Tethys Petroleum Limited provided an update on the previously announced US$15 million convertible debt facility (“Interim Facility”) with Olisol Petroleum Limited (“OPL”), a wholly owned subsidiary of Olisol Investments Limited (together with OPL, “Olisol”).
The Interim Facility was entered into with OPL on November 19, 2015, as the first transaction of those contemplated in the Letter of Intent signed with Olisol and announced by Tethys on November 9, 2015 (“LOI”). Under the terms of the Interim Facility, Tethys was entitled to draw down the corresponding funds within two business days of entering into the facility and, as announced on December 29, 2015, the Company submitted draw down notices for the entire loan amount of US$15 million on November 21, 2015.
Despite Olisol having provided written confirmation, in advance of the Company entering into the Interim Facility, of its bank accounts containing funds totaling in excess of US$15 million, no further funds have been received by the Company from Olisol since receipt of the US$5,138,918 in late November as previously announced which was used to repay the US$5 million term loan from Nostrum Oil & Gas PLC.
Olisol has continued to inform the Company that the funds are subject to USD transfer restrictions imposed by the bank authorities in Kazakhstan ("Currency Controls"), which have prevented further transfers within the contractually obligated timeframes. In light of this, and acknowledging the difficult economic and business environment in Kazakhstan as indicated by the changes in the value of the Kazakhstani tenge over the past six months, the Company allowed Olisol time to make alternative arrangements to transfer the balance of the loan to Tethys, or one of its Kazakhstan subsidiaries in-country using funds not restricted by Currency Controls. Over the last two months, Olisol has continually stated that they are working hard on the contemplated transactions and has advised the Company on many occasions over this period that funds would be forthcoming imminently, only for each of their own targets to pass without any transfer being made.
Due to the lack of progress by Olisol with these initiatives, the Company set deadlines, the first of which being January 22, 2016 for the receipt of the next US$2 million. This deadline has now passed and the US$2 million has not been received. Olisol has provided assurances that these funds will be forthcoming early next week.
Tethys has been working tirelessly with Olisol to try to resolve the impediments to completing the transactions agreed between the companies, including proposing receipt of funds from offshore Olisol sources and in-county in Kazakhstani tenge. The Board of Directors of Tethys (the “Board”) continues to believe that the transactions with Olisol are in the best interests of Tethys stakeholders and that Olisol is a strong in-country strategic partner. With Olisol’s assistance the Company has collected overdue debts which has positively affected the Company’s balance sheet in the short term. However, due to transaction completion delays, the Board is obligated to consider alternative funding and investment options for the Company, alongside continued discussions with Olisol. The Company has been engaging in discussions with other parties and is now in active negotiations. Should the overdue funds under the Interim Facility arrive in a timely manner however, Tethys will continue to work with Olisol to close the wider transaction.
In the event that the transactions with Olisol are able to proceed, the Company will mail the management information circular in relation to the placing to shareholders and plans to hold a special meeting to approve the transactions as soon as practicable. Further information on this will be provided in due course as appropriate. There is no certainty that this placing will be completed. Any further delays by Olisol may mean that closing cannot be achieved before the expiry of the existing approval from the Ministry of Energy of Kazakhstan for issuance of new shares by the Company, though an extension of this will be sought.
Current Financial Position
The Company currently does not have sufficient funding to meet its requirements over the next few months and therefore, if the transactions with Olisol do not proceed for any reason, the Company's ability to continue as a going concern will be dependent on the Company being successful in securing alternative funding. There is no certainty that the management will be successful nor have sufficient time to implement any alternative transaction.