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AIM-listed Tower Resources (LSE:TRP) saw its shares tumbled down 24.5% from its previous value at 2:00 PM, London Time, after a report that no oil was found in its Ugandan asset.
Why has this occurred?
The Mvule-1 well, the last of the three wells under the company’s 100% interest in the EA5 licence was drilled to a depth of 590 metres, with no significant hydrocarbon encountered.
The well, which was spudded on 12th February, hoped to provide an estimated 80 million barrels of resource potential, but proved to be water bearing following electric wireline logging and fluid sampling.
Tower Resources’ wholly-owned subsidiary Neptune Petroleum (Uganda) Limited is now tasked to complete the site restoration in compliance with government regulations, with the project abandoned ahead of its exploration period, which was scheduled to end on the 26th March.
“It is a great disappointment that the final commitment well in EA5 was unsuccessful, for the Tower Board, Tower’s shareholders, the committed staff of Neptune Uganda and the people of West Nile who have been so supportive over the past six years,” said Peter Kingston, Chief Executive of Tower Resources.
Diversion of Funds and Focus
Following the failure to find oil, Tower Resources will concentrate in Namibia, where it holds a 15% working interest in a 12,000 km2 licence operated by Arcadia.
The 0010 Licence is comprised of three large structures, the Delta of which is thought of to contain about 9.25 billion barrels of gross unrisked recoverable resources.
“We are now ready to focus on our highly attractive position in Namibia, despite this frustrating outcome in Uganda,” according to Chairman Jeremy Asher.
The Chairman said the company is financially covered to move forward from the unfavourable outcome.
The £5.41 million it raised on the 9th February will now reinvested into the exploration in Namibia, which is expected to commence in 2013.
CEO Comments
Highlighting the support of all the stakeholders in the Uganda undertaking, CEO Kingston still remains optimistic, saying:
“While I believe that the largest structures have now been tested, I also believe that the generation of oil has been established and there remains potential for oil discoveries in West Nile sometime in the future. The Tower Board will continue to review future opportunities in the region.”
Company Spotlight
Tower Resources engages in what it considers a “high risk high reward strategy” of early stages oil exploration in the hope to secure investment value for shareholders in the event of successful discovery.
References
↑ Uganda – Mvule-1 Exploration Well spud
↑ Tower Resources Press Release on Uganda Exploration
↑ Namibia Project
↑ Tower Resources Company Strategy
