Tower Resources plc (“Tower”), LN: TRP, the AIM listed exploration company, is pleased to announce its final results for the 12 months ended 31 December 2012.

Highlights
  • Increased our share of the highly prospective Namibian Licence 0010 from 15% to 30%, increasing our net risked recoverable resources to 540 million barrels of oil equivalent (“mmboe”) at an immediate cash cost of $5.3 million
  • Supported the successful farm-out of 44% of the Namibian Licence 0010 to Repsol, a successful and experienced international explorer and which has become the Licence operator
  • Secured the Namibian government’s agreement to these changes and a one year extension of the licence
  • Commenced planning for the Welwitschia-1 well to be drilled in early-mid 2014
  • Entered into a £20 million Equity Finance Facility with Darwin Strategic Limited and an £8 million SEDA through Yorkville.
  • Recruited Graeme Thomson as CEO and Philip Swatman as Senior Non-Executive Director
  • Recently strengthened the experienced management team, with Nigel Quinton now working as Vice President New Ventures and Andrew Matharu having joined as Vice President Corporate Affairs

Graeme Thomson, Chief Executive Officer of Tower Resources commented:

‘I am very pleased with the progress that we have made this year. Tower is in a strong position to realise the potential upside of our Namibian assets and we continue to capitalise on our extensive Africa operating experience in the search for new assets to complement our current portfolio.

Planning for our Welwitschia-1 well continues apace and with a number of other companies operating offshore Namibia, there will be a great deal of activity in the next 12 months in what we consider to be one of the most exciting postcodes in international E&P. We believe that Tower’s enviable interest position in Licence 0010 and our ongoing search for new opportunities will drive shareholder value creation.’

Contacts
Tower Resources

Jeremy Asher (Chairman)
Graeme Thomson (CEO)
+44 20 7253 6639

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 20 759 74000

M Communications

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

CHAIRMAN’S STATEMENT

Tower is being revitalised. We have laid the foundations to achieve this by assembling a talented management team within the Company and bringing an experienced operator into our key Namibian licence. The benefits will follow, although I am aware that much of this progress may not yet be fully apparent in terms of outcomes.

In 2012 and to date in 2013 we achieved the following:

  • Increased our share of the highly prospective Namibian Licence 0010 from 15% to 30%, increasing our net risked recoverable resources to 540 million barrels of oil equivalent (“mmboe”) at an immediate cash cost of $5.3 million
  • Successfully raised $18.6 million through the issue of new shares including to new institutional investors
  • Supported the successful farm-out of 44% of the Namibian Licence 0010 to Repsol, a successful and experienced international explorer and which has become the Licence operator
  • Secured the Namibian government’s agreement to these changes and a one year extension of the licence
  • Commenced planning for the Welwitschia-1 well to be drilled in early-mid 2014
  • Entered into a £20 million Equity Finance Facility with Darwin Strategic Limited and an £8 million SEDA through Yorkville.
  • Recruited Graeme Thomson as CEO and Philip Swatman as Senior Non-Executive Director
  • Recently strengthened the experienced management team, with Nigel Quinton now working as Vice President New Ventures and Andrew Matharu having joined as Vice President Corporate Affairs
  • Drilled Mvule-1 exploration well in Uganda at a cost of $8.6 million: plugged and abandoned with licence relinquished in March 2012
Namibia

We are very pleased to have achieved completion of the transactions noted above and especially with a partner of the calibre of Repsol. Their involvement provides strong further external validation of the positive view of the structures on the licence that we, our partner Arcadia and our independent consultants all share.

We have also made considerable progress on planning the first well on the Delta structure, Welwitschia-1, which we expect to drill in early-mid 2014. As previously announced, we have also kindly been offered the opportunity to use the Rowan Renaissance, a rig on long-term charter to Repsol, which will be en route through Namibia in early 2014, in the event no better options can be found. We continue to refine the best possible economic and technical solution for the Welwitschia-1 well. For the time being, I can confirm that the well is currently planned to reach a target depth of at least 3,000m, and to intersect and test the five identified target reservoirs and possibly go further. The 2011 CPR from Oilfield International estimated that those targets could contain gross unrisked recoverable resources of over 9.2 billion bbls and 14.5 tcf of gas; they assigned net risked recoverable resources of 458 million boe to Tower’s attributable 30% share. By any standard this Licence and this well have the potential to transform Tower’s fortunes.

Apart from our own progress, we are also pleased to see that HRT has begun drilling offshore Namibia and we look forward to the results of their programme of three exploration wells. They have farmed out part of their interest to Galp, also a big and successful international company. I would like to remind our shareholders that just as Chariot’s negative results last year did not have any substantial implications for our blocks, a positive result for HRT is also no guarantee of a positive result for us (or vice versa). If the HRT results have any clear implications for our own blocks that we can identify, then we will advise the market as soon as we can.

Uganda

In Uganda, we drilled the Mvule-1 well at a cost of $8.6 million but it was not successful. We subsequently relinquished Block EA5 in March 2012, as discussed in last year’s annual report. We have closed down our operations in that licence area and completed site restoration to the satisfaction of the Ugandan authorities, with our bond being released in March 2013. We have maintained a commercial presence in Uganda, and look forward to the next licensing round which we hope will take place in 2013. We have made a considerable investment in Uganda, and learned a great deal from our work on EA5, which we would like to put to good use in Uganda and perhaps elsewhere in East Africa in the future.

Western Sahara

In Western Sahara, we await the next stage in the political process, but we believe that there is a growing acknowledgement within the United Nations that the present undetermined status of the SADR is neither desirable nor sustainable in the face of a growing terrorist presence in West Africa. We are therefore cautiously optimistic that some progress will be made in the foreseeable future.

New CEO and New Ventures

Graeme Thomson was appointed as CEO in June 2012. He has settled into the Company and brought us the benefit of both his experience and his considerable network of personal contacts to strengthen the team, including the recent recruitment of Nigel Quinton and Andrew Matharu. He has also been helping us to originate new ventures. Philip Swatman joined us in April 2012 as Senior Non-Executive Director..

In addition to effecting the changes in Licence 0010 and planning for the first well, we have been looking at a large number of opportunities and whittling them down to the ones that we consider in the same order of attractiveness as our current portfolio. It is in the nature of this type of activity that there is little we can say until transactions are actually concluded, but I would like to reassure my fellow shareholders that work is underway and we are looking hard but with a keen eye to value creation and widening the portfolio of upside opportunities for Tower.

Financial developments

The Group’s loss for the year ended 31 December 2012 was $11.7 million, of which $8.6 million comprised the Mvule-1 well. This represented a reduction of $18.9 million compared to the loss of $30.6 million incurred in 2011. Cash balances at 31 December 2012 amounted to $10.1 million, including $5.6 million of restricted cash.

Our decision to increase our share of the Namibian License 0010 to 30% means that our interest is no longer carried, and therefore we will have to cover our pro rata share of expenses – indeed, of the restricted cash that we held at 31 December 2012, $5.3 million was set aside for this purpose. The budget for the Welwitschia-1 well is not yet finalised, but it is important to stress that the largest part of that cost will not need to be financed until much closer to the time of drilling. Our expectation is that our additional cash requirement for the calendar year 2013 is actually quite modest in the absence of other new ventures or a farmout.

As most shareholders will be aware, in addition to our cash on hand today of $3.5 million, the Company also has a £20 million standby equity finance facility available from Darwin Strategic, as well as an £8 million SEDA from Yorkville, if required.

Future strategy

Our aim as a Company remains to identify high-impact exploration opportunities and secure and exploit them for our shareholders before their value is fully realised in the wider market. As I wrote last year, this will not change. I will take this opportunity to remind shareholders that our focus to date has been in sub-Saharan Africa, and while we will not rule out other areas if a superb opportunity warrants, we also believe that there are excellent opportunities in Africa, both West and East.

The Board and I would like to thank all of our shareholders for their support and patience. As the largest shareholder in the Company, with 11.4% of the issued share capital, I am determined that we will continue to rejuvenate Tower, that we will be successful, and, I hope that all of us will thereby be richly rewarded.

Jeremy Asher
Non-Executive Chairman

-ends-

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