1 The Company
Tethys Petroleum (TETHF, Financial) is engaged in the acquisition, exploration, and development of crude oil and natural gas fields primarily in Kazakhstan, Tajikistan, and Georgia.
| Number of shares (March 31, 2014) | 299,577,744 |
| Number of options (March 31, 2014) | 33,827,400 |
| Number of warrants (March 31, 2014) | 2,202,538 |
| Fully diluted number of shares | 335,607,682 |
| Share price | $0.33 |
| Market cap | $98.5 million |
| Enterprise value | $85.9 million |
| P/S | 2.8 |
| P/B | 0.5 |
| Tickers | TETHF,TSX:TPL |
1.1 History
Tethys was formed on August 12, 2003. The company had its IPO on June 27, 2007. Tethys commenced commercial gas production in December 2007 from its initial production project in the Kyzyloi Field in Kazakhstan.
1.2 Business Model
Tethys' objective is to build a diversified oil and gas exploration and production company with a mixture of oil and gas field development projects and long-term high potential exploration projects focused on the Central Asian and Caspian Region.
1.3 Assets
Tethys has projects in the Republic of Kazakhstan, Republic of Tajikistan and Georgia.
(Source: Tethys)
The company has proved reserves of 14.1 MMboe in Kazakhstan and 10,928 MMboe in global resources.
(Source: Tethys)
2 Management
The CEO Julian Hammond was Deputy CEO from February 2011 until July 2012 when he took over as CEO. Collectively, Tethys’ management team has over 130 years of industry experience.
2.1 Insider Ownership
Tethys’ directors and executive officers own 0.6% of the company.
Here is a table of Tethys’ insider activity during the last 30 days.
| Name | Title | Trade Date | Shares Purchased | Current Ownership | Increase InShares |
| Julian Hammond | CEO | June 26 | 50,000 | 325,000 shares | +18.2% |
| William Wells | 10% Owner | June 30-July 23 | 215,822 | 58,549,150 shares | +0.4% |
There have been 265,822 shares purchased by insiders during the last 30 days.
Here is a table of Tethys’ insider activity by calendar month.
| Insider buying / shares | Insider selling / shares | |
| July 2014 | 115,822 | 0 |
| June 2014 | 2,838,554 | 216,000 |
| May 2014 | 2,380,769 | 180,000 |
| April 2014 | 0 | 276,000 |
| March 2014 | 0 | 0 |
| February 2014 | 0 | 0 |
| January 2014 | 184,385 | 20,000 |
| December 2013 | 0 | 412,385 |
| November 2013 | 200,000 | 22,000 |
| October 2013 | 0 | 0 |
| September 2013 | 14,000 | 174,450 |
| August 2013 | 120 | 0 |
| July 2013 | 11,393 | 0 |
| June 2013 | 0 | 212,957 |
| May 2013 | 12,000 | 215,700 |
| April 2013 | 0 | 0 |
| March 2013 | 0 | 139,200 |
| February 2013 | 25,000 | 0 |
| January 2013 | 0 | 195,500 |
There have been 5,782,043 shares purchased and there have been 2,064,192 shares sold by insiders since January 2013.
2.2 Compensation
Here is a table of the management’s compensation during the last three years.
(Source: Management information circular)
The management’s total compensation has declined during the last three years.
3 Operating Summary
Here is a table of Tethys’ annual oil and gas production since 2010.
| Year | Oil production (bopd) | Gas production (boe/d) | Oil & Gas production combined (boe/d) |
| 2010 | 1,866 | 4,292 | 6,158 |
| 2011 | 2,861 | 3,508 | 6,369 |
| 2012 | 2,869 | 2,287 | 5,156 |
| 2013 | 2,778 | 2,044 | 4,822 |
The oil production has increased 49% since 2010 and the gas production has declined 52% since 2010.
4 Financial Summary
4.1 Current Situation
Tethys reported the first-quarter financial results on May 15 with the following highlights:
| Revenue | $6.8 million |
| Net loss | $4.9 million |
| Cash | $13.7 million |
| Debt | $6.7 million |
| Production | 4,025 boe/d |
Tethys raised $15 million on May 14.
(Source: Earnings release)
Oil production declined 37% year-over-year and gas production increased 16% year-over-year during the first quarter. Oil production is currently at approximately 2,750 barrels per day.
4.2 Historical Developments
Here is a table of Tethys’ revenue and earnings since 2007.
| Year | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
| Revenue ($ millions) | 0.2 | 5.4 | 8.6 | 14.7 | 30.3 | 33.6 | 36.9 |
| Net loss ($ millions) | 41.8 | 22.6 | 21.7 | 29.6 | 27.0 | 20.9 | 17.6 |
| EPS | -1.26 | -0.40 | -0.20 | -0.15 | -0.10 | -0.07 | -0.05 |
Tethys’ revenue has increased 18,350% since 2007, and the negative earnings per share have decreased every year.
5 Shares
Here is a table of Tethys’ number of shares since 2007.
| Year | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
| Number of shares (millions) | 33.3 | 56.0 | 134.6 | 260.6 | 286.7 | 286.7 | 299.6 |
Tethys’ number of shares have grown 800% since 2007, but the revenue has grown 18,350%.
6 Outlook
Tethys’ goals in the short term are to:
- complete the conditional sale of 50% (plus one share) of the Kazakh assets
- carry out the shallow gas exploration and development programme in order to significantly increase natural gas production
- secure appropriate funding, as required
- fully appraise the Doris and Dione oil field discoveries in the Akkulka Block, Kazakhstan
- continue exploration drilling and evaluation of the Akkulka and Kul-Bas licence blocks in Kazakhstan
- explore and develop new licences in Georgia
- develop the Tajik Bokhtar PSC together with the company’s new partners
7 Risks
The three main risks are negative earnings, country risk, and the oil and gas prices. Tethys’ all assets are located in the former Soviet Union countries, which carry some extra risk. Tethys is also a penny stock.
8 Conclusion
Tethys is currently trading at a P/B ratio of 0.5. I believe the stock could have at least 100% upside potential during the next 12 months.
Disclosure: The author is long TSX:TPL
