Central Asia oil producer sells Kazakh assets to China PE fund

The transaction will result in an initial $75 million cash payment to Tethys. Additional performance bonus payments will be made for the further discovery of proven and probable reserves achieved from the 2013 and 2014 drilling program, according to a statement.

Bonus payments will also be made in profit sharing of any excess profit at any exit by SinoHan from the project.

Under the terms of the deal, SinoHan will acquire a 50% stake, plus one share, in Tethys subsidiary Tethys Kazakhstan SPRL (TK SPRL). Tethys will remain as the operator of the assets, with both partners having equal board representation in TK SPRL.

The cash injection will help the company fund more extensive and accelerated work program in Kazakhstan, also benefiting from a tie-up with an investor that has strong Chinese networks in the resource sector.

"It makes sense to us at this stage of our corporate growth to bring in a partner to share 50% of the risk and funding in Kazakhstan, adding to a balanced portfolio company-wide where we have a joint venture with the China National Petroleum Corporation and Total in Tajikistan, and also a partner on our projects in Georgia," said David Robson, chairman and president of Tethys.

This is the first major oil and gas investment by HanHong in Kazakhstan. Founded in 2009, the group operates over 10 renminbi-denominated funds in China, which are primarily invested in domestic small-loan finance companies and mining companies. Globally, it manages several resources funds valued at more than $1 billion.

HanHong Resources Fund (HRF), one of its global resource funds, invests in overseas commodities exploration companies. HRF's executive GPs come from HanHong and other international financial companies with expertise in natural resources. The fund's LPs include Chinese institutional investors as well as investors from other countries and regions.

Since 2010, HRF has invested in a series of projects in the US, South Africa and Central Asia. To date, the commercial value of resources in the fund's overseas portfolio exceed $2 billion.

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