http://www.edisoninvestmentresearch.com/serve_pdf.php?d=researchreports&f=Tethys070714Initiation.pdf and This is the Cantor note: Tethys Petroleum (BUY) – CNPC sets out plans for Chinese gas infrastructure TPL LN (31p, TP 86p), Market cap: £93m We note an article published yesterday from Chinese news agency, Xinhuan, that China National Petroleum Corporation (“CNPC”) has signed an agreement with Tajiktransgaz to launch a gas pipeline company to jointly establish a natural gas pipeline (Line D) between China and Turkmenistan. The agreement aims to add 25bcm in gas supply to China from Turkmenistan annually. This follows the Chinese government signing inter-governmental gas agreements with Uzbekistan, Tajikistan and Kyrghyzstan in September last year. The feasibility studies have been completed by Trans-Asia Gas Pipeline Company with construction of the Tajikistan section of Line D is expected to commence this year. According to the CNPC, construction of the Lines A, B, C, D and auxiliary facilities in China are anticipated to be completed by the end of 2020, 80bcm of natural gas will be transported from Central Asia to China annually, taking over 40% of China's gas imports. Clearly it is hoped that CNPC’s 33% interest in the Bokhtar PSC, Tajikistan, which Tethys farmed out to the Chinese major in December 2012 in a landmark transaction, will be a material contributor to the proposed gas supply. The field is estimated to contain a 27.5bnboe recoverable resource base, consisting of 114tcf of gas and 8.5bnbbls of oil. In our view, the Chinese government will be keen to expedite drilling activity at the Bokhtar PSC in an effort to meet the requirements of this large scale gas infrastructure development. This can only be positive news for Tethys, with the market largely ignoring its Tajik assets – deeming them to be much longer term plays. Full details of the 2014-2015 programme are yet to be announced, however we would expect 2014 to consist of a seismic survey and subsequent data interpretation followed by a deep exploration well in 2015. Under the terms of the farm out, Tethys will be carried on the $80m initial work programme (with its financial exposure limited to $9m), following a $60m cash injection received on completion of the deal. We have long highlighted Tethys as one of our top picks in the junior E&P space, with shareholders gaining exposure to a well capitalised business underpinned by a strong Kazakh production base, and a fully funded drilling schedule. In our view, further exploration/appraisal drilling will invariably unlock additional resource potential in Kazakhtan, whilst the accelerated gas programme could provide a material increase in near term cash flows. We reiterate our BUY recommendation and TP of 86p
all set fair
come on Kazakhs
Another 275000 taken by pam yesterday!
Good luck with your investment here. For me I'll just watch.
Treadstone - you discern correctly! I've followed the story for a couple of years and I'm certainly persuaded by the developing arguments of several long-respected posters over the last year, a couple of whom have been in touch with Pope directly and doubtless helped to bring about this situation (in fact one of them is now named as a potential replacement director). The management's initial pioneering exploration, 'diplomacy' and early deals were a real achievement in a challenging region but their operational performance has been consistently unimpressive and they've even missed several self-imposed targets - not helpful. Since enough deals are now done and assets secured (Georgia is another red-herring IMO) the focus should clearly be on steady production increases and prudent financial management to maximise the eventual share of Tajik production (or take-out price, at any rate.) Given the scale of the assets and the potential value of the JV, it's been disappointing that the BoD have run such high costs while repeatedly failing to secure predicted increases in production. This would have made the financial position so much more secure while waiting for the big drills and the exceptionally high management costs might have seemed more justifiable. Sure Pope will be playing for nobody but themselves, however as they are the largest shareholder I feel their interests are much more aligned with mine (the directors hold surprisingly few shares) I would certainly hope Pope have consulted widely before making their move but since I don't expect the BoD to give in easily, I agree it could be a bumpy ride. OTOH with the potential newsflow in the next 3-6 months, all the geopolitical variables and the involvement of oil majors and China (and even Gazprom in the wings!) absolutely anything could happen... I do like a ripping yarn so I added quite a few yesterday (but not enough to swing any votes!) GL
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