Whats-Hot-or-Not
Periodically we publish our picks. Stocks that we like are “Hot” and listed below. Stocks not considered hot are removed.
Whats-Hot-or-Not
Buy Tethys Petroleum Limited $0.75 (TPL on the TSX)
Tethys Petroleum (TPL)
This is a company that is listed on the Toronto Stock Exchange, yet it has no operations in North America. Its operations are in three central Asian Countries:Kazakhstan, Tajikistan & Uzbekistan. It is an example of how the Toronto Stock Exchange and its junior exchange The Toronto Venture Exchange, provide capital the world over for promising companies. Companies operating across the globe list on the TSX and TSXV for various reason, including reasonable listing costs, the ability to raise capital regardless of the location or nature of its operations, and the welcome mat of Canada.
The Business of Tethys
Tethys is an oil and gas company. It calls itself “The Central Asian Oil & Gas Company”. It has spend many years establishing its position in these countries, which to most Westerners, are remote and unknown jurisdictions. Imagine a body of land occupied by these three countries, that borders on Russia to the north, Mongolia & China to the East, Afghanistan & Pakistan to the south, Iran to the south-west, and Azerbaijan & Turkmenistan to the west. A very interesting part of the world that borders on many of the most violent and changing countries in the world, as well as a dynamically growing part of the world.
In these diverse ethnic countries, Tethys has established a major beachhead. It claims to be the only independent oil and gas company working in all the three countries, it claims to have gained the confidence of the governments in all three countries and it claims to have established agreements with many of the major players in the area, to drill for oil and gas resources in all three countries and to either export this energy to anxious consumers in nearby China and elsewhere, or to provide the local economies with the energy to promote economic growth. Quite an accomplishment actually.
The Driving Force Behind Tethys
Dr David Robson was the founder and is Executive Chairman, President and Executive Director of the Tethys Petroleum Group of Companies, listed on the Toronto Stock Exchange since 2007. Since 1990 he worked on oil and gas projects in many parts of the former Soviet Union including Siberia, Sakhalin, Murmansk, and the Caspian region. He established the first non-state gas development project in Ukraine, the first non-state drilling in the fSU Black Sea, the first non-state exploration and development wells in Georgia and negotiation of the first EBRD loan to a private sector project in Ukraine. He holds many honors and experienced positions, and travels the world promoting Tetrys. The CEO is Julian Hammond who has been with the company through its listing and deeply involved in the operations.
Oil & Gas Assets
After years of efforts and exploration, Tetrys has now turned the corner and had $27,000,000 in revenue in the first 9 months of 2012, and revenues are expected to grow substantially as production ramps up. In Kazakhstan and Tajikistan it has Gross Proven Reserves of 15.6 MMboe, Proven & Probable 27.5 and substantially more as Possible. The company made the first oil discovery in 2010 in the entire region, and has significant additional discoveries and potential discoveries. Commercialization includes an oil terminal and pipelines to carry the oil to neighbours on all sides.
The numbers attributable to Tajukistan included in these reserves are negligible but with substantial upside both for gas and for oil and oil concentrates. The company considers Tajikistan the “jewel in the crown”. It has a massive land position, and agreements with other majors in the area on excellent terms with Total S.A. and CNODC (Chinese). Exploration has created some explosively large potential targets and high hopes.
In Uzbekistan, the company is producing oil, has impressive new projects and significant exploration upsides. It has oil production currently with new production expected as government final approvals are received. There is high potential for more discoveries in areas that appear to be prospective.
An Overview
Tethys has too many shares outstanding (287,000,000), and has struggled to establish itself as a Western oil and gas company in an area of the world that is suspicious of Western interests. By diligent effort, it seems to have earned the trust and co-operation of the governments and of the various interests in the area. When questioned about how it is to work in these countries, Dr Robson responds that it is very similar to working in any other part of the world including North America. You recognize the interests and wishes of both the governments and the local people, and you do what is necessary to be a good corporate citizen – the same as anywhere.
Tethys seem to have succeeded by its first mover advantage and seems to control significantly valuable large exploration areas, as well as having established the infrastructure and gas and oil flow to be a successful company. For those who believe in carbon energy, this is an area of the world that desperatly needs a dramatic increase in the supply of fossil fuels, with neighbors that want all that can be produced. China is very active in the area, building pipelines and seeking supply contracts.
This company is a good bet and a very cheap stock price. It has enormous upward stock appreciation potential.
Cautions
Of course the major caution to this potential investment is a political consideration. In this violent part of the world, which is attempting to modernize centuries of tradition within just a few years, with many competing religions and groups, one never can be certain of what tomorrow brings. Dr Robson claims that he feels safer in these countries than he does walking in New York City. Perhaps that is so, but matters can change with violent suddenness.
We may or may not have positions in the securities we name under ‘Whats-Hot-or-Not’. Whether an investment is made in a particular security depends on many factors, including portfolio balancing, timing, cash and capital reserves, asset allocation and numerous other factors. Readers are advised to do their own research on our picks and decide in light of their own circumstances, whether an investment is appropriate.
Except for the historical information presented herein, matters discussed in this document contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds
