Tethys Petroleum Limited, an oil and gas exploration and production company focused on Central Asia and the Caspian Region, said Friday that it has inked an agreement to sell 50% of its Kazakh oil & gas assets to SinoHan Oil and Gas Investment B.V., a subsidiary of HanHong, a Chinese private equity fund. According to terms of the deal, Tethys will receive an initial payment of $75 million for the transaction while SinoHan will acquire a 50% + 1 share in Tethys Kazakhstan SPRL, a unit of Tethys that holds the Kazakh assets.
ALMATY, KAZAKHSTAN–(Marketwired – Nov. 1, 2013) – Tethys Petroleum Limited (“Tethys” or “the Company”) (TSX:TPL)(LSE:TPL), the oil and gas exploration and production company focused on Central Asia and the Caspian Region, today announced that it has entered into a definitive agreement for the sale of 50% of its Kazakh oil & gas assets to SinoHan Oil and Gas Investment B.V. (“SinoHan”), part of HanHong, a Beijing, PRC based private equity fund.
Tethys will receive an initial payment of USD 75 million for this sale.
Additional performance bonus payments will be made to Tethys for the incremental discovery of 2P reserves achieved from the 2013 and 2014 drilling program, and also in profit sharing of excess profit at any exit by SinoHan from the project.
SinoHan will acquire a 50% + 1 share in Tethys Kazakhstan SPRL (“TK SPRL”), the wholly owned subsidiary of Tethys which holds the Kazakh assets.
Tethys will remain as the operator of the Kazakh assets with both partners having equal board representation in TK SPRL.
The sale achieves the following:
USD 75 million cash injection into Tethys, with the potential for future bonuses
Maintain 50% holding in producing asset with significant upside
Fund more extensive and accelerated work program in Kazakhstan
Strategic investor with access to capital and strong Chinese networks in the resource sector
The sale is subject to Kazakh State approvals, including the waiver on pre – emption (Article 36). Closing will take place once these approvals are received.
Dr. David Robson, Chairman and President of Tethys, commented, “We are pleased with this transaction with SinoHan. As well as receiving a USD 75 million cash payment, we have agreed a bonus payment system that provides further cash payments based on the success on our 2013 and 2014 drilling program in adding reserves. Of course, we still own 50% and will also share the success of any further discoveries through this equity ownership as well. It makes sense to us at this stage of our corporate growth to bring in a partner to share 50% of the risk and funding in Kazakhstan, adding to a balanced portfolio company-wide where we have a joint venture with CNPC and Total in Tajikistan, and also a partner on our projects in Georgia. We believe we have further demonstrated our ability to attract reliable, strategic partners to our projects in order to ensure we are fully funded to maximise the returns for shareholders.”
Mr Andrew Macintosh, Group CEO of HanHong Private Equity, commented, “HanHong Private Equity is dedicated to investment in natural resources around the world. Central Asia, especially Kazakhstan, is one of our focus areas. This investment marks the first major oil & gas investment by HanHong in Kazakhstan and we are most excited to form a partnership with Tethys Petroleum for its strong track record and excellent expertise in Central Asia. We strongly believe that the financial resources and Chinese connections of HanHong, together with the sector know-how of Tethys, will accelerate the success of our joint venture.”
Through this transaction SinoHan will acquire a 50% interest (plus 1 share) in Tethys Kazakhstan SPRL which is a wholly owned subsidiary of Tethys and which owns a 100% interest in TethysAralGaz LLP (which holds 100% of the Kyzyloi Gas Production Contract, the Akkulka Gas Production Contract and the Akkulka Exploration Contract), Kul-Bas LLP (which holds a 100% interest in the Kul-Bas Exploration and Production Contract), Tethys Services Kazakhstan LLP (which employs Tethys Kazakh staff) and Transcontinental Oil Transportation SPRL (which holds a 50% interest in Aral Oil Terminal LLP).
The USD 75 million initial cash payment to Tethys includes a base consideration of USD 55 million and USD 20 million towards the cost of an agreed work programme that commenced on July 1st 2013. This work programme includes the currently drilling AKD08 and 09 wells and testing of the KBD01 well.
Two further payments (the First and Second Bonus Payouts) of up to USD 30 million will be made to Tethys for any increase in 2P (proven and probable) oil and gas reserves in calendar years 2013 and 2014 (adjusted for any production in 2013 and 2014).
In addition to the Base Consideration and the First and Second Bonus Payments, Tethys will be eligible to profit sharing of excess profit at any exit by SinoHan from the project.
HanHong is placing a USD 3.88 million deposit into escrow for the transaction. Tethys has no obligation to make any payments, bonus or otherwise, to SinoHan in the event of a sale or other realisation of the value of its investment.
HanHong (SinoHan’s parent):
HanHong Private Equity Management Company Limited was founded in August 2009 and registered in Tianjin China where it was granted the license specialized in dealing private equity management in November of the same year.
The management team of HanHong is composed of experts and professionals from China, United States, Australia and United Kingdom with profound knowledge and experience in finance and natural resources investment and management. HanHong has over US$1 billion under management. www.hanhongpe.com
About Tethys Petroleum (Tethys Kazakhstan’s parent)
Tethys is focused on oil and gas exploration and production activities in Central Asia and the Caspian Region with activities currently in the Republics of Kazakhstan, Tajikistan, Uzbekistan and potential interests in the Republic of Georgia. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.