Tethys Oil - Exploring to grow
Q1 in line, modest revisions Playing the long-term game Discounts oil at USD 55/bbl Q1 in line, modest revisions Operations at Blocks 3&4 continue to deliver robust numbers. Tethys’ Q1 revenues of USD 25. 4m were slightly below ABGSCe at USD 26. 6m, but 15% above consensus at USD 22.
0m. EBITDA of USD 12. 3m was in line with our expectation of USD 13m, but well above consensus at USD 8.
5m. Net cash of USD 57m was on par with ABGSCe at USD 57. 3m, with negative WC offset by low net capex (taking into account the farm-down to EOG on Block 49).
We make only modest revisions to our cash flow estimates, and highlight that revenue estimates are sensitive to capex assumptions, as recoverable cost affects net entitlement volumes. Our free cash flow estimates are essentially unchanged. Exploring to grow We find Tethys Oil’s transformation from a company with a partnered interest in oil production to a full-fledged E&P interesting.
The strong balance sheet and production at Blocks 3&4 represent a good basis for growth through exploration. Further analysis is required to assess commerciality. The next significant event is the appraisal drilling on Block 56, where Tethys will drill three wells starting in Q4’21.
Discounts oil at USD 55/bbl Our SOTP (WACC 12%, USD 60/bbl long term oil price) points to a share price of SEK 75. We estimate that an oil price of USD 55/bbl is discounted in the current share price. Successful exploration outcomes could contribute in building further asset value.