TIDMTRP
RNS Number : 8468H
Tower Resources PLC
19 March 2015
Tower Resources plc
Corporate Update
19 March 2015
Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN)),
the AIM-listed Africa-focussed oil and gas exploration company,
provides the following corporate update with respect to activity
across its portfolio and strategy.
Chairman's Statement
We are taking steps to adjust to the current adverse oil sector
market conditions. We believe that underlying market conditions
will improve over the next couple of years, and sentiment will
follow; the question is how best to position our company for this
environment, not merely to manage through it but also to take
advantage of the opportunities it creates.
Tower has a good portfolio of license interests in hand and in
our pipeline, in several promising areas. Our strategy is as
follows:
-- To maintain and even expand our license portfolio while
minimising forward commitments and costs
-- To seek opportunities through asset or corporate transactions
in order to optimize the portfolio and further reduce overall
costs
-- To farm-out where appropriate some of the costs of those commitments that cannot be deferred
Our portfolio now has limited financial exposure with no
drilling commitments. Our discretionary work programs have been cut
and focused onto work related to farming out when conditions are
favorable or on post-well analysis. Group costs are adjusting
accordingly. Our current cash balance remains in excess of US$4
million even after paying in full for the Kenya well.
The Board fully recognises the current adverse sentiment towards
the sector and to exploration in particular. We are fully aligned
with other shareholders, most of us having personally made large
cash investments in the Company. The pre-drill potential of the
high-risk prospects drilled in Namibia in 2014 and Kenya in 2015
were validated in both cases by the entry into those blocks of
large, well-respected and successful international companies with
strong exploration track records, and offered enormous potential
upside to shareholders. They were not successful, but we are
reviewing the implications of these results for those blocks, where
untested targets still remain. With the current devaluation of
exploration assets in the market, we are all suffering substantial
losses and discounts to asset values. However, we also know that
exploration is a long-term activity and rarely lacks painful
moments. We will continue to work our way through this downturn to
achieve success.
We have been through cycles before, and we are confident that
the sector sentiment will change in due course. This is a time of
especially rapid change and volatility, which we think has, led to
a short-term undervaluation of exploration assets. We are very
alive to the opportunities for consolidation, as well as the
attractiveness of building a wider low-cost, low-commitment,
high-impact exploration portfolio at this time. Our team has
already proved its deal-making abilities and I believe these will
allow our company to deliver a better outcome for shareholders
looking forward.
We set out below an update on our activities in advance of
annual results, which we expect to publish in early May.
Jeremy Asher
Chairman
Portfolio Activity
Kenya Block-2B, Non-operated 15% interest
On 23 February, Tower announced the result of the Badada-1 well,
onshore Block-2B, Kenya, which has now been plugged and abandoned
following the completion of logging operations. The Operator, Lion
Petroleum Inc. ("Lion" 30%), is in discussions with the Kenyan
Ministry of Energy as how best to complete its evaluation of the
remaining prospectivity of Block-2B.
Badada-1 was the first well to target Tertiary rather than
Cretaceous age source and reservoirs within the Anza Basin. We were
encouraged that the overall geological model was confirmed by the
results of the well. There is a great deal of analysis to be
performed on samples and data obtained. The information obtained
from Badada-1 should enable us to make better predictions of seal
and source for any future drilling, thus reducing prospect specific
risks.
The well took a total of 51 days to drill compared to the
Operators initial estimate of 70 days and a small net saving on the
budgeted US$25.8 million gross well cost (net US$3.8 million) is
expected.
Financial commitments are fully met and we do not anticipate
significant additional expenditure this year. Any future drilling
is likely to require a farm-out.
On 12 December 2014 Tower announced the granting of injunctive
relief in relation to the injunction served on 17 November 2014
against Lion, its ultimate parent Taipan Resources Inc., Premier
Oil plc, the County Government of Wajir, the Ministry of Energy and
Petroleum, the Attorney General and the National Land Commission.
This permitted the drilling of the Badada-1 well. A further hearing
is expected shortly and the named parties believe the claims have
no merit.
Zambia- Operated, 80% interest
Since becoming Operator of Blocks 40 and 41, as part of the
acquisition of Rift Petroleum Limited ("Rift") in April 2014, the
Company has successfully completed all of its Initial Period
commitments in this frontier basin.
During August 2014, Tower completed an extensive programme of
geological fieldwork in Blocks 40 and 41 of the Zambezi basin, as
part of the Initial Period work programme. The fieldwork comprised
the evaluation of geophysical data, geochemical analysis and rock
sampling to assess the potential for source rock generation and
reservoir presence. The final results from this geological
fieldwork will be submitted to the Zambian Ministry of Mines and
Energy in the coming weeks. Initial results from this fieldwork are
encouraging and indicate that the elements for a working petroleum
system are present.
The three-year Second Period has been split into three one-year
periods. These would progressively involve further field work,
minor gravity data acquisition and interpretation and then
potentially a 2D seismic programme. Tower will be looking for
partners to fund contingent airborne surveys and seismic
acquisition which are needed to define drilling locations in
2017/18.
Namibia PEL0010, Non-operated, 30% interest
Following resolution of our dispute with the operator, Repsol,
regarding final drilling costs of Welwitchia-1/1A, we continue to
evaluate the remaining potential in PEL0010. The Welwitschia-1/1A
well completed in June 2014 failed to reach the deeper Albian
Carbonate targets identified previously, which were assessed
originally to have multi-billion barrel potential. Our attention is
now focussed on a reassessment of this potential in the light of
the extra geophysical data obtained from the well during this
reassessment period, and also an optimal location for testing these
deeper targets.
We remain of the view that oil will be discovered in commercial
quantities offshore Namibia and we note plans announced by other
international companies for contingent drilling in late 2015/16/17.
There has also been considerable seismic acquisition in recent
months and ongoing in 2015. This remains a very underexplored and
potentially exciting province.
South Africa, Non-operated 50% interests
In South Africa we remain positive about the future potential of
the acreage we acquired last year through our acquisition of Rift
Petroleum. Concerns about the regulatory environment have been
lessened by the Government's decision to consult further with the
industry. Our acreage is surrounded by the majors (Exxon, Total,
Shell and Anadarko) and our commitments are low.
On the Algoa-Gamtoos Block, the processing and interpretation of
3D seismic data acquired in 2014 has continued, along with the
synthesis of additional data, which will more clearly define
prospectivity. The First Renewal Application to the Algoa-Gamtoos
Exploration Right has been submitted to the Petroleum Authority of
South Africa (PASA) and we expect this to be granted in H2 2015.
With technical studies hopefully demonstrating improved
prospectivity the Joint Venture hopes to be in a position to commit
to drill in 2016/17. Tower's preferred option is to farm-out part
of its interest in advance of that time.
Adjacent to the Algoa-Gamtoos Block 11B/12B of the Outeniqua
basin, Total spudded the deep-water Brulpadda-1 exploration well in
August 2014, in order to test the newly defined and highly rated
deep-water play in the basin. However, due to technical issues with
the rig the drilling of Brulpadda-1 was abandoned with a view to
returning to drill in 2016.
An application for the conversion of the SW Orange Basin TCP
into a three year Exploration Right has been submitted to PASA. A
formal response to the application is expected later in the
year.
Cameroon, 100% PSC application
Tower was selected as preferred bidder on the shallow-water
Disonni block, offshore Cameroon and negotiations regarding the
Production Sharing Contract (PSC) are now entering the final
stages. The block is located in the under-explored Rio Del Rey
Basin, which is an extension of the Niger Delta play systems, and
offers Tower access to potentially lower risk prospectivity
combined with material upside in deeper gas-condensate plays. On
signing of the PSC our priority will be the acquisition of 3D
seismic in H2 2015. A partner will be sought to share Tower's
financial commitment and provide additional technical input.
Saharawi Arab Democratic Republic (SADR), Non-operated 50%
interest
Through its subsidiary, Comet Petroleum Limited, Tower Resources
holds a 50% interest in the three blocks totalling over 77,000km(2)
spanning both the onshore and offshore in the Aaiun Basin. The
offshore Guelta and Imlili blocks and the Bojador onshore block are
operated by Hague and London Oil plc ("HALO" 50%).
Recent activity in the Aaiun Basin saw Kosmos Energy ("Kosmos"
55%) and partners (ONHYM 25%, Cairn Energy 20%) drill the CB-1
exploration well in the Morocco awarded offshore Cap Boujdour
block. The well encountered 14 metres of net gas and condensate pay
in clastic reservoirs over a gross hydrocarbon bearing interval of
approximately 500 metres. The discovery is non-commercial and the
well was plugged and abandoned, but it is nevertheless encouraging.
It is reported that Kosmos will analyse the results and integrate
with recently acquired 3D seismic data across the block with a
potential to drill a second well.
The significance of this well result, located some 50 kms North
of the Guelta Block and some 60 km west of the Imlili block, is
that a working petroleum system has been established thus
significantly de-risking plays along this part of the Atlantic
margin.
Ethiopia
Following an internal review of an application made by Rift
Petroleum (Ethiopia) Limited, a wholly-owned subsidiary of Tower
Resources, for Blocks AB3 and AB6, the Company has decided to
withdraw the application and have so informed the Ethiopian
Ministry Of Energy.
Equity Funding Facility ("EFF") Expires
On 26 March 2012 the Company announced that it had entered into
a GBP20 million EFF with Darwin Strategic Limited ("Darwin") with
the purpose of providing greater funding flexibility to Tower. The
initial term of the EFF was for a period of 36 months and will
expire on 23 March 2015. Tower has decided not to renew this
facility and has informed Darwin accordingly.
CEO comment
Graeme Thomson, CEO, commented "The aim of the Company has
always been to create high impact opportunities which allow
shareholders the opportunity to participate in material exploration
upside. Tower is one of the few AIM listed companies to have
generated, financed and then drilled two potentially high impact
wells in the last year. Whilst drilling results to date have not
delivered the success that we all would have hoped for, the high
reward potential of frontier exploration goes hand-in-hand with its
high risk nature. The Company will continue to create further
attractive opportunities in accordance with the strategy outlined
by the Chairman".
Contacts
Tower Resources plc
Graeme Thomson (CEO)
Andrew Matharu (VP - Corporate Affairs)
+44 20 7253 6639
Peel Hunt LLP (Nominated Adviser and Joint Broker)
Richard Crichton/Charles Batten
+44 20 7418 8900
GMP Securities Europe LLP (Joint Broker)
Rob Collins/Emily Morris
+44 20 7647 2800
Vigo Communications
Chris McMahon/ Peter Reilly
+44 20 7016 9572
This information is provided by RNS
The company news service from the London Stock Exchange
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