REG - Tower Resources PLC - Transformational Farm-out Agreements

Tower ResourcesAnnouncement

10/01/2025 07:00

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RNS Number : 8262S  Tower Resources PLC  10 January 2025

 

10 January 2025

 

 

Tower Resources plc

("Tower" or the "Company")

Transformational Farm-out Agreements for Cameroon and Namibia Licenses

 

Tower Resources plc (AIM: TRP), the AIM-listed oil and gas company focused on
Africa, is pleased to announce that it has executed two farm-out agreements
and associated documentation with Prime Global Energies Limited ("Prime") for
minority, non-operated interests in its Thali license, offshore Cameroon, and
PEL96 offshore Namibia.

 

Through its wholly-owned subsidiary, Tower Resources Cameroon S.A. ("TRCSA"),
the Company has agreed to farm-out a 42.5% non-operated interest in the Thali
license to Prime in exchange for a US$15,000,000 cash contribution towards the
Thali work programme and drilling of the NJOM-3 well in 2025, and further
payments as set out below. In addition, via Tower Resources (Namibia) Limited,
Prime has also agreed to farm-in to PEL96, offshore Namibia, for a 25%
non-operated interest. As explained below, as part of these arrangements,
Tower will also receive further payments including US$937,500 in cash
immediately and a further US$3,437,500 cash on completion of the two farm-out
agreements, for a total of US$4,375,000 in cash.

 

Completion of both farm-out agreements is expected to occur by the end of Q1
2025 subject to government, partner and regulatory consents.

 

Prime is a UK-incorporated company with more than three decades of upstream
operational experience. In 2022, Prime's parent company, Prime International
Oil and Gas Company Limited ("PIOGCL"), acquired the assets of ENI in Pakistan
(which included the former interests of Lasmo in Pakistan) and is a
substantial upstream company with significant technical resources and
production from both operated and non-operated production in Pakistan.

 

Highlights

·      Prime will acquire a 42.5% non-operated interest in the Thali
license, in return for a US$15,000,000 contribution to the Thali work
programme costs;

·      Prime is also acquiring a 25% non-operated interest in PEL96,
offshore Namibia, with Tower receiving US$2,500,000 cash on completion (of
which US$1,875,000 will be held back pending completion of the Thali farmout
as well as the PEL96 farmout);

·      In recognition of existing production-based payment agreements in
place with Pegasus Petroleum Limited ("Pegasus") on the Thali license, which
Pegasus has agreed to modify in Prime and Tower's favour, Prime will commit to
production-based payments of 10% of Prime's after-tax share of profit oil from
Thali to Tower, which will, in turn, be passing the majority of those payments
on to Pegasus and also retaining a portion itself, as previously disclosed;
other aspects of the transaction include:

o  A payment of US$1,875,000 will be made to Tower upon the farm-out
agreement execution; 50% to be paid to Pegasus and 50% to be retained by
Tower;

o  A further payment of US$1,875,000 to Tower on completion of the Thali
farm-out; 50% to be paid to Pegasus and 50% to be retained by Tower;

o  The issue of 5,650,483,681 Ordinary shares in Tower to Pegasus in
consideration of the cash retentions by Tower noted above.

·      Therefore, in aggregate Tower will be in receipt of a total of
US$4,375,000 in cash on completion of both the Thali and PEL96 farm-out
agreements;

·      Agreement in principle for Tower and Prime to work together on
other projects in Cameroon, with Prime participating up to 42.5% depending on
the project.

 

Tower Resources Chairman & CEO, Jeremy Asher, commented:

 

"I am delighted to announce the execution of these transformational farm-out
agreements for our Cameroon and Namibia licenses. In Prime, we have secured a
partner with substantial technical and financial resources and a track record
of operational success, and we are very pleased to be working closely with
them on these two highly valuable projects.

 

"For our Thali license, the funding provided should enable Tower to drill the
NJOM-3 commitment well, which will mark a significant milestone for the
Company. Whilst this has been our priority, we have also made great efforts
over the past few years to understand better the huge prospectivity of the
PEL96 license, offshore Namibia, and I'm very pleased that its potential has
also been recognised through this additional agreement with Prime as a
non-operating partner.

 

"These negotiations required flexibility from all of us and, as a result,
there have been some changes to the Pegasus Facility Agreement giving rise to
the production-based payments already agreed in respect of the Thali farm-out.
These payments were originally intended to be similar to those agreed in our
earlier potential farm-out agreements, a portion of which were to be paid on
to Pegasus as consideration for funding previously provided, but paid from the
farm-out partner's share of production, so that Tower would incur no net cost.
However, during these negotiations we agreed to amend the basis and reduce the
amount of these payments in return for Tower retaining a larger participating
interest in the license, alongside some cash payments to Tower and Pegasus at
execution and completion. Pegasus will be using 50% of its share of these cash
payments to subscribe for shares in Tower, half of which will be locked in for
a year. Whilst this results in a significant increase in my beneficial
shareholding in the Company due to my personal involvement in Pegasus, it
achieves a similar purpose to the previous, more generous, production payment
structure in that both are largely contingent on Thali's success, and it
serves to further align my interests with those of my fellow-shareholders
while also contributing significantly to the Company's current working capital
position.

 

"Our goal remains to achieve progress across the Company's entire asset base
and deliver value for all stakeholders, and the additional liquidity these
transactions will generate, upon completion, should allow us to proceed with
all our work programmes with greater confidence.

 

"Deals of this nature require complex negotiation, lengthy documentation, and
are often strategic for our partners as well as for ourselves. That is
especially so in this case, where we and Prime are also keen to work together
on further projects in Cameroon in the future. But our whole team understands
that this also requires patience and support from investors, so we would all
like to acknowledge our appreciation for the trust and commitment demonstrated
by so many of our valued shareholders whilst these conversations have been
ongoing. We would also like to thank Mike Lakin of Envoi for introducing us to
Prime last year. I look forward to keeping you updated with our further
progress."

 

Cameroon Farm-out and Production Payments Deed

 

After receiving a detailed offer for the financing of the Thali license (see
announcements dated 30 September 2024 and 16 October 2024), the Company has
now executed a farm-out agreement with Prime whereby Prime will take a 42.5%
non-operated interest in Thali, in return for a US$15,000,000 contribution to
the work programme, including the drilling of the NJOM-3 well, which is
already partly funded and other arrangements as summarised above and below.

 

The Thali participating interest being farmed out is subject to future
production-based payments to the Company, a portion of which are committed to
Pegasus (wholly owned by a trust of which the Company's CEO and Chairman is a
lifetime beneficiary) pursuant to agreements made in 2019 arising from the
working capital facility that Pegasus had provided to the Company at that
time, and which it extended multiple times as announced on 4 March 2021 (the
"Pegasus Facility Agreement"). These production-based payments were originally
intended to be similar to those agreed and disclosed in the Company's earlier
proposed farm-out agreements, a portion of which would then be paid on to
Pegasus as per the Production Payment Agreements, but paid from the farm-out
partner's share of production, so that it would not require payments from
Tower.

 

However, during negotiations, Tower and Prime agreed to reduce the amount of
these payments (covered by a separate Production Payments Deed from Prime to
Tower) in return for retaining a larger participating interest in the license,
alongside some cash payments to Tower (and also, in turn, to Pegasus) at
execution and completion. Pegasus has agreed to use 50% of the cash payments
(US$1,875,500) to subscribe for 5,650,483,681 Ordinary shares ("Pegasus
Consideration Shares") which represents a price of 0.027 pence per share at
the exchange rate at the time of the market close on 9 January 2025, being the
price at which the most recent placing was completed as announced on 11
November 2024, but without any commissions or fees.

 

Pegasus has entered into a lock-in arrangement in respect of 50% of the shares
for which it is subscribing for a period of 12 months from issue. It should be
noted that to date neither Pegasus nor Mr Asher, the beneficial owner, has
sold any of their shares in the Company.

 

The production-based payments to Tower will represent 10% of Prime's after-tax
share of profit oil from Thali (thus, based on current participating
interests, corresponding to 4.25% of the total profit oil). Tower will be
passing the majority of those payments (approximately 88%, corresponding to
3.75% of the total profit oil) on to Pegasus, at no net cost to the Company.

 

Now that the farm-out agreement has been executed, Tower will receive payment
of US$1,875,000 with 50% to be paid to Pegasus and 50% to be retained by Tower
as set out above. Following completion of the farm-out for Thali, Tower will
receive payment of a further US$1,875,000, of which, as with the payment on
execution, 50% will be paid to Pegasus with Tower retaining the remaining 50%.

 

Completion of the farm-out transaction is expected by the end of Q1 2025 given
that approvals from the Government of the Republic of Cameroon will be
required.

 

Although multiple rigs are currently available to drill the NJOM-3 well in
2025, the exact timing of the well will now depend on the timing of the
government approval for the Thali farm-out transaction, as well as government
approval for an extension to the First Exploration Period from the current
date of 4 February 2025. The well timing will therefore be dictated in large
part by the sequence of feasible rig slots after completion, considering the
normal lead times for mobilisation of equipment and personnel. The Company
will provide shareholders with further details on the expected timing of the
NJOM-3 well following completion of the farm-out transaction, although, as
usual, the Company will not be able to comment in any detail on commercial
negotiations in progress.

 

As part of wider funding arrangements and in addition to the financing
provided by this Cameroon farm-out, Tower is in discussions with various
African lending banks about medium-term facilities to support the Company in
achieving early production from the Thali license.

 

The Company believes that the US$15,000,000 being raised from the farm-out
transaction will be sufficient to meet the current NJOM-3 well commitment.
Further testing, development and production costs beyond that US$15,000,000,
to the extent not externally financed, will be met by the partners in the
ratio of their participating interests.

 

Namibia Farm-out

 

Negotiations with Prime also resulted in their expressing interest in the
Company's PEL96 license offshore Namibia. Subsequently, a farm-out agreement
has been executed pursuant to which Prime will take a 25% non-operated
interest in the PEL96 license (out of Tower's 80% interest), in return for
US$2,500,000 aggregate cash at completion.

 

Completion of the farm-out will be subject to Namibian government approvals
and the consent of the other partners in the PEL96 license (the National
Petroleum Corporation of Namibia (Pty) Ltd, and our local partner ZM Fourteen
(Pty) Ltd.) and is expected to occur by the end of Q1 2025.

 

These funds are not restricted as to use, and will further enable the Company
to proceed with its various activities in relation to Namibia and elsewhere,
including the evaluation of the large stratigraphic and structural leads and
prospects across the license area, as announced on 2 August 2024. The Company
is planning to reprocess the previously acquired 2D seismic data over large
areas of the license, in order to achieve better data quality and a more
detailed picture of the structures it wishes to explore further with new 3D
seismic data acquisition. This reprocessing work will guide the final choice
of the 3D seismic data acquisition area.

 

The budget for Tower's 2025 work programme, including this 2D reprocessing
work, is approximately US$1,225,000, which has been approved by the existing
PEL96 partners. This cost will now be shared with our new partners, subject to
the relevant approvals and farm-out completion.

 

Further cooperation

 

As part of a separate letter agreement, Tower has committed to offer Prime the
opportunity to participate in other future Tower projects in Cameroon, with
Prime participating up to 42.5% depending on the project.

 

Pegasus Subscription pursuant to amended Pegasus Facility Agreement

 

Following the issue of the Pegasus Consideration Shares ("the Pegasus
Subscription"), Jeremy Asher and Pegasus will be interested in shares as
follows.

 

 Pegasus and its Affiliates Holdings         Shareholding   Shareholding (%)  Shareholding upon exercise of total number of Options and Warrants held  % of Issued share capital upon exercise of Options and Warrants held
 Current Holding                             1,707,255,782  7.30%             3,472,706,930                                                            12.81%
 Holding following the Pegasus Subscription  7,357,739,463  25.33%            9,123,190,611                                                            27.85%

 

 

Related Party Disclosures

 

Pegasus, due to its relationship to Jeremy Asher and existing shareholding,
constitutes a Related Party of the Company in accordance with the AIM Rules
for Companies.

 

Therefore, the amendment to the Pegasus Facility Agreement which gave rise to
the Production Payment Agreement between the Company and Pegasus, along with
the Pegasus Subscription (together the "Related Party Arrangements"),
constitute related party transactions in accordance with AIM Rule 13.
Accordingly, Paula Brancato, Stacey Kivel and Mark Enfield, being the
Directors independent of the Related Party Arrangements, consider, having
consulted with the Company's Nominated Adviser, SP Angel Corporate Finance
LLP, that the terms of the Related Party Arrangements are fair and reasonable
insofar as the Company's shareholders are concerned.

 

Pegasus and Tower have agreed to establish a Relationship Agreement in order
to govern the Company's future relationship with Pegasus given its larger
shareholding in the Company. Further details are expected to be included in
the Company's 2024 Annual Report when published.

 

 

Share Capital following Equity Issue to Pegasus Petroleum Limited

 

Application will be made for the 5,650,483,681 Pegasus Consideration Shares to
be admitted to trading on AIM. It is expected that Admission of the Pegasus
Consideration Shares will become effective and that dealings will commence at
8.00 a.m. on or around 15 January 2025.

 

Following admission of the Pegasus Consideration Shares, the Company's
enlarged issued share capital will comprise 29,044,691,475 Ordinary Shares of
0.001p each with voting rights in the Company. This figure may be used by
shareholders in the Company as the denominator for the calculations by which
they will determine if they are required to notify their interest in, or a
change in the interest in, the share capital of the Company under the FCA's
Disclosure and Transparency Rules.

 

 

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 & CEO

 Andrew Matharu

 VP - Corporate Affairs

 BlytheRay                            +44 20 7138 3204

 Financial PR

 Tim Blythe

 Megan Ray

 SP Angel Corporate Finance LLP       +44 20 3470 0470

Nominated Adviser and Joint Broker

 Stuart Gledhill

 Caroline Rowe

 Axis Capital Markets Limited         +44 203 026 2689

Joint Broker

 Ben Tadd

 Novum Securities Ltd                 +44 20 7399 9400

Joint Broker

 Jon Bellis

 Colin Rowbury

 

About Tower Resources

Tower Resources plc is an AIM listed energy company building a balanced
portfolio of energy opportunities in Africa across the exploration and
production cycle in oil and gas and beyond. The Company's current focus is on
advancing its operations in Cameroon to deliver cash flow through short-cycle
development and rapid production with long term upside, and de-risking
attractive exploration licenses through acquiring 3D seismic data in the
emerging oil and gas provinces of Namibia and South Africa, where world-class
discoveries have recently been made.

Tower's strategy is centred around stable jurisdictions that the Company knows
well and that offer excellent fiscal terms. Through its Directors and staff,
Tower has access to decades of expertise and experience in Cameroon and
Namibia, and its joint venture with New Age builds on years of experience in
South Africa.

About Prime Global Energies Limited

Prime has a legacy spanning over three decades of exploration and production
activities in Pakistan's oil and gas industry. Prime holds participating
interests in nine concession blocks, of which four are operated and five are
non-operated.

The company operates the following assets in Pakistan:

·      Bhit and Badhra gas concessions and Bhit gas processing plant
with processing capacity of 370 MMscfpd;

·      Kadanwari gas field; and

·      South West Miano III exploration license.

Prime also has interests in several non-operated assets including the Sawan
processing plant, which is the gas processing hub for gas fields in the Middle
Indus, and processes gas from the Sawan, Kadanwari, Latif, Miano, and Mohar
gas fields (capacity 450 MMscfpd), and the Zamzama gas processing plant
(capacity 550 MMscfpd), together with the Latif and Mubarak exploration
licenses.

It is also noteworthy that a Prime affiliate has established the largest
off-grid brownfield photovoltaic power project in Pakistan.

Prime Global Energies Limited is a wholly owned subsidiary of Prime
International Oil & Gas Company Limited (PIOGCL).

Website: www.piogcl.com

 

 

NOTIFICATION AND PUBLIC DISCLOSURE OF TRANSACTIONS BY PERSONS DISCHARGING
MANAGERIAL RESPONSIBILITIES AND PERSONS CLOSELY ASSOCIATED WITH THEM:

 

 1.            Details of the person discharging managerial responsibilities/person closely
               associated
 a)            Name:                                                         Jeremy Asher
 2.            Reason for the notification
 a)            Position/status:                                              Chairman and Chief Executive Officer
 b)            Initial notification/Amendment:                               Initial notification
 3.            Details of the issuer, emission allowance market participant, auction
               platform, auctioneer or auction monitor
 a)            Name:                                                         Tower Resources PLC
 b)            LEI:                                                          2138002J9VH6PN7P2B09
 4.            Details of the transaction(s): section to be repeated for (i) each type of
               instrument; (ii) each type of transaction; (iii) each date; and (iv) each
               place where transactions have been conducted
 a)            Description of the financial instrument, type of instrument:  Ordinary Shares of 0.001 pence each

               Identification code:                                          GB00BZ6D6J81

 b)            Nature of the transaction:                                    Issue of Pegasus Consideration Shares

 c)            Price(s) and volume(s):

Price(s)     Volume(s)
                                                                             0.027 pence  5,650,483,681

 
 d)            Aggregated information:                                       Single Transaction as in 4 c) above

Price(s)     Volume(s)
               Aggregated volume:                                            0.027 pence  5,650,483,681

               Price:

 
 e)            Date of the transaction:                                      10 January 2025

                                                                             07:00 GMT
 f)            Place of the transaction:                                     Outside a trading venue

 

d)

Aggregated information:

Aggregated volume:

Price:

Single Transaction as in 4 c) above

 Price(s)     Volume(s)
 0.027 pence  5,650,483,681

 

e)

Date of the transaction:

10 January 2025

07:00 GMT

f)

Place of the transaction:

Outside a trading venue

 

 

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