NEITHER THIS ANNOUNCEMENT NOR ANY PART OF IT CONSTITUTES AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE OR ACQUIRE ANY NEW ORDINARY SHARES IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL.

Tower Resources plc (“Tower” or the “Company”) (TRP.L,TRP:LN), the AIM listed Africa focused oil and gas exploration company, is pleased to announce:

  • a placing and subscription to a raise approximately £5.2 million ($8 million), after expenses, (the “Placing”) through the issue of new ordinary shares (“Ordinary Shares”);
  • the completion of negotiations for a 100% interest in the Thali PSC (as defined below and previously known as the “Dissoni Block”) located in a sub-basin of the prolific Niger Delta, offshore Cameroon; and
  • the pursuit of a new strategic regional initiative in Namibia, an underexplored and highly prospective region.

Highlights

  • Approximately £5.2 million ($8 million) net of expenses to be raised by way of a Placing with certain existing and new investors at a price of 0.19 pence per placing share:
    • Funding secures inter alia (i) the Company’s ability to enter into the Thali PSC and thereby entry to the highly prospective Thali Block, (ii) payment of anticipated costs associated with the initial stage of a new regional Namibian strategy which the Company has been developing in consultation with the Namibian government, and (iii) provides funds to deliver its current work commitments across the remainder of its portfolio
    • Introduction of M&G Investments (“M&G”) as a new strategic investor in the Company with an 18% shareholding in the enlarged share capital based on an investment of approximately £2.3 million ($3.55 million) in the Placing
    • Directors of the Company, staff, consultants and their connected persons have undertaken to subscribe for 491,000,000 Ordinary Shares, raising approximately £0.9 million ($1.4 million) in the Placing.
  • Imminent signing of a 100% interest in the shallow water Thali Block PSC in the Rio Del Rey Basin, a proven producing sub-basin of the petroliferous Niger Delta, offshore Cameroon
    • Production sharing contract (the “Thali PSC” or the “PSC”) now agreed with the Government of Cameroon and with signing anticipated imminently
    • The Thali Block includes existing oil and gas discoveries and contains a number of already identified exploration opportunities
    • A three year work programme is planned to unlock both the appraisal and exploration potential, including acquiring new 3D seismic in 2016 and a commitment to drill a well in 2017/18
    • Entry into Cameroon marks a strategic shift, introducing an asset within a proven producing basin to Tower’s portfolio.
  • Tower are currently negotiating new acreage positions offshore Namibia, with the aim of providing economies of scale and lower risk in future exploration, full details of which will be announced in due course:
    • Namibia remains, in the Company’s view, a highly prospective area with only 15 exploration wells along a 1,600km section of the Atlantic Margin, with proven source, reservoir and seal
    • HRT’s Wingat #1 well, drilled in 2013, was the first Namibian well to recover oil to surface and has demonstrated the presence of a working petroleum system
    • Interest in the area remains high with wells planned by Shell and OMV/Murphy in 2016/17, and with Chariot and Tullow also likely to drill within a similar timeframe.
  • The Placing also provides funding to progress Blocks 40 and 41 in Zambia, which cover in the region of 6,000 km² of the western part of the unexplored Mid-Zambesi basin:
    • Initial fieldwork has demonstrated the existence of excellent mature source rocks for gas, and the potential for oil
    • Tower will undertake further fieldwork later in 2015 to better understand the Blocks’ potential prior to any commitment to airborne gravity and magnetic surveys in 2016 and 3D seismic in 2017
    • A farm-out process has been initiated to accelerate the Company’s work programme
    • Tower’s commitments remain low and the Company retains the ability to exit the Blocks at any time with no contingent liability.

Graeme Thomson, Chief Executive Officer of Tower Resources, said:

“The Placing secures Tower’s entry into the Thali Block offshore Cameroon and provides the financial strength to commence our work programme on this Block and across Tower’s wider portfolio. I am extremely pleased with the support that this oversubscribed Placing has received from existing and new institutional investors and from the Directors, staff, consultants and others connected persons of the Company. We are particularly pleased to welcome M&G as an 18% shareholder, endorsing management’s strategy and working together to achieve our shared ambitions, most notably in relation to Namibia and Cameroon.

Our entry into the Thali Block is a shift in our risk profile from frontier to proven basins, which has been over eighteen months in the making. Located in the Rio Del Rey Basin, a sub-basin of the highly petroliferous Niger Delta, the Thali Block provides Tower with lower risk appraisal and exploration potential in this shallow water proven-producing region while maintaining significant upside potential for the Company and its investors both there and in frontier areas.

We continue to see value and opportunities in Namibia and we are in discussions for new acreage positions which, if successful, will provide low cost exposure to assets with significant exploration potential.

Both of these initiatives reflect a move in Tower’s strategy towards lower cost exposure, technical de-risking of the plays and the intention to farm-out higher cost exposures to larger companies.

Finally, we have made excellent progress in Zambia, and completed our initial work programme on time and on budget. The results to date are encouraging, demonstrating the potential for both oil and gas plays on our Blocks 40 and 41. In South Africa, we hope to see a restart of drilling activity by the industry when the proposed legislative framework is clear, but in the meantime our work commitments in this highly prospective area are minimal.

These are exciting times for Tower. The Board look forward with increasing confidence to being able to deliver its strategy with sustained cost-effective activity across a focussed portfolio.”

Contacts
Tower Resources

Graeme Thomson (CEO)
Andrew Matharu (VP – Corporate Affairs)
+44 20 7253 6639

Peel Hunt LLP (Nominated Adviser and Joint Broker)

Richard Crichton/Ross Allister/ Chris Burrows
+44 20 7418 8900

GMP Securities Europe LLP (Joint Broker)

Rob Collins/Emily Morris
+44 20 7647 2800

Vigo Communications

Chris McMahon/Alex Aleksandrov
+44 20 7016 9572

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Note regarding forward-looking statements:

This announcement contains certain forward looking statements relating to the Company’s future prospects, developments and business strategies. Forward looking statements are identified by their use of terms and phrases such as “targets” “estimates”, “envisages”, “believes”, “expects”, “aims”, “intends”, “plans”, “will”, “may”, “anticipates”, “would”, “could” or similar expressions or the negative of those, variations or comparable expressions, including references to assumptions.

The forward looking statements in this announcement are based on current expectations and are subject to risks and uncertainties which could cause actual results to differ materially from those expressed or implied by those statements. These forward looking statements relate only to the position as at the date of this announcement. Neither the Directors nor the Company undertake any obligation to update forward looking statements, other than as required by the AIM Rules for Companies or by the rules of any other applicable securities regulatory authority, whether as a result of the information, future events or otherwise. You are advised to read this announcement and the information incorporated by reference herein, in its entirety. The events described in the forward-looking statements made in this announcement may not occur.

Neither the content of the Company’s website (or any other website) nor any website accessible by hyperlinks on the Company’s website (or any other website) is incorporated in, or forms part of, this announcement.

Any person receiving this announcement is advised to exercise caution in relation to the Placing. If in any doubt about any of the contents of this announcement, independent professional advice should be obtained.

This summary should be read in conjunction with the full text of the announcement which follows.

Background to and reasons for the Placing

The last year has been a challenging one for all industry participants. A combination of a falling oil price and a broad lack of industry drilling success has led to an unfavourable environment for exploration companies. Despite this, Tower’s strategy to maintain and to develop a high-impact exploration portfolio while minimising its forward commitments and costs has continued. The Company has also, for more than a year, sought to extend that strategy in response to changing market conditions by seeking lower risk exploration and appraisal opportunities. The initiatives announced today form part of the execution of that strategy and the entry into the Thali Block in Cameroon, in particular, adds proven basin exposure to complement and balance Tower’s frontier activities. Whilst we expect market conditions to remain difficult for the sector, the Placing allows the Company to continue to progress and develop its portfolio and will ensure that when markets recover, Tower is well placed to benefit.

The Placing

The Company has conditionally placed 2,904,989,747 Ordinary Shares in the capital of the Company (the “Placing Shares”) at a price of 0.19 pence per share to raise net proceeds of approximately £5.2million (US$8 million) net of estimated fees and costs of £0.3 million ($0.5 million), by means of a placing and subscription with institutional and other investors by Peel Hunt LLP and GMP Securities Europe LLP acting as joint bookrunners. Application has been made for the Placing Shares to be admitted to trading on AIM. It is expected that Admission of the Placing Shares will become effective and that dealings will commence in the Placing Shares by 8.00 a.m. on 20 July 2015.

Following admission of the Placing Shares, the Company’s enlarged issued share capital will comprise 6,735,155,777 ordinary shares of 0.1 pence 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.

Use of Proceeds

The Placing is expected to raise net proceeds of approximately approximately £5.2 million (US$8 million) and the expected application of funds raised in the Placing, after expenses is summarised as follows:

US$m
Cameroon 5.4
Namibia 2.7
Zambia 0.6
Other licences 0.5
Corporate 0.6
Less: current cash balance 1.8
TOTAL PLACING (net of estimated fees and costs): 8.0

Cameroon

Tower was selected as the preferred bidder for the Thali Block, offshore Cameroon, in September 2013. Thali covers an area of 119km² and lies in the prolific Rio del Rey basin, in the eastern part of the Niger Delta. The Thali PSC has been negotiated and Tower expects to be formally awarded a 100% interest in the Block imminently. Thali represents a low cost entry into a mature region with low-risk, moderate volume targets and the potential for significant exploration upside.

The Rio del Rey basin has, to date, produced over one billion barrels and has remaining reserves estimated at 1,200 million boe, primarily from shallow producing sands at depths of less than 2,000 metres. Rio Del Rey is a sub-basin of the prolific Niger Delta, an area in which over 34.5 billion barrels of oil has been discovered, with 2.5 billion boe attributed to the Cameroon section.

The Thali Block has the potential for up to four distinct play systems, including the established play in which three discovery wells, two gas (Rumpi-1, Njonji-2) and one oil (Njonji-1), have already been drilled on the Block. These are currently viewed as sub-commercial, but with better quality seismic Tower sees potential to add incremental oil reserves to achieve commerciality. There is also significant potential to develop prospects at deeper levels, in both structural and stratigraphic traps, once better imaging has been achieved.

The existence of infrastructure in adjacent blocks means that the development of a 20 million barrel field has the potential to be economically viable at current oil prices. There are 7 million barrels already discovered on the Block.

On signing of the Thali PSC, the Company’s priority will be the acquisition of 3D seismic in early 2016. The seismic will be used to update the existing 24 year old data set and allow better resolution of shallow plays alongside imaging of deeper sections. The initial exploration period is for three years, and Tower expects to be drilling in 2017/18. The market downturn in the services sector presents the opportunity for the Company to leverage lower seismic and drilling costs and a partner will be sought to share Tower’s financial commitment and provide additional technical input.

Namibia

Tower’s strategy for Namibia has been developed in conjunction with M&G’s Oil and Gas team. We are both convinced that Namibia will become a significant oil and gas province in the future and intend to play a key role in that. Tower is currently negotiating substantial new operated acreage positions offshore Namibia and these will be announced once they have been secured.

Tower currently retains a 30% interest in Repsol-operated licence PEL10, located in the Walvis Basin, offshore Namibia. The licence was originally awarded 100% to Tower’s subsidiary Neptune Petroleum (Namibia) Limited in 2005. As previously reported, the Welwitschia-1A well was completed in the third quarter of 2014 but did not reach the deeper objectives. The current exploration period on PEL10 extends to 22 August 2015 and all current licence obligations have been met. The next period would require a well to be drilled and Tower does not consider that to be justified currently. This area forms part of the negotiations referenced above.

Tower and many other companies believe that Namibia remains under-explored, with significant potential for major discoveries. The Wingat #1 well drilled by HRT in 2013 recovered the first oil to surface and has demonstrated the existence of a working petroleum system in the North, in addition to the system already demonstrated by the Kudu discovery in the South.

Further, the Company notes plans announced by other international companies for drilling in 2016 and 2017. Interest in the area remains high with wells planned by Shell and OMV/Murphy in 2016/17 with Chariot and Tullow also likely to drill within a similar timeframe, and there has been considerable seismic acquisition in late 2014 and into 2015.

Zambia

Tower became operator of and acquired an 80% interest in Blocks 40 and 41, covering an area of 6,526km² onshore Zambia within the Zambesi basin, in April 2014. During August 2014, Tower completed an extensive programme of geological fieldwork in Blocks 40 and 41, as part of the initial period work programme. Since that time, the Company has successfully completed all of its initial period commitments in this frontier basin and is well positioned for the next exploration period.

The results from this fieldwork are encouraging and indicate that elements for a working petroleum system are present with the potential for both oil and gas generation. Given the excellent surrounding infrastructure and constrained domestic energy market, Tower believes that there is a significant gas to power opportunity in the area, with the Blocks well positioned relative to existing infrastructure.

The three-year secondary period has been split into three one year periods with respective commitments to further field work (being funded from the Placing), airborne gravity and magnetic data acquisition and interpretation, and a 2D seismic programme. The acreage can be relinquished at the end of each annual decision point if results are discouraging, so commitments are light and proportionate to prospectivity. Tower is actively looking for partners to accelerate the programme so that prospects could be drilled in 2017/18.

About M&G

M&G has invested approximately £2.3 million ($3.55 million) in the Placing and will be an 18% shareholder in the Company.

M&G is an international active asset manager, investing on behalf of individuals and institutions for over 80 years. At 31 March 2015 the firm managed over £269 billion of assets through a wide range of investment strategies across equities, bonds, property and multi asset.

Headquartered in London, M&G employs over 1,800 people worldwide operating from offices across Europe and Asia.

M&G’s history is a story of investment firsts, from the UK’s first mutual fund in 1931 to the Inflation Linked Corporate Bond Fund in 2010. M&G is the investment arm of Prudential plc in the UK and Europe.

Directors Participation

The Directors of the Company have agreed to subscribe, in aggregate, for 371,500,000 Ordinary Shares under the Placing at a cost of approximately £0.7 million ($1.1 million).

  As at the date of this announcement Number of Placing Shares acquired pursuant to the Placing Immediately following Admission of the Placing Shares
  Number of Ordinary Shares % of issued share capital Number of Ordinary Shares Number of Ordinary Shares % of issued share capital
Jeremy Asher (1) 276,384,252 7.22 171,000,000 447,384,252 6.64
Peter Taylor 107,253,051 2.80 118,000,000 225,253,051 3.34
Peter Blakey 99,130,216 2.59 53,000,000 152,130,216 2.26
Graeme Thomson 10,000,000 0.26 26,500,000 36,500,000 0.54
Philip Swatman (2) 4,500,000 0.12 3,000,000 7,500,000 0.11

Note (1): These shares are held by Agile Energy Limited, which is owned by the Asher Family Trust of which Jeremy Asher is the lifetime beneficiary

(2): 2,000,000 of these shares are held by Raigersfield Capital Limited, a company controlled and 52% owned by Mr Swatman

The Remuneration Committee has, in conjunction with its advisers, determined that it is appropriate to issue options over 120 million shares at the Placing price, which will vest in equal portions on the anniversary of their grant for the next three years. This issue will be taken into consideration when the annual grants are reviewed at the end of 2015.

IMPORTANT NOTICE

This announcement does not constitute or form part of any offer or invitation to purchase, or otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security in the capital of the Company in any jurisdiction.

The information contained in this announcement is not to be released, published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States or to any US Person. This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or to any US Person. Securities may not be offered or sold in the United States absent: (i) registration under the Securities Act; or (ii) an available exemption from registration under the Securities Act. The securities mentioned herein have not been, and will not be, registered under the Securities Act and will not be offered to the public in the United States.

This announcement does not constitute an offer to buy or to subscribe for, or the solicitation of an offer to buy or subscribe for, Ordinary Shares in the capital of the Company or any other security in any jurisdiction in which such offer or solicitation is unlawful. The securities mentioned herein have not been, and the Ordinary Shares will not be, qualified for sale under the laws of any of Canada, Australia, the Republic of South Africa or Japan and may not be offered or sold in Canada, Australia, the Republic of South Africa or Japan or to any national, resident or citizen of Canada, Australia, the Republic of South Africa or Japan. Neither this announcement nor any copy of it may be sent to or taken into the United States, Canada, Australia, the Republic of South Africa or Japan. In addition, the securities to which this announcement relates must not be marketed into any jurisdiction where to do so would be unlawful.

This announcement has been issued by and is the sole responsibility of the Company.

Peel Hunt LLP is authorised and regulated in the UK by the Financial Conduct Authority and is advising the Company and no one else in connection with the Placing (whether or not a recipient of this announcement). Peel Hunt will not be responsible to any person other than the Company for providing the regulatory and legal protections afforded to customers of Peel Hunt nor for providing advice in relation to the contents of this announcement or any matter, transaction or arrangement referred to in it. The responsibilities of Peel Hunt, as nominated adviser under the AIM Rules for Nominated Advisers, are owed solely to London Stock Exchange and are not owed to the Company or to any Director or Shareholder or to any other person in respect of their decision to acquire Ordinary Shares in reliance on any part of this announcement.

GMP Securities Europe LLP (“GMP”) is authorised and regulated in the UK by the Financial Conduct Authority and is advising the Company and no one else in connection with the Placing (whether or not a recipient of this announcement). GMP will not be responsible to any person other than the Company for providing the regulatory and legal protections afforded to customers of GMP nor for providing advice in relation to the contents of this announcement or any matter, transaction or arrangement referred to in it.