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Tethys signs gas sales contract in Kazakhstan, moves into positive operating cash flow

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Central Asia-focused oil and gas company Tethys Petroleum (TSX: TPL) has signed a sales contract for the gas from its Akkulka gas field in Kazakhstan, a contract that will move the company into a position of positive operating cash flow.

The contract, for which first deliveries are expected before the end of this month, is expected to double current gas production and more than double current gas revenue.

"The positive operating cash flow provides a strong base to grow from with our planned step up of oil production in Kazakhstan from 750 barrels of oil per day (bopd) currently, to 3-4,000 bopd in Q2 2011, and also planned oil production increases in Uzbekistan from our radial drilling program and new horizontal well," said CFO Bernard Murphy.

The company is also eager to generate cash as it is currently evaluating its Doris oil discovery in Kazakhstan, and exploring for more oil in the immediate area, it said.

Kyzyloi field, which is also know as the company's phase 1 gas production, is already being sold under the long-term take-or-pay contract with Asia Gas at a price of US$36 per thousand cubic metres (Mcm).

The new Akkulka phase 2 contract is also with Asia Gas and is priced at US$38 per Mcm. Gas sold under this contract is for domestic sales and as such subject to a small royalty payment to the Kazakh State, said Tethys.

The Akkulka contract runs for a period of 2 years with both parties agreeing to assess the price after one year.

The average daily contract quantity for phase 2 is expected to be approximately 500 Mcm, which gives a total production for both phases together of approximately 1,000 Mcm per day.

Gas flows from the Kyzyloi and Akkulka fields along a company-built 56 kilometre pipeline to Tethys' booster compressor station, where gas fired compressors compress the gas into the trunkline.

Tethys is focused on oil and gas exploration and production activities in Central Asia, with activities currently in the Republics of Kazakhstan, Tajikistan and Uzbekistan.

Quick facts: TETHYS PETROLEUM LIMITED

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TSX:TPL
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