Tower Resources plc (AIM:TRP), the oil and gas exploration company with interests in sub-Saharan Africa, principally in Uganda and Namibia,  is pleased to provide a brief update of its current operations in Namibia and the outcome of a detailed technical and economic evaluation of the 0010 Licence. Tower has a 15% working interest in the Licence and is fully carried financially by Arcadia Petroleum Limited (“Arcadia”) through the current 3-D seismic survey and an initial exploration well.

The Tower Board is pleased to announce that the 3-D seismic survey being undertaken by the “Geowave Master” produced its first seismic recordings on Friday 2nd July in fair weather conditions. It is still expected that processing and interpretation can be completed early in 2011.

The Board is also pleased to issue a letter from Oilfield International (“OIL”) (attached and on the Tower Resources plc website) summarising the principal conclusions from their Competent Persons Report (“CPR”) which independently appraises the resource potential and Expected Monetary Value (“EMV”) of Tower’s 15% interest in Licence 0010. The conclusions set out in the CPR and the CPR letter are summarised below.

  • OIL have estimated that the net risked prospective resources attributable to Tower’s 15% working interest of Namibia Licence 0010 is 170 million barrels of oil equivalent, having an EMV of US$ 696 million (UK£ 0.45/share)

The OIL review team included two geophysicists, a geologist and a petroleum engineer having a total of 125 years of experience as technical specialists in the oil and gas industry. In particular, two of them have considerable experience of South America where South Atlantic exploration is most advanced. The OIL assessment has been undertaken in compliance with the SPE Petroleum Resources Management System (SPE-PRMS). OIL has had access to all available data from the Licence and a wide variety of regional technical information. They reviewed the work undertaken by Arcadia and Tower and where relevant, undertook technical analysis of their own to accommodate their own wide and relevant experience, particularly of the Brazilian basins, and any publicly available information. Interaction with Arcadia took place to understand their technical approach. OIL confirmed the main structural features as Delta (at two separate levels, Maastrichtian and Palaeocene) and Alpha and Gamma (at the Palaeocene level only) but, also, some significant, high risk resource potential in stratigraphic features between the main 4-way dip closed anticlines. The main conclusions, which reflect assessments for Delta, Gamma and Alpha only, are as follows:

  • The Delta structure at Maastrichtian level (“DeltaM”) is classified as a prospect, which, in a technical sense, means it is suitable to drill without further information – the 3-D seismic is still justified to strengthen the interpretation and minimise the risk of penetrating a locally poor reservoir interval with the first well.
  • The Delta, Gamma and Alpha structures at Palaeocene level are classified as Leads, which require further information to raise them to prospect level.
  • OIL has used the seismic data, the two Namibian discoveries and regional data to evaluate the likelihood that the reservoirs would be predominantly light oil-bearing with a possible gas cap; gas condensate-bearing or dry gas-bearing. For Delta, OIL concludes probabilities of 50%, 40%; and 10% respectively. All other structures are rated 45%, 44%, 11% respectively.
  • OIL have calculated prospective resources based on seismic data, well data from two wells drilled on the Licence in the early 1990s and the judgement of its relevant specialists. Prospective resources for the prospect and leads at the 50% probability level have been estimated as follows:
    • In the event of light oil, gross recoverable resources amount to 7.55 billion barrels and 12.4 trillion scft of natural gas. Net figures for Tower are 1.08 billion barrels and 1.8 trillion scft of natural gas.
    • In the event of gas condensate, gross resources amount to 765 million barrels and 28.5 trillion scft of natural gas. Net figures for Tower are 109 million barrels and 4.1 trillion scft natural gas.
    • In the event of dry gas, gross resources amount to 67 million barrels and 27.8 trillion scft natural gas. Net figures for Tower are 10 million barrels and 3.9 trillion scft natural gas.
  • OIL have engineered the most likely development approach and associated capital cost, operating cost and production profiles for each case together with currently traded oil and gas prices (gas into Europe), escalated to 2020 first production and beyond. They have calculated NPV 10% after-tax values on that basis for each case. Each has been valued on an independent standalone basis to avoid trying to determine economies of shared facilities.
  • The final step has been to estimate a geological chance of success (“COS”) for each structure. This has made use of all basic technical information but also an intensive review of the AVO data, in particular interpretations prepared by consultants to Arcadia. DeltaM has been assessed as having a 26% COS; DeltaP an 8% COS; GammaP a 12% COS; and AlphaP a 20% COS. An economic confidence factor of about 85% was then applied to the geological COS’s to calculate the economic COS used in the EMV calculations.
  • OIL has calculated net risked prospective resources to Tower as 91 million barrels and 474 billion scft natural gas (together ca 170 million barrels oil equivalent).
  • OIL has calculated an EMV for the prospective resources of Tower in Namibia Licence 0010 to be US$ 696 million, or UK£ 0.45 per share. US$ 480 million can be attributed to the Delta Prospect and Delta Lead, both targets for the first well to be drilled.

Peter Kingston, Chairman of Tower Resources plc commented. “I am delighted that such a comprehensive independent review of the prospectivity of Namibia Licence 0010 has confirmed its potential as a world class group of oil and gas prospects. It is also encouraging that the independent view of gross reserve potential and the estimated chance of success for the likely first well are favourable. I have no doubt that the operational progress already planned by ourselves and a number of Namibia operators over the next two years will increase everyone’s awareness of the huge potential in the South Atlantic and Namibia in particular.”

In accordance with AIM guidelines, Peter Kingston, who is a petroleum reservoir engineer with over 40 years experience in technical, executive and advisory roles in the oil exploration and production industry, and is Executive Chairman of the Company, is the qualified person that has reviewed and approved the technical information contained in this announcement.