8 May, 2018 – Tower Resources plc (the “Company” or “Tower” (TRP.L, TRP LN)), the AIM listed oil and gas company with its focus on Africa, announces its preliminary results for the 12 months ended 31 December 2017.
§ Completion of the sale of Comet Petroleum Limited
§ Placings and subscription raised aggregate gross proceeds of US$3.0 million
§ Open Offer raised gross proceeds of US$245,000
§ Appointment of David M Thomas as Independent Non-Executive Director
§ Commencement of Environmental and Social Impact Assessment required for drilling on Thali license
§ Award of Thali 3D seismic reprocessing contract to DMT Petrologic GmbH.KG
§ Cash balance at year-end of $2.2 million (2016: $790k).
Post-reporting period events:
§ Reprocessing of the Thali 3D seismic dataset has been completed
§ Award of reserve report contract to Oilfield International Ltd in respect of the Thali license
Jeremy Asher, Chairman and Chief Executive Officer of Tower said:
“Our Company has made substantial progress since our last Annual Report in June 2017, and we are looking forward to finalising our Cameroon drilling program and making further progress towards near-term oil production.”
CHAIRMAN AND CHIEF EXECUTIVE’S STATEMENT
2017 has been a year of change for Tower Resources plc (“Tower” or the “Company“), as well as for our industry. We believe that the gentle recovery in oil prices over the last twelve months is not merely the result of OPEC cuts, but also stems from a growing realisation that the massive reduction in exploration and development activity during the past few years was not sustainable. Global oil demand continues to grow, and as existing fields decline, the potential production gap will not be met by US shale production alone. Larger projects, which had been put on hold, are now being sanctioned, and the smaller end of the oil and gas ecosystem is also now seeing more activity both in the asset market and the equity markets.
Since our last Annual Report in June 2017, we completed the fundraising we signalled at that time, and began the reprocessing of the 3D seismic data over our Thali license offshore Cameroon. We also began the Environmental and Social Impact Assessment (“ESIA”) required before we can begin drilling at Thali. At the time of writing, the reprocessing of the data is complete and the quality of the resulting data set is good. Our analysis of the new dataset and conclusions should be complete soon and will be released to the market together with a Competent Person’s Report (CPR) in the coming months.
We continue to review drilling options in parallel with completing our technical review of the data and the ESIA, so that we may have a firm drilling plan ready in the third quarter of this year.
Our financial position is much stronger than it was a year ago. It is clear that we will need to raise financing for the well we plan to drill on Thali, before we can drill it. But we believe this can be raised either at the asset level or the corporate level, from various sources, including industry partnering, and within a more flexible timeframe than the deadlines within which we had to operate last year.
Following the November 2017 fundraising, we welcomed David M Thomas to our board of directors. David is a petroleum geologist who spent decades with major firms such as Occidental, Tenneco (now part of BG) and Kuwait Petroleum where he was Chief Geologist, but he has also helped build smaller firms such as Medoil and Orion Energy. His experience is global, but much of it has been earned in Africa where we have our focus, and he is already contributing strongly to our board.
Our objectives for the year ahead include getting our drilling program underway in Thali, planning further work in Cameroon including the pathway to production, agreeing plans to move forward in South Africa and Zambia, and potentially in Namibia, and generally continuing to strengthen our financial position. We look forward to achieving these goals.
SUMMARY AND OPERATIONAL REVIEW
Our strategy continues to be to shift our focus towards lower risk exploration and development within proven basins, best characterised by our 2015 signature of the Thali PSC in the Rio Del Rey basin, offshore Cameroon. We have not abandoned high risk/reward exploration altogether: we still have our licenses in Zambia and South Africa, for example, and we also have a new license under discussion in Namibia. The Thali PSC also has a high reward upside in the deeper zones, which have not yet been tested by past drilling, as Exxon’s Zafira discovery to the South-West of our block has demonstrated. We continue to believe that all of our assets are attractive and valuable. But our strategy is to shift the balance of our investment, and to focus our current investment on the lower risk, earlier reward opportunities like Thali, or other appraisal and development opportunities, during this phase of the market cycle.
This strategy requires finding external finance at the asset level for our existing exploration commitments wherever possible, which is why we took the decision some time ago to convert our working interest in the SADR to a royalty interest, and why we are now supporting our partner and operator, NewAge Energy Algoa (Pty) Ltd (50%), in seeking a farm-in partner for our Algoa-Gamtoos block in South Africa. Our financial strategy remains to explore asset-level financing even for assets that we could also finance with our own equity, to achieve the most economically attractive financing for each asset and the best value for shareholders.
As an operator, as in Cameroon and Zambia, we believe that the scale of local operations is also important to create savings and synergies across blocks in the same basin. To some extent this can be achieved and reinforced through good relations with other local operators but controlling multiple blocks oneself is the most obvious way to achieve such synergies (where they can be found) to the benefit of one’s host nation, one’s partners, and one’s investors alike. To this end, we are continuing to discuss a further PSC in Cameroon even while undertaking development of our existing one.
Keeping overhead costs appropriately low, and managing operating costs well, are always important, but especially so in this phase of the market cycle. We have always sought to keep fixed costs down, and total costs flexible, through outsourcing a number of important functions such as our technical-subsurface relationship with EPI Limited, and we have reduced our corporate costs substantially since 2016, as our 2017 figures are beginning to show.
On an operational level, activity has been low in both Zambia and South Africa but will increase in the future, as South Africa has now passed its new Petroleum Law and Zambia’s new Petroleum Law is currently navigating parliament. In Cameroon we have been working on the reprocessing of 3D seismic data (completed in April 2018) and the ESIA that needs to be completed before we commence drilling.
Full announcement at https://www.towerresources.co.uk