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Nostrum blames unrealistic expectations for protacted Tethys acquisition

September 15, 2015

Nostrum Oil has blamed unrealistic expectations by the board of the Tethys Petroleum for the failure so far of a deal to acquire the Caspian-focused oil company.

A deal from London-registered Nostrum to snap up Tethys has still be accepted.

Nostrum said the low oil price had led to a deterioration in Tethys’ value and its board’s expectations, in particular as to the terms of the interim funding, are unrealistic given the current financial circumstances and situation of Tethys.

Nostrum made a formal approach to Tethys on 13 July 2015, following the failure by Tethys board to consummate the deal they had previously agreed with Kazakh firm AGR-Energy.

An exclusivity period for Nostrum expired on August 25, which was followed by an offer of C$0.147 per Tethys share.

Tethys Petroleum had knocked back a takeover bid from Nostrum in July, citing allegiance with AGR Energy. Nostrum approached Tethys’ board with an offer of $0.2185 per share.

However, the board rejected the offer, instead calling its collaboration with AGR, which includes $47.7million in financing, “a transformational deal for Tethys that has the potential to add significant value for shareholders of Tethys”.

During past weeks whilst Tethys and Nostrum have attempted to reach an agreement as to terms of an offer which the Tethys may be able to support. Meanwhile Nostrum believes the underlying financial position of Tethys has continued to deteriorate and that there has continued to be an erosion of Tethys’ value.

Nostrum said it remains willing to maintain the price of C$0.147 per Tethys share. Nostrum believes that if the Tethys board is able to reach agreement shortly as to the terms of a recommended offer, a deal can be concluded by December. However, any further delay in reaching agreed terms is likely to result in further erosion of value and a delay in implementing any offer, as well as increasing the amount of interim funding that will be required by Tethys until completion of any transaction.

Nostrum also warned the offer may be withdrawn by Nostrum at any time.

Nostrum has proposed an additional US$15 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 to support short term liquidity for Tethys until the completion of any offer by Nostrum.

By Phil Allan

Source: Energy Voice

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