Tethys Petroleum Limited announced that its wholly owned subsidiary, Tethys Petroleum Inc. ("TPI") has secured loan financing from a group of accredited investors in the amount of USD$5,300,000 toward the purchase of a new drilling rig from China.
The ZJ 70 diesel mechanical drilling rig is capable of drilling 23,000 feet (7,000 metres) and is manufactured by the Sichuan Honghua Petroleum Equipment Co. Ltd in Chengdu, China. It will be one of the largest rigs in Kazakhstan. The purchase creates significant flexibility and lower costs over hiring a third party drilling company.
The rig would also be available for third party contracts to create an additional revenue stream during periods of inactivity. It is capable of drilling the deeper prospects in Tajikistan.
Delivery is expected Q2 2008.
The deal involves a 3-year loan with monthly payments of interest and capital and a final balloon payment. The average annual interest payable expressed as a percentage of the total borrowed funds is 9.3%. 795,000 warrants to purchase Tethys shares were also issued to the lenders with a term of 3 years and an exercise price of CAD$3.25.
Lenders have security over the shares of TPI which has no other assets except the drilling rig. No corporate guarantees or security are being provided by Tethys.
Dr. David Robson, CEO and President of Tethys, said of the acquisition, "This financing helps secure a rig for the deeper drilling program and beyond and provides for significant cost saving on individual wells. It has been manufactured by a high quality firm that last year made over 100 deep drilling rigs, many of which were exported all over the world."
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