Tethys Oil AB

STO:TETY

Earnings Call Analysis

Tethys Oil's Q3 Highlights: Stability Amid Acquisition Bid

Tethys Oil experienced a steady third quarter marked by unchanged revenues of $30.8 million and a slight decline in EBITDA. Cash flow from operations dropped to $15.4 million due to lower oil sales, while net cash stood at $9 million. The company anticipates 2024 production between 7,800 and 8,000 barrels per day, with operating costs expected around $18 per barrel. An exciting development is the ongoing test of the Kunooz-1 well. Additionally, Roc Oil's acquisition offer of SEK 58.70 per share, a 90% premium, has the board's backing, with the acceptance period ending December 2.

A Transformative Quarter for Tethys Oil

The third quarter of 2024 was a pivotal moment for Tethys Oil, marked by several key developments that could transform the future of the company and provide substantial value to shareholders. Tethys drilled the much-anticipated Kunooz-1 exploration well in Block 58, initiating a phase of extensive testing. Meanwhile, Roc Oil of Australia made an acquisition offer valuing Tethys at roughly SEK 1.894 billion, presenting a substantial 89.5% premium over the share price prior to the announcement.

Block 58: A Ray of Hope

The Kunooz-1 exploration well, which commenced drilling in August and completed in October, is currently undergoing testing operations to uncover what lies beneath. Initial evaluations point to the presence of significant fractures in the reservoir, but drilling complications introduced uncertainty into the potential oil yield. Tethys is hopeful that these tests will clarify the resource potential over the next few weeks. The results of this well could have a substantial impact on the company's valuation and future operations.

Production Stabilization in Block 3&4

For the first time in years, Tethys reported an increase in production from its non-operated fields in Blocks 3 & 4, rising to a promising level. This is a positive sign after previous declines. The stabilization in production is attributed to operational improvements implemented by the field operator, CCED, allowing Tethys to maintain a steady revenue stream, which stood at $30.8 million, matching the previous quarter, though EBITDA slightly dipped in comparison.

Financial Position: General Stability with Some Concerns

The company’s cash flow from operations for the quarter was $15.4 million, down from $19.9 million in the previous quarter. Tethys ended the third quarter with total cash of $16 million and a net cash position of $9 million. Notably, the company encountered an underlift position involving 30,000 barrels at the end of the quarter, which signifies barrels that Tethys has yet to sell, potentially affecting future cash flow positively as this balance normalizes.

Guidance and Future Prospects

Looking ahead, Tethys maintains its production guidance for 2024 at a range of 7,800 to 8,000 barrels of oil per day, a reduction from the broader range provided earlier in the year, signaling improved clarity amidst operational uncertainties. Additionally, the operating expenditure per barrel is projected to remain stable at around $18, aligning with recent trends. This predictability in operational costs could provide a level of assurance for investors.

Anticipated Developments Ahead

As the October 20 to December 2 acceptance period for the Roc Oil offer approaches, Tethys finds itself at a crossroads. Management is focused not only on facilitating the best possible outcome for shareholders in light of this offer—but also on addressing ongoing operational developments, particularly in Block 56. Tethys is optimistic about receiving approval for the field development plan (FDP), which they anticipate concluding within the next few weeks.

Conclusion: Navigating an Exciting Transition

Tethys Oil stands at a critical juncture with significant opportunities for both operational advancements and strategic corporate decisions. The outcome of the Kunooz-1 testing, the expected approval of the FDP for Block 56, and the looming Roc Oil acquisition offer form a compelling narrative. Investors should remain attentive as these developments unfold, shaping the future of the company in potentially transformative ways.

Earnings Call Transcript 2024-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Tethys Oil Third Quarter Earnings Report 2024 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Magnus Nordin. Please go ahead.

[Magnus Nordin, executive]

Good morning, everyone, and welcome to yet another quarterly earnings call with Tethys, one that could possibly be our last in the public environment. We've had quite an exciting quarter. Possibly one of the most exciting quarters since the company turned public in 2004.

We've drilled an exploration well that we have been waiting for, for a long time to get off the ground. We are hopefully very close to getting an FDP for our operated Block 56. And we have received a public offer from Roc Oil of Australia for all the outstanding shares of Tethys. Not bad for a third quarter, I'd say.

So, if the Roc offer is accepted by shareholders, and I believe the first date for the acceptance period to end has been advised to be the 2nd of December. This could very well mean that this is our final quarterly report as a public company. But, of course, we don't know what our shareholders are going to do. And while we continue to be a public company, we, of course, strive to create value for all our stakeholders, including all our current investors. So, let's get down to the details of what we've actually achieved during Q3.

Well, Block 58, the Kunooz-1 exploration well started in August. Drilling completed in October, a little bit after the quarter left. We will get into the details, but testing operations are ongoing of that well.

Block 56, FDP for Block 56 and commerciality declaration, we've filed an FDP with the Ministry of Energy and Minerals in Oman in June, and we have been talking back and forth about the best way of optimizing that before we actually get off to start developing the block. 49, we still have the block. We have the second period, and we are looking at various ways of getting some sensible data out of the Thameen-1 well.

On the non-operated side, the production from 3&4 actually increased during the third quarter compared to the second quarter, a very good sign, I must say. I think it's the first time in years, we've actually seen an increase quarter-by-quarter rather than a decrease. So, we are quite optimistic that operator CCED has now managed to stabilize things and possibly turn them around a bit on the production side.

That gave us a revenue and other income of $30.8 million, suspiciously close to what we had in the second quarter, which was also at $30.8 million. EBITDA a little bit down from the previous quarter. Petter, our CFO, will give you all the details behind these numbers.

Cash flow from operations, $15.4 million, down from $19.9 and cash down a little bit from $18.1 million for last quarter to $16.4 million, again, back to Petter on that one. And then, of course, on September 13th, Roc Oil announced our intention to acquire all the shares of Tethys for a cash price of $58.70 per share at the time, and almost 90% premium to the share price close on the Stockholm Exchange on the 12th of September. And, as I said, the acceptance period is up and running.

But let's turn on. So, production, Blocks 3&4. We saw a slight increase compared to second quarter. Of course, as you may remember, second quarter was impacted by some weather events, a lot of rain in the early parts of the second quarter, which for some operational shut-ins. It took a while to sort that out, but we are now seeing both that new wells drilled deliver nicely on oil and also that some of the wells shut in because of the rain have actually come back on.

So, we are seeing stabilization, a general stabilization at around levels, and we expect production to continue to increase for the fourth quarter. And we stand by our guidance of 2024 year production to be somewhere in the range of 7,800 to 8,000 barrels of oil per day, narrowing our range a little bit now as we are actually well into the fourth quarter.

3&4 continues to deliver good production and now hopefully, in a more stable manner than we've seen over the last couple of years. Appraisal wells of the near field areas in Farha and Saiwan continue. And whereas we've seen the new Farha wells produced well, there's been a little bit more uncertainty around Saiwan and Shahd wells. But all in all, we are seeing a stabilization of the production also from new production wells and appraisal wells drilled.

Picking up on certain of the exploration prospects, both near-field ones, but in particular, maybe the Barik, which is a known reservoir of a tight sandstone formation, where various fracking designs have been tried, and we are hopeful we are going to see some continuation of that as we move into both the fourth quarter and on to next year.

We'll also do some work on the heavy oils that's also well known in the area. A lot of heavy oil is known to exist, particularly in Block 4. However, the possibility of producing that has been uncertain to say the least, but there is now some work from the operator, CCED to ascertain if there are any good ways of actually bringing that oil also to surface.

And then we are at the very end of the seismic acquisition program, where we now are about to have a complete coverage of all the interesting areas of Block 3&4, which will be subject to ongoing interpretation probably for the next couple of years to see what can be unearth of additional prospectively in those blocks.

Leaving the non-operated producing 3&4 and move to 56, where we are eager to get the field development plan approved so we can get on with getting commercial production from this field or these fields, I should say. The development plan for the block was submitted in June. We are primarily focusing on the Al Jumd discovery, where we had a long-term production test last year, the Sarha and the MENA discoveries, the MENA one was made earlier this year.

And then there is a very good exploration upside with a number of prospects and leads identified and a lot of seismic yet to be interpreted. We've had a good dialogue with the Ministry of Energy and Minerals. I hope we are in the concluding phases of that dialogue.

We have been focusing a bit on the exploration strategy going forward as part of the FDP, not only for the known discoveries, but also for the prospects and leads and the potential of the block. And we would expect the FDP to be approved in the fourth quarter. So, within the next weeks, we are hopeful.

58 is more of an immediate event. The Kunooz Well was started, as I said, in August. We had 3 targets, the Birba and Buah carbonates and the Khufai slightly deeper carbonate. We drilled the well to a total depth of 3,923 meters through vertical depth.

We drilled through all the reservoirs and here, we had some interesting events occurring. One of the main uncertainties on the well was reservoir quality of the carbonates, both the Birba and the Khufai. We produce, as you may recall, from the Buah and Khufai in Block 4, and we know from experience there that reservoir qualities can be quite fickle. You can have a good well with good productivity and you can have a well just a slight distance away from there that is much worse. So, reservoir in these carbonates is quite important.

What we also learned from Block 4 is that fractures, not only the matrix porosity of the carbonates, but also that fractures have been created as secondary porosity can be quite important for productivity. And what we found when we drilled Kunooz was fractures galore. We had so much fractures in the Ara/Birba section that we had to resort to drilling blind.

No drilling fluid back to surface, no cuttings. We have absolutely no idea what we drilled through, but that is carbonates, and we believe and blocks have confirmed that we also got into the, if you look at the map here, I should say this is not to scale. This is just an illustration of where we are.

So, we got into the Ara/Birba, lost circulation immediately, continued a little bit, we were not able to cure the flows. So, switched over to water-based mud and drilled blind through the Ara/Birba, the Buah into the Shuram shale and into the Khufai and TD-ed in what we believe to be the Masirah Bay as we've come out of the Khufai.

Logs confirm the tops of the various horizons and confirms the presence of the Shuram and the Khufai below. However, the whole quality of the Khufai and also with massive fractures and the difficulties of drilling water-based through the Shuram Shale made it unclear what we actually would be able to get out of the Khufai. So, we decided to plug above the Khufai and not do any further testings of that at this stage.

But in the Birba/Buah, we have more than 500 meters of fractured carbons that we have now completed for testing. And since we really have no idea what's in the reservoir, we decided not to test the hole, but to do an open hole test just like you did in the old days and see what comes up. So, within the next couple of weeks, we will open up the well, and we will flow the well and see what comes to surface.

We should bear in mind that while drilling, a lot of drilling fluid, water-based, was lost into the fracture system. So, we may first have the well cleaned up and get part or all of that water back. And then we'll see if we also get some oil. And obviously, we are hopeful that the multiple fractures will be filled not with saltwater, but with oil.

But the only way to find out is to flow the well and see what comes to the surface. So, do stay tuned. We should have an idea of what's in this reservoir over the next 2 to 3 weeks.

So, yes, I think we can move straight on to financial highlights actually. And there, I believe Petter is much better placed to explain the intricate details of our financials than I am. So, Petter, please.

[Petter Hjertstedt, executive]

Thank you, Magnus, and good morning, everyone. The third quarter in general was largely in terms of revenues and earnings unchanged versus the second quarter. And as you can see in the graph to the right, this year-to-date have been relatively stable on those headline numbers of revenue and EBITDA with only a small dip in the first quarter.

In the second quarter, we saw stable oil prices and stable net entitlement and very, very small changes in overall cost, leading to an EBITDA of only $15.2 million, only $0.5 million lower than the second quarter.

If you look a bit closer at the cash flow, however, we did see a bit of movement as there was a lower contribution from working capital and some increased CapEx ticking up in the third quarter as activity picked up out in the field. We ended the quarter with $16 million in cash and a net cash position of $9 million.

So, looking closer at the revenues and entitlement and oil sales, we see that, revenues, as I said before, relatively flat over most of the quarters of this year. However, we do see slightly lower oil sales volumes, in particularly in the third quarter. And as a result, we have an underlift position of almost 30,000 barrels at the end of the quarter, and that is a shift from an overlift position at the end of Q2.

So, essentially, we have almost 30,000 barrels that we are entitled to sell but have yet to sell by the end of the quarter. And that we expect to even out in the coming quarters as that position balances out.

But that did have some impact on the oil sales revenues in the quarter and certainly will impact the cash flow profile in both at the end of the quarter and moving into Q4. The cost pool, which is the unrecovered cost has risen to $40 million from almost $33 million at the end of the second quarter as we are operating at full entitlement, but have costs exceeding that. We have thus $40 million of, let's call it, pent-up cash flow that we hope to recover in the coming years.

Moving to expenses. We saw a relatively flat development both in OpEx and in admin costs. In OpEx, cost savings in production costs and G&A at the operator were offset by slightly higher workovers as some of that activity picked up during the third quarter, and that has been crucial in also stabilizing the production that we've seen. So, switching out pumps on some key producers have had a positive effect. But, of course, we also see the commensurate cost with that.

OpEx per barrel is unchanged for the second quarter in a row at $18 per barrel, and we expect that to be the full year average number as well as it averages out with continued improved small cost savings in OpEx in the fourth quarter. We saw a smaller uptick as well in admin expenses, but that is mainly related to the activity of our strategic review and lending activities that concluded in the third quarter.

When it comes to cash flow from operations and CapEx, we saw operating cash flow about $1 million lower than the previous quarter. But then, of course, we didn't have the full benefit of the working capital swings at times can be quite significant. So, after that, it was about $5 million lower than the previous quarter. And, of course, we had an uptick in CapEx, as I mentioned before, that's both on 3 and 4 as activity and some exploration drilling has picked up. But in particular, it is related to the drilling of the Kunooz-1 well, which Magnus has told you about.

We do expect more expenditure on Kunooz in the fourth quarter as it did conclude drilling operations in October, and we are looking forward to some testing in the coming [Technical Difficulty] Just mentioned that the working capital shift is mainly an effect of the switch to an underlift position. That is the main contributing factor to that shift from quarter-to-quarter. And as I'm sure you're all accustomed to now, that does tend to fluctuate from quarter-to-quarter, but even out over time.

The result of this is a negative free cash flow of almost $9 million. But in the quarter, we did also conclude financing and drew down $7 million on that loan. So, we ended the quarter with $16 million in cash on hand and have more than $50 million available to draw on that facility. And here is a quick reminder on that.

We have a 5-year $60 million amortizing term loan that was concluded in August. We made one drawdown in the quarter and have that available for the 9 months with some very good interest rates.

And however, some hedging requirements that have yet to be put in place and have not been seen in the third quarter. But that certainly gives us ample support to manage the volatility that we do see in some of those cash flows as we explore and also as the oil price continues to fluctuate.

And that takes me to our forward-looking guidance for the year. We are expecting production for the full year to be in the range of 7,800 to 8,000 barrels of oil per day. That's a narrowing of that guidance band that we provided earlier. So now, at a smaller range, but certainly in line with what we have seen in the year-to-date production and as you will see in the monthly production updates.

Operating expenditure is expected to be around $18 per barrel for the full year, and that's in line with what we've seen in the past 2 quarters and certainly is something we expect along those lines in the fourth quarter.

Investment in oil and gas is largely unchanged with just some small addition with the effect of the testing on the Kunooz-1. We expect to be able to finance all these investments with the cash we have on hand, the cash being generated and the debt facility that we have available. With that, I would like to conclude my financial update and hand over to Magnus.

[Magnus Nordin, executive]

And thank you, Petter, and thank you for that. Approaching the end of the summary of the public offer received from Roc Oil. So, SEK 58.7 in cash per share, which actually corresponds to a company valuation of SEK 1.894 billion, a premium of 89.5% compared to the close on the 12th of September.

The independent bid committee of the Board of Directors of Tethys has unanimously recommended shareholders to accept Roc's public offer. Roc has also received irrevocables for about, I think, some 16% of the outstanding shares of Tethys.

The acceptance period commenced after ROC filed the formal Offering memorandum with the NASDAQ Stockholm Stock Exchange commenced on the 20th of October and will expire on the 2nd of December. And the offer is, among others, conditional on receiving 90% acceptance of the shareholders of Tethys.

So, with that, on the cards, I do think it's fair to say that the third quarter 2024 offered quite a lot of excitement for Tethys and for our shareholders. As we move into the fourth quarter, the final fourth quarter of 2024, that excitement continues with 3 major cliffhangers. Will Block 58 test oil Kunooz on Block 58 test oil or water? When will we finally get the Block 56 field development plan? And will Roc's offer be accepted on December 2 or not? So, stay tuned. There will be a lot happening in Tethys over the next couple of weeks. We may meet again for a Q4 report early February in 2025 in that case.

However, if the Roc offer is accepted, it's quite possible also that Tethys will no longer be a public company in February of 2025. But that's to be determined. And for the time being, do stay with us. And now, let's move over to questions.

[Operator]

[Operator Instructions] And the first question comes from the line of Teodor Sveen-Nilsen from SB1 Markets.

[Teodor Nilsen, analyst]

A few questions. First one is on Kunooz well. Could you say anything about the resource estimate there? And the second question, which is maybe the most important, as you said, is most likely the last quarter presentation you do as a publicly listed company. So, I just wonder what do you remember the best from your peers as the CEO? What's the best memories from Tethys Oil? And maybe also the same question to Petter, of course, you haven't been there for that many years, but what's your best memory from Tethys Oil?

[Magnus Nordin, executive]

Okay. Well, thank you, Teodor. What was your first question, sorry?

[Teodor Nilsen, analyst]

That was a resource estimate for the…

[Magnus Nordin, executive]

Okay. Right. I think pre-drill, we were somewhere at 120 million barrels at a, was it 18% chance of success or something?

[Petter Hjertstedt, executive]

Across all the -- we were at about 45 million barrels and mean? Those are all published numbers, and I don't think we have any new view on that.

[Magnus Nordin, executive]

No, nothing new. I mean, depending on what the test of shows, then, of course, we would maybe be able to come up with a revised resource based on of course, but dependent on what will show. And as we say, I mean, testing preparations are ongoing, and we would expect to have some idea of the test before the end of the month.

Then maybe best memories, there have been a few quarter reports, and you have been a very diligent participant Teodor, and we thank you very much for that. I would almost like to turn the question around to you. But first, let's see. Obviously, the major discoveries in 3 and 4 and the resilience and longevity of the 3 and 4 discoveries, I mean, 150 million barrels has actually been extracted from Blocks 3 and 4.

I think that's a lot more than we expected when we first entered the block and also when we had the first discoveries there. And that's, of course, a major success. The ability to build the Tethys portfolio of a number of other exploration opportunities in Oman has also been quite exciting. And every time we have been able to announce a new EPSA, that's been a major milestone, both of potential, but also of confidence in Tethys's ability to do something sensible with this acreage.

Then, of course, there have been ups and downs in connection with the quarterly reports, we have had the occasional 10%, 15% up day, and we have had several more 10%, 15% down days with strong volatility associated with reports, which also, of course, has created a bit of excitement and almost betting as to how will the report be received today.

And I think, all in all, it's been a most interesting journey and some very, very entertaining years with a lot of good things to look back to. And it isn't quite over yet. I mean we will know more in about a month's time. Petter, any thoughts from your side?

[Petter Hjertstedt, executive]

It's a difficult question. I think it's very difficult to pinpoint any single moment. There are lots of times that are imprinted on memory.

But I would say that what actually -- I think one of the lasting things with the past few years is certainly seeing the strategy come to fruition, looking back at negotiating licenses and looking at the plans that were laid at that time and now seeing, for instance, the Kunooz Well being drilled and seeing how that is being realized and a testament of kind of keeping the long-term view and trying to keep the momentum despite sometimes very challenging conditions, while trying to please the shareholders that need for constant sort of action and updates. I think it's a difficult balance in a long-cycle business. But it's certainly the ups and downs, I would say, are the enjoyable bit.

[Magnus Nordin, executive]

Indeed, Petter, if you don't like ups and downs, you should not be in oil business.

[Teodor Nilsen, analyst]

I have one third question, if I may. As far as I remember, the companies were formed after acquisition of [Operator Instructions] licenses in Oman. That was, of course, a great deal paying only $1 million. Where can we find that kind of deals now going forward? Where do you look for those kind of deals globally?

[Magnus Nordin, executive]

Interesting question, Teodor, and it's obviously something that they deserve some thoughts. I think actually, Oman may still offer some such opportunities. As we have concluded over the years we've been there, there is underexplored areas. The received wisdom of where oil has been generated and where oil has been reservoir in Oman still prevails a lot of the outlooks. And, in particular, the flanks of the Salt Basin are by no means fully explored. And I think that could still be opportunity.

[Petter Hjertstedt, executive]

We are looking at Algeria now without being -- every deal is unique. And while the numbers will not always translate, I think we do see overlooked potential in Algeria, and that is what we are pursuing there, hopefully, on being able to secure it on terms that are equally favorable from a risk-reward perspective without going to the specific numbers.

[Magnus Nordin, executive]

Indeed, indeed. So, there are still overlooked opportunities. And if you want to get a good risk reward, why look in areas where oil is known and has been discovered and look around that and see what may have been overlooked by past companies.

[Operator]

And the next question comes from the line of Knut Martin Karlsen from Commandeer Capital.

[Knut Martin Karlsen, analyst]

I just want to first start by thanking you for being great stewards of our shareholders' capital and doing rational decisions, which may not always be popular. I would like to start on Block 56.

During the second quarter conference call, it was mentioned that the declaration of commerciality was within weeks, not months. And yet here we stand without a declaration of commerciality. And you touched on that there were some dialogue with regards to the exploration part of the license that had delayed the declaration. Could you perhaps go a bit more into detail on that?

[Magnus Nordin, executive]

Shall we say it's I mean, a field development plan is by its nature, a plan for developing known discoveries. In the case of 56, there's also a strong exploration upside. And we have had a discussion on how to, shall we say, best optimize resources between both the getting production up and running as quickly as possible and ramping that up as quickly as possible while also maintaining a strong focus on the exploration potential of the block, which sort of goes hand-in-hand because, I mean, if you stop exploring, as we have seen in various other situations, you will eventually have difficulties in boosting and maintaining production.

So, I think it's fair to say that we are in good agreement with the ministry that we certainly want to do this, and we are just ironing out the details of how we can optimize the combination of development production and future exploration.

So, certainly, there has been a delay in getting the FDP and getting the commerciality. But I think for the long-term project, it's been a good dialogue and it's probably going to benefit the project going forward in a way maybe that it's better to have it now rather than later.

[Knut Martin Karlsen, analyst]

So, moving on to the bid from the Fusan Group of China. Given the importance of the pre-drill estimates for Block 56, which were quite large and in your own word, would transform the company. If pre-drill comes in, which would indicate a significant increase in valuation, would this affect the term of the bid?

And specifically, while Term 5 allows the bidder to withdraw in case of adverse changes, would there be a provision for Tethys or its shareholders to reconsider acceptance if significant positive developments do occur?

[Magnus Nordin, executive]

Let's put it this way. I mean, the offer is made to shareholders, and the shareholders may very well elect not to tender their shares. And if enough shareholders feel that a value-creative event has occurred, they may then not tender their shares and thus force maybe an adjustment in price. But at this stage, it's very much up to the shareholders and, of course, to the company to provide the shareholders with as good information as possible for the shareholders to make as good decision as possible.

But it is entirely up to the shareholders. And if they elect not to tender the shares by, in this case, December 2, then they would have elected not to do that. And it would then be up to the buyer to address that situation. And that's beyond what we can speculate in what the buyer would do in that case, if they do not reach 90% by December 2.

Then, of course, there are other terms and conditions also, including various government and other approvals, et cetera, et cetera. So, I mean, it's not a done deal and nothing is done until it's done. And as we have pointed out here, there is some interesting developments going on in the company, and we will see how that will affect the shareholders' view on the offer.

And if the offer is not accepted, they reach the 90% by December 2, we'll see what happens then. But to answer your question directly, it's in the hands of the shareholders based on whatever information the company is able to give.

[Knut Martin Karlsen, analyst]

And going a bit further on that, and I was curious if you could reflect a bit on the decision of landing the acceptance period for December 2, given the current ongoing testing on Block 58 and the delayed announcement of the production plans for Block 56, which will probably be announced quite up until that deadline. It's quite a tight time period there to get all the information needed to make a qualified decision with regards to the value of the offer.

[Magnus Nordin, executive]

The acceptance period is entirely in the hands of the buyer. It's nothing where the seller has any information. I mean, all we can do now is continue running the company as business as usual. The offer is known to shareholders, but it's up to the buyer how the buyer wants to handle the offer made and any acceptance period or any other conditions. Tethys is not involved in that. It's entirely up to the buyer.

[Knut Martin Karlsen, analyst]

And perhaps another question with regards to the bid. So, you yourself, Mr. Nordin, Landlon Partners and one other shareholder has made an irrevocable acceptance of the shares to Roc Oil. And it was a bit interesting. You mentioned that you were going sort of old school with the Kunooz-1 well to see if anything was flowing to the surface.

And when we first discussed the Kunooz-1 well in a conference call some years ago, we were sort of making a bit perhaps a humoristic analogy to the spindle top. But is it to be understood that if it's 150fet gusher with 100,000 barrels, you would still have irrevocable acceptance of the shares? Or is there a mechanism there, too?

[Magnus Nordin, executive]

There are certain situations where the irrevocables would be released. And I believe one of them is that unless acceptance by other shareholders is less than 80%, for example, the irrevocable would be released. So, again, it's very much up to the shareholders to decide based on whatever information they have and what we know if they want to accept the offer as it stands or not. The other factors, I should say, in starting.

[Knut Martin Karlsen, analyst]

Perhaps I'm just going to end by saying that the Lucas well on the spindletop took 9 days to get under control. So, that could perhaps be something to think about with the planning and all of that.

[Magnus Nordin, executive]

Hopefully, we've learned something from that, and we expect to have a controlled flow of whatever it is that comes out of the well. But thanks for reminding us of this optimistic outcome.

[Operator]

And the next question comes from the line of [indiscernible]

[Foreign Language]

[Unknown Analyst]

You mentioned that it's going to take 2 to 3 weeks to get results in the Block 58, and that is cutting it very close to the acceptance period as recently mentioned, and there can be complications. But will Tethys, regardless if you have finished what you want to finish in the different blocks go out with as much information as possible like before December 2 so as shareholders can make a good decision as possible? Or because, yes, if you're not finished, then you're like, well, we're going to finish the fourth. Well, then we don't have any information.

[Magnus Nordin, executive]

It is an interesting question. And clearly and, as you said, this is a live operation, and there could be surprises. And it's difficult to have a fixed timetable. But clearly, everyone is aware of the situation, and it's our intention to keep the shareholders as well briefed as possible with the events from the testing of the well.

[Unknown Analyst]

Yes. Because if I can complain a little bit, you had complications in 58, as you mentioned, now drilling. I mean, some companies would have published that ongoing when you drilled, we have multiple fractures, this we had to change. We have to drill in blind. Like I mean, some companies would have issued at the PM when that happened. So, that's just why I'm thinking, but you decided to wait until now to release it.

So, it's very important for us if we should accept or not. Then, I have another question, like is there any realistic scenario of the information that you will gather during these last weeks in 58 and 56 that the Board would resinder its recommendation of accepting this offer?

[Magnus Nordin, executive]

Again, that would be a question to the Board. And I think it's something the Board would have to address when and if there is information that would suggest that the Board would have to address such a situation. It's nothing that I can either really comment on or speculate on at this stage. Primarily, it's up to the shareholders and Tethys will provide as much and as good information as possible from the ongoing operations.

[Petter Hjertstedt, executive]

I can add that both management and Board take this question quite seriously or very seriously even in terms of being acutely aware of that situation, as you described. And that means that until this company is owned by anyone else than the current shareholders, it is our duty to keep you informed and take decisions that are in the interest of shareholders. But that has to be done on the basis of a sound information. And that's why it's very difficult to speculate ahead of time what information will be available at what point and with what certainty.

But it's certainly something everyone is acutely aware of. And ultimately, as you say, if shareholders are not satisfied with the situation, they will have to act in accordance to their own best interest. And the bidder will, of course, have to adapt accordingly, right?

So, there are several parties in this, and I think everyone is fully aware of the situation and we'll aim to do the best under those circumstances. But it's very difficult to beforehand say exactly what that will be before you know the information. And that's the same with the information provided to date.

It is on the basis of giving as a complete picture as possible at the time when it makes meaningful sense to communicate it. Sometimes communicating things beforehand can be rather misleading than informative. So, that's always a balance that has to be struck.

[Unknown Analyst]

I will hope you will release as much information as you are holding as close to this acceptance period, so we can make as good of a choice possible.

[Operator]

As there are no further questions on the phone line, I would now like to hand back to the floor for any questions that have been written in.

[Petter Hjertstedt, executive]

Yes, that's right. Thank you. We do have a set of e-mail questions from Stephane Foucaud from Auctus Advisors. And I believe most of these questions will actually be put to Magnus. I will ask them on his behalf. The first question has already been addressed, but let's ask it again.

Why has the FTP for Block 56 not been approved yet, as mentioned by another participants. We were expecting that to be in the matter of weeks after the Q2 report, now months have passed. Do you want to address that again, Magnus?

[Magnus Nordin, executive]

No, indeed. So, we've had a more detailed dialogue than we anticipated with the MEM, and it's lately been directed primarily towards the exploration part of the block going forward. And we expect it now to have it certainly, within the next month or so.

[Petter Hjertstedt, executive]

Excellent. On Block 58, the question on flow test. I think several participants have touched on this. Would you expect to announce the flow test results as they come through? Or would you wait to the end of the test to announce the results?

[Magnus Nordin, executive]

And again, here and I think as Petter touched on just a couple of minutes ago, we would certainly do keep shareholders updated in what's happening and release any meaningful information as soon as we have it.

[Petter Hjertstedt, executive]

I think we can add to that. I mean, any information that is of great importance to the share price, I think we are obliged to announce as soon as we are aware of those.

[Magnus Nordin, executive]

Any material change to the company's position will have to be immediately.

[Petter Hjertstedt, executive]

Yes, exactly. And that is something that's always the case. There is one final question, slightly more technical. Why were the logs, this is on Block 58. Why were the logs inconclusive on the fractured reservoirs? What did the resistivity logs say?

[Magnus Nordin, executive]

Given that we have nothing really to compare the logs with since we drill blind, there is uncertainty as to what the resistivity is actually showed. So, what we have more certainty on is the presence of fractures and where they are, the various formation tops and the permeability from the fractures and the porosity within the matrix.

But we have incomplete information to actually conclude if the resistivity logs, what they actually show. And that's why an open or flow test is essential to get a better handle on what's actually in the reservoir. I hope that answered the question, Petter.

[Petter Hjertstedt, executive]

I believe so. I think Stefan will have to follow up if he's not satisfied with your questions offline. But I believe that's all we have on e-mail. And otherwise, I don't know if there's anything, any new questions coming in from the participants.

[Operator]

We have no further questions on the audio line. I would now like to hand back to Magnus Nordin for any closing remarks.

[Magnus Nordin, executive]

So, in that case, thank you so much for listening. Stay tuned for 56, tsay tuned for 58 and stay tuned for the offer from Roc. We should have some very interesting couple of weeks ahead of us. And until we meet again, best of luck and take care. Thank you, everyone.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.