Tower Resources plc (“Tower”), LN: TRP, the AIM listed exploration company, announces its Interim Results for the six months ended 30 June 2012.

Highlights
  • Significant progress in Namibia post-period end announced today:
    • Repsol enters 0010 Licence in Namibia as operator with 44% share
    • Tower increases strategic holding in 0010 Licence from 15% to 30%
    • Tower raises gross £5.9m (US$9.2m) through a placing at 3 pence per share with institutions and Directors, increasing shares in issue by 14%
    • Repsol, Tower and Arcadia now actively seeking a rig to drill the first well on the Delta prospect with gross unrisked recoverable potential of over 9 billion barrels and 14.5 tcf of gas
  • Developments during the reporting period, already announced, include:
    • Tower entered £8 million SEDA with YA Global Master SPV Ltd (“Yorkville”) in January and completed a £5.4m placing with institutions and Directors in February to fund drilling costs of the Mvule-1 well in Uganda and provide working capital
    • Drilled, plugged and abandoned this final commitment well on the EA5 licence in Uganda in February
    • In March, entered into £20m equity financing facility (EFF) with Darwin Strategic Limited
    • Philip Swatman appointed Senior Independent Director in April, took over chair of audit committee in May
    • Graeme Thomson appointed Chief Executive Officer in June

Jeremy Asher, Chairman, commented:

“The Board is extremely pleased with the progress that Tower has made in the first seven months of this year. We have increased our share of licence 0010 from 15% to 30% and been joined in the licence by Repsol, a partner and operator of the highest quality.

The appointment of Graeme Thomson as Chief Executive of your company has further strengthened Tower’s commercial expertise as Graeme brings with him a more than 30 years public company experience including a number of senior roles in the oil & gas industry.

This is an extremely exciting time to be involved with Tower Resources. Our increased interest in licence 0010 and our improved financing capacity together with the continued support of shareholders make me feel that we are now ideally positioned to derive maximum upside from our existing assets and to capitalise on new opportunities in Africa.”

-ends-

Contacts
Tower Resources plc

Graeme Thomson (CEO)
www.towerresources.co.uk
+44 20 7253 6639
+44 7930 405 921

Northland Capital Partners Limited

(Nominated Adviser and Joint Broker)
Gavin Burnell/ Edward Hutton
John Howes/Alice Lane (Broking)
+44 20 7796 8800

Investec (Joint Broker)

Ben Colegrave
Chris Sim
+44 20 7597 4000

M Communications

Patrick d’Ancona
Chris McMahon
Andrew Benbow
+44 20 7920 2358

CHAIRMAN’S STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Dear Shareholder,

The first seven months of 2012 have been an exciting and productive time for Tower, notably in Namibia, despite the disappointment we had in Uganda in February.

I am delighted that we have been able to welcome Graeme Thomson to the team as CEO, as well as Philip Swatman, whose appointment to the Board I already discussed in the statement accompanying the 2011 annual report. Graeme has over 30 years public company experience and has held a number of senior positions in the oil & gas industry. His broad and deep knowledge of building oil and gas businesses should bring great value to Tower’s shareholders.

Graeme joined us during a crucial period at the beginning of June, as we were in mid-negotiation with Arcadia regarding Repsol’s farm-in and our own wish to increase our share of licence 0010 in Namibia. During the past two months he has steered us to a successful conclusion of those negotiations with great skill and assurance.

We are now in the position we have been seeking since the beginning of this year. Today we have separately announced that we have agreed, conditional on Namibian consents, to increase our share of licence 0010 from 15% to 30%, and at the same time we welcome Repsol as operator with a 44% share. The quality of the licence, which includes the Delta prospect with gross unrisked potential of 9 billion barrels, is set out in detail in last year’s CPR. This potential is heavily underscored by Repsol’s entry: their rigorous due diligence work provides further validation, by one of the world’s foremost Atlantic margin drilling experts, of the technical work already completed. They are presently looking at a variety of rig options and are consulting with the Namibian government, Arcadia and Tower as they do so. We would all like the first well to be drilled as soon as possible, but not at any cost: the oil and gas, if present, will wait for us. Naturally we will notify the market as soon as a rig is contracted.

Increasing our share of the licence has come at the cost of forgoing our carried interest, so that we now have to fund our share of the drilling. Investors will recall that our 15% carried interest covered two wells, but the second well was contingent on the outcome of the first well and then on Arcadia’s decision as to whether to proceed to the next exploration phase. The value in the carry therefore lay mainly in avoiding the cost of the first well.

Our 30% share of the first well (untested) and the back costs, together, are presently expected to come to around $20-25 million. Our £5.9 million (approximately $9.3 million) placing announced today has raised some of this already; we have held off raising the balance of the funds, which we do not presently need as we do not yet have a contracted rig, in anticipation of raising them in due course at what we hope will be better terms, following a roadshow with a wider group of institutional investors.

If we had to raise the balance of the expected funding requirement on exactly the same terms as today’s placing, then we would have expanded our share capital by approximately 35% in order to achieve an increase in our licence interest of 100% (from 15% to 30%) with the first well fully funded.

This would mean that the interest in licence 0010 that each share would enjoy – fully funded through the first well – would have increased by approximately 50% per share as a result. If the balance of the funding is achieved on better terms than the current placing, then the increased licence interest per share, and hence the upside potential, will be even larger.

We do not anticipate any difficulty raising the balance of the funds required for this exciting well. Our current placing, which covers the back-costs and expected near term funding requirement, has been fully taken up by directors and investors that also participated in the last placing. We believe there will be more than sufficient institutional appetite for the remainder of the funding, and in any event we also have an equity finance facility (“EFF”) and a standby equity distribution agreement (“SEDA”) with a combined capacity of over £28 million available.

With all this commercial activity going on, the interim results themselves are, by comparison, somewhat less exciting. The loss of $9.2 million includes the $7.3 million costs of the unsuccessful Mvule-1 well previously announced in February, as well as $0.7 million in fees and costs related to the EFF, SEDA and promissory note. Underlying administrative costs remain steady, although we did have costs in the period associated with adverse currency movements, one-off board recruitments and depreciation of Ugandan assets in the period. Our cash balances improved slightly in the period to $2.4 million, of which $0.3 million is restricted.

Although Namibia has been our main area of focus during the past few months, we have also remained active in Uganda and Western Sahara during this period. In Uganda we have been overseeing an orderly winding up of operations in licence EA5 including site restitution and disposal of tailings, and while we are reducing staff in Uganda, we have maintained a dialogue with the government in anticipation of the next developments there. In Western Sahara, in addition to our existing interests in three large blocks, we have also signed an agreement, together with Wessex Petroleum, to study shale gas opportunities in Western Sahara in an area close to the Algerian border. We shall seek new ventures that broaden the Company’s portfolio but wish to continue to focus on high potential areas only.

As previously announced, during the period both Peter Kingston and Mark Savage left the Board and we thank them for their many contributions to the Company. I believe that we are now entering a definitive and exciting period for Tower, and the Board and I would like to thank all of our shareholders for their support during the past months and we hope that this support will be well rewarded.

Jeremy Asher
Chairman
30 July 2012

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