Tethys Petroleum (TSE:TPL)(LON:TPL) has outlined its progress to investors made since the oil and gas company's board and executive management was overhauled late last year.
The company said that in addition to cost reductions, a new US$6 million loan and doubled gas production in Kazakhstan, it has reached a deal to restructure its Georgian project and remove its current funding obligations of about US$4 million under the farm-out signed in July 2013.
As a result, Tethys will reduce its interest in the Georgia assets to 49 percent from 56 percent, and its partner, Georgian Oil and Gas, will become operator on the licenses on blocks XIA, XIM and XIN. The partners are also seeking to renegotiate a more efficient new work program with the state, Tethys said, especially on block XIN, where a US$2.1 million seismic program is due by June of this year.
Tethys said the agreement will help alleviate immediate funding concerns, and give it time to carry out a planned farm-out process or sale of its Georgian assets.
The news comes after a series of changes to streamline the organization, including an aggressive downsizing, which is estimated to reduce general and administrative costs from US$21 million in 2014 to US$13 million this year. The company has now closed its Dubai, Washington and Toronto offices, effective December 31, 2014, and is looking at cutting staff in Kazakhstan as well.
The Central Asia-focused oil and gas producer also recently announced that gas production at its Kazakhstan assets more than doubled from before after the next phase of shallow gas output came on stream. The new production was achieved on schedule, with a 10-day average of 559 Mm3/d.
A further increase in production is planned for the second quarter as two more previously tested wells are brought online. This followed a new one-year gas sales contract announced in December, which increased the price of gas by 42 percent to $75/mcm.
The company also said its recently installed dehydration system is performing well, and is expected to be commissioned by the state in the next month.
Tethys noted that it is less reliant on oil sales than in the past due to the increase in gas volumes and pricing early this year, a trend it expects to continue in the short-term. The company has not yet been impacted by the slump in global oil prices due to the lag in affecting the domestic market in Kazakhstan.
"In this oil and gas price environment we need a leaner, more cost effective company and with the changes we have implemented to date we are well on our way to achieving this," said executive chairman John Bell.
"The recent signing of the loan funding should give us sufficient time to gain clarity on the timing of the Sinohan transaction completion, and also on further proposed asset disposals.
"I continue to look at other strategic initiatives to determine the best way to maximize the return to shareholders."