The drilling programme on Block 4 onshore the Sultanate of Oman continues with the drilling of Saiwan East-4 (SE-4). The SE-4 well is primarily designed to further evaluate the extension of the oil bearing Khufai reservoir.

SE-4 is being drilled 2.9 kilometers to the southeast of the highly successful Saiwan East-3 well which recently tested at a rate of 10,714 barrels of oil per day from a 467 metres horizontal section in the upper part of the Khufai reservoir. SE-4 is being drilled with the same rig and equipment as was used for SE-3 but SE-4 will be drilled as a vertical well. SE-3 penetrated a 61 metres gross oil column in the Khufai and one of the main objectives of SE-4 is to ascertain whether the Khufai reservoir is oil bearing at the SE-4 location.

The SE-4 well will also penetrate the Buah, Amin and Miqrat formations that have been found to contain thick layers of 'heavy' oil in previous wells, including SE-3. The other main objective of SE-4 is to explore potential formations below the Khufai. The well will be drilled to basement and drilling operations are expected to last slightly more than 30 days.

Tethys has a 30 per cent interest in Blocks 3 and 4. Partners are Mitsui E&P Middle East B.V. with 20 per cent and the operator CC Energy Development S.A.L. (Oman branch) holding the remaining 50 per cent.

Assignment to Mitsui Approved by Government The assignment whereby Tethys Oil through its wholly owned subsidiary Tethys Oil Blocks 3 and 4 Ltd ("Tethys") assigns to Mitsui E&P Middle East B.V., a subsidiary of Mitsui & Co. Ltd., ("Mitsui"), 20 percentage points in license 3 and 4 onshore the Sultanate of Oman has been approved by the Government of the Sultanate of Oman.

After the assignment to Mitsui, Tethys holds a 30 per cent interest in Blocks 3 and 4 and Mitsui E&P Middle East B.V. holds a 20 per cent interest. The operator CC Energy Development S.A.L. (Oman branch) holds a 50 per cent interest.

Mitsui and Tethys entered into an agreement on May 19, 2010 whereby Mitsui where to acquire 20 percentage points of the license covering Blocks 3 and 4 onshore the Sultanate of Oman ("The transaction"). Total compensation to be paid by Mitsui in consideration for the 20 per cent interest amounts to USD 20 million in cash. In addition Mitsui undertakes to fund Tethys share of non exploration related capital expenditure up to USD 60 million on Blocks 3 and 4 effectively from January 1st 2010. In addition Mitsui will pay to Tethys a production bonus amounting to USD 10 million in the event combined future production from the two Blocks come to exceed 10,000 barrels of oil per day.

Following the approval now obtained by the Government of the Sultanate of Oman it is expected that closing of the transaction will take place within ten days or as soon as closing documents are in place. Upon closing Tethys will receive the cash payment of USD 20 million as well as will be reimbursed all expenditure incurred on Blocks 3 and 4 since January 1, 2010, less MUSD 3 already paid by Mitsui on Tethys behalf.

Tags: Tethys Oil