfactory process for monitor-
ing the Company’s compliance with appli-
cable laws, regulations, internal rules and
procedures, and board resolutions. The
Board further ensures that the Company’s
external communications are characterised
by openness, and that they are accurate,
reliable, and relevant. The Board of Direc-
tors’ work is governed by annually adopted
rules of procedure. The chairman of the
Board of Directors supervises the work
and is responsible for it being well organ-
ised and efficient. This entails, among
other things, continually following the
Company’s operations in contact with the
Managing Director and being responsible
for other Board members receiving the
information and documentation needed to
ensure high-quality discussions and well-
founded decisions by the Board of Direc-
tors. The chairman is responsible for the
evaluation of the Board of Directors’ and
the Managing Director’s work and repre-
sents the Board of Directors in ownership
matters.
The Board has during the year increased its
focus on environmental and sustainability
issues and assessed how this impact risks
and business opportunities for the Com-
pany and also defined and adopted group
policies to govern the Company’s conduct
in society, with the aim of ensuring its
long-term value creation capability. The
Board has also devoted time to the Com-
pany’s strategies and operations.
According to the current rules of proce-
dure the Board of Directors shall, after the
constituent Board meeting following the
AGM, hold a minimum of seven ordinary
meetings during a calendar year.
Timing and main items for ordinary meetings following AGM
May
August
September
November
December
Constituting meeting
Second quarter report
Strategy review and discussion of investment plan
Third quarter report
Investment plan and budget, liquidity and forecast
January–February
Fourth quarter Year-end report, allocation of profit, review auditors’ report
March–April
Annual report and AGM
mittee, Hovslagargatan 5B, SE-111 48
Stockholm.
The Nomination Committee
report,
including the final proposals to the AGM
2023, will be published on the Company’s
website together with the notice of the
AGM.
The Nomination Committee’s assignment
is to prepare proposals for Board of Direc-
tors and election of auditors, remuneration
to the Board of Directors and auditors as
well as Chairman for the Annual General
Meeting.
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 Nomina-
tion Committee applies rule 4.1 of the
Swedish Corporate Governance Code
including the Company’s Board Diversity
policy in its proposal for Board members.
The Nomination Committee believes that
the Board has an appropriate composition
with a diversity and a mix of nationalities
with diverse knowledge. The Board diver-
sity policy is available on the Company’s
website.
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 elected at the AGM 2022 consists of
five members and no deputies. Per Seime
was elected chair 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 34–35.
30
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.
Board of Directors and committee
attendance in 2022
During 2022, the Board held 14 meetings
of which seven were ordinary and seven
extraordinary, in person, via telephone
or digitally and per capsulam meetings.
Attendance at the meetings is shown in the
table below. Board secretary was the Com-
pany’s CFO, Petter Hjertstedt, and Head of
Legal, Camilla Hansén. Prior to each meet-
ing, 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 2022
Board member
Board
Member
Audit
Committee
Member
Remuneration
Committee
Member of
Technical
Committee
Board
meetings
Audit
Committee
meetings
Remuneration
Committee
meetings
Technical
Committee
meetings
Per Seime
Klas Brand
Chair
Yes
Yes (Chair)
Member
Yes (Chair)
–
–
Yes
–
–
–
Yes (Chair)
Yes
–
14/14
14/14
14/14
14/14
14/14
4/4
4/4
–
–
–
2/2
–
–
2/2
–
–
–
4/4
4/4
–
Robert Anderson
Member
Alexandra Herger
Member
Magnus Nordin
Member
–
–
–
Remuneration to the Board 2022
Remuneration to be paid to the Board
of Directors for the period between the
AGM:s of 2022 and 2023 amounts to a
total of TSEK 2,015, allocated among the
Board members in the way shown in the
below table. The Annual General Meet-
ing 2022 resolved that remuneration of
the chairman of the Board of Directors
shall be TSEK 700 per annum and of the
other members TSEK 330 per member per
annum. Remuneration is not paid for ser-
vice of the Boards or directors of subsidi-
aries. Magnus Nordin, who is employed
by Tethys Oil, does not receive any remu-
neration for his service on the Board of
Directors.
Annual fee for committee members is
TSEK 35 per committee assignment and
annual fees for the chairman of the 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 AGM:s of 2022 and 2023 (in their
capacity as Board members)
Per Seime
Robert Anderson
Alexandra Herger
Magnus Nordin
Klas Brand
Total
TSEK
800
395
400
–
420
2,015
Board committees
In order to increase the efficiency of its
work and enable a more detailed analysis
of certain matters, the Board has formed
three committees: The Audit, Remunera-
tion and Technical committees. Commit-
tee members are appointed within the
Board for the period until the next AGM.
The committees’ duties and authorities are
regulated in the annually approved rules of
procedure for each committee. The com-
mittees monitor and evaluate relevant mat-
ters and make recommendations for deci-
sions by the Board of Directors.
Audit Committee
The Board has established an Audit Com-
mittee for the period up to and including
the AGM 2023, consisting of Klas Brand
31
as Chairman and Per Seime as member
of the committee. The Audit Committee
convened four times in 2022. The work
has mainly focused on supervising the
Company’s financial reporting and assess-
ing the efficiency of the Company’s finan-
cial internal controls, the primary objec-
tive is to provide support to the Board
of Directors. 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 election and remuneration of the
auditor. The Audit Committee reports to
the Board, normally in conjunction with
the following Board meeting.
Remuneration Committee
The Board has established a Remunera-
tion Committee for the period up to and
including the AGM 2023, consisting of Per
Seime as Chairman and Alexandra Herger
as member of the Committee. The Remu-
neration Committee convened two times
in 2022. The work has mainly focused on
preparing the Board’s decisions on prin-
ciples for remuneration to the Managing
Director and Group Executive Manage-
ment, establishing key performance indi-
cators, monitoring and evaluating variable
remuneration and the application of the
guidelines for remuneration as well as to
construct and propose the share-based
incentive programme to the AGM.
The guidelines for remuneration to senior
executives were approved by the Annual
General Meeting 2022. In order to sim-
plify the variable remuneration compo-
nents and the measurements there will
be a need for minor changes to the remu-
neration guidelines to be proposed for the
AGM in 2023. The remuneration guide-
lines applied in 2022 and proposed for
2023 is presented in the Administration
report on pages 43-47.
Technical Committee
The Board has established a Techni-
cal Committee for the period up to and
including the AGM 2023, consisting of
Robert Anderson as Chairman and Alex-
andra Herger as a member of the Com-
mittee. The Technical Committee con-
vened four times in 2022. The work has
mainly focused on following up on work
programmes, budgets and investment pro-
posals, evaluation of and recommendation
on appointment of independent qualified
reserve auditor, oversight of the reserves
evaluation 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 2022.
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 third
quarter and nine months report 2022.
Tethys Oil’s auditor:
Pricewaterhouse Coopers AB
documents to enable it to continually
monitor the activities for the year.
Johan
Malmqvist
Sophie
Damborg
Lead
partner
Co-signing
Auditor
2021
2020
Role
Company auditor
since
Remuneration to the auditors of Tethys
Oil is paid in accordance with approved
current accounts. In 2022, remuneration
to PricewaterhouseCoopers AB amounted
to MUSD 0.2 (MUSD 0.2). For details
on remuneration to auditors, see note 9,
Auditor’s fees.
Independent qualified reserves
auditor
Tethys Oil’s independent qualified reserves
auditor annually evaluates 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 2022 report was ERC Equi-
poise Limited (“ERCE”), the same that
also audited the 2021 report. For further
information, see Reserves on page 40.
Managing Director and executive
management
The Managing Director is responsible for
the day-to-day business of the Company
and shall take the decisions needed for
developing the business in accordance with
the external and internal framework. The
Board evaluates the work of the Manag-
ing Director formally at least once a year,
and without any member of the executive
management present during this evalua-
tion process.
Per the end of 2022 the executive manage-
ment in Tethys Oil consisted of the Manag-
ing Director (Magnus Nordin), CFO (Pet-
ter Hjertstedt), CTO (Fredrik Robelius)
and Head of Legal (Camilla Hansén). The
Board of Directors has adopted an instruc-
tion for the Managing Director which
clarifies the responsibilities 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
32
Internal control
The Board of Directors has the overall
responsibility for establishing an effective
system of internal control and risk man-
agement to ensure smooth business opera-
tions, clearly defined reporting lines and
performance measurement systems. This
includes maintaining an effective control
environment and overseeing relevant poli-
cies and important accounting principles
applied by the Group in financial report-
ing as well as changes to these principles.
The main focus of the internal control
function is designing effective business
processes and controls, documentation of
the control procedures and implementa-
tion of routines with further assessment
of the process’s effectiveness and internal
controls efficiency.
The Board of Directors identifies and mon-
itors business and financial risks ongoing.
Risks identified are addressed to the proper
part of the organization and internal con-
trol activities are designed to execute and
mitigate these risks. Activities status and
results are reported to the Board of Direc-
tors on an ongoing basis.
Financial reporting
The Group’s financial reporting procedures
comply with the requirements of the laws
and accounting and reporting regulations
of the countries of incorporation of the
Group’s subsidiaries, together with the
International Financial Reporting Stand-
ards (‘IFRS’).
Internal control over financial reporting is
designed to provide reasonable assurance
regarding the reliability of financial report-
ing and the preparation and fair presenta-
tion of published financial statements.
The Company’s finance team has a set of
procedures allowing to monitor business
performance, perform analyses and follows
up on budget, prepare forecasts, follows
up on significant variations between peri-
ods etc. The control activities also include
following up on the authorisation manual
and accounting principles.
Tethys Oil’s main assets are held jointly
with partners and the relationships are gov-
erned through Joint Operating Agreement
(JOA). The focus of internal control is,
therefore, to ensure reliability and accuracy
of the operator’s financial information,
including where Tethys Oil is an operator.
The control is conducted by monthly and
quarterly expenditure controls, quarterly
budget reviews and interviews with opera-
tors to understand and explain deviations
from budget. As part of the monitoring
and control procedure of the Exploration
and Production Sharing Contract, Tethys
Oil regularly reviews the results of recov-
erability audits performed by Ministry of
Energy and Minerals of Sultanate Oman.
The Board of Directors further decides on
specific control activities and auditing of
operators in joint operations.
With the Company’s current size, opera-
tions as well as finance and internal control
team, Tethys Oil currently does not con-
sider it necessary to have a dedicated inter-
nal 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 and follow-up
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, 17 April 2023
Tethys Oil AB (publ)
The Board of Directors
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 2022 on pages 29–33 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
RevR 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, 17 April 2023
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Sophie Damborg
Authorized Public Accountant
33
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 2022)1
5,000
Warrants in Tethys
Oil (per 31 December
2022)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 2022
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.
Board member 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
3434
r
e
g
r
e
B
x
e
A
l
y
b
o
t
o
h
P
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
VP Global Exploration at Marathon
Oil, executive positions at Shell and
Enterprise Oil
Board member: Panoro Energy ASA,
and Tortoise Capital Advisors Member:
Women's Leadership Committee,
Oil Council and Leadership Texas,
Foundation for women's resources,
member of the PGS ASA’s Nomination
Committee
Several executive positions in different
oil companies
Board member: Minotaurus AB,
including subsidiaries, and Minotaurus
Energi AS
Shares in Tethys Oil (per
31 December 2022)1
Warrants in Tethys
Oil (per 31 December
2022)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 2022
1,555,427
2020/23: 60,000
2021/24: 60,000
2022/25: 60,000
–
No
Yes
3535
Executive management
Executive management
Magnus Nordin
Petter Hjertstedt
Function
Board member and Managing Director
Chief Financial Officer
Employed since
2004
2016
Education/background
Bachelor of Arts, University of Lund and Master of Arts,
University of California, Los Angeles
Finance and accounting at Linköping University, Sweden
Year of birth
Nationality
Experience
1956
Sweden
1979
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
Shares in Tethys Oil (per
31 December 2022)*
1,555,427
Warrants in Tethys Oil
(per 31 December 2022)
2020/23: 60,000
2021/24: 60,000
2022/25: 60,000
8,275
2020/23: 50,000
2021/24: 50,000
2022/25: 50,000
Camilla Hansén
Function
Head of Legal
Employed since
2022
Fredrik Robelius
Chief Technical Officer
2011
Education/background
Master of Laws (LL.M.) and business administration
Stockholm University, Sweden
Education: PhD Engineering Physics, Uppsala University;
Postgraduate Diploma Petroleum Engineering, Heriot-Watt
University
Year of birth
Nationality
Experience
1976
Sweden
1973
Sweden
Associate at Linklaters Advokatbyrå. Head of M&A Legal at
Nordea Bank Abp
Energy engineering positions in Fortum, petroleum engineering
related positions in Tanganyika Oil and Sinopec
Shares in Tethys Oil (per
31 December 2022)*
Warrants in Tethys Oil
(per 31 December 2022)
–
–
* Privately, via company or insurance policy
14,742
2020/23: 50,000
2021/24: 50,000
2022/25: 50,000
3636
r
e
g
r
e
B
x
e
A
l
y
b
o
t
o
h
P
Payments to authorities
Payments to authorities 2022
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 as well as production sharing and income taxes for the
fiscal year 2022 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)
1,964
129,059
59,487
–
–
–
1,964
1,964
–
–
–
129,059
129,059
–
–
–
59,487
59,487
–
250
350
350
950
950
188,545
250
350
350
189,495
189,495
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
1,964
–
1,964
1,964
129,059
–
129,059
129,059
–
59,487
59,487
59,487
300
650
950
950
129,359
60,137
189,495
189,495
Licence costs
This pertains to costs for maintaining the exploration licences for
Block 49, Block 56 and Block 58 in Oman where payments were
made to Oman’s Ministry of Energy and Minerals and Oman’s
Ministry of Finance.
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.
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 gov-
ernment take. Under the terms of each EPSA, Tethys Oil is sub-
ject to Omani income taxes, which are paid in full, on behalf of
Tethys Oil, from the government share of oil. 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 2022 is MUSD 59.5
(MUSD 45.0). For more information, please see note 14.
37
Administration report
Administration report
The consolidated financial statements of the Tethys Oil Group (hereafter referred to as “Tethys Oil” or the “Group”) as it is
described in note 18, 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 2022. The amounts relating to
the comparative period (equivalent period of last year) are shown in parenthesis after the amount for the current period.
THE GROUP’S OPERATIONS
Tethys Oil is an oil and gas exploration and production company
with focus on onshore areas with known oil discoveries in the Sul-
tanate of Oman. 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. The business model has resulted in growth in both pro-
duction and reserves as well as shareholder value over time.
Licences & Agreements
Tethys Oil Interest %
Phase
Blocks 3&4, Oman
Block 49, Oman
Block 56, Oman
Block 58, Oman
30
1001
65
100
Production phase
Expiry date
July 2040
Partners
(operator in bold)
CCED, Mitsui, Tethys Oil
Initial exploration phase
December 2023
Tethys Oil
Second exploration phase
December 2023
Tethys Oil, Medco, Biyaq, Intaj
Initial exploration phase
July 20242
Tethys Oil
1 Contingent final formal government approval
2 The one-year extension of the initial exploration phase was approved on 6 January 2023
OPERATIONAL REVIEW
Production
The Group’s reported production comes from Blocks 3&4 in
Oman which averaged 9,940 barrels per day in 2022 compared to
11,136 barrels per day in 2021. The Group’s reported production
declined by 11 percent in 2022 compared to the year before and
amounted to 3.6 million barrels (4.1 million barrels). The decline
in production in 2022 is the result of a number of operational
issues experienced during the year. The principal reasons for the
weaker production development were related to constraints in
the performance of processing facilities, particularly the facili-
ties related to water handling, and flow lines. These constraints
hindered newly drilled wells from effectively contributing to the
overall production. In addition, performance of the Anan field and
some newly drilled wells on Block 4 disappointed and thus con-
tributed less than expected.
The main focus on Blocks 3&4 in 2022 was on a remedial actions
programme to counter the various production related issues. The
programme included the replacement of older flow lines, addi-
tional loop lines as well as water handling initiatives to increase
the output from wells with high water cut. Amongst other things,
an upgrade was made on the produced water re-injection system
(PWRI) at the Saiwan central processing facility on Block 4. The
upgrade process included new pumps and replacement of water
pipes and was a key element in the debottlenecking of production
on Block 4. It should enable greater production rates from exist-
ing high water cut wells and newly drilled wells going forward
but resulted in a temporary production decline when ongoing as a
number of wells were periodically shut in.
In 2021, only 14 new wells were drilled on Blocks 3&4, a number
that increased to 36 in 2022. With the addition of a fourth drill-
ing rig that began its operations in the third quarter, the rate of
drilling activity continued to increase in the fourth quarter and
will continue to do so in 2023 when a total of 47 new wells are
planned for.
Average daily production net to Tethys Oil, yearly
bopd
12,500
10,000
7,500
5,000
2,500
0
2010
2012
2014
2016
2018
2020
2022
38
Exploration and appraisal operations per Block
Blocks 3&4
As in 2021, two exploration wells were drilled in 2022 on Blocks
3&4, Hamdah-1 and Ahad-1, a number that is expected to
increase to four in 2023.
Hamdah-1 was the first exploration well of the year and was drilled
in the first quarter, and aimed at proving an extension of a Khu-
fai play but did not encounter any oil. During the fourth quarter
the second exploration well of 2022, Ahad-1, was drilled. Ahad-1,
located some five kilometres southeast of the Shahd B field on
Block 4, targeted the Barik and Lower Al Bashair formations but
like Hamdah-1 earlier in the year it encountered no oil.
As a part of the continuation of the exploration programme an
additional three exploration well were planned to be drilled in the
first quarter 2023, Elaf-1, Rahbah-1 and Jari-1. Elaf-1, located
some eight kilometres northwest of Ulfa-1, is targeting the Khufai
and Buah formations while Rahbah-1 is located about seven kilo-
metres southeast of the Ulfa field, where it will be targeting the
Khufai, Buah and Barik formations. In the southern part of Block
4 Jari-1 will target a Cryogenian age formation near where the
Luja-1 well was drilled and confirmed the presence of a working
petroleum system in the area in 2019. A successful drilling result
will likely upgrade several prospects in an area that hold significant
volume potential.
The Blocks 3&4 partnership aims to cover 100 percent of the
potentially prospective areas of the Blocks with 3D seismic before
the end of 2024. During 2022 seismic acquisition was focused on
the southern part of Block 4 where an area comprising 3,500 km2
is being covered, which by 31 December 2022 was almost halfway
complete.
Block 49
In the second quarter 2022, Tethys Oil was granted an extension
of the initial exploration phase on Block 49 by 18 months, expir-
ing in December 2023. Following the extension, the primary focus
of the Block 49 work programme for 2022 was first to analyse
and later begin preparations for the planned 2023 re-entry and
re-testing of the Thameen-1 well drilled in 2021.
The logs from Thameen-1 indicated a more than 30-metre thick
hydrocarbon bearing zone in the Hasirah sandstone formation.
When tested, however, no flows of hydrocarbon to surface were
achieved. Subsequent analysis of, among others, samples of the res-
ervoir rock obtained from side wall cores suggest that the Hasirah
reservoir rock is tight and virtually impermeable despite having
good porosity. Further studies suggest that hydrocarbons could
flow if the reservoir rock is artificially fractured. Plans are for the
well to be re-entered and re-tested late in the second quarter 2023
and this time a hydraulic fracture operation will be carried out.
Ongoing preparations focus on the hydraulic fracture design, pro-
curement and site preparation. Successfully flowing hydrocarbons
to surface through this operation would turn the inconclusive Tha-
meen-1 well into a discovery and thus determine the Company’s
further course of action in relation to a second exploration phase.
Block 56
The focus on Block 56 for 2022 were divided between, primarily
appraisal, activities in the Al Jumd area in the north-western part
of the block and exploration activities in the central area further
to the south.
In early 2022, Tethys Oil drilled the horizontal Al Jumd-2 with
positive results and an initial flowrate of some 700 barrels of oil
per day, confirming the Company’s model of the discovery. Fol-
lowing the positive results, the discovery’s appraisal programme
was expanded by an additional two wells, Al Jumd-3 and -4, in the
third quarter 2022. In total, Al Jumd-2, -3 and -4 are targeting the
structure’s north-western, north-eastern and southern areas respec-
tively and cover a significant portion of the discovery.
In parallel with the drilling, preparations commenced for an
extended well test (“EWT”) with the primary purpose of estab-
lishing the resource volume and production capability of the Al
Jumd discovery. The well test was initially planned to start in 2022
but was delayed due to the certification process and installation
of the fiscal meter and its software taking more time than initially
expected. The fiscal meter is necessary to be able to export the
oil through the production facility Simsim on PDO’s Block 6 to
where it will be transported by truck from the Al Jumd-2 pro-
duction facility. The final certification and installation of the fiscal
meter was completed in in the first quarter of 2023, after which
the test is expected to commence by the end of March.
In addition to the three wells on the Al Jumd discovery, two explo-
ration wells were drilled on Block 56 in other parts of the Al Jumd
area in the first quarter of 2022. The Sahab-1 exploration well did
not flow any oil to surface during testing and has after additional
analysis in the fourth quarter been deemed non-commercial and
will not be subject to any further work. The Sarha-3 well testing
operations started in the second quarter with the first and deepest
of three layers, the Kareem sandstone, and had a flow of approxi-
mately 20 barrels of oil per day of 15 API, high viscosity oil. In
order to continue the testing operation of the remaining two lay-
ers, the Khalata and Gharif sandstones, the sourcing of a workover
rig is required and further testing has been put on hold as the
activities of the EWT have taken priority.
The central area of the block is, based on legacy seismic data and
results from previously drilled exploration wells, estimated to hold
some 50 million barrels of unrisked resources. To further investi-
gate the potential of the area, a seismic acquisition campaign of
some 2,000 km2 was completed in the first quarter of 2022 after
which processing and, later on, interpretation of the 3D data com-
menced. The interpretation will establish more details on the pro-
spective volumes of the area and is expected to be completed in the
second quarter of 2023. From the interpreted data, a detailed pros-
pect maturation process will take place from which several drillable
prospects will be established ahead of a planned exploration well in
the second half of 2023.
Block 58
In 2022, Tethys Oil conducted exploration activities on two dif-
ferent parts of the block, Fahd and South Lahan. In the Fahd area,
located in the north-eastern corner of the block, prospect matura-
tion was completed in the fourth quarter of 2022 and volumetrics
were finalised. The process concluded with the identification of
three prospects, holding a combined estimate of unrisked prospec-
tive resource potential of 184 mmbo with targets in the Buah,
Khufai and Ara formations. Analysis of the finalised prospect
39
inventory will continue in 2023 and based on the findings the
location of the first exploration well on the block will be selected
for a planned spud in the third quarter.
Contingent resources Blocks 3&4 (audited)
mbo
1C
2C
3C
Total 31 December 2022
4,994
14,623
31,089
In South Lahan, the focus has been on the processing and inter-
pretation of the 450 km2 3D seismic acquired in late 2021. The
interpretation work in 2022 yielded encouraging results and drill-
able prospects are expected during the first half of 2023.
Reserves and contingent resources
Oman, Blocks 3&4
Tethys Oil’s net working interest Reserves in Blocks 3&4 Oman
as at 31 December 2022 amount to 23,901 thousand barrels of
oil (“mbo”) of Proven and Probable Reserves (2P). The 2P reserve
Replacement Ratio amounts to 37 percent. In addition, Tethys
Oil’s net working interest resources in Oman amount to 14,623
mbo of 2C Contingent Resources. The Company’s 2022 and
2021 year-end Reserves were evaluated by ERC Equipoise Limited
(“ERCE”) as independent qualified reserves evaluator.
Additions and revisions include maturation of Contingent
Resources to Reserves from the Ulfa and Saiwan East fields. Revi-
sions of the Reserves also include the net of upside revisions on the
Farha South and Saiwan East fields and negative revisions of Shahd
and Anan field.
Based on ERCE’s model and current oil price assumptions, Tethys
Oil’s net entitlement Reserves (Reserves after government take)
amount to 7,182 mbo of 1P, 10,446 mbo of 2P and 14,017 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 contingent
upon the on-going appraisal programme, a committed work pro-
gramme as well as budget to access these resources.
The evaluation 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), Society of Petroleum Evaluation Engineers
(SPEE), Society of Exploration Geophysicists (SEG), Society of
Petrophysicists and Well Log Analysts, (SPWLA), and the Euro-
pean Association of Geoscientists & Engineers (EAGE).
Development of reserves, Blocks 3&4 (audited)
mbo
1P
Total 31 December 2021
16,645
Production 2022
Additions and revisions
-3,628
1,023
Total 31 December 2022
14,040
2P
26,174
-3,628
1,356
23,901
3P
38,449
-3,628
1,390
36,211
Reserve replacement ratio, %
28%
37%
38%
Production and operating expenditure guidance 2023
Tethys Oil expects full year 2023 average production to be in
the range of 9,000–10,000 barrels of oil per day. Under current
circumstances, the OPEC+ production quotas are not expected
to limit production output. Monthly fluctuations outside of the
yearly average production range is to be expected. Operating
expenditure is expected to be in the range of USD 14.5 (±1.0)
per barrel.
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 up to 40 percent of the value of total oil produc-
tion on an annual basis, this is referred to as ‘cost oil’. After deduct-
ing any allowance for cost oil, the remaining production is split
80/20 between the government (“government take”) and the joint
operations partners. If the costs incurred during the period exceeds
the maximum 40 percent of production, it is carried forward to
be recovered in future periods and is referred to as the ‘Cost Pool’.
If there are no costs to be recovered, the joint operations 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 percent, depend-
ing on available recoverable cost.
During 2022 all recoverable cost incurred was recovered from pro-
duction and as per 31 December 2022 there was no unrecovered
cost in the Blocks 3&4 cost pool (31 December 2021: MUSD –).
Net entitlement share for 2022 was 46 percent (2021: 44 percent)
of production. As per 31 December 2022 Tethys Oil’s net share of
the cost pool balance was MUSD – (MUSD –).
Revenue and sales
During 2022, Tethys Oil sold 1,585,534 barrels of oil from Blocks
3&4, representing a 12 percent decrease compared to 2021 when
1,808,857 barrels of oil were sold. The decrease in oil sold is a
result of the lower production in addition to the overlift position
of 2021 shifting to an underlift position at the end of 2022.
Revenue from oil sales in 2022 was MUSD 149.4 (2021:
MUSD 113.5), a 32 percent increase compared to 2021. The
increase in revenue was driven by a 50 percent increase in Achieved
oil price, offsetting the lower sales volumes. Achieved oil price was
USD 94.2 per barrel (2021 USD 62.8).
The shift to an underlift position of 66,961 barrels from an overlift
position of 11,886 at the end of 2021, and an increased oil price
resulted an adjustment of MUSD 7.1 (MUSD -0.8). The underlift
(overlift) adjustment together with revenue adds up to Revenue
and other income of MUSD 156.5, a 39 percent increase in 2022
compared to MUSD 112.7 in 2021.
40
Revenue and other income
Oil sold, bbl
1,585,534
1,808,857
2,317,875
2,259,849
2,163,148
Underlift (overlift) movement, bbl
78,829
-8,717
-160,490
123,238
70,174
Net barrels produced, after government take, bbl
1,664,363
1,800,140
2,157,385
2,383,086
2,233,322
2022
2021
2020
2019
2018
Achieved oil price, USD/bbl
Revenue, MUSD
Underlift (overlift) adjustments, MUSD
Revenue and other income, MUSD
94,2
149.4
7.1
156.5
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
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 vol-
umes. Where the sales volume exceeds the quantity of barrels pro-
duced, an overlift position occurs and where it is less, an underlift
position occurs. During the year, the group shifted its overlift posi-
tion of 11,886 barrels at the end of 2021 to an underlift position
of 66,961 barrels at the 31 December 2022. 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 Sin-
gapore, 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 Sultanate of Oman’s Ministry of Oil and Gas, 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
Production costs,
MUSD
Well workovers, MUSD
Operator G&A and
overhead expenses
Total operating
expenses, MUSD
Operating expenses
per barrel, USD
2022
2021
2020
2019
2018
33.5
5.0
31.0
2.9
29.6
3.1
37.1
4.1
32.8
2.8
11.6
9.9
10.7
10.4
10.3
50.1
43.8
43.4
51.6
45.9
13.8
10.8
10.5
11.0
10.7
Production costs relate to oil production on Blocks 3&4, and com-
prise of expenses for throughput fees, energy, consumables, field
staff, and maintenance. Well workovers and interventions relate to
downhole work including replacing of electric submersible pumps.
Operator G&A and overhead expenses relate to administration as
well as operator overhead.
Production costs, well workovers and operator G&A together
comprise operating expenses, amounting to MUSD 50.1 in 2022
(MUSD 43.8), an increase of 14 percent compared to 2021. The
increase is mainly due to more expensive well workovers driven by
low rig availability and higher production costs mainly caused by
the increase in fuel prices.
Depletion, depreciation and amortisation
2022
2021
2020
2019
2018
DD&A, MUSD
40.5
41.2
44.5
47.6
45.9
DD&A per barrel, USD
11.2
10.1
10.7
10.2
10.7
Depletion, depreciation and amortisation (“DD&A”) is com-
prised of two components; a straight-line depreciation component
and an unit of production component. DD&A in 2022 amounted
to MUSD 40.5 (MUSD 41.2). The lower DD&A is a result of
lower production. The DD&A charge relates to Blocks 3&4 and a
depreciation relating to lease under IFRS 16 of MUSD 0.3.
Netback
USD/bbl
Netback Blocks 3&4
Value of oil produced
(Average OSP)
Government take
Entitlement value
(after government
take)
Operating expenses
Netback
Capex
Netback (Net of
Capex)
2022
2021
2020
2019
2018
95.3
-51.6
64.1
-35.7
47.2
-22.7
63.6
-31.3
69.8
-33.5
43.7
-13.8
29.9
-17.5
28.4
-10.8
17.6
-7.5
24.6
-10.5
14.1
-9.4
32.4
-11.0
21.4
-11.5
36.3
-10.7
25.6
-11.7
12.4
10.1
4.7
9.8
13.9
The increase in Netback is a result of the increased oil price and
higher entitlement. The increase in Netback (net of Capex) is only
a result of the higher oil price as the higher entitlement covered the
increased capital expenditure.
Exploration Costs
Exploration costs recorded in 2022 was MUSD 4.5 (2021: MUSD
4.1) and are mainly related to the write down of three dry explora-
tion wells on Block 3&4, Mubash’er, Ahad-1 and Hamdah-1, as
well as the Sahab-1 well on Block 56. Exploration and appraisal
expenditures are capitalised as they incur and subject to regular
review. Dry or uneconomic wells are expensed when the recover-
ability of the costs is deemed unlikely.
Administrative expenses
Administrative expenses amounted to MUSD 7.3 for 2022 com-
pared to MUSD 7.5 during 2021. Administrative expenses are
mainly salaries, rents, listing costs and external services.
41
Net financial result
The net financial result for 2022 of MUSD 4.7 (MUSD 0.6) has
been impacted by net gain due to changes in foreign exchange
rates resulting from the depreciation 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, 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
2022 is MUSD 59.5 (2021: MUSD 45.0). Income tax of MUSD
0.6 related to Tethys Oil’s income in Gibraltar was recorded in the
income statement in the fourth quarter. Note 14 presents more
information on the treatment of Tethys Oil’s income tax.
Result
Tethys Oil reports a net result after tax for 2022 of MUSD 58.3
(MUSD 16.7), representing earnings per share of USD 1.79
(USD 0.51). The result for 2022 increased compared to 2021 due
to higher oil prices.
Liquidity and financing
Cash and bank as per 31 December 2022 amounted to MUSD
41.5 compared to MUSD 68.6 as per 31 December 2021.
In May 2022, a dividend of SEK 2.00 per share was paid to share-
holders, which in total amounted to MUSD 6.6. Furthermore,
an extra ordinary distribution of 5.00 SEK per share, MUSD
16.2 was distributed to shareholders through a mandatory share
redemption programme.
For the twelve months ended 31 December 2022, the cash flow
from operations amounted to MUSD 87.0 (MUSD 64.9). Cash
flows from investments in oil and gas amounted to MUSD
89.1 (MUSD 35.2). For the twelve months of 2022, free cash
flow (cash flow from operations less investments) amounted to
MUSD -2.3 (MUSD 29.7).
Tethys Oil’s ongoing operations on Blocks 3&4, Block 49, Block
56, and Block 58 in Oman, including investment programme, and
elsewhere are expected to be funded from cash flow from opera-
tions and from available funds.
Investments and work programme
During 2022, total investments in oil and gas properties amounted
to MUSD 89.1 compared to MUSD 35.2 in 2021. In 2022,
investments of MUSD 63.4 related to Blocks 3&4, MUSD 0.4 to
Block 49, MUSD 23.9 to Block 56 and MUSD 1.4 to Block 58.
The increased investment in Blocks 3&4 was mainly the result of
a more extensive drilling programme for Appraisal and Develop-
ment wells. In addition, all plant expansion projects were greatly
increased. The increased spend on Block 56 is the result of 5 wells
being drilled.
Country/
Asset,
MUSD
Book value
31 Dec
2022
Investments
Jan–Dec
2022
Book value
31 Dec
2021
Investments
Jan–Dec
2021
Oman Blocks
3&4
Oman Block 49
Oman Block 56
Oman Block 58
New ventures
Total
198.5
0.6
38.9
8.0
0.1
246.1
63.4
0.4
23.9
1.4
–
89.1
180.9
0.4
16.7
6.6
0.3
204.9
30.4
-7.9
7.9
4.8
–
35.2
Investments Blocks
3&4, MUSD
Drilling
G&G
Facilities
Total investments
Blocks 3&4
2022
2021
2020
2019
2018
30.1
13.4
19.9
17.6
4.1
8.7
19.4
9.2
10.2
25.0
10.1
18.9
25.5
11.2
13.7
63.4
30.4
38.8
54.0
50.4
Investments and work programme 2023
Tethys Oil’s investments in oil and gas properties for 2023 is
expected to amount to MUSD 85–95.
The increase in oil and gas investments compared to 2022 (MUSD:
89) is a result of a combination of deferred spending from 2022 as
well as an increased work programmes in Block 3&4. The majority
of oil and gas investments relating to the Blocks operated by Tethys
Oil are expected to be incurred in the second half of 2023 with
resulting cash flow impact.
Investments on Blocks 3&4 are expected to be MUSD 65–75
(2022: MUSD 63.4). The increased expenditure is due to more
wells, mainly development wells being drilled in addition to wells
carrying over from prior years.
2023 spending on Block 49 is expected to be MUSD 1.5 (2022:
MUSD 0.4) with expenditure focusing on a re-entry and retesting
of the Thameen-1 well including hydraulic fracking.
On Block 56, Tethys Oil’s 2023 investments, including carry
arrangements, is expected to amount to a total of MUSD 8.0
(2022: MUSD 23.8). The expenditure includes one exploration
well in Central area as well as extended well testing of three wells
in the Al Jumd area.
On Block 58 Tethys Oil’s 2023 investments are expected to
amount to MUSD 10.5 (2021: MUSD 1.4) to cover the expense
related the drilling of one exploration well in the Fahd area.
Parent company
The parent company reports a net result after tax for 2022
amounting to MSEK 294.2 compared to MSEK 360.9 for 2021.
Administrative expenses amounted to MSEK 49.7 for 2022 com-
pared to MSEK 40.2 for 2021. Net financial result amounted to
MSEK 327.9 during 2022 compared to MSEK 386.5 for 2021.
Dividends from subsidiaries amounting to MSEK 250.5 and cur-
42
rency exchange differences related to intercompany loans were the
components of the net financial result.
simplify the guidelines. In addition, changes have been made in
respect of severance pay in the context of a change of control of
the Company.
OTHER INFORMATION
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.
Other than the aforementioned agreements, there are no indi-
vidual agreements or similar circumstances relating to the busi-
ness which are of crucial significance for the group’s operations or
profitability.
Board of Directors
At the AGM of shareholders on 18 May 2022 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 distribution of work between the board and the Man-
aging Director. The work procedure is evaluated each year and
revised if deemed appropriate. The board held 14 meetings during
2022. The five members of the board have consisted of four non-
executive directors and the managing director. The board has three
committees – Audit Committee, Remuneration Committee and
Technical Committee. Klas Brand is Chairman of the audit com-
mittee, 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 29 full
time employees (26). Of these, 11 (10) were women. In addition,
Tethys Oil has a number of contractors and consultants engaged
in the group’s operations.
The Company has not received any comments on the guidelines
from shareholders.
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 adoption of these guidelines by the Annual Gen-
eral Meeting 2022.
Application of guidelines
These guidelines apply to remuneration to the Group Executive
Management and to members of the Board of Directors if remu-
neration is paid for work performed outside the scope of the ordi-
nary board work (e.g. pursuant to an employment or consultancy
agreement). As of the date of these guidelines, the Company’s
Group Executive Management are the Managing Director, the
CFO and the CTO.
These guidelines constitute a framework within which remunera-
tion to the Group Executive Management 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, development and production. A central
objective in the group’s business model is to explore for and pro-
duce oil and gas in an economically, socially, and environmentally
responsible way. For more information regarding the group’s stra-
tegic priorities, please refer to the group’s annual reports and the
Company’s website: (www.tethysoil.com).
The Company’s remuneration principles are to ensure responsible
and sustainable remuneration decisions that support the Compa-
ny’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. The remuneration shall be on mar-
ket terms and based on the principles of performance, competi-
tiveness and fairness.
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 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 prac-
tice, remuneration 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.
Remuneration policy 2022
The previous guidelines were approved by the Annual General
Meeting 2020. The changes made are primarily linguistic and to
Elements of remuneration
The remuneration covered by these guidelines may consist of basic
salary, variable cash salary, pension, non-financial benefits and sev-
43
erance pay. In addition hereto, the General Meeting may decide
on, inter alia, long-term incentive programs in which the Group
Executive Management can participate.
Principles for basic salary
The basic salary shall be in line with market conditions, be compet-
itive, and shall take into account the scope and responsibility asso-
ciated with the position, as well as the skills, experience and per-
formance of each member of the Group Executive Management.
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 per cent 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 pre-
determined and measurable performance criteria that reflect the
key drivers for pursuing the Company’s strategy, long-term inter-
ests and sustainable business practices. Such performance criteria
include (but are not limited to) HSE, production, reserves replace-
ment, 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 executive’s achievement of the
performance indicators as described in the agreed individual per-
formance targets.
Payment of variable cash salary shall be conditional upon the
Group Executive Management member remaining employed for
the duration of the qualification period.
Variable cash remuneration shall qualify for pension benefits only
to the extent it is required pursuant to mandatory provisions of
applicable collective bargaining agreements.
The annual variable cash salary may not amount to more than
twelve months’ basic salary and is therefore expected to amount to
no more than 50 per cent of the total remuneration.
Principles for pension benefits
Pension benefits shall comprise a defined contribution scheme
with premiums calculated 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 per cent of the
basic salary and is therefore expected to amount to no more than
25 per cent of total remuneration.
Principles for non-financial benefits
Non-financial benefits shall be based on market terms and shall
facilitate the duties of the Group Executive Management. 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 per cent of the basic salary and is
therefore expected to amount to no more than five 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 members of the Group Executive Management shall not
exceed nine months.
A mutual termination period of twelve months applies between
the Company and the Managing Director and of up to nine
months between the Company and other members of the Group
Executive Management.
Severance pay to the Managing Director and other members of
the Group Executive Management shall not exceed twelve months’
gross basic salary, provided that the employment is terminated
by the Company. In the event a member of the Group Execu-
tive Management terminates his or her employment, no severance
shall be payable.
Notwithstanding the above, in the event of a change of control of
the Company, the Managing Director or other members of the
Group Executive Management may receive severance pay in excess
of twelve months’ basic salary and may receive severance pay even
if notice is given by the executive, provided that the sum of sal-
ary paid during the notice period and the severance pay may not
exceed the equivalent of 24 months’ gross basic salary.
For the purposes of these guidelines, a change of control shall
mean any event whereby a single party (or a group of parties act-
ing in concert), directly or indirectly, controls in excess of 51 per
cent of the shares or votes in the Company (e.g., due to a public
tender offer).
Principles for certain remuneration to members of the
Board of Directors
To the extent members of the Board of Directors perform work
for the Company 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 framework, if any, for such
remuneration, to be approved by the Annual General Meeting.
Long-term incentive programs
Any remuneration resolved upon by the General Meeting is not
covered by these guidelines. Accordingly, these guidelines do not
apply to the Company’s long-term incentive programs resolved
upon by the General Meeting.
The Company’s existing long-term incentive programs are directed
to certain key employees of the group and designed to create con-
ditions for retaining and recruiting competent and committed per-
sonnel to the group. More information on the Company’s existing
and proposed incentive programs from time to time is available on
the Company’s website: (www.tethysoil.com).
In connection with incentive programs resolved on by the General
Meeting, the Company may make such cash payments to the par-
44
ticipants which are compatible with the decisions to implement
or settle such incentive programs (e.g., by making cash payments
to participants who, pursuant to the terms of the programs, are to
receive incentive instruments (e.g., warrants) free of charge or be
compensated for tax effects). Such payments shall not be consid-
ered part of the basic or variable cash salary as they are an integral
part of the incentive programs.
Preparation and review of the compliance of these
guidelines
The Board of Directors has established a Remuneration Com-
mittee to deal with matters of executive compensation and wider
group remuneration. These guidelines have been prepared by
the Remuneration Committee of the Board of Directors and the
Board of Directors. The Remuneration Committee is responsible
for preparation of updated proposals in respect of guidelines for
executive remuneration. A proposal for amended guidelines is to
be prepared by the Remuneration Committee and the Board of
Directors when the need for material amendments arises, but at
least every four years.
Within the scope and on the basis of these guidelines, the Board of
Directors shall, based on the Remuneration Committee’s prepara-
tion and recommendations, annually decide on the specific revised
remuneration terms for each member of the group Executive Man-
agement and make such other decisions in respect of remunera-
tion for member of the Group Executive Management that may
be required.
The members of the Remuneration Committee are independent in
relation to the Company and the Group Executive Management.
The Managing Director and the other members of the Group
Executive Management do not participate in the Board of Direc-
tors’ handling of, or resolutions regarding, remuneration-related
matters if they are affected by such matters.
Derogations from these guidelines
The Board of Directors is entitled to adjust the compensation in
the case of, for example, extraordinary increases or decreases in
the group’s earnings. The Board of Directors may also 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.
Remuneration policy – proposal 2023
The Board of Directors of Tethys Oil AB (publ) (the “Company”)
proposes that the Company shall apply the following guidelines
for executive remuneration agreed after the Annual General Meet-
ing 2023.
Background
The previous guidelines were approved by the Annual General
Meeting 2022. The changes made are primarily linguistic and
related to the variable remuneration and the performance criteria.
The Company has not received any comments on the guidelines
from shareholders.
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 adoption of these guidelines by the Annual Gen-
eral Meeting 2023.
Application of guidelines
These guidelines apply to remuneration to the Group Executive
Management and to members of the Board of Directors if remu-
neration is paid for work performed outside the scope of the ordi-
nary board work (e.g. pursuant to an employment or consultancy
agreement). As of the date of these guidelines, the Company’s
Group Executive Management are the Managing Director, the
CFO, the CTO and the Head of Legal.
These guidelines constitute a framework within which remunera-
tion to the Group Executive Management 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, development and production. A central
objective in the group’s business model is to explore for and pro-
duce oil and gas in an economically, socially, and environmentally
responsible way. For more information regarding the group’s stra-
tegic priorities, please refer to the group’s annual reports and the
Company’s website: (www.tethysoil.com).
The Company’s remuneration principles are to ensure responsible
and sustainable remuneration decisions that support the Compa-
ny’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 group
executives at a reasonable cost. The remuneration shall be on mar-
ket terms and based on the principles of performance, competi-
tiveness and fairness.
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 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 prac-
tice, remuneration 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 guidelines may consist of basic
salary, variable cash salary, pension, non-financial benefits and sev-
erance pay. In addition hereto, the General Meeting may decide
on, inter alia, long-term incentive programs in which the Group
Executive Management can participate.
Principles for fixed salary
The fixed salary shall be in line with market conditions, be compet-
itive, and shall take into account the scope and responsibility asso-
ciated with the position, as well as the skills, experience and per-
formance of each member of the Group Executive Management.
45
On the assumption of payment of full variable salary, pension ben-
efits and other benefits, the fixed salary is expected to amount to
no more than 45 per cent of the total remuneration. If there is no
variable salary, pension benefits or other benefits, the fixed salary
will constitute the entire remuneration.
Principles for variable salary
Variable salary, i.e. cash bonuses, shall be based on a set of pre-
determined and measurable performance criteria that reflect the
key drivers for pursuing the Company’s strategy, long-term inter-
ests and sustainable business practices. Such performance criteria
include (but are not limited to) HSE, ESG, reserves & resources
and financial return 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 executive’s achievement of the
performance indicators as described in the agreed individual per-
formance targets.
Payment of variable salary shall be conditional upon the Group
Executive Management member remaining employed for the
duration of the qualification period.
Variable cash remuneration shall qualify for pension benefits only
to the extent it is required pursuant to mandatory provisions of
applicable collective bargaining agreements.
The annual variable cash salary may not amount to more than
twelve months’ fixed salary and is therefore expected to amount to
no more than 50 per cent of the total remuneration.
Principles for pension benefits
Pension benefits shall comprise a defined contribution scheme
with premiums calculated 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 per cent of the
basic salary and is therefore expected to amount to no more than
25 per cent of total remuneration.
Principles for non-financial benefits
Non-financial benefits shall be based on market terms and shall
facilitate the duties of the Group Executive Management. 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 per cent of the basic salary and is
therefore expected to amount to no more than five 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 members of the Group Executive Management shall not
exceed nine months.
A mutual termination period of twelve months applies between
the Company and the Managing Director and of up to nine
months between the Company and other members of the Group
Executive Management.
Severance pay to the Managing Director and other members of
the Group Executive Management shall not exceed twelve months’
gross basic salary, provided that the employment is terminated
by the Company. In the event a member of the Group Execu-
tive Management terminates his or her employment, no severance
shall be payable.
Notwithstanding the above, in the event of a change of control of
the Company, the Managing Director or other members of the
Group Executive Management may receive severance pay in excess
of twelve months’ basic salary and may receive severance pay even
if notice is given by the executive, provided that the sum of sal-
ary paid during the notice period and the severance pay may not
exceed the equivalent of 24 months’ gross basic salary.
For the purposes of these guidelines, a change of control shall
mean any event whereby a single party (or a group of parties act-
ing in concert), directly or indirectly, controls in excess of 51 per
cent of the shares or votes in the Company (e.g., due to a public
tender offer).
Principles for certain remuneration to members of the
Board of Directors
To the extent members of the Board of Directors perform work
for the Company 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 framework, if any, for such
remuneration, to be approved by the Annual General Meeting.
Long-term incentive programs
Any remuneration resolved upon by the General Meeting is not
covered by these guidelines. Accordingly, these guidelines do not
apply to the Company’s long-term incentive programs resolved
upon by the General Meeting.
The Company’s existing long-term incentive programs are directed
to certain key employees of the group and designed to create con-
ditions for retaining and recruiting competent and committed per-
sonnel to the group. More information on the Company’s existing
and proposed incentive programs from time to time is available on
the Company’s website: (www.tethysoil.com).
In connection with incentive programs resolved on by the General
Meeting, the Company may make such cash payments to the par-
ticipants which are compatible with the decisions to implement
or settle such incentive programs (e.g., by making cash payments
to participants who, pursuant to the terms of the programs, are to
receive incentive instruments (e.g., warrants) free of charge or be
compensated for tax effects). Such payments shall not be consid-
ered part of the basic or variable cash salary as they are an integral
part of the incentive programs.
46
Preparation and review of the compliance of these
guidelines
The Board of Directors has established a Remuneration Com-
mittee to deal with matters of executive compensation and wider
group remuneration. These guidelines have been prepared by
the Remuneration Committee of the Board of Directors and the
Board of Directors. The Remuneration Committee is responsible
for preparation of updated proposals in respect of guidelines for
executive remuneration. A proposal for amended guidelines is to
be prepared by the Remuneration Committee and the Board of
Directors when the need for material amendments arises, but at
least every four years.
Within the scope and on the basis of these guidelines, the Board of
Directors shall, based on the Remuneration Committee’s prepara-
tion and recommendations, annually decide on the specific revised
remuneration terms for each member of the Group Executive
Management and make such other decisions in respect of remu-
neration for member of the Group Executive Management that
may be required.
The members of the Remuneration Committee are independent in
relation to the Company and the Group Executive Management.
The Managing Director and the other members of the Group
Executive Management do not participate in the Board of Direc-
tors’ handling of, or resolutions regarding, remuneration-related
matters if they are affected by such matters.
Derogations from these guidelines
The Board of Directors is entitled to adjust the compensation in
the case of, for example, extraordinary increases or decreases in
the group’s earnings. The Board of Directors may also 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.
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
percent of the licence. Consequently, Tethys Oil has an effective
25% interest in the Gargzdai licence. The holding in Gargzdai is
consolidated through the equity method in Tethys Oil’s financial
statements and is presented in the balance sheet under “Invest-
ments in associates” and in the income statement as “Share of net
result from associates”.
As at 31 December 2022, the value of the shareholding in the
associated Danish company Odin Energy A/S which has the hold-
ing in the Lithuanian Gargzdai licences, amounted to MUSD 0.0
compared to MUSD 0.0 at the end of 2021. As such, the holding
is not presented in the balance sheet. During the third quarter
2022 Tethys Oil received dividend of MUSD 0.1 from the Odin
Energy A/S (2021: MUSD: 0.0). The book value related to Mini-
jos Nafta (Gargzdai) is zero and there are no formal or informal
obligations related to Minijos Nafta. Tethys Oil does not recog-
nize, any net result from Minijos Nafta.
Share data
As at 31 December 2022, 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 at 31 December 2022, Tethys Oil held 738,351 of its own
shares which were purchased since the restart of the share repur-
chase programme in the third quarter 2022. 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 programs. A total of
263,678 shares were purchased by the Company in 2022. The
repurchased shares are still included in the total number of shares
but are not included in the average number of shares outstand-
ing. The weighted average number of shares outstanding during
2022 before dilution is 32,435,616 and after dilution 32,531,314.
After 31 December 2022 and up to and including 31 March
2023, Tethys Oil has acquired a further 367,755 shares. A weekly
updated list of Tethys Oil’s repurchases is available on the Com-
pany’s website.
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 19. More information on Tethys Oil’s share can be
found on page 26-28 in the Annual Report.
Seasonal effects
Tethys Oil has no significant seasonal variations.
Transactions with related parties
See note 20.
Risk and uncertainties
A statement of risks and uncertainties are presented in note 1 on
page 63.
Appropriation of profit
The Board of Directors proposes a dividend of SEK 2.00 per share
(AGM 2022: SEK 2.00) equal to MSEK 64.6 (MSEK 65.2) to
be distributed in November. The Board of Directors proposes an
extraordinary distribution of SEK 3.00 per share (AGM 2022:
SEK 5.00) by way of a mandatory share redemption programme
following the AGM 2023 equal to MSEK 97.0 (MSEK 162.9).
47
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
2022
148.2
294.2
442.4
2021
25.3
360.9
386.2
The Board of Directors proposes that these earnings be appropriated as follows:
To the shareholders, a distribution of SEK 2.00
per share (AGM 2022: SEK 2.00)
To the shareholders, an extraordinary
distribution of SEK 3.00 per share (AGM 2022:
SEK 5.00)
To be retained in the business
64.6
65.2
97.0
280.8
442.4
162.9
158.1
386.2
Dividend and Distribution
The Board of Directors has proposed a cash dividend of SEK 2.00
per share amounting to SEK 64,636,514 at the current number
of shares outstanding (net of treasury shares) and an extraordi-
nary distribution of SEK 3.00 per share amounting to SEK
96,954,771. The dividend and extraordinary distribution are sub-
ject to approval at the AGM 2023. This is a total distribution of
SEK 161,591,285.
The parent company has distributable earnings (unrestricted
equity) of MSEK 442.4 at 31 December 2022. After the dividend
and cash distribution of MSEK 161.6. the parent company will
have retained earnings of MSEK 280.8.
As per 31 December 2022, the Group’s and the parent company’s
equity ratio amounted to 90 percent and 54 percent, respectively.
After the dividend and distribution, the Group’s and the parent
company’s equity ratio will amount to 90 percent and 45 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 than 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
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, 10
May 2023.
48
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
Depletion, depreciation and amortisation
Exploration costs
Administrative expenses
Share of net result from associates
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:
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, 19
12
13
14
16
16
16
16
16
2022
149.4
7.1
156.5
-50.1
106.4
-40.5
-4.5
-7.3
0.1
54.2
23.5
-18.8
4.7
58.9
-0.6
58.3
-5.9
-5.9
52.4
52.4
–
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
–
33,056,608
32,543,670
32,664,523
1.79
1.78
33,056,608
32,619,054
32,660,948
0.51
0.51
49
Consolidated balance sheet
31 December, MUSD
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
Note
2022
2021
7
15
16
6
6
17
246.1
0.8
246.9
26.9
0.7
41.5
69.1
204.9
1.1
206.0
9.2
0.7
68.6
78.5
316.0
284.5
0.8
76.3
-5.6
213.7
285.2
10.8
0.4
11.2
–
19.6
19.6
30.8
0.8
76.3
0.3
179.2
256.6
12.8
0.8
13.6
0.2
14.1
14.3
27.9
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES
316.0
284.5
50
Consolidated statement of changes in equity
MUSD
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
Closing balance 31 December 2021
Opening balance 1 January 2022
Net result 2022
Other comprehensive income 2022
Total comprehensive income
Transactions with owners
Repurchase of shares
Dividend
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2022
Attributable to shareholders of the parent company
Share
capital
Paid in capital
Reserves
Retained earnings
Total equity
1.8
–
-1.5
-1.5
–
–
–
–
0.0
0.3
0.3
–
-5.9
-5.9
–
–
–
–
0.0
-5.6
178.8
16.7
–
16.7
-1.0
-7.8
-7.7
0.2
-16.3
179.2
179.2
58.3
–
58.3
-1.6
-6.6
-16.2
0.6
-23.8
213.7
257.7
16.7
-1.5
15.2
-1.0
-7.8
-7.7
0.2
-16.3
256.6
256.6
58.3
-5.9
52.4
-1.6
-6.6
-16.2
0.6
-23.8
285.2
0.8
–
–
0.0
–
–
–
–
0.0
0.8
0.8
–
–
0.0
–
–
–
–
0.0
0.8
76.3
–
–
0.0
–
–
–
–
0.0
76.3
76.3
–
–
0.0
–
–
–
–
0.0
76.3
51
Consolidated cash flow statement
1 January – 31 December, MUSD
Note
Cash flow from operations
Profit before tax
Adjustments for:
Depletion and depreciation
Exploration costs
Other non-cash items
Total cash flow from operations before change in working capital
Change in receivables
Change in liabilities
Cash flow from operations
Investment activity
Investment in oil and gas properties
Investment in other fixed assets
Dividend from associates
Cash flow from investment activity
Financing activity
Repurchase of shares
Dividend
Share redemption
Incentive programme
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
7
7
7
16
2022
58.9
40.5
4.5
-4.4
99.5
-17.7
5.2
87.0
-89.1
-0.3
0.1
-89.3
-1.6
-6.6
-16.2
-0.2
-24.6
-26.9
68.6
-0.2
41.5
2021
16.7
41.1
4.1
-0.7
61.2
-0.6
4.3
64.9
-35.2
–
–
-35.2
-1.0
-7.8
-7.7
–
-16.5
13.2
55.4
–
68.6
52
Financial statements for the parent company
Parent company income statement
1 January – 31 December, MSEK
Other income
Administrative expenses
Share of net result from associates
Exploration costs
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, 19
7
12
13
14
2022
14.8
-49.7
1.6
-0.4
-33.7
552.4
-224.5
327.9
294.2
–
294.2
2021
14.6
-40.2
–
–
-25.6
505.2
-118.7
386.5
360.9
–
360.9
1 As there are no items in the parent company’s other comprehensive income, no separate report on total comprehensive income is presented.
53
Parent company balance sheet
31 December, MSEK
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
Note
2022
2021
7
18
20
15
16
17
20
–
1.0
903.2
904.2
3.2
5,1
47,6
55.9
0.4
1.0
509.1
510.5
2.3
0.8
76.8
79.9
960.1
590.4
6.0
71.1
530.3
-382.1
294.2
519.5
10.9
429.7
440.6
960.1
6.0
71.1
530.3
-505.0
360.9
463.3
7.9
119.2
127.1
590.4
54
Parent company statement of changes in equity
MSEK
Opening balance 1 January 2021
Transfer of prior year net result
Net result 2021
Total comprehensive income
Transactions with owners
Repurchase of shares
Dividend
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2021
Opening balance 1 January 2022
Transfer of prior year net result
Net result 2022
Total comprehensive income
Transactions with owners
Repurchase of shares
Dividend
Share redemption
Incentive programme
Total transactions with owners
Closing balance 31 December 2022
Restricted equity
Unrestricted equity
Share
capital
Statutory
reserve
Share
premium
reserve
Retained
earnings
6.0
–
–
0.0
–
–
–
–
0.0
6.0
6.0
–
–
0.0
–
–
–
–
0.0
6.0
71.1
530.3
–
–
0.0
–
–
–
–
0.0
71.1
–
–
0.0
–
–
–
–
0.0
530.3
71.1
530.3
–
–
0.0
–
–
–
–
0.0
71.1
–
–
0.0
–
–
–
–
0.0
530.3
-390.2
22.7
–
0.0
-8.7
-65.2
-65.2
1.7
-137.5
-505.0
-505.0
360.9
–
0.0
-15.9
-65.2
-162.9
6.0
-238.0
-382.1
Net
result
22.7
-22.7
360.9
360.9
–
–
–
–
0.0
360.9
360.9
-360.9
294.2
294.2
–
–
–
–
0.0
294.2
Total equity
239.9
–
360.9
360.9
-8.7
-65.2
-65.2
1.7
-137.5
463.3
463.3
–
294.2
294.2
-15.9
-65.2
-162.9
6.0
-238.0
519.5
55
Parent company cash flow statement
1 January – 31 December, MSEK
Note
2022
2021
Cash flow from operations
Profit before tax
Adjustments for:
Dividend from Group company
Net exchange differences
Finance costs − net
Other non-cash items
Total cash flow from operations before change in working capital
Change in receivables
Change in liabilities
Cash flow from operations
Investment activity
Dividend from associates
Investment in oil and gas properties
Cash flow from investment activity
Financing activity
Financing from long term receivables
Repurchased shares
Dividend payment
Share redemption
Incentive programme
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, 13
12, 13
7
16
294.2
-250.5
-52.1
-25.1
-11.4
-44.9
-5.2
3.0
-47.1
1.6
0.0
1.6
254.5
-15.9
-65.2
-162.9
-1.6
8.9
-36.6
76.8
7.4
47.6
360.9
-350.0
-11.6
-24.9
-29.7
-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
56
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 Oman and Lithuania. The Company is a limited liability
company incorporated and domiciled in Stockholm, Sweden. The Company
is listed on Nasdaq Stockholm.
The consolidated financial statements of Tethys Oil AB and its subsidiar-
ies (collectively referred to as the Group) for the year ended 31 December
2022 have been approved by the Board of Directors on 17 April 2023.
Basis of preparation
The consolidated financial statements of the Tethys Oil AB group have been
prepared in accordance with prevailing International Financial Reporting
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 Parent Company financial statements have been prepared in accord-
ance with the Annual Accounts Act and Swedish Financial Accounting
Standards Council’s RFR 2 “Accounting for legal entities”. RFR 2 means
that the Parent Company in the annual report for the legal entity shall apply
IFRS’ rules and statements as adopted by the EU, so far this is possible
within the framework of the Annual Accounts Act and with regard to the
connection between accounting and taxation. The recommendation states
which exceptions and additions that shall be or are allowed to be made
from IFRS. The accounting principles of the Parent Company are the same
as for the Group, except in the cases specified below in the section entitled
“Parent Company accounting principles”.
control is transferred to the Group. They are deconsolidated from the date
that control ceases.
The financial statements of subsidiaries are prepared for the same report-
ing year as the Parent Company, using consistent accounting policies.
Subsidiaries are consolidated from the date of their acquisition, being the
date on which the Group obtains control, including when control is obtained
via potential voting rights, and continue to be consolidated until 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 con-
tingent liabilities 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-con-
trolling interest in the acquired asset either at fair value or at the non-
controlling interest’s proportionate share of the acquired net assets.
Intra-group balances and transactions, including unrealized profits arising
from intra-group transactions, are eliminated. Unrealized losses are elimi-
nated unless the transaction provides evidence of an impairment of the
asset transferred.
Non-controlling interests represent the equity in subsidiaries that is not
attributable, directly or indirectly, to the Group shareholders.
The consolidated financial statements have been prepared on a going con-
cern basis and in accordance with the framework described above and
effective for the year ended 31 December 2022. The accounting policies
that follow have been consistently applied to all years presented, except
where otherwise indicated.
Non-controlling interests in the results and equity of subsidiaries are shown
separately in the consolidated statement of profit or loss, statement of
comprehensive income, statement of changes in equity and balance sheet
respectively.
The consolidated financial statements have been prepared under the his-
torical cost basis unless disclosed in the accounting policies below.
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.
(ii) Associates
Associates are entities over which the group has significant influence but
not control or joint control. This is generally the case where the group holds
between 20% and 50% of the voting rights. Investments in associates are
accounted for using the equity method of accounting after initially being rec-
ognised at cost. Share of net profit or loss from an associate is accounted
for as increase/decrease of the initial investment. Dividends received or
receivable from associates are recognised as a reduction in the carrying
amount of the investment.
IASB issued several amended accounting standards that were endorsed by
EU, effective date 1 January 2022. None of these had a material effect on
the Group financial statements 2022.
Accounting policies of associates are changed where necessary to ensure
consistency with the policies adopted by the Group.
Certain new accounting standards, amendments to accounting standards
and interpretations have been published that are not mandatory for 31
December 2022 reporting periods and have not been early adopted by the
group. These standards, amendments or interpretations are not expected
to have a material impact on the entity in the current or future reporting
periods and on foreseeable future transactions.
Under the equity method of accounting, the investments are initially recog-
nised at cost and adjusted thereafter to recognise the group’s share of the
post-acquisition profits or losses of the investee in profit or loss, and the
group’s share of movements in other comprehensive income of the inves-
tee in other comprehensive income. Dividends received or receivable from
associates and joint ventures are recognised as a reduction in the carrying
amount of the investment.
Basis of consolidation
The consolidated group financial statements consolidate the financial
statements of Tethys Oil AB and its subsidiaries are prepared as of 31
December each year.
Where the group’s share of losses in an equity-accounted investment
equals or exceeds its interest in the entity, including any other unsecured
long-term receivables, the group does not recognise further losses, unless
it has incurred obligations or made payments on behalf of the other entity.
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity where 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 to direct the activi-
ties of the entity. Subsidiaries are fully consolidated from the date on which
Unrealised gains on transactions between the group and its associates and
joint ventures are eliminated to the extent of the group’s interest in these
entities. Unrealised losses are also eliminated unless the transaction pro-
vides evidence of an impairment of the asset transferred.
Financial statements of equity-accounted entities are prepared for the
same reporting year as the group. Where material differences arise in the
57
accounting policies used by the equity-accounted entity and those used by
Tethys Oil, adjustments are made to those financial statements to bring the
accounting policies used into line with those of the group.
banken Sverige) rates of exchange prevailing at the balance sheet date
and foreign exchange currency differences are recognized in the income
statement.
The carrying amount of equity-accounted investments is tested for impair-
ment in accordance with the policy described below.
Transactions in foreign currencies are translated into the functional cur-
rency at exchange rates prevailing at the transaction date. Exchange differ-
ences are included in financial income/expenses in the income statement.
(iii) 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 conducts oil and gas operations as a joint operation that does
not have a separate 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.
Joint ventures
Interests in joint ventures are accounted for using the equity method (see
below), after initially being recognised at cost in the consolidated balance
sheet. Tethys Oil group has no joint ventures.
Changes in ownership interests
The group treats transactions with non-controlling interests that do not
result in a loss of control as transactions with equity owners of the group.
A change in ownership interest results in an adjustment between the carry-
ing amounts of the controlling and non-controlling interests to reflect their
relative interests in the subsidiary. Any difference between the amount of
the adjustment to non-controlling interests and any consideration paid or
received is recognised in a separate reserve within equity attributable to
owners of Tethys Oil AB group.
When the group ceases to consolidate or equity account for an invest-
ment because of a loss of control, joint control or significant influence, any
retained interest in the entity is remeasured to its fair value, with the change
in carrying amount recognised in profit or loss. This fair value becomes the
initial carrying amount for the purposes of subsequently accounting for the
retained interest as an associate, joint venture or financial asset. In addi-
tion, any amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the group had directly disposed
of the related assets or liabilities. This may mean that amounts previously
recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a joint venture or an associate is reduced but
joint control or significant influence is retained, only a proportionate share
of the amounts previously recognised in other comprehensive income are
reclassified to profit or loss where appropriate.
Foreign currency translation
(i) Functional and presentation currency
The US dollar is the presentation currency of the Group. In management’s
view this provides the most meaningful information about the company’s
performance and results to the Group’s management and shareholders.
The functional currency of each of the Group’s consolidated entities is the
currency of the primary economic environment in which the entity operates.
The Group’s most significant subsidiaries’ functional currency is USD, as
being most common for oil and gas industry.
Foreign exchange gains and losses that relate to borrowings are presented
in the statement of profit or loss, within finance costs. All other foreign
exchange gains and losses are presented in the statement of profit or loss
on a net basis within other gains/(losses).
Group companies
The results and financial position of foreign operations or entity that have a
functional currency different from the presentation currency are translated
into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at
the closing exchange rate at the date of that balance sheet,
• income and expenses for each income statement and statement of com-
prehensive income are translated at the average exchange rate, except
for transactions where it is more relevant to use the rate of the day of
the transaction, and
• the translation differences which arise are recorded directly in the for-
eign 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.
For the preparation of the financial statements for the reporting period, the
following exchange rates have been used:
31 December 2022
31 December 2021
Currency
Average
Period end
Average
Period end
SEK/USD
10.12
10.44
8.56
9.04
Segment reporting
Primary operating segments are split between producing and non-producing
oil and gas properties and geographic perspective is reported as secondary
segment information. Both segments are reported in a manner consistent
with the internal reporting provided to the Executive Management.
Classification of assets and liabilities
Non-current assets, long-term liabilities and provisions consist for the most
part solely of amounts that are expected to be recovered or paid more than
twelve months after the balance sheet date. Current assets and current
liabilities consist solely of amounts that are expected to be recovered or
paid within twelve months after the balance sheet date.
Oil and gas properties
Oil and gas properties are initially recorded at historical cost, where it is
probable that they will generate future economic benefits.
Oil and gas properties are all costs for acquiring concessions, licences or
interests in production sharing contracts and for the survey, drilling and
development of such interests and are capitalised on a field area cost cen-
tre basis. This includes capitalisation of decommissioning and restoration
costs associated with provisions for asset retirement (see “Provisions”).
Oil and gas properties are subsequently carried at cost less accumulated
depreciation, depletion, and amortization (including any impairment).
Gains and losses on disposals of oil and gas properties are determined by
comparing the proceeds with the carrying amounts of assets sold and are
recognised in the income statement.
Routine maintenance and repair costs for producing assets are expensed
to the income statement when they are incurred.
Tethys Oil AB’s (the Parent Company) functional currency is Swedish Krona
(‘SEK’) as the company is domicile in Sweden and run most of its business
primarily in SEK. Accordingly, Tethys Oil AB’s (Parent Company) presentation
currency is SEK.
Oil and gas properties are categorised as either producing or non-producing.
Depreciation, depletion and amortization
No depreciation or amortisation is charged during the exploration and eval-
uation phase.
(ii) Transactions and balances
Parent Company
Monetary assets and liabilities denominated in foreign currencies are trans-
lated into the functional currency at the National Bank of Sweden (Riks-
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,
58
in which case the straight-line method is applied. In accordance with the
unit of production method, net capitalised costs to reporting date, together
with anticipated future capital costs for the development of the proved
and probable reserves determined at the balance sheet date price levels,
are depleted based on the year’s production in relation to estimated total
proved and probable reserves of oil and gas. Depletion of a field area is
charged to the income statement once commercial production commences,
under category Depreciation, depletion and amortisation.
Commercial reserves
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
The Group adopts the successful efforts method of accounting for explora-
tion and evaluation costs. Exploration costs related to non-producing oil
and gas properties are charged to the income statement when a decision
is made not to proceed with an oil and gas project, or when the expected
future economic benefits of an oil and gas project are less than the capi-
talised costs. No depletion is charged to non-producing oil and gas prop-
erties. Costs related to non-producing oil and gas properties and directly
associated with an exploration well are capitalised until the determination
of commercial 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. Once the commercial reserves
are found, and the commercial production commences, exploration assets
are tested for impairment and transferred to producing assets.
Impairment of Oil and Gas Properties
Tethys Oil continuously assesses its producing oil and gas properties for
any need for impairment. This is performed in conjunction with each balance
sheet date or if there are trigger events or changes in circumstances that
indicate that the carrying values of assets may not be recoverable. Such
indicators 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 a licence right, production sharing agreement or
equivalent owned by Tethys Oil. A cash generating unit usually corresponds
to each acquired asset 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 2
under the section Impairment testing. An impairment loss is recorded when
the book value of an asset or a cash generating unit exceeds the recover-
able amount. Impairment losses are charged to the income statement.
Tangible assets other than oil and gas
Other tangible assets are stated at cost less accumulated depreciation.
Depreciation is based on cost and is calculated on a straight-line basis
over the estimated economic life of 3 to 5 years for office equipment and
other assets.
Additional costs to existing assets are included in the assets’ net book
value or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably.
The net book value of any replaced parts is written off. Other additional
expenses are deemed to be repair and maintenance costs and are charged
to the income statement when they are incurred. The net book value is writ-
ten down immediately to its recoverable amount when the net book value
is higher. The recoverable amount is the higher of an asset’s fair value less
cost to sell and value in use.
Gains and losses on disposals are determined by comparing proceeds
with carrying amounts. These are included in profit or loss. When revalued
assets are sold any amounts included in other reserves in respect of those
assets transferred to retained earnings.
Cash and cash equivalents
For presentation in the statement of cash flows, cash and cash equiva-
lents includes cash on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value, and bank over-
drafts. Bank overdrafts are shown within borrowings in current liabilities in
the balance sheet.
Borrowing costs
Borrowing costs attributable to the acquisition, construction or produc-
tion of qualifying assets are added to the cost of those assets. Qualifying
assets are assets that take a substantial period of time to complete for
their intended use or sale. Investment income earned on the temporary
investment of specific borrowings pending to be used for the qualifying
asset, is deducted from the borrowing costs eligible for capitalisation. This
applies to the interest on borrowings to finance fields under development
which is capitalised within oil and gas properties until production com-
mences. All other borrowing costs are recognised in the income statement
in the period in which they occur. Interest on borrowings to finance the
acquisition of producing oil and gas properties is charged to the income
statement as incurred.
Provisions
General provision
Provisions for legal claims and other obligations are recognised when the
group has a present legal or constructive obligation as a result of past
events, and it is probable that an outflow of resources will be required to
settle the obligation, and the amount can be reliably estimated. Provisions
are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an out-
flow will be required in settlement is determined by considering the class
of obligations as a whole. A provision is recognised even if the likelihood
of an outflow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of management’s best esti-
mate of the expenditure required to settle the present obligation at the end
of the reporting period. The discount rate used to determine the present
value is a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The increase in the
provision due to the passage of time is recognised as interest expense.
Site restoration provision
Site restoration work is the work anticipated at the end of the useful life of
a production unit or when other installation may be required by law, by the
terms of operating licences or by an entity’s stated policy and past practice.
Amounts used in recording a provision for site restoration are estimated
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 annual 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.
Financial Instruments
Financial assets and financial liabilities are recognised when a group entity
becomes a party to the contractual provisions of the instruments.
59
Financial assets and financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets
Financial assets are classified into financial assets measured at fair value
through profit or loss or fair value through other comprehensive income
or at amortised cost. The Group determines the classification at initial
recognition.
Financial assets are classified as financial assets measured at amortised
cost if both of the following conditions are met:
• The asset is held within a business model whose objective is to hold
assets in order to collect contractual cash flows;
• The contractual terms of the financial asset give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Otherwise, they are classified as financial assets measured at fair value.
The Group does not have any financial assets measured at fair value
through other comprehensive income (hereinafter referred to as FVTOCI.
After initial recognition, financial assets are measured based on the follow-
ing classification:
• Financial assets measured at amortised cost are measured at amor-
tised cost using the effective interest method.
• Financial assets other than those measured at amortised cost are
measured at fair value through profit and loss.
In contrast, 12-month ECL represents the portion of lifetime ECL that is
expected to result from default events on a financial instrument that are
possible within 12 months after the reporting date. Expected credit losses
are recognized in the consolidated statement of profit and loss within the
financial costs. The Group de-recognises a financial asset when the con-
tractual rights to the cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and rewards of ownership
of the asset to another party. On de-recognition of a financial asset in its
entirety, the difference between the asset's carrying amount and the sum of
the consideration received and receivable and the cumulative gain or loss
that had been recognised in other comprehensive income and accumulated
in equity is recognised in profit or loss.
Financial liabilities
All financial liabilities are measured at fair value at initial recognition. How-
ever, financial liabilities measured at amortised cost are measured at cost
after deducting transaction costs that are directly attributable to the finan-
cial liabilities. Financial liabilities are subsequently measured at amortised
cost using the effective interest method, except for derivatives measured
at fair value through profit or loss. The Group determines the classification
at initial recognition.
After initial recognition, financial liabilities are measured based on the fol-
lowing classification:
• Financial liabilities measured at amortised cost are measured at amor-
tised cost using the effective interest method. Amortisation under the
effective interest method and gains or losses on de-recognition are rec-
ognised as profit or loss in the consolidated statement of income.
• Financial liabilities measured at fair value through profit or loss include
financial liabilities held for trading and financial liabilities designated as
measured at fair value through profit or loss at initial recognition. The net
gain or loss recognised in the consolidated statement of profit or loss
incorporates any interest paid on the financial liability and is included in
the gain/(loss) on derivative financial instruments and investments, net.
The Group’s financial assets include cash and cash equivalents, trade and
other receivables and loans issued.
The Group’s financial liabilities may include loans and borrowings and trade
and other payables.
All regular way purchases or sales of financial assets are recognised and
de-recognised on a trade date basis. Regular way purchases or sales are
purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Loans
and receivables (including trade and other receivables, bank balances and
cash) are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the effect of discount-
ing is immaterial.
Impairment and de-recognition of financial assets
In accordance with IFRS 9, the Group assesses expected credit losses
on financial assets measured at amortised cost. The Group recognises a
reserve for such expected credit losses at each reporting date. The Group
always recognises lifetime expected credit losses (“ECL”) for its trade and
other receivables (the “simplified approach” under IFRS 9) and updates
this expectation at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument. The expected
credit losses on these financial assets are estimated using a provision
matrix based on the Group’s historical credit loss experience, adjusted
for factors that are specific to the debtors, general economic conditions
and an assessment of both the current as well as the forecast direction
of conditions at the reporting date, including time value of money where
appropriate.
For all other financial instruments, the Group recognises lifetime ECL when
there has been a significant increase in credit risk since initial recogni-
tion. If, on the other hand, the credit risk on the financial instrument has
not increased significantly since initial recognition, the Group measures
the loss allowance for that financial instrument at an amount equal to
12-month ECL. The assessment of whether lifetime ECL should be recog-
nised is based on significant increases in the likelihood or risk of a default
occurring since initial recognition instead of on evidence of a financial asset
being credit-impaired at the reporting date or an actual default occurring.
Lifetime ECL represents the expected credit losses that will result from all
possible default events over the expected life of a financial instrument.
Financial liabilities are recognised initially at fair value plus in the case
of loans and borrowings, directly attributable transaction costs. Any differ-
ence between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings
using the effective interest method.
Loans and borrowing are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Loans and borrowings and trade and other payables are subsequently
measured at amortised cost using the effective interest rate method.
Trade and other payables represent liabilities for goods and services pro-
vided to the Group prior to the end of the financial year which are unpaid.
Accounts and other payables are presented as current liabilities unless pay-
ment is not due within 12 months after the reporting period.
The Group de-recognises financial liabilities when, and only when, the
Group's obligations are discharged, cancelled or have expired. The differ-
ence between the carrying amount of the financial liability de-recognised
and the consideration paid, including any non-cash assets transferred or
liabilities assumed, and payable is recognised in profit and loss as other
income or finance costs.
For investments in equity instruments that are not held for trading, this
will depend on whether the group has made an irrevocable election at the
time of initial recognition to account for the equity investment at fair value
through other comprehensive income (FVOCI).
Equity instruments
The group subsequently measures all equity investments at fair value.
Where the group’s management has elected to present fair value gains and
losses on equity investments in OCI, there is no subsequent reclassifica-
tion of fair value gains and losses to profit or loss following the derecogni-
tion of the investment. Dividends from such investments continue to be rec-
ognised in profit or loss as other income when the group’s right to receive
payments is established. Changes in the fair value of financial assets at
60
FVPL are recognised in other gains/(losses) in the statement of profit or
loss as applicable.
Impairment losses (and reversal of impairment losses) on equity invest-
ments measured at FVOCI are not reported separately from other changes
in fair value.
Impairment of equity instruments
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.
Leases
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.
Assets and liabilities arising from a lease are initially measured on a pre-
sent value basis. Lease liabilities include the net present value of the fol-
lowing lease payments:
• fixed payments (including in-substance fixed payments), less any lease
incentives receivable
• variable lease payments that are based on an index or a rate, initially
measured using the index or rate as at the commencement date
• amounts expected to be payable by the group under residual value
guarantees.
Dividends
Provision is made for the amount of any dividend declared, being appropri-
ately authorised and no longer at the discretion of the entity, on or before
the end of the reporting period but not distributed at the end of the report-
ing period.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the company, excluding any costs of
servicing equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued
during the year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account:
• the after-income tax effect of interest and other financing costs associ-
ated with dilutive potential ordinary shares, and
• the weighted average number of additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
Revenue and Other income
Revenue from sale of crude oil
Revenue from sale of crude oil is 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.
Lease payments are allocated between principal and finance cost. The
finance cost is charged to profit or loss over the lease period to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
The title transfer is the moment when crude oil is loaded onto a tanker on
behalf of the customer. Revenue is only recognised to the extent that it is
highly probable that a significant reversal will not occur.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less any
QBA (Quality Bank Adjustment) is an additional income received by Tethys
Oil from CCED. In substance, this is premium paid for the quality of the
extracted oil being above the average quality of the oil in Omani. QBA is
recognized as part of Revenue from sales of crude oil.
lease incentives received
• any initial direct costs, and
• restoration costs.
Under IFRS 16 Tethys Oil applies the exceptions for short-term leases and
leases for which the underlying asset is of low value e.g. office leases
and IT servers/programmes and other leases of shorter duration or lesser
value.
IFRS 16 Leases does not apply to joint operations unless operated by
Tethys Oil. In the case of joint operations operated by Tethys Oil, the group
recognises its interest share of the value of the underlying assets and
corresponding liabilities of the leases in its consolidated group accounts.
At present Tethys Oil does not have any leases under IFRS 16 from joint
operations in its group accounts.
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.
If 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 Par-
ent 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.
Underlift and overlift adjustment
Lifting arrangements for oil and gas produced in the Companys jointly
owned operations are such that each participant may not receive and sell
its precise share of the overall production in each period. The resulting
imbalance between cumulative entitlement and cumulative liftings is under-
lift or overlift.
Underlift and overlift are valued at market value and included within Trade
and other receivables and Accounts payables and other current liabilities
respectively. Movements during an accounting period are adjusted through
cost of sales such that gross profit is recognized on an entitlement basis.
Underlift or overlift positions are taken into account for future oil sales nom-
inations, aiming at balancing the position. Underlift and overlifts are adjust-
ing Revenue income over the periods and recorded on a separate line.
Other Income
Incidental revenues from the test production of oil and gas are recognised
as Other Income until quantities of proven and probable reserves are deter-
mined or commercial production has commenced.
Income from the sale or farm-out of oil and gas concessions in the explora-
tion stage are reported in the Income Statement net of capital expenditures.
Profit oil and cost recovery in Joint Operation
Tethys Oil’s producing oil and gas property in Oman (Blocks 3&4) is gov-
erned 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 investments and operating expenses (CAPEX and OPEX) incurred. Profit
oil and gas is split between the host government and joint operations par-
ties 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. Joint operations definition and accounting
policy are described in this note above.
61
Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave that are expected to be settled wholly
within 12 months after the end of the period in which the employees render
the related service are recognised in respect of employees’ services up to
the end of the reporting period and are measured at the amounts expected
to be paid when the liabilities are settled. The liabilities are presented as
current employee benefit obligations in the balance sheet.
Post-employment obligations /Pension obligations
The group operates various post-employment schemes mostly defined con-
tribution pension plans. For defined contribution plans, the group pays con-
tributions to publicly or privately administered pension insurance plans on
a mandatory, contractual or voluntary basis. The group has no further pay-
ment obligations once the contributions have been paid. The contributions
are recognised as employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash refund
or a reduction in the future payments is available.
Share-based payments
Share-based compensation benefits are provided to employees. Equity
settled share-based payments are recognized in the income statement as
administrative expenses and as equity in the balance sheet. The share-
based 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.
Termination benefits
Termination benefits are payable when employment is terminated by the
group before the normal retirement date, or when an employee accepts
voluntary redundancy in exchange for these benefits. The group recognises
termination benefits at the earlier of the following dates: (a) when the group
can no longer withdraw the offer of those benefits; and (b) when the entity
recognises costs for a restructuring that is within the scope of IAS 37 and
involves the payment of terminations benefits. In the case of an offer made
to encourage voluntary redundancy, the termination benefits are measured
based on the number of employees expected to accept the offer. Benefits
falling due more than 12 months after the end of the reporting period are
discounted to present value.
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 prepared 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 recog-
nised in other comprehensive income or directly in equity. In such 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 financial state-
ments. Deferred income tax assets are recognised only to the extent that
it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Related party transactions
Related parties include shareholders and other related parties (e.g. jointly
controlled entities, associated companies) representing entities that have
significant influence on the Group, and members of key management per-
sonnel 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 Tethys Oil.
Cash Flow Statement
The statement of cash flows is prepared in accordance with the indirect
method. The reported cash flow only covers transactions that have resulted
in payments or disbursements.
Rounding of amounts
All amounts disclosed in the financial statements and notes have been
rounded off to the nearest thousand currency units unless otherwise stated.
Parent Company accounting principles
The Parent Company has prepared its annual report in compliance with the
Swedish Annual Accounts Act and the recommendation RFR 2, Accounting
for Legal Entities of the Swedish Financial Reporting Board. The Annual
Report was prepared on a historical cost basis.
The preparation of financial statements in conformity with RFR 2 requires
the use of certain critical accounting estimates. It also requires manage-
ment to exercise its judgement in the process of applying the Parent Com-
pany’s accounting policies.
The accounting principles of the Parent Company deviate from the account-
ing principles of the group in respect of the following:
Leasing
The Parent Company has chosen not to apply IFRS 16 Leases but has
instead chosen to apply RFR 2 and IFRS 16 Leases p. 2-12. This policy
choice means that no right of-use assets or lease liabilities are recognised
in the balance sheet. Instead, leasing fees are expensed on a straight-line
basis over the lease period. The Parent Company only has office leases and
IT-servers/-programs 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.
All financial assets and liabilities are current and the fair value of these
seems to be the carrying amount as the discounting effects are not
significant.
Subsidiaries:
The Parent Company’s investments in subsidiaries and associates are rec-
ognised using the cost method. The values of subsidiaries are tested for
impairment when there is an indication of a decline in the value.
Shareholders contributions and 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. Shareholder contributions paid by the
Parent Company are recognised as an increase in the holding’s carrying
amount.
Income Taxes
A tax liability is recognised when a future payment, in application of a tax
regulation, is considered probable and can be reasonably estimated. The
exercise of judgment is required to assess the impact of new events on
the amount of the liability. Deferred tax assets are recognised for unused
tax losses to the extent that it is probable that future taxable profits will be
available against which the losses can be utilised. Estimation and judge-
ment are required to determine the value of the deferred tax asset, based
upon the timing and level of future taxable profits.
Information on the Board of Directors and senior executives, as well as
remuneration for these, is disclosed in Note 11 Employees.
The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated finan-
cial statements are disclosed in Note 2.
For disclosures of the Parent Company’s transactions with related parties,
refer to Note 20, Related-party transactions under the Parent Company.
62
Note 1, Risk management
Tethys Oil is engaged in the exploration, development and production of
oil and its operations are subject to various risks and uncertainties which
include but are not limited to those listed below. The risks and uncertain-
ties below are not the only ones that the Group faces.
Non-Financial risks (Operational risks)
Exploration, development and production risks
Tethys Oil is active in the exploration, the appraisal and subsequent devel-
opment and production of oil and natural gas. The operational risks vary
depending upon which of the aforementioned stages Tethys Oil’s operations
are in. The main risks of the exploration phase are related to the geologi-
cal chances of success in encountering hydrocarbons from drilling in the
targeted areas. In addition, the encountered hydrocarbons must be of such
a quality and quantity that they can be developed in a commercial way.
The main risks of the appraisal and development stage are uncertainties
relating to the size and productive capacity of a discovery as well as the
costs and technical challenges associated with bringing it to production.
The main risks of the production phase is the ability to maintain long-term
profitable, safe and sustainable production.
Volatility in oil and gas commodity prices including political risks
Prices for oil is subject to large fluctuations with a variety of factors. These
factors include, but are not limited to: the economic conditions in the
United States, the Sultanate of Oman, Europe and other key markets; gov-
ernmental regulation; political stability in the Middle East, Northern Africa,
Eastern Europe and elsewhere; risks of supply disruption; natural disas-
ters; terrorist attacks; the availability of alternative fuel sources; and the
actions of the Organization of Petroleum Exporting Countries (“OPEC”) and
other major oil producing countries affecting the global output of oil and
natural gas. In recent years OPEC and associated countries have, from
time to time, agreed to voluntary production limitations, and Oman has in
the past participated in such agreements. In the past such limitations had
impact on the Tethys Oil production.
The political risks are closely monitored by Tethys Oil’s management
and factored in when evaluating possible projects. Tethys Oil’s principal
approaches to deal with this risk are assets diversification, emphasis
on continuous close dialogue with host country authorities and interest
groups, nationally and locally. Tethys Oil holds its oil and gas interest
through licences or agreements, directly or indirectly, which are granted
by national governments. Tethys Oil’s operations are often also subject to
local permits.
Prices for oil are also subject to the availability of foreign markets and the
Company’s ability to access such markets. Because of lower prices, the
economics of producing from some wells may change, which could result in
reduced production of oil or natural gas and/or a reduction in the economic
volumes of the Company’s reserves. 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 end of the reporting period.
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)
58.3
5
7.9
58.3
-5
-7.9
Changes in environmental legislation can result in an impact on produc-
tion, or require significant expenditures, Breach of applicable environmental
regulation or legislation may result in liabilities such as the recovery of
the damages, the imposition of fines and penalties, which maybe material.
Access to equipment
An operational risk factor in Tethys Oil’s projects is access to equipment.
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 and other equipment has in the past led to
cost increases and has in part been the cause of project delay.
Key personnel
Tethys Oil is dependent on certain key personnel. These people are impor-
tant 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 personnel. One of key personnel has
founded the Company at the same time as he is among the existing share-
holders and a member of the Board of Directors of the Company.
Licences/ EPSA
Tethys Oil’s direct interests are held through agreements with host coun-
tries, for example licences or exploration and production sharing agree-
ments (EPSA). These agreements have negotiated expiry dates with options
for extension. Standard EPSAs in Oman are awarded with two exploration
phases (initial phase and second phase) which normally have a duration
of three years each. Upon discovery and declaration of commerciality the
operator can apply to enter the production phase which typically has a dura-
tion of 15–30 years. With each exploration phase the operator commits to
a minimum work obligation which usually includes the acquisition of seis-
mic and drilling of wells. In recent years, the Ministry of Energy and Minerals
(MEM) has in several cases granted extensions to an ongoing exploration
phase to allow the operator to complete its work programme and fulfil its
commitments and any subsequent analysis.
Financial risks
The Group’s activities expose it to a variety of financial risks such as foreign
currency exchange rate risk, liquidity risk, credit risk and risk of manage-
ment estimates and assumptions. The Group’s risks are continuously moni-
tored 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 as expenses in foreign subsidiaries, oil and
gas expenditures, or financial instruments may fluctuate due to changes in
rates, which can negatively affect the result, cash flow and equity.
The major proportion of the Group’s assets relate to international oil and
gas discoveries valued in USD and which generate revenues in USD. Dur-
ing the reporting period 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:
Environmental and climate change
Oil and gas operations can be environmentally sensitive. All phases of the
oil and natural gas business present environmental risks and are subject
to environmental regulation pursuant to a variety of laws and regulations
in the jurisdictions where the Company operates. Environmental legisla-
tion 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 etc.
Tethys Oil devotes considerable effort and expense to identify and mitigate
any perceived environmental risk in its operations.
2022
2021
Revenues
100% in USD
100% in USD
Investments in Oil & Gas
100% in USD
99.8% in USD
External financing at year end
No
No
Tethys Oil does not 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 when sufficient amounts of SEK required 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 risk.
63
Translation risk
Exchange-rate changes affect the Group’s operating profit in conjunction
with the translation of the income statements of subsidiaries into 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 Refinancing risk
Liquidity risk is the risk that the Company will not be able to meet its finan-
cial obligations as they fall due.
Tethys Oil is operating in several countries and exposed to currency fluc-
tuations. Income is and will also most likely be denominated in foreign
currencies, US dollars. Furthermore, Tethys Oil has since inception been
equity and debt financed through share and bond issues, bank loans and
financed by asset divestment. Additional capital could be needed to finance
Tethys Oil’s future operations and/or for acquisition of additional licences.
The main risk is that this need could occur during less favourable market
conditions. Tethys Oil continuously ensures that sufficient cash balances
are maintained in order to cover day to day operations. Management relies
on cash forecasting to assess Tethys Oil’s cash position based on expected
future cash flows. All financial liabilities of the Group as at end of 2022 and
2021 are fall due within 12 months.
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 end of each period the
account receivable basically represent the amounts due within the next
month. This is the maximum exposure on accounts receivable. There is no
history of default, and the Group does 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.
The Board of Directors responsibility is 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.
Note 2, Critical accounting estimates and judgements
In preparing consolidated financial statements in conformity with IFRS, esti-
mates and assumptions are used by Tethys Oil management in determining
the reported amounts of assets and liabilities, revenues and expenses rec-
ognized during the periods presented and disclosures of contingent assets
and liabilities known to exist as of the date of the financial statements.
These estimates and assumptions must be made because certain informa-
tion that is used in the preparation of such financial statements is depend-
ent on future events, cannot be calculated with a high degree of precision
from data available, or are not capable of being readily calculated based
on generally accepted methodologies. In some cases, these estimates are
particularly difficult to determine and the Company must exercise signifi-
cant operations judgment. Actual results for all estimates could differ mate-
rially from the estimates and assumptions used by the Company, which
could have a material adverse effect on the Group’s business, financial
condition, results of, cash flows and future prospects. More detailed infor-
mation about significant estimates is presented below.
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.
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. 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. Recent results
are disclosed in the note 7 under the section Impairment testing.
Oil and natural gas price assumptions
The Oil price assumptions are based on 3rd party forecast combined with
market data.
Discount rate assumptions
The discount rates used for impairment testing and provisions continuously
updated during the year in light of changing economic and geopolitical
outlooks.
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.
Income taxes
Tethys Oil has not recorded a deferred tax in relation to the tax losses
carried. Management does not consider the measurement of deferred tax
assets to be a significant accounting estimate.
64
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
on income statement ratios and provided to the executive management,
which is considered to be the chief operating decision maker. Producing
assets include the Company’s non-operated interest in Blocks 3&4. Non-
producing assets include the operated exploration interests in Block 49,
Block 56 and Block 58.
The segment Other includes the head office and other central functions
across the Group as well as the Company’s indirect 25 percent holding
in its Lithuanian associated company Minijos Nafta UAB. The operating
result for each segment is presented below. Revenue and other income
relates to external (non-intra group) transactions and customers. Oman is
Tethys Oil´s only oil producing area from which revenue is generated as
at 31 December 2022 (and comparative period). Revenue, depletion and
operating expenses, which is presented in notes 4, 7 and 8, therefore only
related to Oman and Blocks 3&4. Regarding Oil and gas properties seg-
ment reporting is provided in note 7. Please refer to note 1 regarding credit
risk exposure on accounts receivables.
Producing assets
Non-producing assets
Other
Group income statement Jan-Dec 2022, MUSD
Total
Revenue and other income
Operating expenses
Depreciation, depletion and amortisation
Exploration costs
Administrative expenses
Share of net profit from associate
Operating result
Revenue by country
Revenue and other income
Oman
Other
Group income statement Jan-Dec 2021, MUSD
Total
Revenue and other income
Operating expenses
Depreciation, depletion and amortisation
Exploration costs
Administrative expenses
Operating result
Revenue by country
Revenue and other income
Oman
Other
156.5
-50.1
-40.2
-2.5
-4.6
–
59.1
–
–
–
-1.7
-0.1
–
-1.8
Producing assets
Non-producing assets
156.5
–
–
–
112.7
-43.8
-41.1
–
-2.6
25.2
–
–
–
-4.1
–
-4.1
Producing assets
Non-producing assets
112.7
–
–
–
Oil and Gas properties as of 31 Dec 2022
Producing assets
Non-producing assets
Oil and Gas properties
198.5
47.5
Producing assets
Non-producing assets
Other
–
–
-0.3
-0.3
-2.6
0.1
-3.1
Other
–
–
Other
0.1
–
–
-0.1
–
-4.9
-5.0
Other
–
–
Other
0.3
Total
156.5
-50.1
-40.5
-4.5
-7.3
0.1
54.2
Total
156.5
–
Total
246.1
Total
112.7
-43.8
-41.2
-4.1
-7.5
16.1
Total
112.7
–
Total
204.9
Oil and Gas properties as of 31 Dec 2021
Producing assets
Non-producing assets
Oil and Gas properties
180.9
23.7
Note 4, Revenue and other income
MUSD
Revenue
Underlift (+) / overlift (-), adjustment
Revenue and other income
2022
149.4
7.1
156.5
2021
113.5
-0.8
112.7
Tethys Oil sells all of its oil to Mitsui Energy Trading Singapore, wich is
part of Mitsui & Co Ltd. All oil sales come from Block 3&4 Oman and are
made on a monthly basis. Tethys Oil´s average selling price is based on
the monthly average price of the two-month future contract of oman blend
as traded on the Dubai Mercantile Exchange, including trading and quality
adjustments.
Note 5, Other income
Parts of the administrative expenses in Tethys Oil, such as overhead costs
in the parent company, have been charged out to oil and gas projects within
the group. Other income in the parent company during 2022 amounted
to MSEK 14.8 (14.6). 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 2022
operator in block 49, 56 and 58 in Oman and hold 100% of the licenses
interest in Block 49, 58 and 65% in Block 56.
65
Note 6, Site restoration provision
Tethys Oil estimates that its share of site restoration costs for Blocks 3&4
at year end 2022 amounts to MUSD 10.6 (MUSD 12.8) and for Block 49 to
MUSD 0.2 (MUSD 0.2). As a consequence of the revised value of the site
restoration provision, the value of Oil and Gas properties for Blocks 3&4 have
been reduced by the corresponding amount. The change in provision follows
an annual review of the site restoration calculation which estimates the cost
of plugging all of the wells and removing surface facilities. The value is calcu-
lated using an annual inflation factor of 2 percent, discounted with a risk-free
interest rate of 4.1 percent (2021: 1.9 percent) and a credit spread of 4.0
percent (unchanged from 2021).
MUSD
31 December 2022
31 December 2021
Provisions as of beginning of period
Accretion expense
Impact of changes to discount rate
Change in estimates and provisions
relating to new drilling and installations
Total provision for abandonment
liabilities
13.0
0.8
-5.8
2.8
10.8
Breakdown of the provision to short-term and long-term liabilities
Short-term
Long-term
Total provision for abandonment
liabilities
–
10.8
10.8
12.5
0.7
-1.6
1.4
13.0
0.2
12.8
13.0
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 oil and gas properties
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
Exploration
Block 562
Block 583
Exploration
Exploration
July 2040
Dec 2023
Dec 2023
July 2024
Lithuania
Gargzdai4
Production
No expiration date
30%
100%
65%
100%
25%
CCED, Tethys Oil, Mitsui
Tethys Oil
Tethys Oil, Medco Arabia Ltd, Intaj LLC, and Biyaq Oil Field
Services
Tethys Oil
Odin, GeoNafta, Tethys Oil
1 The contingent final formal goverment approval for the exploration and production sharing
agreement (EPSA) for Block 49 was, in 2022, extended to December 2023. 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 acquisition and
processing and exploratory drilling.
3 Tethys Oil entered into an one year extention of the initial exploration phase of the EPSA
for Block 58, approved on 6 of January 2023. 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 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
31 December 2022
31 December 2021
198.5
47.5
246.1
180.9
24.0
204.9
Tethys Oil’s
31 December
Site restoration
and other
share
30%
100%
65%
100%
2022
Investments
DD&A
adjustments Exploration costs
1 January 2022
198.5
0.6
38.9
8.0
0.1
246.1
63.4
0.4
23.9
1.4
–
89.1
-40.2
–
–
–
–
-3.0
-0.2
–
–
–
-40.2
-3.2
-2.6
–
-1.7
–
-0.2
-4.5
180.9
0.4
16.7
6.6
0.3
204.9
66
MUSD
Licence
Phase
Blocks 3&4
Production
Block 49
Exploration
Block 56
Exploration
Block 58
Exploration
New ventures
Total
MUSD
Producing cost pools
Cost 1 Jan 2022
Investments
Exploration cost
Change in estimates
Cost 31 Dec 2022
Accumulated depreciation 1 Jan 2022
Depletion charge for the year
Accumulated depreciation 31 Dec 2022
Net book value 31 Dec 2022
MUSD
Investments Block 3&4 categories
Drilling
G&G
Facilities
Total
MUSD
Oil & gas properties Block 3&4
categories
Drilling
G&G
Facilities
Total
Tethys Oil’s
31 December
Site restoration
and other
share
30%
100%
65%
100%
2021
Investments
DD&A
adjustments Exploration costs
1 January 2021
180.9
0.4
16.7
6.6
0.3
204.9
30.4
-7.9
7.9
4.8
–
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
Block 3&4
537.7
63.4
-2.6
-3.0
595.5
-356.8
-40.2
-397.0
198.5
2022
30.1
13.4
19.9
63.4
2022
101.5
31.7
65.3
198.5
Total
537.7
MUSD
Producing cost pools
Cost 1 Jan 2021
63.4
Investments
-2.6
-3.0
595.5
Change in estimates
Cost 31 Dec 2021
Accumulated depreciation 1 Jan 2021
-356.8
Depletion charge for the year
-40.2
Accumulated depreciation 31 Dec 2021
-397.0
Net book value 31 Dec 2021
Block 3&4
507.7
30.4
-0.4
537.7
-315.7
-41.1
-356.8
180.9
Summa
507.7
30.4
-0.4
537.7
-315.7
-41.1
-356.8
180.9
198.5
2021
17.6
4.1
8.7
30.4
2021
93.8
27.5
59.5
180.9
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 2022 it was
concluded that no impairment test is required.
Exploration costs related to the write-down of exploration wells at Block 56,
Blocks 3&4 and New venture projects in total of MUSD 4.5 were recorded
in 2022 (2021:MUSD 4.1 in Block 49).
Note 8, Operating expenditure
Note 10, Administrative expenses
Group MUSD
Parent MSEK
Group MUSD
Parent MSEK
Production costs
Well Workovers
Operator G&A and overhead
expenses
Total
2022
-33.5
-5.0
-11.6
-50.1
2021
-31.0
-2.9
-9.9
-43.8
2022
2021
2022
2021
–
–
–
–
–
–
Personnel costs
Rent
Other office costs
Listing costs
Costs of external relations
Other costs
Total
-3.3
-0.4
-0.5
-0.2
-0.1
-2.8
-7.3
-4.0
-0.4
-0.7
-0.2
-0.1
-2.1
-7.5
2022
-23.7
-2.7
-2.9
-1.8
-0.8
-17.8
-49.7
2021
-19.4
-2.4
-2.9
-1.3
-0.5
-13.7
-40.2
Note 9, Remuneration to company auditor
PwC:
Audit fee
Audit-related fees
Other
Audit fees to other audit company
Other
Total
Group MUSD
Parent MSEK
2022
2021
2022
2021
-0.2
0.0
0.0
0.0
-0.1
-0.3
-0.2
0.0
0.0
0.0
–
-0.2
-2.2
-0.2
−
−
−
-1.7
-0.1
-0.4
–
–
-2.4
-2.2
Of the Group total during 2022, MUSD 0.2 (MUSD 0.2) has been in relation
to PwC Sweden.
67
Note 11, Employees
Average number of full time
2022
2021
employees per country
Total
Total men
Total
Total men
Parent company
Sweden
Total parent company
Subsidiary companies in Sweden
Subsidiary companies foreign
Oman
United Arab Emirates
Total subsidiary companies
foreign
Total group
8
8
–
20
1
21
29
5
5
–
13
–
13
18
7
7
–
18
1
19
26
4
4
–
12
–
12
16
MUSD
2022
2021
Salaries, other remuneration
and social costs
Parent company
Sweden
Total parent company
Subsidiary companies in
Sweden
Subsidiary companies foreign
Oman
United Arab Emirates
Total subsidiary companies
foreign
Total group
Salaries,
other
remuner-
ation
Salaries,
other
Social
remuner-
costs
ation
Social
costs
-1.9
-1.9
–
-3.3
-0.1
-3.4
-5.3
-0.4
-0.4
–
–
–
–
-0.4
-1.6
-1.6
–
-2.7
-0.1
-2.8
-4.4
-0.7
-0.7
–
–
–
–
Salaries and other
remuneration
to executive
Pension
Share
based
management during
Basic
arrange-
Variable
2022, MSEK
salary
ments
salary
long term
incentive1
Other
Total
benefits
2022
Managing director
5.078
0.000
0.581
1.399
0.055
7.113
Other executive
management
5.588
0.653
0.951
1.565
0.040
8.797
Total
10.666
0.653
1.533
2.964
0.095 15.910
Salaries and other
remuneration
to executive
management during
2021, MSEK
Pension
arrange-
ments
Basic
salary
Share
based
Variable
salary
long term
incentive1
Other
Total
benefits
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
Total remuneration to executive management increased in 2022 compared
to 2021, mainly as the executive management group increased by one
member. During 2022, the basic salary for the Managing Director increased,
partly due to pension cost decreasing and a corresponding increase in
basic salary. Remuneration to the other members of the executive manage-
ment increased as a result of the addition of one member to the executive
management group. According to the employment contract, the Managing
Director has a mutual notice period of twelve months. If the employment is
terminated by the Company, the Managing Director is entitled to severance
pay corresponding to twelve months' salary, less from the date at new
employment begins at another company.
Remuneration to board member, MSEK
AGM 2023
AGM 2022
AGM 2022 to
AGM 2021 to
Per Seime
-0.7
Robert Anderson
Alexandra Herger
MUSD
2022
2021
Magnus Nordin
Salaries and other remuneration
Board
and
Board
and
Other
distributed between The Board
managing
Other
managing
employ-
and other employees
director
employees
director
ees
Klas Brand
Total
0.800
0.395
0.400
0.000
0.420
2.015
0.800
0.395
0.400
0.000
0.420
2.015
Parent company
Sweden
Total parent company
Subsidiary companies in
Sweden
Subsidiary companies foreign
Oman
United Arab Emirates
Total subsidiary companies
foreign
Total group
-0.7
-0.7
–
–
–
–
-0.7
-1.2
-1.2
–
-3.3
-0.1
-3.4
-4.6
-0.8
-0.8
–
–
–
–
-0.8
-0.8
-0.8
–
-2.7
-0.1
-2.8
-3.6
During 2022 one woman has been a member of the Board of Directors,
compared to one in 2021. One woman has been a member of the execu-
tive management, compared to none in 2021. At the AGM of shareholders
on 18 May 2022, 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 are no agreements on pensions for any
of the directors of the board. For the executive management, the pension
costs follow a defined contribution plan.
1 The Managing director received 60,000 (60,000) and Other executive management
received 100,000 (100,000) warrants in the 2022 incentive programme, totalling
160,000 (160,000) warrants.
Note 12, Financial income and similar items
Group MUSD
Parent MSEK
Interest income
Currency exchange gains
Dividend from group companies
2022
2021
0.3
23.2
–
–
15.2
–
Total
23.5
15.2
2022
67.4
234.5
250.5
552.4
2021
24.9
130.3
350.0
505.2
Note 13, Financial expenses and similar items
Group MUSD
Parent MSEK
Interest expenses
Currency exchange loss
Other financial expenses
Total
–
-18.0
-0.8
-18.8
2022
2021
2022
-42.0
2021
–
–
-13.9
-182.4
-118.7
-0.7
–
0.0
-14.6
-224.5
-118.7
68
Note 14, Tax
The Group's income tax charge amounts to MUSD 0,6 (MUSD –) and is
related to Tethys Oil's income in Gibraltar. 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 generated. Tax losses car-
ried forward amounted to MSEK 219.3 (MSEK 262.2). There are no time
limits for the utilization of tax losses.
The tax expenses 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% (2021: 20,6%)
Non-deductible expenses
Non-taxable income
Utilized (+) / Built up (-) tax loss carry forwards previously not
recorded as deferred tax assets
Tax expense
2022
2021
294.2
360.9
-60.6
-74.3
-0.2
51.9
8.8
0.0
-0.1
72.1
2.3
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 Omani 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 2022 is MUSD 59.5
(MUSD 45.0).
Local income generated in Tethys Oil's Gibraltar subsidiaries are subject to
Gibraltar taxes. Tethys Oil recorded MUSD 0.6 (MUSD −) in tax in Gibraltar
in the period.
Note 15, Trade and other receivables
Trade receivables oil sales
Underlift position
Non-trade receivables
Joint operation receivables
Other receivables
Total
Group MUSD
Parent MSEK
2022
12.5
6.1
4.9
0.1
3.3
26.9
2021
7.2
–
–
1.7
0.3
9.2
2022
2021
–
–
–
–
3.2
3.2
–
–
–
–
2.3
2.3
Note 16, Shareholders’ equity
As at 31 December 2022, the number of issued shares in Tethys Oil
amounted to 33,056,608, with a nominal value of SEK 0.18 (SEK 0.18).
All shares represent one vote each. Tethys Oil has a warrant-based incen-
tive 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 2022 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 32,664,523. For for further informa-
tion please see note 20.
resolved
to grant
the Board of Directors
(“AGM”)
Tethys Oil's Annual General Meeting on 18 May 2022
has
the authorisa-
tion to repurchase up to 10 percent of the company’s shares.
During the fourth quarter Tethys Oil repurchased 186,778 shares. During
the third quarter, Tethys Oil repurchased 76,900 shares. As of 31 Decem-
ber 2022, Tethys Oil held 738,351 shares in treasury – the equivalent
of 2.2 percent of issued shares. Up until 31 March 2023 an additional
367,755 shares were repurchased, bringing Tethys Oil’s number of treas-
ury shares to 1,106,106 as per the publication of this annual report.
For the complete repurchase authorisation, please refer to Tethys Oil’s web-
site www.tethysoil.com.
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
2022: SEK 2.00). Proposed record date is November 2023. The Board of
Directors proposes an extraordinary distribution of SEK 3.00 per share by
way of a mandatory share redemption programme following the AGM 2023
(AGM 2022: SEK 5.00). Further details will be presented in the proposal
to the 2023 AGM.
Note 17, Accounts payable and other current liabilities
Group MUSD
Parent MSEK
31 December 2022
31 December 2021
31 December 2022
31 December 2021
Accounts payable
Joint operations payable
Overlift position
Tax liability
Other current liabilities
Total
0.3
11.6
1.0
–
1.2
14.1
1.7
–
–
–
9.2
10.9
2.2
–
–
5.7
7.9
0.6
16.9
–
0.6
1.5
19.6
69
Note 18, 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
Reg. office
(thousands)
Percentage
Number of shares
Nominal value
per share
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
2022
1.0
−
1.0
SEK 100
SEK 100
SEK 100
EUR 1
GBP 1
USD 1
USD 1
USD 1
USD 1
Parent
2021
1.0
0.0
1.0
Note 19, Incentive programmes
Warrants based 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 have been issued annually since 2015, following a decision by
the respective AGM. Since 2021 warrants are only issued to the Execu-
tive Management. 160,000 (200,000) new warrants were issued in 2022.
In October 2022 the exercise period for the 2019 incentive programme
expired without any warrants having been exercised.
As the share price was below the subscription price for all the active
tranches of the incentive programme for most of 2022, there was limited
dilution effects of the warrants included in the weighted average number
of shares after dilution, which amounted to 32,664,523 during 2022. 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.
Warrant incentive
programme
Subscription
Shares per
Number of warrants
Exercise period
price, SEK
warrant
1 Jan 2022
Issued 2022
Exercised 2022
Expired 2022
31 Dec 2022
2019 incentive programme
1 Jun – 7 Oct, 2022
2020 incentive programme
13 Jun – 6 Oct, 2023
2021 incentive programme
12 Jun – 4 Oct, 2024
2022 incentive programme
18 Aug – 6 Oct 2025
64.90
48.20
70.80
99.50
1.21
1.12
1.07
1.00
350,000
350,000
200,000
–
900,000
–
–
160,000
160,000
–
–
–
–
–
350,000
–
–
–
350,000
–
350,000
200,000
160,000
710,000
Total
Warrant incentive
programme
Subscription
Shares per
Number of warrants
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
Total
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
Warrant incentive programme
Incentive programme cost
Total
Group MUSD
Parent MSEK
2022
0.3
0.3
2021
0.5
0.5
2022
3.5
3.5
–
350,000
350,000
200,000
900,000
2021
4.0
4.0
70
Long-term incentive program 2022–2024
In 2022, Tethys Oil introduced the Tethys Oil Long-Term Incentive Programme
2022–2024 (“LTIP 2022”). The Program is established to form a part of
the incentive and retention program directed to the employees of the Group,
except for Executive Management. The aim is to align the objectives of the
Company´s shareholders and the employees for increasing the value of the
Company in the long-term, to retain the employees at the Company and to
offer them a competitive incentive program that gives them an opportunity to
receive Shares acquired with the Reward.
The Program comprises one (1) three-year (3) Vesting Period. The Vesting
Period covers the financial years of 2022—2024. The Reward is expressed
as a gross cash amount in Swedish Krona (SEK). The maximum limit for the
program is MSEK 6,1 .
A Participant’s Reward is paid in three (3) instalments (30 per cent in con-
nection with the third quarterly report for the financial year 2022, 30 per
cent in connection with the publication of the first quarterly report for the
financial year 2023 and 40 per cent in connection with the publication of the
first quarterly report for the financial year 2024). The net reward (reward net
of applicable taxes) is used for acquiring Reward Shares for the Participant.
The payment of each instalment is conditional on continued employment, and
continued ownership of the Reward Shares purchased within the program.
Note 20, 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 Qatbeet Limited and Tethys Oil Oman Onshore Limited.
During the year, the Company entered into the following significant transac-
tions with related parties.
Transactions with group companies, MSEK
Interest income
Other income
Dividend income
Interest expense
Total
Balance with related parties, MSEK
Receivable from group companies
Total
Balance with related parties, MSEK
Payable to group companies
2022
67.1
14.8
250.5
-42.0
290.4
2022
903.2
903.2
2022
429.7
429.7
2021
36.9
14.6
350.0
-12.0
389.5
2021
509.1
509.1
2021
119.2
119.2
During the financial year 2022, a total amount of 6,008,200 SEK was granted
to the participants of the program to be earned during the vesting period.
Total
In the first installment, a total of 1,802,460 SEK reward was exercised, and a
total of 23,774 Reward Shares were purchased with the net reward.
At the end of the financial year 2022, a total of 4,205,740 SEK remains
outstanding for the remaining installments.
Receivables or payables from related parties arise from the net of pur-
chased services and upstreamed or downstreamed funds between parent
and subsidiaries. The interest rates on receivables are in the range of SOFR
+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.
During 2022 Tethys Oil received dividend of 1,6 MSEK from the associated
company Odin Energy A/S.
Information on the Board of Directors and senior executives, as well as
remuneration for these, is disclosed in Note 11 Employees
Note 21, Pledged assets
The parent company has no pledged assets as per 31 December 2022
(On 31 December 2021, MSEK 0.5 was pledged related to the office rental
space).
Note 22, Contingent liabilities
As part of the farmin transaction with Medco for Block 56 there is further
potential consideration contingent upon a declaration of commerciality.
Note 23, Subsequent events
No significant events have occurred after the end of the reporting period
other than as described in the report.
71
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, 17 April 2023
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 17 April 2023.
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Sophie Damborg
Authorized Public Accountant
72
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
We believe that the audit evidence we have obtained is suf-
ficient and appropriate to provide a basis for our opinions.
Opinions
We have audited the annual accounts and consolidated accounts of
Tethys Oil AB (publ) for the year 2022.
The annual accounts and consolidated accounts of the com-
pany are included on pages 38 – 72 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 2022 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
2022 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 com-
mittee in accordance with the Audit Regulation (537/2014) Arti-
cle 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.
Our audit approach
Audit scope
We designed our audit by determining materiality and assessing the
risks of material misstatement in the consolidated financial state-
ments. In particular, we considered where the management and
the Managing Director made subjective judgements; for example,
in respect of significant accounting estimates that involved mak-
ing 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.
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.
73
Key audit matter
Recoverability of the carrying value of oil and gas
properties
The carrying value of oil and gas properties amounted to
MUSD 246.1 as per 31 December 2022 and the major part
represented by the producing assets in Block 3&4 in Oman.
The oil and gas properties relating to Block 3&4 in Oman
amounted to MUSD 198.5 by 31 December 2022.
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 Block 3&4 in Oman during the year and as per 31 Decem-
ber 2022 it was concluded that no impairment was recorded.
Refer to pages 39–42 in the Directors’ report, page 58–59
in the Accounting Policies and note 2 and 7 in the financial
statements 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 assess-
ment are inherently judgmental. Our audit work therefore
assessed the reasonableness of management’s key judgements
of the recoverable amount of Block 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 1–28
and 34–37. 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 Man-
aging Director are responsible for this other information. The
information in the “Remuneration report 2022”, 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
74
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.
The Audit Committee shall, without prejudice to the Board of
Director’s responsibilities and tasks in general, among other things
oversee the company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether
the annual accounts and consolidated accounts as a whole are free
from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinions. Reasonable
assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs and generally accepted
auditing standards in Sweden will always detect a material mis-
statement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggre-
gate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these annual accounts and
consolidated accounts.
A further description of our responsibility for the audit of the
annual accounts and consolidated accounts is available on Revi-
sorsinspektionen’s website: www.revisorsinspektionen.se/revisorn-
sansvar. This description is part of the auditor´s report.
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
Report on other legal and regulatory
requirements
• in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
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 2022 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
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 2022.
Our examination and our opinion relate only to the statutory
requirements.
75
In our opinion, the Esef report 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 my (our) ethi-
cal 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, individu-
ally 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 validation that the Esef report
has been prepared in a valid XHTML format and a reconciliation
of the Esef report with the audited annual accounts and consoli-
dated accounts.
Furthermore, the procedures also include an assessment of
whether the consolidated statement of financial performance,
financial position, changes in equity, cash flow and disclosures in
the Esef report has been marked with iXBRL in accordance with
what follows from the Esef regulation.
PricewaterhouseCoopers AB, 405 32 Göteborg, was appointed
auditor of Tethys Oil AB (publ) by the general meeting of the
shareholders on the 19 May 2022 and has been the company’s
auditor since the 2001. The company has been listed at Nas-
daqOMX since the 2 May 2013.
Gothenburg, 17 April 2023
PricewaterhouseCoopers AB
Johan Malmqvist
Authorized Public Accountant
Lead Partner
Sophie Damborg
Authorized Public Accountant
76
Tethys Oil’s history
2001
Tethys Oil AB was founded in 2001
2002
Tethys Oil was awarded its first licence onshore Denmark
2004
IPO and listing on First North
2006
First Company-operated well drilled in Denmark
2007
Acquisition of interests in Blocks 3&4, Oman
2009
First drilling as a partner on Blocks 3&4
2010
20 percent of Blocks 3&4 farmed out to Mitsui
First production on Blocks 3&4
2011
Production of over 1,000 bopd
2012
EPSA for Blocks 3&4 extended until 2040
Three-year MSEK 400 bond loan issued
2013
Tethys Oil approved for listing on NASDAQ OMX Stockholm
2014
MSEK 400 bond redeemed
2015
Tethys Oil distributes SEK 3.00 per share to its shareholders
2016
Production in 2016 amounts to 12,235 bopd (before government take)
2017
Tethys Oil awarded Block 49 onshore Oman
2018
Record financial results and successful appraisal of contingent resources
SEK 2.00 paid in dividend; an amount that has been paid yearly since
2019
Record production from Blocks 3&4, Oman
Tethys Oil acquires 20 percent in Block 56 onshore Oman
2020
Tethys Oil awarded Block 58 onshore Oman
Tethys Oil acquires a further 45 percent interest in Block 56
Tethys Oil farms out 50 percent of Block 49
2021
The Thameen-1 exploration well is successfully drilled on Block 49
2022
Extensive and promising exploration activities on Block 56 and Block 58
The appraisal wells Al Jumd- 2, -3 and -4 is drilled on Block 56
Address
Corporate Head Office
Tethys Oil AB (publ)
Hovslagargatan 5B
SE-111 48 Stockholm
Sweden
Telephone: +46 8 505 947 00
Fax: +46 8 505 947 99
E-mail: info@tethysoil.com
www.tethysoil.com
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