REG - Tower Resources PLC - Preliminary Results to 31 December 2021
31/05/2022 07:00
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RNS Number : 3148N Tower Resources PLC 31 May 2022
31 May 2022
Tower Resources plc
Preliminary Results to 31 December 2021
Tower Resources plc (the "Company", the "Group" 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 2021.
Highlights:
· Cameroon exploration and evaluation expenditure on the Thali PSC
amounted to $1.3 million (2020: $2.2 million). Extension of the First
Exploration Period of the PSC was granted to 11 May 2022 (and further
extension to 11 May 2023 was subsequently agreed);
· In Cameroon, the Group also negotiated a farm-out agreement in
respect of the Thali PSC, however the agreement has not to date been approved
by the Government of Cameroon;
· In South Africa, operator NewAge completed interpretation of the
reprocessing of 4,500 line kms of 2D seismic data on behalf of the joint
venture. The data set incorporated both existing JV data and further data
acquired from the Petroleum Agency of South Africa ("PASA") including lines
from the Brulpadda discovery across the Outeniqua basin to the JV license area
at Algoa-Gamtoos. The work identified a deeper-level slope play similar to
that seen at Brulpadda, with three distinct reservoir sections containing
unrisked Pmean recoverable resources of 1.4 billion barrels of oil equivalent;
· In Namibia the Group began basin modelling work as envisaged in the
license work plan;
· The Group received a favourable ruling in the UK from the Upper
Tribunal ("UTTC") supporting the previous (2019) favourable ruling from the
First Tier Tax Tribunal ("FTT") in respect of the Group's UK VAT position;
· Administrative costs net of share-based payment charges of $762k
(2020: $508k) include legal fees incurred totalling $263k (2020: $56k);
· Cash balance at year-end of $10k (2020: $10k).
Post-reporting period events:
· 14 January 2022
Placing for cash to raise £1.5 million (gross) via a subscription of
576,923,077 new ordinary shares of 0.001p each at a price of 0.26 pence per
share;
· 7 February 2022
Announcements by the National Petroleum Corporation of Namibia ("Namcor"), and
also operator Shell Namibia Upstream B.V. ("Shell"), and partner QatarEnergy,
confirming that the Graff-1 well on PEL 39 has made a discovery in both its
primary and secondary targets, and proved a working petroleum system for light
oil in the Orange Basin, offshore Namibia. The Company provided an analysis of
the implications of this successful well for the prospectivity of other
operators' acreage in Namibia, including its own, and observed that Tower's
net acreage position of 18,637 km2 is believed to be the third largest net
acreage position in the Namibian offshore, after Exxon and Eco Atlantic Oil
& Gas;
· 1 April 2022:
Issue of warrants in lieu of £30,000 (in aggregate) of Directors fees and a
further £7,500 employment costs, to conserve the Company's working capital at
a strike price of 0.2625 pence, and exercisable over five years;
· 9 May 2022:
The Company was notified by the Government of Cameroon of a further extension
of the First Exploration Period of the Thali PSC to 11 May 2023. The Company
also announced that it was negotiating an LOI with Shelf Drilling for Shelf's
Trident VIII jack-up drilling rig to drill the NJOM-3 well on the Thali block
in the fourth quarter of 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
Nick Lovering
Hugh Rich
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
During 2021 we continued to encounter problems arising from the pandemic, but
these gradually receded in importance, and by the end of the year - and even
before the conflict in Ukraine - the world had woken up to the consequences of
several years of underinvestment in the oil and gas industry, with the price
of Brent pushing $80/bbl and European gas prices already reflecting physical
shortages. Since the year-end we have seen the Brent price for prompt delivery
move above $110/bbl, and even forward prices, which are usually less volatile,
have risen substantially, with Brent for 2025 delivery having increased from
below $60/bbl a year ago to around $80/bbl now.
Naturally, this has increased the potential value of all of our projects. The
prospectivity and value of our license interests in Namibia and South Africa
have also been enhanced both by work that we and our partners have undertaken
in 2021 and in the year to date, and also by the exciting drilling results
achieved by TotalEnergies and Shell in Namibia during the same period. This
work is discussed in more detail in the Operational Review section below.
Our Cameroon project is also positively affected by the increase in oil
prices, though this increase also presents us with short term challenges. Our
Njonji development plans on the Thali PSC represent our path to near-term
production, and in that sense are more sensitive to the increase in oil prices
than our other assets - our internal cash flow projections have certainly
improved from those we presented to shareholders in 2021. However, I should
also emphasise something we have said in the past: that the economics of the
Njonji development are very solid at a wide range of oil prices, and therefore
the positive impact of the current high prices, while welcome, is not
critical. Our priority is to get the NJOM-3 well drilled, as this is the
gateway to the rest of the development. And with higher oil prices leading to
increased drilling activity around the world, there are also some additional
challenges to address in the form of longer lead times and higher prices for
rigs and services.
The Government of Cameroon has recognised this, in providing us with a further
extension of the First Exploration Period of the Thali PSC to May 2023, which
should give us plenty of time to get the NJOM-3 well drilled, tested and
evaluated before entering the next Exploration Period. And with this extension
in hand, we are now finalising a binding LOI for a rig to drill the NJOM-3
well prior to the year-end. As we have already explained in our recent
Cameroon update, although costs have risen a bit, this is somewhat mitigated
by our having already completed a lot of the work for the well and acquired
all the long lead items, which are in place in our facility in Douala.
At the time of writing, we are in discussions regarding the final financing
arrangements for the well, and as we previously announced, we do not intend to
go forward with the previously agreed farm-out as originally planned. It now
appears that we can raise some debt financing at the level of our Cameroon
subsidiary to help with the NJOM-3 costs, which (if it can be done) would
obviously be preferable to the asset-level dilution of the farm-out as
originally structured. We do not want to comment further on these discussions
at this stage, and we cannot be certain what the final arrangements will be,
but we do believe that we will be able to achieve a better overall outcome
than the farm-out, while also avoiding a further approval process.
The remainder of 2022 looks like being a crucial period for our Company, and I
hope it will also be a very successful period.
STRATEGIC REPORT
Our strategy over the past several years has been to focus in the near term on
lower risk appraisal and development within proven basins where there is still
low-risk exploration upside, such as our Thali PSC in Cameroon, while still
maintaining selective exposure to longer term and high risk/reward exploration
in areas where we have existing relationships, such as Namibia and South
Africa.
Even before the current conflict in Ukraine, markets were becoming aware by
the end of 2021 that the global underinvestment in exploration and production
since 2015 was already having a profound effect on both oil and gas supply,
and on prices. This has reinforced the benefits, both short and long term, of
a strategy based on achieving short term production as quickly as we can,
while also continuing to develop potential resources for the future.
Totalenergies' 2020 success in South Africa with its Brulpadda and Luiperd
wells in the Outeniqua basin, and its recent success in Namibia at Venus-X1
coupled with Shell's recent success in Namibia with its Graff-1 well, indicate
that in Namibia and South Africa we have chosen promising countries for our
exposure to high risk, high reward exploration. These successes have also
resulted in a renaissance of investor interest in exploration, and especially
in these countries, as both the scale of these opportunities and the need for
the resulting oil and gas over the next decade have become apparent.
In the near term, our strategy still requires reaching first oil in Cameroon
as soon as possible, especially now that production is worth so much more than
a few years ago. Our Cameroon license also has substantial exploration upside,
but this can only be unlocked once we have the existing discovery appraised
and in production.
This activity requires financing, and while there is still non-dilutive
financing available (within limits) for producing assets, the equity
requirements for the earlier stages of exploration and development usually
require some trade-offs between the amount of a project one can retain and the
speed with which it can be developed. We always look at the alternatives of
financing our activity at the asset level, whether via debt or other
non-dilutive financing, or via farm-outs, or at the corporate level, again
with debt or equity, in order to achieve the best expected outcome for our
shareholders.
Although we have both operated and non-operated interests, our preference is
to operate assets, in order to control costs and timing more directly, and to
build up our local relationships and internal knowledge of reservoirs and
petroleum systems, and this remains the case in 2021 and now.
Over the past few years, keeping costs low and flexible without losing access
to our people and their skills has also been critical to survival, and we
believe will continue to be critical to success in future - not merely in
being able to keep costs to a minimum in periods where activity is necessarily
low, as we have recently seen, but also in being able to ramp up the resources
and technology we are able to bring to our projects in the future when needed.
This is why our technical-subsurface relationship with EPI, which has served
us well since 2015, and our more recent relationship with Bedrock Drilling on
well design and management, are an essential part of our strategy.
Finally, as noted in our last annual report, our strategy is to enable and to
support the wider strategic and environmental plans of each of the countries
in which we operate, to increase power generation from cleaner sources,
including both renewables and natural gas, both to aid economic development
and to displace less efficient diesel and fuel-oil based power generation, and
to reduce imports of liquid fuels by increasing local production where
possible. These countries' strategic plans depend critically on the continued
development of local oil and gas production in the near term, in order to meet
the national goals and COP26 and other climate commitments which they have set
for the next decade.
OPERATIONAL REVIEW
In 2021, much of our activity remained constrained by the impact of the
pandemic and associated travel and other restrictions. In Namibia and South
Africa, where our work programme naturally comprised more planning activity in
any case, this was less of a problem than in Cameroon, where our original
intention had been to be drilling already. Nevertheless, we were able to make
progress on all three licenses.
In Cameroon the first half of the year was dominated by the discussions with
MINMIDT and the other elements of government in Cameroon regarding the
extension of the initial exploration period of our PSC in the unusual
circumstances, and the negotiation of a farm-out agreement with Beluga Energy.
The discussions with the government were substantially complete in March and
the extension itself was formalised in May, and we were able to announce the
terms of the farmout in August. Although we worked hard to complete the
farm-out documentation with Beluga as quickly as possible, and submitted a
request to government to approve the farmout in September, we waited a long
time for any feedback on the approval process (and to date have still not
received a formal approval). However, we used the time to update our drilling
plans, and in particular to advance our planning for the next steps following
the NJOM-3 well, including identifying potential contractors for the wellhead
platform and refining the design, and also identifying candidates for the
Mobile Oil Production Unit ("MOPU") and potential partners for its provision.
At the time of writing our plan is to drill the NJOM-3 well in the fourth
quarter of 2022.
In Namibia, we began basin modelling work as planned, and by the end of the
year we felt ready to begin a more formal piece of work integrating all the
well information and seismic data we could obtain to understand the subsurface
better and to prioritise the various leads in our license area. This area,
spanning three blocks over 23,297 km2 (gross), is one of the largest acreage
positions in Namibia - we believe that only Exxon and Eco Atlantic, following
their acquisition of the Azinam interests in Namibia, have larger acreage -
and so the importance of the initial subsurface work to narrow down the areas
of interest and to prioritise the leads is critical. We expect to complete
this work by the end of the summer of 2022 and will have more to say about it
at that time. As noted elsewhere in this report, the success of Shell's
Graff-1 well and TotalEnergies' Venus-X1 well in early 2022 have given this
work additional impetus and excitement since the year-end.
In South Africa, our 50% partner NewAge, as operator of the Algoa-Gamtoos
block, announced in 2021 an update to its resources estimate following the
2020 reprocessing of 4,500 kms of 2D seismic together with two post-stacked
merged 3D seismic surveys over the Algoa basin. On the deep-water section of
the licence the operator has identified a deeper level slope play, similar to
that seen at TotalEnergies' Brulpadda discovery in the adjoining blocks in the
Outeniqua basin, with three distinct reservoir sections containing unrisked
Pmean recoverable resources of 1.4 billion barrels of oil equivalent:
· A shallow section with 470 million boe recoverable resources;
· A deeper slope section with 231 million boe recoverable resources;
· A basin floor fan section with 710 million boe recoverable resources.
In the second half of the year, our focus in South Africa shifted to preparing
for acquisition of additional 3D seismic data over this promising deep-water
prospect in the Outeniqua basin. We worked with NewAge on the specification
and terms of either a stand-alone survey or participation in a multi-client
survey linked to adjoining acreage. In the event, unresolved environmental
issues delayed one of the surveys in adjoining acreage, and we and our
partners concluded that it would be best to defer the 3D seismic acquisition
while these issues were clarified, a decision which the Petroleum Authority
supported. This remains the next step before we move into the next phase of
the license.
The operator NewAge continued to engage in farmout discussions supported by
Envoi in 2021, and have some interested parties in discussion at the time of
writing. Our own view is that the terms of a farmout have to be right for us
to participate in it, as the cost of the 3D acquisition is not great (compared
to a well, for example) and the timing is anyway still uncertain, but most
importantly, we believe that the prospect itself has substantial value.
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
31 December 2021 31 December 2020
(audited)
(audited)
Note $ $
Revenue - -
Cost of sales - -
Gross profit - -
Other administrative expenses (1,284,136) (755,605)
VAT provision 1,480,683 (174,752)
Total administrative expenses 196,547 (930,357)
Group operating profit / (loss) 4 196,547 (930,357)
Finance expense 6 (149,248) (430,379)
Profit / (loss) for the year before taxation 47,299 (1,360,736)
Taxation 7 - -
Profit / (loss) for the year after taxation 47,299 (1,360,736)
Other comprehensive income - -
Total comprehensive income / (expense) for the year 47,299 (1,360,736)
Basic profit / (loss) per share (USc) 10 0.00c (0.11c)
Diluted profit / (loss) per share (USc) 10 0.00c (0.11c)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2021 31 December 2020
(audited)
(audited)
Note $ $
Non-current assets
Exploration and evaluation assets 12 28,780,391 27,080,202
28,780,391 27,080,202
Current assets
Trade and other receivables 14 8,239 8,805
Cash and cash equivalents 10,227 10,054
18,466 18,859
Total assets 28,798,857 27,099,061
Current liabilities
Trade and other payables 15 2,336,336 3,796,111
Borrowings 16 13,801 1,262,937
2,350,137 5,059,048
Non-current liabilities
Borrowings 46,548 68,763
Total liabilities 2,396,685 5,127,811
Net assets 26,402,172 21,971,250
Equity
Share capital 17 18,264,803 18,254,040
Share premium 17 148,747,595 145,343,446
Retained losses 18 (140,610,226) (141,626,236)
Total shareholders' equity 26,402,172 21,971,250
The financial statements of Tower Resources plc, registered number 05305345
were approved by the Board of Directors and authorised for issue on 30 May
2022.
Signed on behalf of the Board of Directors
Jeremy Asher - Chairman and Chief Executive
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share (1) Share-based Retained Total
capital
premium
payments
losses
reserve
$ $ $ $ $
At 1 January 2020 18,251,117 144,294,128 7,659,308 (148,452,837) 21,751,716
Shares issued for cash 2,265 856,595 - - 858,860
Shares issued on settlement of third-party fees 70 26,150 - - 26,220
Shares issued in settlement of loan interest 588 225,568 - - 226,156
Share issue costs - (58,995) - - (58,995)
Share-based payment charge for the year - - 528,029 - 528,029
Total comprehensive expense for the year - - - (1,360,736) (1,360,736)
At 31 December 2020 18,254,040 145,343,446 8,187,337 (149,813,573) 21,971,250
Shares issued for cash 10,403 3,838,243 3,848,646
Shares issued on settlement of third-party fees 360 110,068 - - 110,428
Share issue costs - (544,162) (544,162)
Share-based payment charge for the year - - 968,711 - 968,711
Transfer to retained losses - - (6,272,250) 6,272,250 -
Total comprehensive income for the year - - - 47,299 47,299
At 31 December 2021 18,264,803 148,747,595 2,883,798 (143,494,024) 26,402,172
(1) The share-based payment reserve has been included within the retained loss
reserve on the consolidated statement of financial position and is a
non-distributable reserve.
CONSOLIDATED STATEMENT OF CASH FLOWS
31 December 2021 31 December 2020
(audited)
(audited)
Note $ $
Cash outflow from operating activities
Group operating profit / (loss) for the year 196,547 (930,357)
Share-based payments 20 968,711 264,416
Shares issued on settlement of third-party fees 110,428 26,220
Operating cash flow before changes in working capital 1,275,686 (639,721)
Decrease in receivables and prepayments 566 44,643
(Decrease) / increase in trade and other payables (1,459,775) 1,980,391
Cash (used in) / from operations (183,523) 1,385,313
Interest paid (net) (2,631) (10,916)
Cash (used in) / from operating activities (186,154) 1,374,397
Investing activities
Exploration and evaluation costs 12 (1,700,189) (2,764,386)
Net cash used in investing activities (1,700,189) (2,764,386)
Financing activities
Repayment of loan facilities 16 (1,278,451) -
Proceeds from borrowings 16 - 561,742
Cash proceeds from issue of ordinary share capital net of issue costs 17 3,304,484 799,865
Interest paid 16 (139,516) (226)
Net cash from financing activities 1,886,517 1,361,381
Increase / (decrease) in cash and cash equivalents 173 (28,608)
Cash and cash equivalents at beginning of year 10,054 38,662
Cash and cash equivalents at end of year 10,227 10,054
COMPANY STATEMENT OF FINANCIAL POSITION
31 December 2021 31 December 2020
(audited)
(audited)
Note $ $
Non-current assets
Loans to subsidiary undertakings 13 17,475,903 15,330,438
Investments in subsidiary undertakings 13 12,307,766 12,307,766
29,783,669 27,638,204
Current assets
Trade and other receivables 14 8,237 8,803
Cash and cash equivalents 6,232 7,236
14,469 16,039
Total assets 29,798,138 27,654,243
Current liabilities
Trade and other payables 15 226,194 1,444,429
Borrowings 16 13,801 1,262,937
239,995 2,707,366
Non-current liabilities
Borrowings 46,548 68,763
Total liabilities 286,543 2,776,129
Net assets 29,511,595 24,878,114
Equity
Share capital 17 18,264,803 18,254,040
Share premium 17 148,747,595 145,343,446
Retained losses 18 (137,500,803) (138,719,372)
Total shareholders' equity 29,511,595 24,878,114
In accordance with the provisions of Section 408 of the Companies Act 2006,
the Company has not presented a statement of comprehensive income and for the
year-ended 31 December 2021 the Company made a profit of $250k (2020: $247k)
The financial statements of Tower Resources plc, registered number 05305345
were approved by the Board of Directors and authorised for issue on 30 May
2022.
Signed on behalf of the Board of Directors
Jeremy Asher - Chairman and Chief Executive
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share (1) Share-based Retained Total
capital
premium
payments
losses
reserve
$ $ $ $ $
At 1 January 2020 18,251,117 144,294,128 7,659,308 (147,154,189) 23,050,364
Shares issued for cash 2,265 856,595 - - 858,860
Shares issued on settlement of third-party fees 70 26,150 - - 26,220
Shares issued on settlement of loan interest 588 225,568 - - 226,156
Share issue costs - (58,995) - - (58,995)
Share option charge for the year - - 528,029 - 528,029
Total comprehensive expense for the year - - - 247,480 247,480
At 31 December 2020 18,254,040 145,343,446 8,187,337 (146,906,709) 24,878,114
Shares issued for cash 10,403 3,838,243 - - 3,848,646
Shares issued on settlement of third-party fees 360 110,068 - - 110,428
Share issue costs - (544,162) - - (544,162)
Share option charge for the year - - 968,711 - 968,711
Transfer to retained losses - - (6,272,250) 6,272,250 -
Total comprehensive expense for the year - - - 249,858 249,858
At 31 December 2021 18,264,803 148,747,595 2,883,798 (140,384,601) 29,511,595
( )
(1) The share-based payment reserve has been included within the retained loss
reserve on the Company statement of financial position and is a
non-distributable reserve.
COMPANY STATEMENT OF CASH FLOWS
31 December 2021 31 December 2020
(audited)
(audited)
Note $ $
Cash outflow from operating activities
Operating profit for the year 214,817 444,590
Share-based payments 20 968,711 264,416
Shares issued on settlement of third-party fees 110,428 26,220
Operating cash flow before changes in working capital 1,293,956 735,226
Increase in receivables and prepayments 566 44,643
(Decrease) / increase in trade and other payables (1,218,235) 248,517
Cash from operations 76,287 1,028,386
Interest received 181,658 222,353
Cash from operating activities 257,945 1,250,739
Investing activities
Loans granted to subsidiary undertakings 13 (2,145,465) (7,919,922)
Impairment of subsidiary undertaking 13 - 5,302,983
Net cash used in investing activities (2,145,465) (2,616,939)
Financing activities
Repayment of loan facilities 16 (1,278,451) -
Proceeds from loan facilities 16 - 561,742
Cash proceeds from issue of ordinary share capital net of issue costs 17 3,304,484 799,865
Interest paid 16 (139,516) (226)
Net cash from financing activities 1,886,517 1,361,381
Increase / (decrease) in cash and cash equivalents (1,004) (4,819)
Cash and cash equivalents at beginning of year 7,236 12,055
Cash and cash equivalents at end of year 6,232 7,236
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
a) General information
Tower Resources plc is a public company incorporated in the United Kingdom
under the UK Companies Act. The address of the registered office is 134
Buckingham Palace Road, London, SW1W 9SA. The Company and the Group are
engaged in the exploration for oil and gas.
These financial statements are presented in US dollars as this is the currency
in which the majority of the Group's expenditures are transacted and the
functional currency of the Company and have been prepared in accordance with
UK-adopted International Accounting Standards, and in compliance with the
requirements of the Companies Act 2006.
b) Basis of accounting and adoption of new and revised standards
Changes in accounting policies
A number of new standards are effective from 1 January 2021 but they do not
have material effect on the Group's financial statements.
New and amended standards
The following amended standards and interpretation are effective for financial
years commencing on or after 1 January 2022. The Group does not intend to
adopt the standards below, before their mandatory application date.
Standard Description IASB Issue Date IASB Effective Date Secretary of State Adoption Date
IAS 37 (Amendments) Onerous Contracts - Cost of Fulfilling a Contract 14 May 2020 1 January 2022 Endorsed
IAS 16 (Amendments) Property, Plant and Equipment - Proceeds before Intended Use. 14 May 2020 1 January 2022 Endorsed
IFRS 3 (Amendments) Reference to the Contractual Framework. 14 May 2020 1 January 2022 Endorsed
IAS 1 (amendments) Classification of Liabilities as Current or Non-current. 23 January 2020 1 January 2023 Endorsed
IFRS 17 Insurance contracts. 25 June 2020 1 January 2023 Endorsed
IAS 12 (Amendments) Deferred tax related to assets and liabilities arising from a single 7 May 2021 1 January 2023 Endorsed
transaction.
IAS 8 (amendments) Definition of accounting estimates. 12 February 2021 1 January 2023 Endorsed
IAS 1 and IFRS Practice Statement 2 (amendments) Disclosure of accounting policies. 12 February 2021 1 January 2023 Endorsed
Future accounting pronouncements
The Company intends to adopt the above listed standards and interpretations in
its financial statements for the annual period beginning 1 January 2022. The
Company does not expect the implementation to have a material impact on the
financial statements.
c) Going concern
The Group will need to complete its agreed farm-out and/or another asset-level
transaction within the coming months, or otherwise raise further funds, in
order to meet its liabilities as they fall due, particularly with respect to
the forthcoming drilling programme in Cameroon. The Directors believe that
there are a number of options available to them through either, or a
combination of, capital markets, farm-outs or asset disposals with respect to
raising these funds. There can, however, be no guarantee that the required
funds may be raised or transactions completed within the necessary timeframes,
which raises uncertainty as to the application of going concern in these
accounts. Having assessed the risks attached to these uncertainties on a
probabilistic basis, the Directors are confident that they can raise
sufficient finance in a timely manner and therefore believe that the
application of going concern is both appropriate and correct.
This point is also discussed in note 2 of the financial statements
d) Basis of consolidation
The consolidated financial statements incorporate the accounts of the Company
and its subsidiaries and have been prepared by using the principles of
acquisition accounting ("the purchase method") which includes the results of
the subsidiaries from their date of acquisition. Intra-group sales, profits
and balances are eliminated fully on consolidation.
The results of subsidiaries acquired or disposed of are included in the
consolidated statement of comprehensive income from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used
by the Group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
As a Consolidated Statement of Comprehensive Income is published, a separate
Statement of Comprehensive Income for the Parent Company has not been
published in accordance with section 408 of the Companies Act 2006.
e) Jointly controlled operations
Jointly controlled operations are arrangements in which the Group holds an
interest on a long-term basis which are jointly controlled by the Group and
one or more ventures under a contractual arrangement. The Group's exploration,
development and production activities are sometimes conducted jointly with
other companies in this way. Since these arrangements do not constitute
entities in their own right, the consolidated financial statements reflect the
relevant proportion of costs, revenues, assets and liabilities applicable to
the Group's interests.
f) Oil and Gas Exploration and Evaluation Expenditure
Costs incurred before the acquisition of a license or permit to explore an
area are expensed to the income statement.
All exploration and evaluation costs incurred following a license or permit to
explore being obtained or acquired on the acquisition of a subsidiary are
capitalised in respect of each identifiable project area. These costs are
classified as intangible assets and are only carried forward to the extent
that they are expected to be recouped through the successful development of
the area or where activities in the area have not yet reached a stage which
permits reasonable assessment of the existence of economically recoverable
reserves (successful efforts).
Costs incurred by Directors' and employees of the parent Company on the
exploration activities are recharged to the subsidiaries and capitalised as
exploration assets accordingly.
Other costs are expensed unless commercial reserves have been established or
the determination process has not been completed. Accumulated costs in
relation to an abandoned area are written off in full against profit in the
year in which the decision to abandon the area is made.
When production commences the accumulated costs for the relevant area of
interest are transferred from intangible assets to tangible assets as
'Developed Oil and Gas Assets' and amortised over the life of the area
according to the rate of depletion of the economically recoverable costs.
g) Impairment of Oil and Gas Exploration and Evaluation assets
The carrying value of unevaluated areas is assessed when there has been an
indication that impairment in value may have occurred. The impairment of
unevaluated prospects is assessed based on the Directors' intention with
regard to future exploration and development of individual significant areas
and the ability to obtain funds to finance such exploration and development.
h) Decommissioning costs
Where a material liability for the removal of production facilities and site
restoration at the end of the field life exists, a provision for
decommissioning is made. The amount recognised is the present value of
estimated future expenditure determined in accordance with local conditions
and requirements. An asset of an amount equivalent to the provision is also
created and depreciated on a unit of production basis. Changes in estimates
are recognised prospectively, with corresponding adjustments to the provision
and the associated asset.
i) Property, plant and equipment
Property, plant and equipment is stated at cost less depreciation.
Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected useful life as
follows:
Computers and equipment, fixtures, fittings and equipment: straight line over
4 years
Leasehold and office refurbishment costs: over duration of lease
The assets' residual values and useful lives are reviewed and adjusted if
necessary, at each year-end. Profits or losses on disposals of plant and
equipment are determined by comparing the sale proceeds with the carrying
amount and are included in the statement of comprehensive income. Items are
reviewed for impairment if and when events indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by
which the carrying amount of the asset exceeds its recoverable amount which is
the higher of an asset's net selling price and value in use.
j) Investments
The Parent Company's investments in subsidiary companies are stated at cost
less any expected credit loss for impairment and are shown in the Company's
Statement of Financial Position.
k) Share-based payments
The Company makes share-based payments to certain Directors, employees and
consultants by the issue of share options or warrants. The fair value of these
payments is calculated either using the Black Scholes option pricing model or
by reference to the fair value of the remuneration settled by way of the grant
of such options or warrants. The expense is recognised on a straight-line
basis over the period from the date of award to the date of vesting, based on
the Company's best estimate of shares that will eventually vest.
l) Foreign currency translation
i Functional and presentational currency
Items included in the financial statements are shown in the currency of the
primary economic environment in which the Company operates ("the functional
currency") which is considered by the Directors to be the U.S Dollar. The
exchange rate at 31 December 2021 was £1 / $1.3479 (2020: £1 / $1.3649).
ii Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the statement
of comprehensive income.
Transactions in the accounts of individual Group companies are recorded at the
rate of exchange ruling on the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at the rates
ruling at the year-end. All differences are taken to the statement of
comprehensive income.
m) Taxation
i Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the statement of comprehensive
income because it excludes items of income or expense that are taxable or
deductible on other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the reporting date.
ii Deferred taxation
Deferred income taxes are provided in full, using the liability method, for
all temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. Deferred
income taxes are determined using tax rates that have been enacted or
substantially enacted and are expected to apply when the related deferred
income tax asset is realised or the related deferred income tax liability is
settled.
The principal temporary differences arise from depreciation or amortisation
charged on assets and tax losses carried forward. Deferred tax assets relating
to the carry forward of unused tax losses are recognised to the extent that it
is probable that future taxable profit will be available against which the
unused tax losses can be utilised.
n) Financial instruments
The Group's Financial Instruments comprise of cash and cash equivalents, loans
and receivables. There are no other categories of financial instrument.
i Cash and cash equivalents
Cash and cash equivalents are carried at cost and comprise cash in hand, cash
at bank, deposits held at call with banks, and other short-term highly liquid
investments with original maturities of three months or less.
ii Receivables
Receivables are measured at amortised cost unless the time value of money is
immaterial. A provision for impairment of receivables is established when
there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. The amount of
the provision is the difference between the assets' carrying amount and the
recoverable amount. Expected credit losses for impairment of receivables are
included in the statement of comprehensive income.
iii Payables
Payables are recognised initially at fair values and subsequently measured at
amortised cost using the effective interest method.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the asset of the Group
after deducting all of its liabilities. Equity instruments issued by the
Company are recorded at the proceeds received net of direct issue costs.
o) Share capital
Ordinary shares are classified as equity. Proceeds received from the issue of
ordinary shares above the nominal value are classified as Share Premium. Costs
directly attributable to the issue of new shares are shown in equity as a
deduction from the Share Premium account.
p) Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event and it is probable that the Group would be required to settle
that obligation. Provisions are measured at the managements' best estimate of
the expenditure required to settle the obligation at the reporting date and
are discounted to present value where the effect is material.
q) Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision makers. The chief operating
decision makers have been identified as the executive Board members.
r) Leases
The Group do not have any leases with a term of 12-months or more that contain
an option to purchase or where the underlying asset has anything other than a
low value and has elected for exemption to the reporting requirements of IFRS
16 (Leases).
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with International
Financial Reporting Standards requires the use of accounting estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. Although these estimates are based on
managements' best knowledge of current events and actions, actual results
ultimately may differ from those estimates. IFRS also require management to
exercise its judgement in the process of applying the Group's accounting
policies.
The prime areas involving a higher degree of judgement or complexity, where
assumptions and estimates are significant to the financial statements, are as
follows:
Recoverability of inter-company balances
Determining whether inter-company balances are impaired requires an estimation
of whether there are any indications that their carrying values are not
recoverable details of which are included in note 13.
Impairment of capitalised exploration and evaluation expenditure
The future recoverability of capitalised exploration and evaluation
expenditure is dependent on a number of factors, including whether it
successfully recovers the related exploration and evaluation asset through
sale. Factors which could impact the future recoverability include the level
of proved, probable and inferred resources, future technological changes which
could impact the cost of drilling and extraction, future legal changes
(including changes to environmental restoration obligations), changes to
commodity prices and licence renewal dates and commitments.
To the extent that capitalised exploration and evaluation expenditure is
determined to be irrecoverable in the future, this will reduce profits and net
assets in the period in which this determination is made. In addition,
exploration and evaluation expenditure is capitalised if activities in the
area of interest have not yet reached a stage which permits reasonable
assessment of the existence or otherwise of economically recoverable reserves.
To the extent that it is determined in the future that this capitalised
expenditure should be written off, this will reduce profits and net assets in
the period in which this determination is made. Details of impairments of
capitalised exploration and evaluation expenditure are included in note 12.
VAT receivable
On 21 May 2021 the Company announced that it had received a favourable ruling
from the Upper Tribunal upholding the First-Tier Tax Tribunal's decision in
the Company's favour and dismissing HMRC's appeal against the First-Tier Tax
Tribunal's decision.
The First-Tier Tax Tribunal's decision, which was announced by the Company in
July 2019, allowed the Company's appeal against HMRC's 2016 decisions to deny
it credit for input VAT. The Upper Tribunal's decision affirmed the First-Tier
Tax Tribunal's decision, and no subsequent appeal was made by HMRC to the
Court of Appeal. There remains a further appeal to the First-Tier Tax Tribunal
by HMRC on procedural grounds which is yet to be heard, however, the Company
does not assess that this appeal has any basis in fact and has released
provisions previously made totalling $1.5 million (2020: provisioned $175k).
Included within trade and other payables (note 15) are amounts totalling $72k
/ £53k (2020: $1.2 million / £903k) with respect to UK VAT payable.
Capital markets / going concern
The Group relies on the UK equities market and the market for equity
participations in oil and gas exploration assets in order to raise the funds
required to operate as a listed entity and complete the respective work
programmes for its oil and gas exploration assets. From time to time, and
especially in light of the present Covid-19 pandemic, general economic and
market conditions may deteriorate to a point where it is not possible to raise
equity finance to fund exploration projects, nor debt to develop projects.
Additional financing may therefore not be available to the Group restricting
the scope of operations, risking both its long-term expansion programme, its
obligations under contracts which may be withdrawn or terminated for
non-compliance and ultimately the financial stability of the Group to continue
as a going concern.
Please see note 1 (c) for a more detailed discussion of going concern matters.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which
they are granted. The fair value is determined by using the Black Scholes
model and by reference to the value of the fees or remuneration settled by way
of granting of warrants. The determination of fair value using the Black
Scholes methodology is based on the input parameters chosen and will therefore
contain an element of judgement and uncertainty. Details of share-based
payment transactions are included in note 20.
3. Operating segments
The Group has two reportable operating segments: Africa and Head Office.
Non-current assets and operating liabilities are located in Africa, whilst the
majority of current assets are carried at Head Office. The Group has not yet
commenced production and therefore has no revenue. Each reportable segment
adopts the same accounting policies. In compliance with IFRS 8 'Operating
Segments' the following table reconciles the operational loss and the assets
and liabilities of each reportable segment with the consolidated figures
presented in these Financial Statements, together with comparative figures for
the year-ended 31 December 2021.
Africa Head Office Total
2021 2020 2021 2020 2021 2020
$ $ $ $ $ $
Administrative expenses (1) 73,931 111,635 598,396 (805,452) 672,327 (693,817)
Pre-licence expenditures - - - (243) - (243)
Share-based payment charges - - (475,780) (236,297) (475,780) (236,297)
Interest income - (416) (1,226) 161 (1,226) (255)
Financing costs (643) (117) (147,379) (430,007) (148,022) (430,124)
Gain / (loss) on disposal of subsidiary undertaking - 1,314,617 - (1,314,617) - -
Loss by reportable segment 73,288 1,425,719 (25,989) (2,786,455) 47,299 (1,360,736)
Total assets by reportable segment (2 / 3) 28,784,388 27,083,022 14,469 16,039 28,798,857 27,099,061
Total liabilities by reportable segment (4) (2,110,144) (2,351,684) (286,541) (2,776,127) (2,396,685) (5,127,811)
(1) Administrative expenses include credits of $1.4 million (2020: expense
$175k) of VAT provision write-backs following the successful defence of VAT
claims made against the Company by HMRC at the chambers of the second-tier tax
tribunal.
(2) Included within total assets of $28.8 million (2020: $27.0 million) are
$14.3 million Cameroon (2020: $13.0 million), $368k Namibia (2020: $320k) and
$14.0 million South Africa (2020: $13.7 million).
(3) Carrying amounts of segment assets exclude investments in subsidiaries.
(4) Carrying amounts of segment liabilities exclude intra-group financing.
4. Group operating profit / (loss)
Profit from operations is stated after charging/(crediting): Total
2021 2020
$ $
Share-based payment charges included within staff costs 475,780 236,297
Share-based payment charges included within professional costs 67,364 20,632
Share-based payment charges included within finance costs - 263,613
Staff costs - 2,203
(Loss) / gain on foreign currencies (21,367) 164,951
An analysis of auditor's remuneration is as follows:
Fees payable to the Group's auditors for the audit of the Group and subsidiary 49,095 39,329
annual accounts
Fees payable to the Group's auditors for non-audit assurance services 4,442 9,884
Total audit fees 53,537 49,213
5. Employee information
The average monthly number of employees of the Group (including Directors)
was:
2021 2020
Head office 3 3
Africa 3 3
6 6
Group employee costs during the year (including executive Directors) amounted
to:
2021 2020
$ $
Wages and salaries - 2,060
Social security costs - 143
Share-based payment charges 475,780 236,297
475,780 238,500
During 2021, no awards were made under the Group share incentive scheme.
Key management personnel include the executive and non-executive Directors
whose remuneration, including non-cash share-based payment charges of $481k
(2020: $399k), was $481k (2020: $399k); see Directors' Report for additional
detail. During the year $581k (2020: $244k) of the full-year share-based
payment charge of $969k (2020: $528k) related to employees and their
remuneration as employees.
The highest paid Director was Jeremy Asher $401k (2020: $305k).
6. Finance costs
During the year covered by these financial statements the Group incurred
finance costs of $149k (2020: $430k). Included within these charges is
share-based payment costs of $nil (2020: $264k) relating to warrants issued on
drawdown and extension of the bridging loan facility and the settlement of
interest due. The Company incurred finance costs of $147k (2020: $430k).
7. Taxation
2021 2020
$ $
Current tax
UK Corporation tax - -
Total current tax charge - -
The tax charge for the period can be reconciled to the loss for the year as
follows:
Group loss before tax (47,299) 1,360,733
Tax at the UK Corporation tax rate of 19% (2020: 19.3%) 8,986 (258,540)
Tax effects of:
Expenses not deductible for tax purposes 90,398 44,896
Tax losses carried forward not recognised as a deferred tax asset (99,384) 213,644
Current tax charge - -
8. Deferred tax
At the reporting date the Group had an unrecognised deferred tax asset of $4.1
million (2020: $4.3 million) relating to unused tax losses. No deferred tax
asset has been recognised due to the uncertainty of future profit streams
against which these losses could be utilised.
9. Parent company income statement
For the year-ended 31 December 2021 the Parent Company made a profit of $250k
(2020: loss of $247k) including financing costs of $147k (2020: $430k).
Included within finance costs are $nil of share-based payments with respect to
warrants issued to lenders (2020: $264k). The Company charged finance interest
on intercompany loan accounts of $185k (2020: $233k) and fees with respect to
the provision of strategic advice and support of $91k (2020: $39k). In
accordance with the provisions of Section 408 of the Companies Act 2006, the
Parent Company has not presented a statement of comprehensive income.
10. Profit / (loss) per share
The fully diluted weighted average number of shares in issue and to be issued
as at 31 December 2021 is 1,900,696,681 (2020: 1,244,247,074). At 31 December
2021 the dilutive effect of share options outstanding was 35,416,521. At 31
December 2020, the fully diluted profit per share has been kept the same as
the basic profit per share because the conversion of share options and share
warrants would decrease the basic loss per share and is thus anti-dilutive.
The number of anti-dilutive shares that were excluded from this computation of
profit per share was 32,615,562.
Basic & Diluted
2021 2020
$ $
Profit / (loss) for the year 47,299 (1,360,736)
Weighted average number of ordinary shares in issue during the year 1,865,280,160 1,244,247,074
Dilutive effect of share options outstanding 35,416,521 -
Fully diluted average number of ordinary shares during the year 1,900,696,681 1,244,247,074
Profit / (loss) per share (USc) 0.00c (0.11c)
11. Property, plant and equipment
Group Company
Year-ended 31 December 2021 $ $
Cost
At 1 January 2021 1,046 1,046
At 31 December 2021 1,046 1,046
Depreciation
At 1 January 2021 1,046 1,046
At 31 December 2021 1,046 1,046
Net book value
At 31 December 2021 - -
At 31 December 2020 - -
Year-ended 31 December 2020 $ $
Cost
At 1 January 2020 1,046 1,046
At 31 December 2020 1,046 1,046
Depreciation
At 1 January 2020 1,046 1,046
At 31 December 2020 1,046 1,046
Net book value
At 31 December 2020 - -
At 31 December 2019 - -
12. Intangible Exploration and Evaluation (E&E) assets
Exploration and evaluation assets Goodwill Total
Year-ended 31 December 2021 $ $ $
Cost
At 1 January 2021 99,088,664 8,023,292 107,111,956
Additions during the year 1,700,189 - 1,700,189
At 31 December 2021 100,788,853 8,023,292 108,812,145
Amortisation and impairment
At 1 January 2021 (72,008,462) (8,023,292) (80,031,754)
Impairment during the year - - -
At 31 December 2021 (72,008,462) (8,023,292) (80,031,754)
Net book value
At 31 December 2021 28,780,391 - 28,780,391
At 31 December 2020 27,080,202 - 27,080,202
Exploration and evaluation assets Goodwill Total
Year-ended 31 December 2020 $ $ $
Cost
At 1 January 2020 96,324,278 8,023,292 104,347,570
Additions during the year 2,764,386 - 2,764,386
At 31 December 2020 99,088,664 8,023,292 107,111,956
Amortisation and impairment
At 1 January 2020 (72,008,462) (8,023,292) (80,031,754)
Impairment during the year - - -
At 31 December 2020 (72,008,462) (8,023,292) (80,031,754)
Net book value
At 31 December 2020 27,080,202 - 27,080,202
At 31 December 2019 24,315,816 - 24,315,816
During the year the Group capitalised amounts totalling $1.7 million (2020:
$2.7 million) with respect to the following assets:
2021 2020
$ $
Cameroon 1,314,854 2,233,492
Namibia 47,880 91,338
South Africa 337,455 439,556
Total 1,700,189 2,764,386
In Cameroon the $1.3 million of capitalised expenditure comprised ongoing
NJOM-3 appraisal drilling preparation costs plus the capitalised cost of
operating the local office in Douala.
In South Africa, Rift Petroleum Limited, Tower's wholly owned subsidiary, and
its JV partner and operator New African Global Energy SA (Pty) Ltd,
completed the reprocessing of existing sub-surface data, further corroborating
management's view of the prospectivity of the Algoa-Gamtoos block.
In Namibia, the Group made various licence commitment payments to the
Government of the Republic of Namibia in addition to commencing basin
modelling work and other work in line with the work programme commitments.
In accordance with the Group's accounting policies and IFRS 6 'Exploration for
and Evaluation of Mineral Resources' the Directors have reviewed each of the
exploration license areas for indications of impairment. Having done so, it
was concluded that a full impairment review was not required on the Cameroon,
South Africa or Namibian licences,.
The Directors have not provided for any impairment of the Group's investment
in the Thali license, because potential transactions and funding discussions
with third parties support the Directors' view that the current carrying value
is recoverable. Furthermore, the operating company, Tower Resources Cameroon
SA, was awarded a 12-month extension of the First Exploration Period of the
license to May 2022 by the Government of the Republic of Cameroon, which has
now been further extended to 11 May 2023.
In South Africa, PASA formally approved the application to enter the second
renewal period, submitted by the Operator NewAge Energy Algoa (Pty) Ltd, on 17
November 2020, having confirmed that the first renewal period work programme
had been completed to its satisfaction. The second renewal period commits the
JV to the acquisition of 700km of 2D seismic acquisition or the acquisition of
300km of 3D seismic. The minimum spend is $5.0 million in total to the JV and
is to be completed by 16 November 2022, representing a commitment to acquire a
minimum of 700km 2D or 300km of 3D seismic over the block. Acquiring the
additional seismic data in 2022 is now no longer possible, not least because
of environmental concerns raised in the fourth quarter of 2021 over Shell's
acquisition of seismic data in the adjoining license areas to the East. As a
result, the JV partners do not expect to acquire the new 3D seismic data over
the block until 2023 at the earliest, the operator has told the Company that
the Petroleum Authority of South Africa ("PASA") accepts this position and
merely requires that the seismic acquisition obligation is completed before
the JV enters the next renewal period.
The Directors' view is that the recent TotalEnergies discoveries at Brulpadda
and Luiperd, and the analysis conducted by the JV indicating that the
deepwater lead in the JV license area conducted in 2021, support the current
valuation of the license.
In Namibia, the Company's investment in the current license is currently just
$368k (2020: $320k), which appears well supported by the valuations implied by
recent transactions in the region, allowing for the early stage of the
evaluation and appraisal process. Furthermore, the Directors continue to
believe firmly that the relatively modest amounts of expenditure incurred on
acquiring and securing tenure to the licence is fully supported by their
initial view of its prospectivity based on the information that is currently
available.
13. Investment in subsidiaries
Loans to subsidiary undertakings Shares in subsidiary undertakings Total
Company $ $ $
Cost
At 1 January 2021 80,192,564 32,216,739 112,409,303
Net advances during the year 2,145,464 - 2,145,464
At 31 December 2021 82,338,028 32,216,739 114,554,767
Provision for impairment -
At 1 January 2021 (64,862,126) (19,908,973) (84,771,099)
At 31 December 2021 (64,862,126) (19,908,973) (84,771,099)
Net book value -
At 31 December 2021 17,475,902 12,307,766 29,783,668
At 31 December 2020 15,330,438 12,307,766 27,638,204
Included within loans made to subsidiary undertakings during the year of $2.1
million (2020: 1.3 million) are amounts of $1.3 million Cameroon (2020: $1.0
million), $394k South Africa (2020: $25k), $415k Rift Petroleum Holdings
(2020: $256k) and $51k (2020: $15k) Namibia.
Loans made by the parent company to subsidiary undertakings are
interest-bearing in accordance with loan agreements made in 2015, and are
repayable to the parent company on demand.
The subsidiary undertakings at the year-end are as follows (these undertakings
are included in the Group accounts):
Country of Class of Proportion of voting rights held Nature of business
incorporation shares held
2020 2020 2020 2019 2020
Tower Resources Cameroon Limited (1) England & Wales Ordinary 100% 100% Holding company
Tower Resources Cameroon SA (2) Cameroon Ordinary 100% 100% Oil and gas exploration
Rift Petroleum Holdings Limited (1) Isle of Man Ordinary 100% 100% Holding company
Rift Petroleum Limited (3) Zambia Ordinary 100% 100% Oil and gas exploration
Rift Petroleum Limited (3) Isle of Man Ordinary 100% 100% Oil and gas exploration
Tower Resources (Namibia) Holdings Limited (1) England & Wales Ordinary 100% 100% Holding company
Tower Resources (Namibia) Limited (4) England & Wales Ordinary 100% 100% Oil and gas exploration
(1) Held directly by the Company, Tower Resources plc
(2) Held directly or indirectly through Tower Resources Cameroon Limited
(3) Held directly or indirectly through Rift Petroleum Holdings Limited
(4) Held directly or indirectly through Tower Resources (Namibia) Holdings
Limited
14. Trade and other receivables
Group Company
2021 2020 2021 2020
$ $ $ $
Trade and other receivables 8,239 8,805 8,237 8,803
15. Trade and other payables
Group Company
2021 2020 2021 2020
$ $ $ $
Trade and other payables 344,601 1,763,182 173,172 1,386,925
Accruals 1,991,735 2,032,929 53,022 57,504
Loans from subsidiary undertakings - - - -
2,336,336 3,796,111 226,194 1,444,429
On 21 May 2021 the Company announced that it had received a favourable ruling
from the Upper Tribunal upholding the First-Tier Tax Tribunal's decision in
the Company's favour and dismissing HMRC's appeal against the First-Tier Tax
Tribunal's decision.
The First-Tier Tax Tribunal's decision, which was announced by the Company in
July 2019, allowed the Company's appeal against HMRC's 2016 decisions to deny
it credit for input VAT. The Upper Tribunal's decision affirmed the First-Tier
Tax Tribunal's decision, and no subsequent appeal was made by HMRC to the
Court of Appeal. There remains a further appeal to the First-Tier Tax Tribunal
by HMRC on procedural grounds which is yet to be heard, however, the Company
does not assess that this appeal has any basis in fact and has released
provisions previously made totalling $1.5 million (2020: provisioned $175k).
Included within trade and other payables are amounts totalling $72k / £53k
(2020: $1.2 million / £903k) with respect to UK VAT payable.
Group creditor payment days are approximately 32 days (2020: 29 days).
Accruals include a number of cash calls in respect of current or proposed work
in South Africa which have not yet been agreed or approved by the JV partners,
and which the Company expects will ultimately change.
16. Borrowings
Total borrowings for the Group and Company are noted below:
Group Company
2021 2020 2021 2020
$ $ $ $
Principal balance at beginning of year 1,338,726 770,480 1,338,726 770,480
Amounts drawn down during the year - 561,742 - 561,742
Principal repaid during the year (1,278,451) - (1,278,451) -
Currency revaluations at year end (743) 6,504 (743) 6,504
Principal balance at end of year 59,532 1,338,726 59,532 1,338,726
Financing costs at beginning of year (7,026) 70,010 (7,026) 70,010
Changes to financing costs during the year 47,383 (3,013) 47,383 (3,013)
Interest expense 99,997 152,372 99,997 152,372
Interest paid during the year (139,516) (226,382) (139,516) (226,382)
Currency revaluations at year end (20) (13) (20) (13)
Financing costs at the end of the year 818 (7,026) 818 (7,026)
Carrying amount at end of period 60,349 1,331,700 60,349 1,331,700
Current 13,801 - 1,262,937
1,262,937
Non-current 46,548 68,763 60,349 68,763
PRINCIPAL REPAYMENT DATES Group Company
2021 2020 2021 2020
$ $ $ $
Due within 1 year 13,801 1,270,960 13,802 1,270,960
Due within years 2-5 46,548 55,010 46,548 55,010
Due in more than 5 years - 5,730 - 5,730
60,349 1,331,700 60,349 1,331,700
During the year, the Group and Company entered into no new facilities (2020:
$562k) and repaid its Shard Merchant Capital Ltd loan in January 2021 and its
Pegasus Petroleum Limited loan in August 2021.
On 21 January 2021, the Company repaid in full the $500k loan facility with
Shard Merchant Capital Ltd. The terms of the Shard Facility included the issue
of 31,446,541 attached three-year warrants at a strike price of 0.6 pence and
5,761,198 shares to pre-pay interest charged at 12% per annum. The loan was
secured by a fixed and floating charge over the Company's assets in favour of
Shard Merchant Capital Ltd. The repayment of the loan included facility
transaction costs of $35k. During the period the Company recognised interest
charges totalling $21k (2020: $43k) and made repayments totalling $535k (2020:
$30k).
On 4 March 2021, the Pegasus Petroleum Limited loan facility, to which Jeremy
Asher is a controlling party, was extended to the end of November 2021.
Consideration for the extension comprised an increase in the production-based
payments, the amount depending on whether the loan would be repaid by 15 July
or only in November 2021. Additionally, simple interest would accrue at 12%
per annum pro rata, commencing on 4 March 2021, and would only be paid at the
end of the facility period. The 15 July date was subsequently extended to 20
August 2021, with the production-based payments effectively limited to 3.75%
of the Contractor share of revenues from the production sharing contract, net
of the Government share and net of all Petroleum Taxes, and the facility was
fully repaid on 20 August 2021.
17. Share capital
2021 2020
$ $
Authorised, called up, allotted and fully paid
2,109,172,592 (2020: 1,325,296,032) ordinary shares of 0.001p 18,264,803 18,254,040
The share capital issues during 2021 are summarised as follows:
Number of shares Share capital at nominal value Share premium
$ $
At 1 January 2021 1,325,296,032 18,254,040 145,343,446
Shares issued for cash 757,556,560 10,403 3,838,243
Shares issued on settlement of third party fees 26,320,000 360 110,068
Shares issued in settlement of loan interest - - -
Share issue costs - - (544,162)
At 31 December 2021 2,109,172,592 18,264,803 148,747,595
In January 2021, the Company raised £1.3 million by placing 384,615,384
shares for cash and 20,000,000 shares in settlement of third party fees at
0.325 pence per share.
In June 2021, the Company raised £50k by placing 20,000,000 shares for cash
at 0.25 pence per share.
In July 2021, the Company raised £16k by placing 6,320,000 shares in
settlement of third fees at 0.25 pence per share.
In August 2021, the Company raised £1.5 million by placing 352,941,176 shares
for cash at 0.425 pence per share.
18. Reserves
Reserves within equity are as follows:
Share capital
Amounts subscribed for share capital at nominal value.
Share premium account
The share premium account represents the amounts received by the Company on
the issue of its shares which were in excess of the nominal value of the
shares.
Retained losses
Cumulative net gains and losses recognised in the Statement of Comprehensive
Income less any amounts reflected directly in other reserves.
19. Financial instruments
Capital risk management and liquidity risk
Capital structure of the Group and Company consists of cash and cash
equivalents held for working capital purposes and equity attributable to the
equity holders of the Parent, comprising issued capital, reserves and retained
losses as disclosed in the Statement of Changes in Equity. The Group and
Company uses cash flow models and budgets, which are regularly updated, to
monitor liquidity risk.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on which
income and expenses are recognised, in respect of each material class of
financial asset, financial liability and equity instrument are disclosed in
note 1 to the financial statements.
Due to the short-term nature of these assets and liabilities such values
approximate their fair values at 31 December 2021 and 31 December 2020.
Carrying amount / fair value
2021 2020
Group $ $
Financial assets (classified as loans and receivables)
Cash and cash equivalents 10,227 10,054
Trade and other receivables 8,239 8,805
Total financial assets 18,466 18,859
Financial liabilities at amortised cost
Trade and other payables 2,336,336 3,796,111
Bridging loan facility 60,349 1,331,700
Total financial liabilities 2,396,685 5,127,811
Carrying amount / fair value
2021 2020
Company $ $
Financial assets (classified as loans and receivables)
Cash and cash equivalents 6,232 7,236
Trade and other receivables 8,237 8,803
Loans to subsidiary undertakings 17,475,903 15,330,438
Total financial assets 17,490,372 15,346,477
Financial liabilities at amortised cost
Loans from subsidiary undertaking 17,475,903 15,330,438
Borrowings 60,349 1,331,700
Total financial liabilities 17,536,252 16,662,138
Financial risk management objectives
The Group's and Company's objective and policy is to use financial instruments
to manage the risk profile of its underlying operations. The Group continually
monitors financial risk including oil and gas price risk, interest rate risk,
equity price risk, currency translation risk and liquidity risk and takes
appropriate measures to ensure such risks are managed in a controlled manner
including, where appropriate, through the use of financial derivatives. The
Group and Company does not enter into or trade financial instruments,
including derivative financial instruments, for speculative purposes.
Interest rate risk management
The Group and Company borrowings carry a fixed interest rate of 1% per month
and are therefore not exposed to any sensitivity risk.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to
interest rates at the reporting date and assuming the amount of the balances
at the reporting date were outstanding for the whole year.
A 100-basis point change represents management's estimate of a possible change
in interest rates at the reporting date. If interest rates had been 100 basis
points higher and all other variables were held constant the Group's profits
and equity would be impacted as follows:
Group Company
Increase Increase
2021 2020 2021 2020
$ $ $ $
Cash and cash equivalents 484 402 419 243
Borrowings 7,725 (9,599) 7,725 (9,599)
8,209 (9,197) 8,144 (9,356)
The Group's exposure to interest rate risk, which is the risk that a financial
instrument's value will fluctuate as a result of changes in market interest
rates on classes of financial assets and financial liabilities, was as
follows:
2021 2021 2020 2020
Floating interest rate Non-interest bearing Floating interest rate Non-interest bearing
$ $ $ $
Cash and cash equivalents 6,935 3,292 7,795 2,259
Foreign currency risk
The Group's and Company's reporting currency is the US dollar, being the
currency in which the majority of the Group's revenue and expenditure is
transacted. The US dollar is the functional currency of the Company and the
majority of its subsidiaries. Less material elements of its management,
services and treasury functions are transacted in pounds sterling. The
majority of balances are held in US dollars with transfers to pounds sterling
and other local currencies, as required to meet local needs. The Group does
not enter into derivative transactions to manage its foreign currency
translation or transaction risk as it does not believe such risks are
material.
At the year-end the Group and Company maintained the following cash reserves:
Group Company
2021 2020 2021 2020
Cash and cash equivalents $ $ $ $
Cash and cash equivalents held in US$ 921 255 921 255
Cash and cash equivalents held in GBP 8,337 9,095 5,311 6,981
Cash and cash equivalents held in XAF 703 559 - -
Cash and cash equivalents held in other currencies 266 145 - -
10,227 10,054 6,232 7,236
Credit risk management
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group or Company.
The Group and Company reviews the credit risk of the entities that it sells
its products to or that it enters into contractual arrangements with and will
obtain guarantees and commercial letters of credit as may be considered
necessary where risks are significant to the Group or Company.
The Group has cash and cash equivalents of $22,792 as at 31 December 2020
(2020: $10,054). The cash and cash equivalents are held with financial
institutions which are rated below. Wherever possible ratings are provided by
Fitch Ratings, however, where no rating was available from either Fitch
Ratings or either of the other major international credit rating agencies such
as Standard & Poors or Moodys, the bank's local credit rating was used:
Group Company
2021 2020 2021 2020
Cash and cash equivalents Rating $ $ $ $
Barclays Bank plc A+ 6,232 7,236 6,232 7,236
Royal Bank of Scotland A 3,292 2,259 - -
First Afriland Bank No rating 324 414 - -
BGFI Bank A+ 379 145 - -
10,227 10,054 6,232 7,236
20. Share-based payments
2021 2020
$ $
In the statement of comprehensive income the Group recognised the following 968,711 528,029
charge with respect to its share-based payments
The share-based payments include the cost of warrants issued in respect of the
company's equity financings and bridging loan, and also share-based payments
for a number of services to the Group's various contractors and brokers and
payments in lieu of Director fees.
Options
Details of share options outstanding at 31 December 2021 are as follows:
Number in issue
At 1 January 2021 157,552,800
Lapsed during the year (1,552,800)
Awarded during the year 88,000,000
At 31 December 2021 244,000,000
( )
Date of grant Number in issue (1) Option price (pence) Latest exercise date
24 Jan 2019 70,000,000 1.250 24 Jan 2024
18 Dec 2020 86,000,000 0.450 18 Dec 2025
01 Apr 2021 88,000,000 0.450 01 Apr 2026
244,000,000
(1) These options vest in the beneficiaries in equal tranches on the first,
second and third anniversaries of grant.
The following Directors held interests, directly or indirectly, in share
options at the year-end:
2021 2020
No. No.
Jeremy Asher 180,000,000 120,000,000
Total 180,000,000 120,000,000
Warrants
Details of warrants outstanding at 31 December 2021 are as follows:
Number in issue
At 1 January 2021 620,444,335
Awarded during the year 186,191,309
At 31 December 2021 806,635,644
Date of grant Number in issue Warrant price (pence) Latest exercise date
09 Nov 2017 31,853,761 1.000 09 Nov 2022
01 Jan 2018 2,542,372 1.000 01 Jan 2023
01 Apr 2018 2,083,333 1.500 01 Apr 2023
01 Jul 2018 2,272,726 1.780 30 Jun 2023
01 Oct 2018 4,687,500 1.575 30 Sep 2023
24 Jan 2019 92,212,000 1.250 23 Jan 2022
24 Jan 2019 19,999,999 1.200 23 Jan 2024
16 Apr 2019 90,000,000 1.000 14 Apr 2024
30 Jun 2019 4,285,714 1.000 28 Jun 2024
30 Jul 2019 3,000,000 1.000 28 Jul 2024
15 Oct 2019 9,600,000 0.500 14 Oct 2022
15 Oct 2019 170,774,151 1.000 14 Oct 2022
15 Oct 2019 10,990,933 0.500 14 Oct 2024
31 Mar 2020 49,816,850 0.200 30 Mar 2025
29 Jun 2020 19,719,338 0.350 28 Jun 2025
28 Aug 2020 78,616,352 0.600 28 Aug 2023
01 Oct 2020 10,960,907 0.390 30 Sep 2025
01 Dec 2020 4,930,083 0.375 30 Nov 2025
31 Dec 2020 12,116,316 0.450 30 Dec 2025
01 Apr 2021 16,998,267 0.450 31 Mar 2026
01 Jul 2021 24,736,149 0.250 30 Jun 2026
14 Jan 2021 128,205,128 0.650 14 Jan 2023
01 Oct 2021 16,233,765 0.425 30 Sep 2026
806,635,644
The following table shows the interests of the Directors in the share
warrants in issue:
2021 2020
No. No.
Jeremy Asher 281,164,127 258,277,029
Paula Brancato 17,212,856 5,769,306
Mark Enfield 15,369,008 3,925,458
Total 313,745,991 267,971,793
The weighted average exercise price of the share warrants was 0.82p (2020:
0.89p) with a weighted average contractual life of 2.4 years (2020: 3.4
years). At 31 December 2020 and 2019 all warrants had fully vested.
In its Statement of Comprehensive Income, the Company recognised share-based
payment charges of $446k (2020: $521k).
In compliance with the requirements of IFRS 2 on share-based payments, the
fair value of options or warrants granted during the year is calculated using
the Black Scholes option pricing model. For this purpose, the volatility
applied in calculating the above charge varied between 20% and 111% (2020: 20%
and 143%), depending upon the date of grant, and the risk-free interest rate
was 0.25% (2020: 0.25%) and the Dividend Yield was nil% for 2021 and 2020.
The Company's share price ranged between 0.2p and 0.5p (2020: 0.2p and 0.7p)
during the year. The closing price on 31 December 2021 was 0.4p per share
(2020; 0.4p). The weighted average exercise price of the share options was
0.7p (2020: 0.8p) with a weighted average contractual life of 3.5 years (2020:
4.0 years). The total number of options vested at the end of the year was
131.8 million (2020: 25.9 million).
21. Related party transactions
The key management of the Group comprises the Directors of the Company. Except
as disclosed, there are no transactions with the Directors other than their
remuneration and interests in shares, share options and warrants. As noted in
the Directors' Report, Pegasus Petroleum Ltd ("Pegasus"), a company owned and
controlled by Jeremy Asher, received $231,952 (2020: $257,155) in fees for
management services, and provided a loan facility set out in note 16. Further
information on Directors' remuneration is detailed in the Directors' Report
and their total remuneration in each of the categories specified in IAS 24
'Related Party Disclosures' is shown below:
Group Company
2021 2020 2021 2020
$ $ $ $
Short-term employee benefits - - - -
Fees charged by companies associated with Jeremy Asher (1) 231,952 257,155 - -
Interest charged on borrowings by companies associated with Jeremy Asher (1) 124,743 108,456 124,743 108,456
Share-based payments (2) 481,042 399,400 481,042 263,613
Share incentive scheme awards (3) - - - -
Finance interest on intercompany loan accounts 184,873 234,652 184,873 234,652
Fees charged with respect to the provision of strategic advice and support 90,975 170,049 90,975 170,049
by the parent
1,113,585 1,169,712 881,633 776,770
(1) Charged by Pegasus Petroleum Limited ("Pegasus"), a company registered in
the Channel Islands, to Rift Petroleum Holdings Limited, a wholly owned
subsidiary of Tower Resources plc and registered in the Isle of Man. Pegasus
Petroleum Limited ("Pegasus") is owned and controlled by a family trust of
which Jeremy Asher is the settlor and lifetime beneficiary. Included in the
Group's operating loss is an amount of $231,952 (2020: $257,155) paid to
Pegasus in respect of charges for management services received during 2021.
(2) Includes $nil (2020: $163,103) of charges for share warrants arising from
the issue and extension of the loan facility made to Tower Resources plc by
Pegasus in 2019; also includes $160,711 (2020: $169,597) in respect of
Director warrants issued in lieu of fees to Directors.
The warrants issued to Pegasus and Mr Asher were on identical terms to those
issued to third parties participating in the loan facility and share
subscriptions.
22. Control
The Company is under the control of its shareholders and not any one party.
23. Leases and capital commitments
The Group is committed to funding the following exploration expenditure
commitments as at 31 December 2021:
Country Interest 2022 2023 onwards
Cameroon Thali (1) Cameroon 100% $9.03 million -
South Africa Algoa-Gamtoos (2) South Africa 50% $3.16 million -
Namibia Blocks 1910A, 1911 and 1912B (3) Namibia 80% $4.50 million -
$16.69 million -
(1) 1 year to 11 May 2023 for initial exploration period
(2) 2 years to 16 November 2022, Operator has informed the Group that further
time will be allowed for fulfillment of this commitment prior to entering the
next phase of work.
(3) First period expiration 5 November 2023, right of extension available
24. Subsequent events
14 January 2022: Placing for cash to raise £1.5 million via a subscription of
576,923,077 new ordinary shares of 0.001p each at a price of 0.26 pence per
share, a discount of 29% to the closing share price on 13 January 2022.
7 February 2022: The Company noted the announcements by the National Petroleum
Corporation of Namibia ("Namcor"), and also operator Shell Namibia Upstream
B.V. ("Shell"), and partner QatarEnergy, confirming that the Graff-1 well on
PEL 39 has made a discovery in both its primary and secondary targets, and
proved a working petroleum system for light oil in the Orange Basin, offshore
Namibia. The Company provided an analysis of the implications of this
successful well for the prospectivity of other operators' acreage in Namibia,
including its own, and observed that Tower's net acreage position of 18,637
km2 is believed to be the third largest net acreage position in the Namibian
offshore, after Exxon and Eco Atlantic Oil & Gas (following Eco's
acquisition of Azinam's Namibian acreage).
1 April 2022: Issue of warrants in lieu of £30,000 (in aggregate) of
Directors fees and a further £7,500 employment costs, to conserve the
Company's working capital. The warrants are exercisable at a strike price of
0.2625 pence ("Warrants"), which is just above the placing announced on 14
January 2022 and equal to the closing share price of 0.2625 pence per share on
31 March 2022. The Warrants are exercisable for a period of 5 years from the
date of issue.
9 May 2022: The Company was notified by the Government of Cameroon of a
further extension of the First Exploration Period of the Thali PSC to 11 May
2023. The Company also announced that it was negotiating an LOI with Shelf
Drilling for Shelf's Trident VIII jack-up drilling rig to drill the NJOM-3
well on the Thali block in the fourth quarter of 2022. The Company also
announced that it had not yet received the approval of its 2021 farmout
agreement, and intended not to continue to seek approval of that farmout in
its current form, due to the Company's belief that better financing
alternatives were now available.
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