Tethys Petroleum Limited:Olisol transaction update

Tethys Petroleum Limited has announced that it has signed a legally binding amendment (the Facility Agreement Amendment) to the US$15 million convertible debt facility entered into on 19 November 2015 with Olisol Investments Limited and its wholly owned subsidiary, Olisol Petroleum Limited (OPL, together Olisol), setting out amended terms to the Interim Facility and consequential changes to the transaction documentation between the companies.

Key terms of the facility agreement amendment

Olisol to convert all but US$1000 000 of the outstanding amount of principal and accrued interest under the Interim Facility (approximately US$6.25 million) into ordinary shares (Interim Facility Conversion).

The conversion will take place at a price of US$0.10 per share and the shares will represent approximately 15.6% of the enlarged undiluted share capital of the company.

This conversion will take place as soon as all approvals are obtained from the Toronto Stock Exchange (TSX), which will likely include the approval by the TSX of a personal information form (PIF) to be submitted by, or on behalf of, Olisol.

The facility amendment agreement provides that Olisol is to submit the PIF within seven business days and Olisol irrevocably commits to the conversion described above.

Olisol will work with a bank in Kazakhstan acceptable to Tethys (Kazakh Bank) to secure a loan for Tethys Aral Gas LLP, in the amount of US$10 000 000 (the Kazakh Loan), within 60 days.

Principals at one potential Kazakh Bank have already provisionally approved offering the Kazakh Loan, subject to satisfactory due diligence refreshment.

The Kazakh Loan, together with the Interim Facility Conversion, would satisfy the outstanding obligations of Olisol under the Interim Facility.

Olisol agree to pay any ordinary interest costs on the Kazakh Loan that are greater than 11%.

Olisol to provide additional working capital reasonably required by Tethys, if necessary, to ensure the company is able to continue to operate until completion of a placement under an amended investment agreement. Any amounts provided by Olisol will convert to ordinary shares on completion of the placement under the amended investment agreement.

The facility amendment agreement amends certain terms and definitions of the Interim Facility in order to facilitate and give effect to the Interim Facility Conversion and the other terms of the Facility Amendment Agreement.

Olisol has committed to purchasing 181 240 793 new shares at a price to be agreed by Tethys and Olisol (acting reasonably).

This purchase will be subject to TSX approval, and would replace the previously announced placing of 150 000 000 shares and the backstopped further offering of 50 000 000 shares under the Investment Agreement announced by the company on December 8, 2015.

This purchase, together with the Interim Facility Conversion of the amounts outstanding under the Interim Facility would result in Olisol owning approximately 42% of the enlarged undiluted share capital of the company.

The shareholder approval for this placing will include an approval to reduce the par value of the shares of Tethys.

The 20 largest shareholders will be offered a right to acquire additional shares to maintain their pro-rata stake following this placing.

Once certain conditions precedent are satisfied, which are expected in the near future, the previously announced initial changes to the board of directors of the company (Board) will come into effect.

Upon successful first draw down of the Kazakh Loan and conversion of the circa US$6.25 million under the Interim Facility into equity, the Board will be comprised of the following five directors.

Adeola Ogunsemi, non-executive director and Chairman of the Audit Committee.

Williams Paul Wells, non-executive director.

Alexander Abramov, non-executive director.

One additional non-executive independent director designated by Olisol

The one remaining Board seat to be filled by a candidate who satisfies the legal and regulatory requirements of the company and whose appointment is agreed by Tethys and Olisol.

At that time, as required under the agreement, John Bell, David Henderson, David Roberts and Jim Rawls will step down from the Board;

John Bell, Executive Chairman commented:

"Tethys now has a strong in-country strategic partner which has committed to becoming a minority shareholder and who will help the company in its objective to supply the growing energy demand in China. I will shortly step down as Executive Chairman, into a non-executive co-Chairman role. Upon completion of the transactions under the Facility Amendment Agreement, David Henderson, David Roberts, Jim Rawls and myself will all step down from the Board. During our tenure we have reduced G&A from US$19.5 million in 2014 to US$9.5million in 2015 and to a target of US$6 million on an annualised basis. We have closed seven offices, achieved certain vital Exploration & Production licence extensions, as well as overseen an increase in production. We leave the Board having steered Tethys into a company focused on capital efficiency and cost discipline, well placed to become a strong platform for future growth."

Adapted from a press release by Louise Mulhall

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/03032016/tethys-petroleum-limited-olisol-transaction-update/