REG - Tower Resources PLC - Preliminary Results to 31 December 2022
19/06/2023 07:00
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RNS Number : 0692D Tower Resources PLC 19 June 2023
19 June 2023
Tower Resources plc
Preliminary Results to 31 December 2022
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 2022.
Highlights:
· In Cameroon, the Group's exploration and evaluation expenditure on the
Thali Production Sharing Contract ("PSC") amounted to $3.1 million (2021: $1.3
million). A formal request for extension of the First Exploration Period of
the PSC to 11 May 2024 has been submitted to the Minister of Mines, Industry
and Technological Development ("MINMIDT") and the Company has been informed
that processing of this extension is underway. Other Cameroon highlights
include:
· Discussions continued with rig owners and operators with the aim to
secure rig availability in the third and/or fourth quarter of 2023 to drill
the NJOM-3 well.
· Discussions continued for asset level financing with several parties,
including a term loan of approximately $7 million with BGFI Bank Group.
· Updated resource estimates and risk profiles were developed for the
reservoirs connected to the NJOM-1 and the NJOM-2 discovery wells,
substantially lowering risk attributed to PS9 Sup and PS3 HW reservoirs, and
increasing total risked pMean prospective resources to 35.4 million bbls.
· In South Africa, operator NewAge continued to work towards the
acquisition of 3D seismic over the permit area.
· In Namibia Tower has been conducting basin modelling to support
technical evaluation of the leads identified to date as part of the work
programme for the Initial Exploration Period for PEL 96. The Company is now
moving forward with more detailed and focused geological and geophysical
analysis aiming to high-grade areas for further seismic data acquisition. Once
this work has been completed, Tower is planning to acquire new 3D seismic data
over the most promising leads/prospects in line with its work programme.
· Following the favourable VAT rulings from the Upper Tribunal in 2022
with respect to the Group's UK VAT position, of the three remaining appeals
outstanding at the year-end, two have been settled with a further appeal
remaining under discussion. The Company received £351k ($422k) in settlement
of the first two appeals, after the accounts date.
· Administrative costs net of share-based payment charges of $631k (2021:
$762k) include legal fees incurred totalling $133k (2021: $263k)
· Cash balance at year-end of $231k (2021: $10k)
Post-reporting period events:
16 January 2023: Facility Agreement with Energy Exploration Capital Partners
LLC ("EECP") to raise $1.25 million. The facility provides for further
convertible advances of up to $4.75 million subject to certain conditions.
15 February 2023: Issue of 23.2 million warrants in lieu of £30,000 (in
aggregate) of Directors fees in respect of the period January-March 2023, to
conserve the Company's working capital. The warrants are exercisable at a
strike price of 0.175 pence (0.21¢) per share. The warrants are exercisable
for a period of five years from the date of issue.
30 March 2023: Share issuance in accordance with the terms of the investment
deed with EEPC announced on 16 January 2023, of 102,543,067 ordinary shares of
0.001 pence each. The purchase price of 0.12 pence (0.15¢) per Ordinary Share
for the settlement amount of $150,000 had been prepaid by EEPC as part of the
16 January advance.
27 April 2023: Cameroon operational update covering:
· Application for a one-year extension of the initial exploration
period of the PSC, following positive discussions with the Minister of Mines,
Industry and Technological Development and the Prime Minister of the Republic
of Cameroon.
· Ongoing discussions with rig owners and operators with the aim to
secure rig availability in the third and fourth quarter of this year to drill
at NJOM-3.
· Ongoing negotiations for a term loan of approximately $7 million with
BGFI Bank Group and asset-level financing with several other parties.
· Updated resource estimates and risks for the reservoirs connected to
the NJOM-1 and the NJOM-2 discovery wells, substantially lowering risk
attributed to PS9 Sup and PS3 HW reservoirs, and increasing total risked pMean
prospective resources to 35.4 million bbls.
· Deployment of software to conduct detailed attribute analysis of the
reprocessed 3D seismic data to identify the oil and gas elements of the
reservoirs in the Njonji-1 and Njonji-2 fault blocks, resulting in a clearer
picture of the pay zones in both fault blocks.
2 May 2023: Issue of 34.4 million warrants in lieu of £30,000 (in aggregate)
of Directors fees in respect of the period April-June 2023, to conserve the
Company's working capital. The warrants are exercisable at a strike price of
0.1425 p (0.18¢) per share, a premium of 24% over the mid-point closing share
price on 28 April 2023. The warrants are exercisable for a period of five
years from the date of issue.
16 May 2023: Placing and subscription of 4,600 million shares to raise £2.3
million ($2.9 million) at a price of 0.05p (0.06¢) per share.
16 June 2023: Namibia technical update setting out initial conclusions from
basin modelling work prior to and after the accounts date.
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
Kasia Brzozowska
Novum Securities Limited +44 20 7399 9400
Joint Broker
Jon Bellis
Colin Rowbury
Axis Capital Markets Limited +44 0203 026 2689
Joint Broker
Richard Hutchison
Panmure Gordon (UK) Limited +44 20 7886 2500
Joint Broker
John Prior
Hugh Rich
BlytheRay +44 20 7138 3204
Financial PR
Tim Blythe
Megan Ray
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
During 2022 the focus of the oil and gas market shifted away from the pandemic
and initially was dominated by the conflict in Ukraine; however, as the year
went on, the market became more concerned with longer term questions of supply
and demand. The potential for supply shortfalls, which had its origin in the
under-investment which preceded the pandemic and continued throughout it, has
been highlighted by the events of the last year. However, the risks of global
stagflation or recession have weighed on demand expectations, and in the short
term the market has remained well balanced mainly due to the continued
movement of Russian oil, albeit to new customers and at lower prices. The
result has been a market which is currently quite well balanced in the short
term, and prices which remain very favourable for the Company's projects, and
with the potential for further upside in the years ahead.
Our Cameroon project is still critical to the Company, as it remains the
project which is closest to first oil, revenues and cash flow. Our priority is
still to get the NJOM-3 well drilled as soon as possible, as this is the
gateway to the rest of the development. As discussed in our operational review
and in recent announcements, we have had to contend with a shortage of
available rigs during 2022 and the first half of 2023, but we now finally have
rig options opening up, and so we are optimistic of being able to move ahead
with this critical well in 2023.
The Government of Cameroon has continued to be extremely supportive and we are
very grateful to them. We are also still in active and detailed discussions
and due diligence regarding the financing for the NJOM-3 well, which we hope
to have completed in good time for our preferred rig option.
In Namibia we have been greatly encouraged by the basin modelling we have been
undertaking both in 2022 and during the first half of 2023, which is discussed
in our operational review and also in more detail in our recent Namibia
update. Our computer basin modelling simulations, calibrated to the nearby
well data, appear to be highly predictive of the source rock maturity and
hydrocarbon generative kitchen areas and show clear migration pathways. We are
especially excited that these outputs closely fit the actual geochemical well
data and predict the oil shows (derived from a mature lacustrine source rock)
that we observed in the Norsk Hydro well 1911/15-1, as well as the actual
geochemical measurements and data points from the other regional wells. A
question we had sought to investigate was the immaturity of the shallower
Upper Cretaceous source rocks encountered in that well, and the underlying
volcano-clastic rocks that are interbedded with sedimentary series with
indications of higher total organic carbon content, but which clearly did not
generate the lacustrine oil found in the 1911/15-1 well. Our basin models,
together with detailed seismic sequence stratigraphic analysis, reconcile
those observations with the lacustrine oil, which clearly originated from
deeper and laterally extensive Lower Cretaceous source rocks in the syn-rift
series. This is a critical and very positive conclusion for potential charge
in our license area.
It was also very nice to see the success of Shell's appraisal drilling at
Graff, which among other things has emphasised the enormous potential of
stratigraphic traps in the region and how the potential volumes found in those
traps can increase as one drills.
In South Africa, our co-venturer and operator NewAge is continuing to explore
the options for acquisition of new 3D seismic data over our deep-water
Outeniqua basin lead, which continues to attract interest from third parties.
We realise that it has been a frustrating time for all shareholders, as we
would all have liked to see the NJOM-3 well drilled already; however, we are
continuing to make progress towards that goal and we remain confident we will
reach it.
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 Production Sharing Contract ("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 and the subsequent appraisal drilling in 2022, all 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 2022 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 the 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 previous annual reports, our strategy remains 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 2022 we were able to make progress on all of our licenses, despite a number
of headwinds.
In Cameroon we received an extension of the initial exploration period of the
Thali PSC to May 2023, and immediately turned our attention to rig
negotiations. However, an unexpected consequence of the conflict in Ukraine
was the decision of Aramco to charter a large number of jack-up rigs for
deployment in the Arabian Gulf, which effectively removed all the surplus
capacity from the jack-up market and led to substantial increases in the
day-rates for both rigs and associated services. At the time of writing,
jack-up rig day-rates, for example, have roughly doubled since the end of
2021. More troubling than the increase in rates was the lack of availability.
Most oil and gas operators with rigs on charter and with options to extend at
"old" rates, were obviously keen to exercise those options, and rig owners
wanted to lock in the new higher rates for as long as possible via new
long-term charters and were therefore unwilling to commit to drilling single
wells. Nevertheless, we anticipated that gaps in operators' schedules would
inevitably arise if we were patient, and although we have had to wait until
2023 for these gaps to appear, it does now seem possible to fit our drilling
requirements within other operators' schedules.
In the meantime, we undertook further subsurface work in 2022 which resulted
in updated volumetric assessments, and we have continued to refine our
subsurface analysis after the accounts date, including the application of
enhanced attribute analysis using the Paradise software which we have
discussed in recent announcements. We have also worked on the financing
options for the NJOM-3 well, and on the budget for the well, in order to
mitigate as best we can the inevitable increases in cost.
In Namibia, we continued the basin modelling work that we had begun in 2021.
The output from this work in the third quarter of 2022 persuaded us that we
should expand the scope of the basin modelling, which continued through the
end of 2022 and up until May 2023. We have recently updated investors
regarding the initial conclusions of this basin modelling work. This has
indicated the potential for mature oil source rocks in the deeper syn-rift
sections across the Dolphin Graben, generating predominantly oil phase
hydrocarbons in substantial volumes, capable of charging very large
structures. It has also identified focused migration pathways from those
source rocks and generative kitchens to the giant anticlines in the Western
area of the license, and a number of potential stratigraphic trap plays both
in the Dolphin Graben itself and along the flanks of the giant structures to
the West, which are also capable of containing large volumes of oil. The basin
modelling work is very closely calibrated with the actual geochemical data
measured in the nearby wells and is highly predictive of hydrocarbon
generation, expulsion and migration, and also explains the presence of the
lacustrine oil in the Norsk Hydro well 1911/15-1 in our license area. The
analysis explains why this oil would originally have been generated and
potentially trapped and the subsequent tilting of the area would have caused
any trapped hydrocarbons to have migrated elsewhere, explaining the residue of
oil in the well and providing us with high confidence in the analysis.
Our next steps in Namibia include an oil seep analysis to put together with
the basin modelling and possibly some further attribute analysis, to
prioritise the leads we have already identified in the license area and to
reassess their likelihood and expected volume of charge. This will allow us to
choose the best area over which to acquire new 3D seismic data in due course.
We will need an extension of the initial exploration period to accommodate
this, and we will apply for that extension in the third quarter of 2023.
In South Africa, our 50% partner NewAge, as operator of the Algoa-Gamtoos
block, has continued to negotiate with potential contractors for 3D seismic
data acquisition on either a proprietary or a multi-client basis. This is a
slow process partly because of the uncertainties created by the new Petroleum
Bill and its implementation, and also the associated uncertainty over the
environmental consultation process highlighted by the litigation over Shell's
delayed plans to acquire 3D seismic over a rather larger area to the East of
our license. PASA, the regulatory authority, has been understanding of this
situation, and we hope to find a way forward that might entail agreeing on a
contractor and an environmental consultation process in the year ahead.
NewAge has also continued to explore farm-out options for the Algoa Gamtoos
block and discussions with interested parties continue.
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
31 December 2022 31 December 2021
(audited)
(audited)
Note $ $
Revenue - -
Cost of sales - -
Gross profit - -
Other administrative expenses (1,007,040) (1,284,136)
VAT provision - 1,480,683
Total administrative expenses (1,007,040) 196,547
Group operating (loss) /profit 4 (1,007,040) 196,547
Finance expense 6 (2,082) (149,248)
(Loss) / profit for the year before taxation (1,009,122) 47,299
Taxation 7 - -
(Loss) / profit for the year after taxation (1,009,122) 47,299
Other comprehensive income - -
Total comprehensive (expense) / income for the year (1,009,122) 47,299
Basic (loss) / profit per share (USc) 10 (0.05c) 0.00c
Diluted (loss) / profit per share (USc) 10 (0.05c) 0.00c
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2022 31 December 2021
(audited)
(audited)
Note $ $
Non-current assets
Property, plant and equipment 11 - -
Exploration and evaluation assets 12 31,833,671 28,780,391
31,833,671 28,780,391
Current assets
Trade and other receivables 14 474,749 8,239
Cash and cash equivalents 231,216 10,227
705,965 18,466
Total assets 32,539,636 28,798,857
Current liabilities
Trade and other payables 15 2,631,815 2,336,336
Provision for liabilities and charges 16 502,972 -
Borrowings 17 12,244 13,801
3,147,031 2,350,137
Non-current liabilities
Borrowings 29,286 46,548
Total liabilities 3,176,317 2,396,685
Net assets 29,363,319 26,402,172
Equity
Share capital 18 18,283,317 18,264,803
Share premium 18 152,336,303 148,747,595
Retained losses 19 (141,256,301) (140,610,226)
Total shareholders' equity 29,363,319 26,402,172
The financial statements of Tower Resources plc, registered number 05305345
were approved by the Board of Directors and authorised for issue on 16 June
2023.
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 2021 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 expense 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
Shares issued for cash 18,384 3,870,790 3,889,174
Shares issued on settlement of third-party fees 131 29,393 - - 29,524
Share issue costs - (311,475) (311,475)
Share-based payment charge for the year - - 363,047 - 363,047
Transfer to retained losses - - (738,615) 738,615 -
Total comprehensive income for the year - - - (1,009,122) (1,009,122)
At 31 December 2022 18,283,317 152,336,303 2,508,230 (143,764,531) 29,363,319
( )
(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 2022 31 December 2021
(audited)
(audited)
Note $ $
Cash outflow from operating activities
Group operating (loss) / profit for the year (1,007,040) 196,547
Share-based payments 21 363,047 968,711
Shares issued on settlement of third-party fees 29,524 110,428
Operating cash flow before changes in working capital (614,469) 1,275,686
(Increase) / decrease in receivables and prepayments (466,510) 566
Increase in provision for liabilities and charges 502,972 -
Increase / (decrease) in trade and other payables 295,479 (1,459,775)
Cash used in operations (282,528) (183,523)
Interest paid (net) (7,387) (2,631)
Cash used in operating activities (289,915) (186,154)
Investing activities
Exploration and evaluation costs 12 (3,053,280) (1,700,189)
Net cash used in investing activities (3,053,280) (1,700,189)
Financing activities
Repayment of loan facilities 17 (12,294) (1,278,451)
Cash proceeds from issue of ordinary share capital net of issue costs 18 3,577,698 3,304,484
Interest paid 17 (1,220) (139,516)
Net cash from financing activities 3,564,183 1,886,517
Increase in cash and cash equivalents 220,989 173
Cash and cash equivalents at beginning of year 10,227 10,054
Cash and cash equivalents at end of year 231,216 10,227
COMPANY STATEMENT OF FINANCIAL POSITION
31 December 2022 31 December 2021
(audited)
(audited)
Note $ $
Non-current assets
Loans to subsidiary undertakings 13 20,859,388 17,475,903
Investments in subsidiary undertakings 13 12,307,766 12,307,766
33,167,154 29,783,669
Current assets
Trade and other receivables 14 474,747 8,237
Cash and cash equivalents 159,456 6,232
634,203 14,469
Total assets 33,801,357 29,798,138
Current liabilities
Trade and other payables 15 87,069 226,194
Provision for liabilities and charges 16 502,972 -
Borrowings 17 12,244 13,801
602,285 239,995
Non-current liabilities
Borrowings 17 29,286 46,548
Total liabilities 631,571 286,543
Net assets 33,169,786 29,511,595
Equity
Share capital 18 18,283,317 18,264,803
Share premium 18 152,336,303 148,747,595
Retained losses 19 (137,449,834) (137,500,803)
Total shareholders' equity 33,169,786 29,511,595
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 2022 the Company made a loss of $312k (2021: $250k).
The financial statements of Tower Resources plc, registered number 05305345
were approved by the Board of Directors and authorised for issue on 16 June
2023.
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 2021 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
Shares issued for cash 18,384 3,870,790 - - 3,889,174
Shares issued on settlement of third-party fees 131 29,393 - - 29,524
Share issue costs - (311,475) - - (311,475)
Share option charge for the year - - 363,047 - 363,047
Transfer to retained losses - - (738,615) 738,615 -
Total comprehensive expense for the year - - - (312,078) (312,078)
At 31 December 2022 18,283,317 152,336,303 2,508,230 (139,958,064) 33,169,786
(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 2022 31 December 2021
(audited)
(audited)
Note $ $
Cash outflow from operating activities
Operating (loss) / profit for the year (846,081) 214,817
Share-based payments 21 363,047 968,711
Shares issued on settlement of third-party fees 29,524 110,428
Operating cash flow before changes in working capital (453,510) 1,293,956
(Increase) / decrease in receivables and prepayments (466,510) 566
Increase in provision for liabilities and charges 502,972 -
Decrease in trade and other payables (139,125) (1,218,235)
Cash (used in) / from operations (556,173) 76,287
Interest received 528,698 181,658
Cash (used in) / from from operating activities (27,475) 257,945
Investing activities
Loans granted to subsidiary undertakings 13 (3,383,485) (2,145,465)
Net cash used in investing activities (3,383,485) (2,145,465)
Financing activities
Repayment of loan facilities 17 (12,294) (1,278,451)
Cash proceeds from issue of ordinary share capital net of issue costs 18 3,577,698 3,304,484
Interest paid 17 (1,220) (139,516)
Net cash from financing activities 3,564,183 1,886,517
Increase / (decrease) in cash and cash equivalents 153,224 (1,004)
Cash and cash equivalents at beginning of year 6,232 7,236
Cash and cash equivalents at end of year 159,456 6,232
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 2022 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 2023. 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 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
IFRS 16 (amendments) Lease Liability in a Sale and Leaseback 1 January 2024
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 2023. 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 a 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 2022 was £1 / $1.2026 (2021: £1 / $1.3479).
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.
o) 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.
p) 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.
q) 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.
r) 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.
s) 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
Following the favourable ruling from the Upper Tribunal received on 21 May
2021, 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 Company released most of its provisions which had previously been recorded
in respect of VAT payable.
At the accounts date there remained three further appeals to the First-Tier
Tax Tribunal by HMRC, which were yet to be heard. The two earlier appeals
concerned time periods not covered by the original Tribunal decisions, to
which HMRC had raised procedural objections which it subsequently withdrew
prior to the accounts date, and these appeals were formally settled after the
accounts date, resulting in a payment (after the accounts date) to the Company
of $422,359 (£351,212) which has been recorded in the accounts as receivable.
The third more recent appeal concerns a revised assessment in respect of time
periods covered by the Upper Tribunal's 21 May 2021 decision. The legal advice
received by the Company is that this revised assessment is incorrect, which is
why the Company only recognises a provision for a potential liability in
respect of this assessment in the 2022 accounts (as opposed to a liability for
VAT in the accounts payable note).
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 repercussions of events in the Ukraine, 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 21.
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 2022.
Africa Head Office Total
2022 2021 2022 2021 2022 2021
$ $ $ $ $ $
Administrative expenses (1) (55,120) 73,931 (709,024) 598,396 (764,144) 672,327
Share-based payment charges - - (242,896) (475,780) (242,896) (475,780)
Interest income - - (931) (1,226) (931) (1,226)
Financing costs (641) (643) (510) (147,379) (1,151) (148,022)
Loss by reportable segment (55,761) 73,288 (953,361) (25,989) (1,009,122) 47,299
Total assets by reportable segment (2 / 3) 31,905,433 28,784,388 634,203 14,469 32,539,636 28,798,857
Total liabilities by reportable segment (4) (2,544,748) (2,110,144) (631,569) (286,541) (3,176,317) (2,396,685)
(1) Administrative expenses include credits of $nil million (2021: expense
$1.4 million) 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 $32.5 million (2021: $28.8 million) are
$17.4 million Cameroon (2021: $14.3 million) , $751k Namibia (2021: $368k) and
$13.7 million South Africa (2021: $14.1 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)
(Loss) / profit from operations is stated after charging/(crediting):
2022 2021
$ $
Share-based payment charges included within staff costs 242,897 475,780
Share-based payment charges included within professional costs 51,228 67,364
Loss / (gain) on foreign currencies 69,299 (21,367)
An analysis of auditor's remuneration is as follows:
Fees payable to the Group's auditors for the audit of the Group and subsidiary 57,136 49,095
annual accounts
Fees payable to the Group's auditors for non-audit assurance services - 4,442
Total audit fees 57,136 53,537
5. Employee information
The average monthly number of employees of the Group (including Directors)
was:
2022 2021
Head office 3 3
Africa 3 3
6 6
Group employee costs during the year (including executive Directors) amounted
to:
2022 2021
$ $
Share-based payment charges 242,897 475,780
242,897 475,780
During 2022, 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 $k243
(2021: $481k), was $243k (2021: $481k); see Directors' Report for additional
detail. During the year $271k (2021: $581k) of the full-year share-based
payment charge of $363k (2021: $969k) related to employees and their
remuneration as employees.
The highest paid Director was Jeremy Asher $187k (2021: $401k).
6. Finance costs
During the year covered by these financial statements the Group incurred
finance costs of $2k (2021: $149k). The Company incurred finance costs of $1k
(2021: $147k).
7. Taxation
2022 2021
$ $
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 1,009,122 (47,299)
Tax at the UK Corporation tax rate of 19% (2021: 19%) (191,733) 8,986
Tax effects of:
Expenses not deductible for tax purposes 46,150 90,398
Tax losses carried forward not recognised as a deferred tax asset 145,583 (99,384)
Current tax charge - -
8. Deferred tax
At the reporting date the Group had an unrecognised deferred tax asset of $4.8
million (2021: $4.1 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 2022 the Parent Company made a loss of $312k
(2021: profit of $250k) including financing costs of $1k (2021: $147k). The
Company charged finance interest on intercompany loan accounts of $536k (2021:
$185k) and fees with respect to the provision of strategic advice and support
of $105k (2021: $91k). 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. (Loss) / profit per share
The fully diluted weighted average number of shares in issue and to be issued
as at 31 December 2022 is 2,165,197,663 (2021: 1,900,696,681). At 31 December
2022 the dilutive effect of share options outstanding was nil (2021:
35,416,521). At 31 December 2022, the fully diluted loss per share has been
kept the same as the basic loss 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 7,688,323 (2021: nil).
Basic & Diluted
2022 2021
$ $
(Loss) / profit for the year (1,009,122) 47,299
Weighted average number of ordinary shares in issue during the year 2,165,197,663 1,865,280,160
Dilutive effect of share options outstanding - 35,416,521
Fully diluted average number of ordinary shares during the year 2,165,197,663 1,900,696,681
(Loss) / profit per share (USc) (0.05c) 0.00c
11. Property, plant and equipment
Group Company
Year-ended 31 December 2022 $ $
Cost
At 1 January 2022 1,046 1,046
At 31 December 2022 1,046 1,046
Depreciation
At 1 January 2022 1,046 1,046
At 31 December 2022 1,046 1,046
Net book value
At 31 December 2022 - -
At 31 December 2021 - -
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 - -
12. Intangible Exploration and Evaluation (E&E) assets
Exploration and evaluation assets Goodwill Total
Year-ended 31 December 2022 $ $ $
Cost
At 1 January 2022 100,788,853 8,023,292 108,812,145
Additions during the year 3,053,280 - 3,053,280
At 31 December 2022 103,842,133 8,023,292 111,865,425
Amortisation and impairment
At 1 January 2022 (72,008,462) (8,023,292) (80,031,754)
Impairment during the year - - -
At 31 December 2022 (72,008,462) (8,023,292) (80,031,754)
Net book value
At 31 December 2022 31,833,671 - 31,833,671
At 31 December 2021 28,780,391 - 28,780,391
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
During the year the Group capitalised amounts totalling $1.5 million (2021:
$1.7 million) with respect to the following assets:
2022 2021
$ $
Cameroon 3,085,434 1,314,854
Namibia 383,193 47,880
South Africa (415,347) 337,455
Total 3,053,280 1,700,189
Cameroon
The $3.1 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, continued
to work on planning the forthcoming seismic acquisition. The JV partners also
negotiated the settlement of certain charges made to the JV, resulting in a
credit of costs historically charged of $565k and a net credit for the year of
$415k.
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 and the Company's internal cash flow projections for the
license support the Directors' view that the current carrying value is
recoverable. Furthermore, the operating company, Tower Resources Cameroon SA,
has applied for a 12-month extension of the First Exploration Period of the
license to May 2024 and has been informed by the Government of the Republic of
Cameroon that this extension is being processed. Final formal confirmation of
the extension has yet to be received but is expected during Q3 of 2023.
Namibia
The Group made various licence commitment and training 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.
The Company's investment in the current license is currently just $588k (2021:
$368k), 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
South Africa
In South Africa, the Petroleum Authority of 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 this period will conclude
upon the completion of the work programme, representing a commitment to
acquire a minimum of 700km 2D or 300km of 3D seismic over the block. Acquiring
the additional seismic data in 2023 is now no longer possible, and as a
result, the JV partners do not expect to acquire the new 3D seismic data over
the block until 2024 at the earliest. The operator has told the Company that
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.
Impairment
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.
13. Investment in subsidiaries
Loans to subsidiary undertakings Shares in subsidiary undertakings Total
Company $ $ $
Cost
At 1 January 2022 82,338,029 32,216,739 114,554,768
Net advances during the year 3,383,484 - 3,383,484
At 31 December 2022 85,721,513 32,216,739 117,938,252
Provision for impairment -
At 1 January 2021 (64,862,126) (19,908,973) (84,771,099)
At 31 December 2022 (64,862,126) (19,908,973) (84,771,099)
Net book value -
At 31 December 2022 20,859,387 12,307,766 33,167,154
At 31 December 2021 17,475,903 12,307,766 29,783,669
Included within loans made to subsidiary undertakings during the year of $3.4
million (2021: 2.1 million) are amounts of $2.5 million Cameroon (2021: $1.3
million), $158k South Africa (2021: $394k), $616k Rift Petroleum Holdings
(2021: $415k) and $131k (2021: $51k) 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
2022 2022 2022 2021 2022
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
(5) Dissolved 10 August 2021
14. Trade and other receivables
Group Company
2022 2021 2022 2021
$ $ $ $
Trade and other receivables 474,749 8,239 474,747 8,237
Trade and other receivables include VAT recoverable from HMRC on late appeals
owed to the Company totalling £351k ($422k) which was received in May 2023.
15. Trade and other payables
Group Company
2022 2021 2022 2021
$ $ $ $
Trade and other payables 195,776 344,601 77,042 173,172
Accruals 2,484,630 1,991,735 58,618 53,022
Loans from subsidiary undertakings - - - -
2,680,406 2,336,336 135,660 226,194
Accruals include UK $59k (2021: $53k); Cameroon $2.1 million (2021: $1.2
million); Namibia $167k (2021: $2k) and South Africa $190k (2021: $723k) and
comprise operational and other asset related costs due plus amounts payable to
Ministerial bodies with respect to licence tenure, most of which has been
settled subsequent to the year-end.
Group creditor payment days are approximately 30 days (2021: 32 days).
16. Provision for liabilities and charges
Group Company
2022 2021 2022 2021
$ $ $ $
VAT appeals 502,972 - 502,972 -
502,972 - 502,972 -
Following the favourable ruling from the Upper Tribunal received on 21 May
2021, 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 Company released most of its provisions which had previously been recorded
in respect of VAT payable.
At the accounts date there remained three further appeals to the First-Tier
Tax Tribunal by HMRC, which were yet to be heard. The two earlier appeals
concerned time periods not covered by the original Tribunal decisions, to
which HMRC had raised procedural objections which it subsequently withdrew
prior to the accounts date, and these appeals were formally settled after the
accounts date, resulting in a payment (after the accounts date) to the Company
of $422,359 (£351,212) which has been recorded in the accounts as receivable.
The third more recent appeal concerns a revised assessment in respect of time
periods covered by the Upper Tribunal's 21 May 2021 decision. The legal advice
received by the Company is that this revised assessment is incorrect, which is
why the Company only recognises a provision for a potential liability in
respect of this assessment in the 2022 accounts (as opposed to a liability for
VAT in the accounts payable note).
17. Borrowings
Total borrowings for the Group and Company are noted below:
Group Company
2022 2021 2022 2021
$ $ $ $
Principal balance at beginning of year 59,532 1,338,726 59,532 1,338,726
Amounts drawn down during the year - - - -
Principal repaid during the year (12,294) (1,278,451) (12,294) (1,278,451)
Currency revaluations at year end (6,149) (743) (6,149) (743)
Principal balance at end of year 41,088 59,532 41,088 59,532
Financing costs at beginning of year 818 (7,026) 818 (7,026)
Changes to financing costs during the year - 47,383 - 47,383
Interest expense 925 99,997 925 99,997
Interest paid during the year (1,220) (139,516) (1,220) (139,516)
Currency revaluations at year end (81) (20) (81) (20)
Financing costs at the end of the year 442 818 442 818
Carrying amount at end of period 41,530 60,349 41,530 60,349
Current 12,244 13,801 12,243 13,802
Non-current 29,286 46,548 29,286 46,548
PRINCIPAL REPAYMENT DATES Group Company
2022 2021 2022 2021
$ $ $ $
Due within 1 year 12,244 13,801 12,243 13,802
Due within years 2-5 29,286 46,548 29,286 46,548
Due in more than 5 years - - - -
41,530 60,349 41,530 60,349
During the year, the Group and Company entered into no new facilities (2021:
$nil).
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.
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.
18. Share capital
2022 2021
$ $
Authorised, called up, allotted and fully paid
3,554,137,955 (2021: 2,109,172,592) ordinary shares of 0.001p 18,283,317 18,264,803
The share capital issues during 2022 are summarised as follows:
Number of shares Share capital at nominal value Share premium
$ $
At 1 January 2022 2,109,172,592 18,264,803 148,747,595
Shares issued for cash 1,434,065,363 18,383 3,870,791
Shares issued on settlement of third party fees 11,200,000 131 29,393
Shares issued in settlement of loan interest - - -
Share issue costs - - (311,476)
At 31 December 2022 3,554,437,955 18,283,317 152,336,303
In January 2022, the Company raised $2.1 million by placing 576,923,077 shares
for cash at 0.260 pence per share.
In August 2022, the Company raised $1.9 million by placing 857,142,286 shares
for cash at 0.175 pence per share.
In August 2022, the Company raised £30k by placing 11,200,000 shares in
settlement of third fees at 0.225 pence per share.
19. 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.
20. 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 2022 and 31 December 2021.
Carrying amount / fair value
2022 2021
Group $ $
Financial assets (classified as loans and receivables)
Cash and cash equivalents 231,216 10,227
Trade and other receivables 474,749 8,239
Total financial assets 705,965 18,466
Financial liabilities at amortised cost
Trade and other payables 2,680,406 2,336,336
Borrowings 41,530 60,349
Total financial liabilities 2,721,936 2,396,685
Carrying amount / fair value
2022 2021
Company $ $
Financial assets (classified as loans and receivables)
Cash and cash equivalents 159,456 6,232
Trade and other receivables 474,747 8,237
Loans to subsidiary undertakings 20,859,388 17,475,903
Total financial assets 21,493,591 17,490,372
Financial liabilities at amortised cost
Trade and other payables 87,069 226,194
Borrowings 41,530 60,349
Total financial liabilities 128,599 286,543
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
2022 2021 2022 2021
$ $ $ $
Cash and cash equivalents 1,122 484 782 419
Borrowings 500 7,725 500 7,725
1,622 8,209 1,282 8,144
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:
2022 2022 2021 2021
Floating interest rate Non-interest bearing Floating interest rate Non-interest bearing
$ $ $ $
Cash and cash equivalents 172,782 58,434 6,935 3,292
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
2022 2021 2022 2021
Cash and cash equivalents $ $ $ $
Cash and cash equivalents held in US$ 55,874 921 55,874 921
Cash and cash equivalents held in GBP 156,448 8,337 103,582 5,311
Cash and cash equivalents held in XAF 13,326 703 - -
Cash and cash equivalents held in other currencies 5,568 266 - -
231,216 10,227 159,456 6,232
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 $243k as at 31 December 2022 (2021:
$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
2022 2021 2022 2021
Cash and cash equivalents Rating $ $ $ $
Barclays Bank plc A+ 159,456 6,232 159,456 6,232
Royal Bank of Scotland A 58,434 3,292 - -
First Afriland Bank No rating 12,947 324 - -
BGFI Bank A+ 379 379 - -
231,216 10,227 159,456 6,232
21. Share-based payments
2022 2021
$ $
In the statement of comprehensive income the Group recognised the following 363,047 968,711
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 2022 are as follows:
Number in issue
At 1 January 2022 244,000,000
Awarded during the year 148,000,000
At 31 December 2022 392,000,000
( )
Date of grant Number in issue (1) Option price (pence) Latest exercise date WAOP
24 Jan 2019 70,000,000 1.250 24 Jan 2024 87,500,000
18 Dec 2020 86,000,000 0.450 18 Dec 2025 38,700,000
01 Apr 2021 88,000,000 0.450 01 Apr 2026 39,600,000
16 Aug 2022 148,000,000 0.300 16 Aug 2027 44,400,000
392,000,000 210,200,000
(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:
2022 2021
No. No.
Jeremy Asher 280,000,000 180,000,000
Total 280,000,000 180,000,000
Warrants
Details of warrants outstanding at 31 December 2022 are as follows:
Number in issue
At 1 January 2022 806,635,644
Awarded during the year 97,773,291
Lapsed during the year (304,439,912)
At 31 December 2022 599,969,023
Date of grant Number in issue Warrant price (pence) Latest exercise date
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 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 10,990,933 0.500 13 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
01 Jan 2022 17,329,020 0.425 01 Jan 2027
13 Jan 2022 7,058,824 0.425 12 Jan 2027
01 Apr 2022 19,851,774 0.263 01 Apr 2027
01 Jul 2022 16,831,240 0.295 01 Jul 2027
01 Aug 2022 10,588,228 0.425 31 Jul 2024
03 Oct 2022 26,114,205 0.250 03 Oct 2027
599,969,023
The following table shows the interests of the Directors in the share warrants
in issue:
2022 2021
No. No.
Jeremy Asher 217,875,279 281,164,127
Paula Brancato 33,238,104 17,212,856
Mark Enfield 31,394,256 15,369,008
Total 282,507,639 313,745,991
The weighted average exercise price of the share warrants was 0.59p (2021:
0.89p) with a weighted average contractual life of 1.8 years (2021: 2.4
years). At 31 December 2022 and 2021 all warrants had fully vested.
In its Statement of Comprehensive Income, the Company recognised share-based
payment charges of $208k (2021: $446k).
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% (2021: 20%
and 111%), depending upon the date of grant, and the risk-free interest rate
was 0.50% (2021: 0.25%) and the Dividend Yield was nil% for 2022 and 2021.
The Company's share price ranged between 0.2p and 0.4p (2021: 0.2p and 0.5p)
during the year. The closing price on 31 December 2021 was 0.2p per share
(2021; 0.4p). The weighted average exercise price of the share options was
0.5p (2021: 0.7p) with a weighted average contractual life of 3.3 years (2021:
3.5 years). The total number of options vested at the end of the year was
185.3 million (2021: 131.8 million).
22. 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 $381k (2021: $232k) in fees for
management services 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
2022 2021 2022 2021
$ $ $ $
Fees charged by companies associated with Jeremy Asher (1) 381,428 231,952 - -
Interest charged on borrowings by companies associated with Jeremy Asher (1) - 124,743 - 124,743
Share-based payments (2) 242,896 481,042 242,896 481,042
Finance interest on intercompany loan accounts 536,375 184,873 536,375 184,873
Fees charged with respect to the provision of strategic advice and support 104,911 90,975 104,911 90,975
by the parent
1,265,610 1,113,585 884,182 881,633
(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.
The following amounts were owed by subsidiary undertakings at the balance sheet date:
Rift Rift Tower Resources (Namibia) Holdings Limited Tower Resources Namibia Tower Resources Cameroon Limited Tower Resources Cameroon SA TOTAL
Petroleum Holdings Limited
Petroleum Limited
($000)
Limited
($000)
($000)
($000)
($000)
($000)
($000)
2022 2,616 1,885 18 362 6 15,974 20,861
2021 1,999 1,727 15 234 4 13,498 17,477
23. Control
The Company is under the control of its shareholders and not any one party.
24. Leases and capital commitments
The Group is committed to funding the following exploration expenditure
commitments as at 31 December 2022:
Country Interest 2023 2024 onwards
Cameroon Thali (1) Cameroon 100% $8.40 million -
South Africa Algoa-Gamtoos (2) South Africa 50% $3.39 million -
Namibia Blocks 1910A, 1911 and 1912B (3) Namibia 80% $4.50 million -
$16.29 million -
(1) to 11 May 2023
(2) period ends on completion of work programme commitments
(3) to November 2023, right of extension available
25. Subsequent events
16 January 2023: Facility Agreement with Energy Exploration Capital Partners
LLC ("EECP") to raise $1.25 million. The facility provides for further
convertible advances of up to $4.75 million subject to certain conditions.
15 February 2023: Issue of 23.2 million warrants in lieu of £30,000 (in
aggregate) of Directors fees in respect of the period January-March 2023, to
conserve the Company's working capital. The warrants are exercisable at a
strike price of 0.175 pence (0.21¢) per share. The warrants are exercisable
for a period of five years from the date of issue.
30 March 2023: Share issuance in accordance with the terms of the investment
deed with EEPC announced on 16 January 2023, of 102,543,067 ordinary shares of
0.001 pence each. The purchase price of 0.12 pence (0.15¢) per Ordinary Share
for the settlement amount of $150,000 had been prepaid by EEPC as part of the
16 January advance.
27 April 2023: Cameroon operational update covering:
· Application for a one-year extension of the initial exploration
period of the PSC, following positive discussions with the Minister of Mines,
Industry and Technological Development and the Prime Minister of the Republic
of Cameroon.
· Ongoing discussions with rig owners and operators with the aim to
secure rig availability in the third and fourth quarter of this year to drill
at NJOM-3.
· Ongoing negotiations for a term loan of approximately $7 million with
BGFI Bank Group and asset-level financing with several other parties.
· Updated resource estimates and risks for the reservoirs connected to
the NJOM-1 and the NJOM-2 discovery wells, substantially lowering risk
attributed to PS9 Sup and PS3 HW reservoirs, and increasing total risked pMean
prospective resources to 35.4 million bbls.
· Deployment of software to conduct detailed attribute analysis of the
reprocessed 3D seismic data to identify the oil and gas elements of the
reservoirs in the Njonji-1 and Njonji-2 fault blocks, resulting in a clearer
picture of the pay zones in both fault blocks.
2 May 2023: Issue of 34.4 million warrants in lieu of £30,000 (in aggregate)
of Directors fees in respect of the period April-June 2023, to conserve the
Company's working capital. The warrants are exercisable at a strike price of
0.1425 p (0.18¢) per share, a premium of 24% over the mid-point closing share
price on 28 April 2023. The warrants are exercisable for a period of five
years from the date of issue.
16 May 2023: Placing and subscription of 4,600 million shares to raise £2.3
million ($2.9 million) at a price of 0.05p (0.06¢) per share.
16 June 2023: Namibia technical update setting out initial conclusions from
basin modelling work prior to and after the accounts date.
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