Nostrum Oil&gas Regulatory News (NOG)

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Amsterdam, 23 September 2015

Tethys and Nostrum reach agreementon headline commercial terms of Proposed Offer

Nostrum Oil & Gas PLC (LSE: NOG) ("Nostrum" or the "Company"), an independent oil and gas company engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin, notes the announcement today by Tethys Petroleum Limited ("Tethys") and confirms that Nostrum and Tethys have reached agreement on headline commercial terms in relation to the possible offer by Nostrum for the entire issued share capital of Tethys Petroleum Limited ("Tethys") (the "Proposed Offer") and the proposed terms of up to US$20 million in interim funding to Tethys ("Interim Funding", and together with the Proposed Offer, the "Proposed Transaction").

Nostrum and Tethys have entered into a non-binding and indicative letter of intent (the "LOI") setting out the proposed terms for the Proposed Offer and the Interim Funding, and have agreed to use all commercially reasonable endeavours to agree legally binding documentation for the implementation of the Proposed Offer prior to 11:59 p.m. London time on October 6th, 2015 (the "End of Exclusivity").

Tethys has granted exclusivity to Nostrum until the End of Exclusivity, and has agreed that a break fee of US$1 million will be payable to Nostrum if Tethys were to breach the terms of the exclusivity.

The principal terms of the Proposed Transaction that have been agreed in the LOI between Nostrum and the Tethys Board, are as follows:

Proposed Offer headline terms:

· a price of C$0.147 per Tethys share;

· the price would be satisfied by the issue of fully paid ordinary shares of £0.01 each in Nostrum; and

· The exchange ratio of Nostrum to Tethys shares would be 1 Nostrum share for every 69.4333 Tethys shares, representing the closing price of GBP 5.005 of a Nostrum share on the London Stock Exchange on 22 September 2015 and the CAD/GBP closing exchange rate on 22 September 2015 of 2.0393 CAD to 1.00 GBP.

Conditions to the Proposed Offer to, amongst others, include the following:

· receipt of all necessary and relevant governmental and joint venture partner consents in Kazakhstan, Tajikistan and Georgia;

· certain additional customary conditions as to the status of the business and financial condition of Tethys between the announcement of a firm offer and the completion of the Proposed Offer;

· the receipt of irrevocable undertakings from each director of Tethys to accept a firm offer (on the terms above) in respect of each of the Tethys shares in which they are beneficially interested;

· receipt of support for the Proposed Offer from the three major shareholders of Tethys in form and substance satisfactory to Nostrum; and

· the receipt of acceptances in respect of 75% of the Tethys shares to which the Proposed Offer relates, or such lower threshold above 50% as Nostrum may determine; and

· other customary conditions.

Interim Funding headline commercial terms:

· an additional US$20 million in further interim funding to Tethys' subsidiary, Tethys Kazakhstan SA, in addition to the US$5 million loan financing provided to Tethys Petroleum Limited on 10 August 2015 (the "Existing Nostrum Funding"), to support short term liquidity for Tethys until the completion of any offer by Nostrum;

· use of proceeds for the Interim Funding may include funding for Tajikistan work obligations, interim capex programmes in Kazakhstan, exploration on the Kul-bas licence and other general working capital purposes;

· a maturity of the end of August 2016 (to match the Existing Nostrum Funding);

· an interest rate equal to 2% per annum above the current yield on Nostrum's 2019 bonds;

· in order to ensure the prudent expenditure of the additional US$20 million in further interim funding, Tethys Kazakhstan SA's access to the additional US$20 million funding to be in accordance with a liquidity budget and schedule to be agreed between Tethys and Nostrum;

· covenants governing the use of proceeds, and the monitoring and control of expenditure of the proceeds to be included as part of the Interim Funding;

· Nostrum would be granted the right for an observer to attend board and committee meetings of Tethys and its group companies and an officer of Nostrum would be appointed as Tethys' representative on the operating committee constituted pursuant to the joint operating agreement in respect of Tethys' Tajik asset;

· the Interim Funding and the Existing Nostrum Funding to be guaranteed by Transcontinental Oil Transportation SPRL, Tethys Tajikistan Limited, Tethys Services Kazakhstan LLP, TethysAralGas LLP, Kul-Bas LLP, Tethyda Limited, South Caucasus Petroleum Corporation and Tethys Services Georgia Limited;

· the Interim Funding to be guaranteed by Tethys Petroleum Limited;

· the Existing Nostrum Funding to be guaranteed by Tethys Kazakhstan SA;

· the Interim Funding and the Existing Nostrum Funding to be secured by pledges given by Tethys Services Kazakhstan LLP, Kul-Bas LLP and Tethys AralGas LLP over the subsoil use contracts and related licences held by such entities in Kazakhstan (but that Kazakh Ministry of Energy approval of the granting of the pledges shall not be a prerequisite for drawdown of the funding);

· the Interim Funding and the Existing Nostrum Funding to be secured by pledges given by Tethys Kazakhstan SA over the participatory interests of Tethys Services Kazakhstan LLP, TethysAralGas LLP and Kul-Bas LLP;

· the Interim Funding and the Existing Nostrum Funding to become repayable, together with accrued interest, an interest make-whole to maturity, an amount equal to Nostrum's third party fees for the Proposed Transation, and a repayment premium of US$750,000 upon either (i) the board of Tethys withdrawing support for the Proposed Offer after execution of a definitive implementation agreement for the Proposed Offer, other than as a result of Nostrum itself withdrawing the Proposed Offer, or Nostrum committing a material breach of the definitive implementation agreement for the Proposed Offer, or (ii) the termination or cancellation of any of Tethys' Kazakh exploration and production licences/contracts (other than the Kul-bas exploration and production contract);

· Nostrum may also require early pre-payment of the Interim Funding in full with a pre-payment fee equal to six month's interest plus an amount equal to the documented fees of Nostrum's advisers in the event of a change of control of Tethys or Tethys Kazakhstan SA to anyone other than Nostrum;

· upon early prepayment or acceleration of the Interim Funding, or if the Proposed Offer does not become unconditional as to acceptances by the offer closing date, then, at the option of Nostrum, a proportion of the Interim Funding to be agreed may be exchanged for 100% of the voting and economic interests of Tethys Tajikistan Limited, subject to (i) Tethys Kazakhstan SA's prior ability to repay such amount within ten business days of Nostrum's election and all applicable laws, regulations and necessary regulatory consents and approvals; and

· no farm down of Tethys' Tajik and Georgian assets may be agreed without Nostrum's consent

· proceeds of any farm out of Tethys' Tajik and Georgian assets would be applied towards early repayment of the Interim Funding, together with accrued interest and a make-whole amount.

Conditions to the Interim Funding to, amongst others, include the following:

· the negotiation and execution of a definitive implementation/support agreement between Nostrum and Tethys (on mutually satisfactory terms) which details, inter alia, the cooperation and assistance to be provided by Tethys and the role and responsibilities of Nostrum in connection with the Proposed Offer prior to the end of the Exclusivity Period;

· the pledge agreements and ancillary security documents being agreed and executed during the Exclusivity Period;

· the negotiation and execution of a definitive Interim Funding agreement, prior to the end of the Exclusivity Period; and

· the unanimous recommendation of the Proposed Offer by the Board of Tethys.

Nostrum and Tethys anticipate, based on a number of assumptions, some of which may be outside of their control, that it would take approximately two months from the date of executing the implementation/support agreement and Interim Funding agreement for Nostrum to prepare and mail a formal offer document to Tethys shareholders, which offer would be open for a minimum of 35 days as required by applicable Canadian securities laws.

This announcement is not an announcement of a firm intention to make an offer and there can be no certainty that the Proposed Offer, the Proposed Transaction, or any offer will be made, nor as to the terms on which any offer might be made. The Proposed Offer, the Proposed Transaction, or any offer for Tethys will not be subject to the provisions of The City Code on Takeovers and Mergers.

Further announcements will be made in due course as appropriate.

Further information

For further information please visit www.nog.co.uk 

Further enquiries

Nostrum Oil & Gas PLC - Investor Relations

Kirsty Hamilton-Smith

Bruno G. Meere

Rachel Pescod

+44 203 740 7430

ir@nog.co.uk

Instinctif Partners - UK

David Simonson

Anca Spiridon

+ 44 (0) 207 457 2020

Promo Group Communications - Kazakhstan

Asel Karaulova

+ 7 (727) 264 67 37

About Nostrum Oil & Gas

Nostrum Oil & Gas PLC is an independent oil and gas company currently engaging in the production, development and exploration of oil and gas in the pre-Caspian Basin. Its shares are listed on the London Stock Exchange (ticker symbol: NOG). The principal producing asset of Nostrum Oil & Gas PLC is the Chinarevskoye field, in which it holds a 100% interest and is the operator through its wholly-owned subsidiary Zhaikmunai LLP. In addition, Nostrum Oil & Gas holds a 100% interest in and is the operator of the Rostoshinskoye, Darinskoye and Yuzhno-Gremyachenskoye oil and gas fields through the same subsidiary. Located in the pre-Caspian basin to the north-west of Uralsk, these exploration and development fields are situated approximately 60 and 120 kilometres respectively from the Chinarevskoye field.

Forward-Looking Statements

Some of the statements in this document are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of the Company or its officers with respect to various matters. When used in this document, the words "expects," "believes," "anticipates," "plans," "may," "will," "should" and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements.

No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity, and shareholders of the Company are cautioned not to place undue reliance on the forward-looking statements. Save as required by the Listing Rules and applicable law, the Company does not undertake to update or change any forward-looking statements to reflect events occurring after the date of this announcement.

Additional Information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.