More issues are surfacing for Tethys Petroleum (TSE:TPL) in the ongoing struggle for financing.
The company has received a default notice from Nostrum Oil & Gas (LON:NOG) in connection with the US$5m facility agreement announced in August.
Tethys does not agree that an event of default has occurred and has submitted a rebuttal of the notification.
The all share offer for Tethys by Nostrum fell apart earlier this month when a major shareholder, Pope Asset Management, rejected the takeover proposal.
It has now emerged that Tethys has admitted that it missed a deadline for cash calls due on an exploration venture with Total (NYSE:TOT) and China’s CNPCOC in Tajikistan. Some US$1.28mln was due for September, while a further US$0.78mln is due in October.
The partners have requested Tethys leave the production sharing contract (PSC).
This follows an earlier claim from the Kazakh Fund Oilsol Investment Group that Tethys had not considered its offer to fund the company and acquire some shares at a premium price to the Nostrum offer.
Oilsol’s proposal gave the possibility of an immediate injection to enable payment to the Tajikistan venture, it claimed.
Tethys responded to the claim and offer by saying it has actively considered proposals from all parties since the exclusivity period ended after October 6.
Amidst this maelstrom of claims and counter claims there is an important issue, according to analyst Sam Wahab, at broker Cantor Fitzgerald. It’s that Tethys may have to leave the Tajikistan PSC.
The analyst said: “If this is the case, and Tethys cannot satisfy the terms to stay in the Tajik PSC, this effectively removes the long-term upside potential that this significant field could yield.”
The field is significant on an international scale with an estimated 27.5bn-barrel resource.
Nevertheless, the Wahab continued, there are alternative options on the table.
AGR Energy is still in the running following last week’s renewed offer of a potential US$20m equity fundraising at a price of C$0.165/share and potential US$5m loan to support short-term liquidity.
While Tethys has rejected Oilsol’s overtures, Cantor analyst’s conclusion in its latest note is the company had better find the funding from somewhere.
Wahab said: “We have long highlighted that in a challenging oil price environment globally, and especially in Kazakhstan (where the selling price at the well head of oil fell to US$13/bbl), that Tethys’ financial constraints will become more pronounced.
“Whilst our forecasts do recognise increased revenue from higher gas prices and volumes (current production c.5,450boepd),and reduced general and administration expenditure, we believe Tethys’ financial flexibility will come under increasing pressure in the absence of material funding.”