REG - Tower Resources PLC - Cameroon Financing and Resource Update

Tower ResourcesAnnouncement

29/06/2022 18:15

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RNS Number : 7147Q  Tower Resources PLC  29 June 2022

29 June 2022

Tower Resources plc

Cameroon Financing and Resource Update

 

Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN), the AIM-listed
oil and gas company with a focus on Africa, is pleased to provide an update on
activity in respect of its Thali Production Sharing Contract (PSC), in the Rio
Del Rey sedimentary basin offshore Cameroon.

 

Cameroon Financing:

 

Tower is pleased to announce that its subsidiary, Tower Resources Cameroon SA
("TRCSA"), has executed a term sheet with BGFI Bank Group ("BGFI"), the
largest bank group in Central Africa, for a medium term loan of CAF 4.42
billion (equivalent to approximately US $7.1 million at the current exchange
rate of 620 Central African Francs ("CAF") to the US dollar) as partial
financing of the NJOM-3 well on the Thali block in Cameroon (the "Loan").

 

The Loan should cover around 40% of the roughly US$18 million cost of the
well, with a further amount in excess of 25% already having been paid for by
TRCSA, and the balance of 35% of the cost of the well also to be funded by
TRCSA. The term of the loan is five years and it will be secured by a modest
restricted cash balance (or bank guarantee) and a partial parent company
guarantee, as well as a pledge of revenues from Njonji production in due
course.

 

Interest on the Loan is to be 8% per annum, with a moratorium on interest
payments during the first year of the facility, and commissions and fees for
BGFI for arrangement, participation and acting as agent for the facility are
as customary.

 

The term sheet is not yet binding, and the Loan will be subject to, inter
alia, the execution of definitive documents and the availability of the
remaining funding required for the NJOM-3 well.

 

Cameroon Resource Update:

 

The NJOM-3 well will appraise the reservoirs already discovered and connected
to the NJOM-1 well, and will also test additional reservoirs which are visible
on the 3D seismic data which we reprocessed in 2018 but which are not present
at the edge of the Njonji structure where NJOM-1 was drilled.

 

The Company has prepared updated resource estimates for the reservoirs
connected to the NJOM-1 discovery well, which are set out in detail in the
linked presentation at page 8. These estimates are a little higher than the
estimates contained in the OIL Reserve Report (24.9 million barrels pMean
recoverable compared with 17.9 million barrels per OIL).

 

The main purpose of the updated resource estimate is not the slightly higher
resource estimate per se, but the evaluation of additional potential
reservoirs on a consistent basis  in the Northern section of the Njonji
structure, which have been identified on the reprocessed seismic and which
were not evaluated in the OIL report. These could amount to up to 20 million
bbls of further resource, with a pMean estimate of 10.8 million bbls, albeit
subject to chances of success in the range 23-32%.

 

The Company has also updated its estimate of the NPV10 of the base volumes in
the 24.9 million barrel pMean recoverable case, to $305 million, as set out in
the linked presentation at page 11.

 

The Company will update its CPR to SPE/PRMS standards in due course to reflect
the updated estimate.

 

Presentation:

 

A copy of the investor presentation will be available this evening following
the conference at www.towerresources.co.uk and can also be accessed here:
http://www.rns-pdf.londonstockexchange.com/rns/7147Q_1-2022-6-29.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7147Q_1-2022-6-29.pdf)

 

 

Jeremy Asher, Tower's Chairman and CEO, commented:

 

"We are delighted to announce this step forward in the financing of the NJOM-3
well, and also in our relationship with BGFI Bank Group. As we announced last
month, the expected cost of the well has increased to approximately US$18
million, and so this facility and the US$4 million or so we have already
invested, will still leave us with a balance - but a much smaller and more
manageable balance - of the NJOM-3 well to finance. We are continuing to look
at financing options at the asset level within TRCSA, including with Beluga
Energy and its investors, though obviously for smaller amounts than discussed
previously. We are also keeping an open mind on other financing alternatives,
but whichever path we follow, as we explained in May, we expect the result to
be considerably more favourable for shareholders than the farmout structure
previously contemplated. We plan to conclude financing discussions in the
third quarter of this year, as previously intimated, and then to press on with
the well.

 

"As previously announced, long lead items for the well are already purchased,
and the environmental and social impact assessment, site survey and site
debris survey are already completed; and the initial exploration period of our
Thali PSC has been extended expressly to accommodate this well.

 

"We are as excited as ever about the Thali PSC, as I plan to explain at the
upcoming Proactive Investors conference in London this evening, 29 June 2022."

 

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.

Contacts:

 

 Tower Resources plc                  +44 20 7157 9625
 Jeremy Asher

Chairman and CEO

 Andrew Matharu

VP - Corporate Affairs

 SP Angel Corporate Finance LLP       +44 20 3470 0470

Nominated Adviser and Joint Broker

 Stuart Gledhill

 Caroline Rowe

 Novum Securities Limited             +44 20 7399 9400

Joint Broker

 Jon Beliss

 Colin Rowbury

 Panmure Gordon (UK) Limited          +44 20 7886 2500

Joint Broker

 John Prior

 Hugh Rich

 

Notes:

 

BGFI Bank Group is a large financial services conglomerate in Central, West
and East Africa, with subsidiaries in ten countries, including Gabon, where
the Group was founded, and Cameroon. The member institutions serve both
individuals and businesses, with emphasis on small-to-medium enterprises
(SMEs). As of December 2020, the Group's assets were in excess of €5
billion, and BGFI Bank Group is described as the largest bank group in Central
Africa (the CEMAC zone).

 

In accordance with the guidelines for the AIM market of the London Stock
Exchange, Dr Mark Enfield, BSc, PhD, and a member of the Board of Tower
Resources plc, who has over 30 years' experience in the oil & gas
industry, is the qualified person that has reviewed and approved the technical
content of this announcement.

 

Glossary:

Best Estimate: At least a 50% probability (P50) that the quantities actually
recovered will equal or exceed the Best Estimate (in statistical terms, a
median).

Brent Forward Curve: the prices on a given day for Brent Crude Oil for
forward delivery, month by month, ranging from the first traded month forward
for ten years or more.

Chance of Development: The chance of discovery multiplied by the chance of
commercial success.

Contingent Resources: Those quantities of Petroleum estimated, as of a given
date, to be potentially recoverable from known accumulations, by the
application of development Project(s) not currently considered to be
Commercial due to one or more contingencies.

DST: Drill Stem Test.

EMV10: Expected Monetary Value derived from a discount rate of 10%.

EWT: Extended Well Test.

High Estimate: At least a 10% probability (P10) that the quantities actually
recovered will equal or exceed the High Estimate.

Low Estimate: At least a 90% probability (P90) that the quantities actually
recovered will equal or exceed the Low Estimate.

MDT: Modular Dynamic Formation Test.

Mean Estimate: The expected value of the full probability distribution of
resource volumes.

MMbbls: Millions of barrels.

NPV10: Net Present Value at a discount rate of 10%.

Prospective Resources : Those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from undiscovered accumulations by
application of future development projects.

Recoverable : Those quantities of hydrocarbons which are estimated to be
producible from accumulations, either discovered or undiscovered. Note that
Contingent and Prospective Resources as estimated herein are all estimates of
recoverable quantities.

Risked: Quantities that have been adjusted for the probability of success or
loss/failure.

Swanson Rule: A methodology for calculating the EMV of an oil or gas
prospect.

Unrisked : Quantities which have not been adjusted for the probability of
success or loss/failure.

 

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