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The share price of Tethys Petroleum Ltd. (LSE:TPL) skyrocketed as much as 52% beginning just before the 11:00 hour today on the London Stock Exchange. The extreme increase was stimulated by Tethys releases during the 10:00 hour announcing a farm-out agreement in its assets in Tajikistan. The share price jumped as high as 40.00, having opened at 26.25.
Total S.A. and China National Oil & Gas Exploration Development Company (CNODC) have joined with Kulob Petroleum Ltd., investing in the Bokhtar Production Sharing Contract. Tethys owns an indirect 85% controlling interest in Kulob Petroleum. The terms of the agreement are extremely beneficial for Tethys, especially in the funding structure.
Kulob will receive approximately $60 million USD when Total and CNODC each pay Kulob 33% of the costs already incurred in developing the site. All of the approximately $90 million invested by Kulob was obtained by loans from Tethys. Kulob will be required to use revenues gained through the agreement to pay off the Tethys loans, giving Tethys not only the continuing 85% share of revenues in Kulob, but also an immediate cash windfall. Kulob’s books will be clear of significant debt, and Tethys should be clear of significant aging receivables.
“This is a tremendous deal for Tethys and extremely beneficial for the country of Tajikistan. It rewards us for taking the first steps into Tajikistan in 2006 and validates our extensive technical work to date in exploring and developing giant petroleum deposits and with the new pipelines carrying gas from Central Asia to China providing a potential export route for any sizable gas discovery. This farm-out also provides significant additional funding for our Company to accelerate our other current projects,” declared Tethys President and Executive Chairman, David Robson.
The potential, in terms of gross un-risked mean recoverable boe expected to be available at the Bokhtar PSC. Independent assessors have determined that it has a potential of 27.5 billion boe, made up of 8.5 billion barrels of oil and 114 trillion cubic feet of gas. Product will be transported via pipeline to China.
Tajikistan is a land-locked country bordered by China to the east and Afghanistan to the south. The country’s economic relationship with China is strong. China has been instrumental in financing infrastructure improvements in Tajikistan so that goods may more easily be exported to China, especially oil, gas, and gold. Many Chinese firms like CNDOC have been investing in the resources of Tajikistan.
Tethys is the only independent oil and gas company with operations in three Central Asian Republics, namely Kazakhstan, Uzbekistan, and, of course, Tajikistan. Its PSC in Tajikistan is the country’s first ever.
