Final Results
Press Release
Tower Resources plc
Final Results for the 12 months ended 31 December 2009
Tower Resources plc ("Tower" or "the Company"), the AIM-listed oil and gas exploration company, today announces its final results for the year ended 31 December 2009.
Highlights:
Uganda
· Prospectivity of EA5 has been enhanced after full evaluation of two wells drilled to date
· Generation and migration of oil has been confirmed
· Programme of geophysical operations approved for the next twelve months
Namibia
· 3-D seismic survey due to begin shortly
· Huge potential confirmed by seismic interpretation carried out in 2009
· Independent Technical Review to be completed soon
Commenting on the results, Peter Kingston, Executive Chairman of Tower said:
"The results of the two Uganda wells, although not establishing a commercial oil accumulation, have given greatly increased insights into the potential of the EA5 Licence. Near mature oil, very similar to oil encountered in all other areas of the Albertine Graben, has now been encountered in widespread surface samples and both wells. A significant interval of potential source rock has been encountered in Avivi-1. Combined pressure data from the two wells has increased the likelihood that Iti-1 contains an oil accumulation in low quality reservoir sands. Progress in Namibia is slower than expected but huge potential has been confirmed. The Tower Board remains very upbeat about the prospects for the Company."
For more information on Tower Resources, please visit; www.towerresources.co.uk
Contacts:
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Tower Resources plc |
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Peter Kingston |
0780 2804852 |
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Astaire Securities (NOMAD and Joint Broker) |
020 7448 4400 |
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Jerry Keen (Broking) Gavin Burnell / Shane Gallwey (NOMAD) |
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Westhouse Securities (Joint Broker) |
020 7601 6100 |
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Tim Feather |
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Walbrook PR |
020 7933 8780 |
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Paul McManus / Leah Kramer |
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CHAIRMAN'S STATEMENT
Dear Shareholder
We have gained new insights into our large licences in Uganda and Namibia as a result of further operations and evaluations carried out during the reporting period. These insights keep us optimistic about the prospects for both areas as your company moves ahead with new plans in Uganda and as the drilling of a first well in Namibia gets closer. There is still every expectation that shareholders will see their investment increase significantly in value in the next two years.
The Company's first Uganda well was drilled in 2009 without any obvious success and a second well has been completed since year end. The information gained from these two wells has confirmed the presence of oil and probable source rocks over a wide area in the EA5 Licence, despite not yet achieving a commercial discovery. The challenge ahead, during the Third Exploration Period, is to determine a drilling prospect where oil has migrated into a structure having better reservoir properties.
Progress in Namibia is behind schedule because the 3-D seismic survey, which was planned for the first quarter of 2010, has been delayed due to problems experienced by the seismic contractor in its operational commitments prior to those in Namibia. Nevertheless, the additional seismic interpretation work undertaken by the operator during 2009 has added weight to earlier studies which predicted multi billion barrel reserve potential in Licence 0010. The focus for the 3-D seismic has changed as a consequence of this work and the Delta prospect, which has recoverable reserve potential of three billion barrels equivalent, is now the most attractive prospect for a first well. Our independent consultant's work is close to completion and is broadly supportive of the operator's interpretation.
The immediate future will see an aero gravity gradiometry survey over the Uganda EA5 Licence, which will provide an excellent data set with which to plan a 2-D seismic programme approaching 500 kilometres in total. The aero survey will be funded by Tower but the seismic programme will require funding from one or more third parties. The "farm out" process is already underway. The aim is to be ready to drill a third well - the commitment well as designated in the Production Sharing Agreement - as early as possible in 2011. This allows time for a follow up well programme if required.
I would also like to pay a special tribute to the Ugandan organisation which comprises almost exclusively Ugandan nationals. The Neptune employees have very effectively supported operations while maintaining excellent relationships with government authorities and the local West Nile people. I am happy that your Company's reputation is safe in their hands.
Financial Highlights
The Company's Operating Loss for the reporting period from 1 January 2009 to 31 December 2009 was $1,045,779. Capital expenditure on exploration studies, drilling operations, and licence management costs and fees amounted to $10,054,272 of which $7,007,192 was contributed by farm-in partners. Cash balances at the year end totaled $8,581,474 although significant amounts were subsequently required in the first quarter of 2010 to meet the cost of drilling operations.
The Company has sufficient capital to fund its activities until the end of 2010 and expects that new funds can be introduced if necessary to meet commitments during 2011. Tower is not obliged to make any contribution towards the Namibia Licence commitments over the next 12 months and is considering options to fund future exploration plans in Uganda during 2010. Global Petroleum Limited has funded most of the cost of the first Uganda well and 25% of the cost of the second well drilled in February 2010. It is still considering whether it wishes to participate as a 25% Licence interest holder in future activities. A programme to attract a future funding partner to meet the costs of planned seismic and well operations is underway and the Board is confident that funding can be achieved in good time.
Operations Summary to end 2009
Uganda
On 15th June 2009, Tower Resources reported that the Iti-1 well had been abandoned as uncommercial but a full re-evaluation of well and Licence data would be undertaken before choosing a second well location.
The results of the re-evaluation studies supported a more positive conclusion of the well results, indicating significant potential for oil to be present within a 35 metre gross reservoir sequence directly above basement. Independent analyses confirmed the presence of clean reservoir sands, with good porosities but low permeabilities, in the interval just above basement between 540 metres and 575 metres ("the basal reservoir"). Palynology analyses pointed to the predominance of alluvial fan deposits which are thought to be analogous to the basin margin edge discoveries elsewhere in the Albertine Graben. This result is consistent with basin modelling studies.
Detailed inspection of wireline pressure data, after undertaking quality control of the raw data and re-evaluation of wireline logs, indicated that the basal reservoir could be oil bearing. Fluid samples taken by a wireline formation fluid sampler produced what had initially appeared to be samples containing only water. Subsequent inspection of the sample chambers showed oil traces, and small quantities of oil were extracted from the rock samples. Analyses of these oil samples indicated that oil could be present above and within the basal reservoir although this could have been consistent with residual non-producible oil in the formations.
Detailed re-examination of seismic data, now calibrated by well data, resulted in the selection of a second well location, Avivi-1. The Iti and Sambia structures no longer seemed analogous to Jobi in EA1 but there was still scope for thick reservoir sands further to the east where the current River Nile has its hinterland. The Sambia structure was thought to be similar to Iti and, although still a possible future prospect, an alternative location was preferred for the second well. The Avivi structure was close to where the main sand fairway might be and on a potential migration path. This location was agreed with the Government of Uganda and detailed well planning began in October 2009. The well was completed after the year-end, and is discussed in more detail below.
Namibia
Interpretation of additional commercially available seismic data, covering each of the three main prospects has confirmed the potential for giant fields. Whereas the earlier focus had been on the most northerly structure, Alpha, integration with the new data identified Delta, a larger prospect than Alpha, having reserve potential, estimated by the Licence Operator, of about three billion bbls of oil equivalent, as the most likely to yield success. The latest interpretation has concluded, however, that there remains a risk in variability of reservoir quality and that a 3-D seismic programme over Delta, before choosing a well location, would be the wisest way forward. The Operator of the Licence, Arcadia Petroleum Limited, agreed this changed approach with the Government of Namibia. The Government have agreed that Arcadia and Tower can continue to the First Exploration Renewal Period but with a variation to the work commitment, replacing a commitment well with a minimum 1000 square kilometres of 3-D seismic. A contract has been signed with CGG Veritas to shoot 1580 sq kms of 3-D seismic and operations were originally expected to begin by the end of 2009 or early 2010.
Other Ventures
There remains no tangible progress in the resolution of political issues in West Sahara so no operational activity is expected in the foreseeable future. The Licence application in Tanzania has lapsed and there are no immediate plans to pursue any other new ventures given the scale of existing activity in Uganda and Namibia.
Since Year-end and Looking Forward
Uganda
The Avivi-1 well was drilled to a total depth of 764 metres but did not encounter oil despite persistent methane gas traces, and tested water from the target reservoir interval using a wireline fluid sampler. Electric logging confirmed the absence of oil and gas and the well was plugged and abandoned on Feb. 27th. Although the well failed to encounter hydrocarbons, the Tower Board has concluded that the information from the first two exploration wells on EA5 demonstrates that considerable exploration potential still exists in the Licence.
Avivi-1 encountered thick sequences of organic rich sediments, which are likely to represent good mature source rocks in the deeper areas of the basin. The thick clays should also provide very effective trap sealing properties. Wireline logs and water samples demonstrate that the Avivi structure is water bearing but mid-mature oil was entrained in the sampled water confirming that oil has been generated in the Licence and is currently migrating. The composition of this oil is similar to that of oil recovered from Iti-1 and surface oil samples. Pressure data from Avivi-1, when combined with pressure data from Iti-1, is consistent with a possible oil accumulation at Iti-1 in low permeability reservoir sand. The uncertainty related to generation and migration of oil in the Rhino Camp Basin has, therefore, been significantly de-risked. The lack of good quality reservoir at either well location increases the emphasis on identifying structures in the deepest area of the basin, where the chances of encountering better reservoir are improved. This can only be achieved by substantially increasing seismic coverage in the areas of greatest interest.
Formal grant for the renewal of the Exploration Area 5 (EA5) Licence has been received from the Minister of Energy and Mineral Development of the Government of Uganda. The Licence area, after relinquishment agreed with the Government, now amounts to 2941 square kilometres. The forward programme, which has been agreed with the Government of Uganda, comprises an aero gravity gradiometry survey over virtually all of the remaining Licence area.
This is an important first step in planning a seismic survey which could approach 500 kilometres, increasing total seismic coverage to nearly 800 kilometres. The seismic interpretation will provide the basis for selecting a third well location. The aero survey is due to begin within the next month and will be funded from available cash resources.
Namibia
The Namibian 3-D seismic survey is now scheduled to begin early in June 2010 but it is still expected that processing and interpretation can be completed early in 2011. There is presently no change to the estimated date for drilling the first exploration well during the favourable weather period of Q4 2011 and Q1 2012. There will likely be growing focus on the northern area of Namibia and the prospectivity of the 0010 Licence during 2010 and 2011. The independent consultants commissioned by Tower to review the technical and economic potential of Licence 0010 and the operator's reserve estimates are close to completing their work and, at first sight, they are confirming the broad conclusions of Licence potential.
The encouraging drilling results from the Falklands may have very little significance for Namibia however they do at least provide confirmation that source rocks laid down in the Atlantic so far south can generate oil as well as gas.
Corporate Outlook
Your Company has not yet achieved a commercial success from its operations to date, but the potential of both Licences appears to be as significant and promising as at any time. The coming year will see important progress in Uganda and Namibia, including considerable further data regarding our licences, even though no drilling is currently foreseen until the second quarter of 2011. The Tower Board remains optimistic about the future prospects with everything still to play for in Uganda and the "big one" in Namibia still to come.
Thank you for your continuing support.
Peter Kingston
Chairman
25th May 2010
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
Year ended Year ended
31 December 2009 31 December 2008
$ $
Continuing operations
Revenue - -
Cost of sales - -
Gross profit - -
Administrative expenses before charge
for share-based payments (750,033) (983,253)
Share-based payments (335,842) (311,378)
Total administrative expenses (1,085,875) (1,294,631)
Group operating loss (1,085,875) (1,294,631)
Finance income 40,096 50,823
________________________________________________________________________________________
Loss before taxation (1,045,779) (1,243,808)
Taxation - -
Loss for the period (1,045,779) (1,243,808)
Attributable to:
Equity holders of the Company (1,045,779) (1,243,808)
Loss per share (cents)
Basic (0.15) c (0.23) c
Diluted (0.15) c (0.23) c
The results shown above relate entirely to continuing operations.
GROUP & COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009
Share-based
Share Share Payments Retained Total
Capital Premium Reserve Losses Equity
$ $ $ $ $
Group
Balance at 1 January 2008 1,052,505 14,926,206 545,660 (2,435,240) 14,089,131
Share issues 104,443 1,519,042 - - 1,623,485
Issue costs - (54,684) - - (54,684)
Loss for 2008 - - 311,378 (1,243,808) (932,430)
_______________________________________________________________________________________
Balance at 1 January 2009 1,156,948 16,390,564 857,038 (3,679,048) 14,725,502
Share issues 701,563 13,222,463 - - 13,924,026
Issue costs - (583,467) - - (583,467)
Loss for 2009 - - 335,842 (1,045,779) (709,937)
_______________________________________________________________________________________
Balance at 31 December 2009 1,858,511 29,029,560 1,192,880 (4,724,827) 27,356,124
_______________________________________________________________________________________
Company
Balance at 1 January 2008 1,052,505 14,926,206 545,660 (1,452,978) 15,071,393
Share issues 104,443 1,519,042 - - 1,623,485
Issue costs - (54,684) - - (54,684)
Loss for 2008 - - 311,378 (839,629) (528,251)
_______________________________________________________________________________________
Balance at 1 January 2009 1,156,948 16,390,564 857,038 (2,292,607) 16,111,943
Share issues 701,563 13,222,463 - - 13,924,026
Issue costs - (583,467) - - (583,467)
Loss for 2009 - - 335,842 (526,216) (190,374)
_______________________________________________________________________________________
Balance at 31 December 2009 1,858,511 29,029,560 1,192,880 (2,818,823) 29,262,128
_______________________________________________________________________________________
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2009
31 December 2009 31 December 2008
$ $
ASSETS
Non-Current Assets
Plant and equipment 142,189 154,491
Goodwill 8,023,292 8,023,292
Intangible exploration and evaluation assets 10,164,069 7,116,989
18,329,550 15,294,772
Current Assets
Trade and other receivables 1,023,737 418,794
Cash and cash equivalents 8,581,474 727,028
9,605,211 1,145,822
Total Assets 27,934,761 16,440,594
LIABILITIES
Current Liabilities
Trade and other payables (578,637) (1,715,092)
Total Liabilities (578,637) (1,715,092)
Net Assets 27,356,124 14,725,502
EQUITY
Capital and Reserves
Share capital 1,858,511 1,156,948
Share premium 29,029,560 16,390,564
Share-based payments reserve 1,192,880 857,038
Retained losses (4,724,827) (3,679,048)
Shareholders' Funds 27,356,124 14,725,502
The financial statements were approved by the Board of Directors on 25th May 2010 and signed on its behalf by:
Peter Kingston
Chairman
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
Year ended Year ended
31 December 2009 31 December 2008
$ $
Cash flow from operating activities
Group operating loss for the year (1,085,874) (1,294,631)
Adjustments for items not requiring an outlay of funds:
Depreciation of plant and equipment 33,519 34,753
Share-based payments charge 335,842 311,378
Operating loss before changes in working capital (716,513) (948,500)
Decrease/(increase) in receivables and prepayments (736,487) 1,827,765
(Decrease)/increase in trade and other payables (1,136,454) (1,650,039)
Cash used in operations (2,589,454) (770,774)
Interest received 40,096 50,824
Net cash used in operating activities (2,549,358) (719,950)
Investing activities
Funds used in exploration and evaluation (3,047,080) (6,355,257)
Repayment of equipment deposit 131,541 874,831
Acquisition of subsidiary undertaking - (93,935)
Payments to purchase plant and equipment (21,216) (82,277)
Net cash from/(used in) investing activities (2,936,755) (5,656,638)
Financing activities
Cash proceeds from issue of shares 13,924,026 1,623,485
Share issue costs (583,467) (54,684)
Net cash from financing activities 13,340,559 1,568,801
Increase in cash and cash equivalents 7,854,446 (4,807,787)
Cash and cash equivalents at beginning of period 727,028 5,534,815
Cash and cash equivalents at end of period 8,581,474 727,028
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2009
1. Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated below.
1.1 Basis of preparation
The financial statements are prepared on a going concern basis, under the historical cost convention and in accordance with International Financial Reporting Standards, as adopted by the European Union ("IFRS"), including IFRS6 'Exploration for and Evaluation of Mineral Resources' and in accordance with the Companies Act 2006. The Parent Company's financial statements have also been prepared in accordance with IFRS and the Companies Act 2006.
1.2 Going concern
During the year ended 31 December 2009 the Group made a loss of $1,045,779 (2008 $1,243,808). At the balance sheet date the Group had net assets of $27,356,125 (2008: $14,725,502).
The operation of the Group is currently being financed from funds which the Company raised from private and public placings of its shares together with monies raised under a farm-out agreement with Arcadia Petroleum Limited in respect of its Namibian licence. In addition the Group has an agreement with Global Petroleum Limited to fund the first drilling commitment well (subject to a cap) and subsequently to fund a second well.
The Directors believe that the Group will be able to secure the funds necessary to enable it to comply with its future commitments and, accordingly, are satisfied that the going concern basis remains appropriate for the preparation of these financial statements.
2. Loss per share
Year ended Year ended
31 December 2009 31 December 2008
$ $
Loss for the year (1,045,779) (1,243,808)
Weighted average number of shares in issue 683,122,182 542,709,385
Basic loss per share (0.15c) (0.23c)
Diluted loss per share (0.15c) (0.23c)
The diluted loss per share has been kept the same as the basic loss per share as the conversion of share options decreases the basis loss per share, thus being anti-dilutive.
3. Dividend
The Directors do not propose to recommend any dividend for the year ended 31st December 2009.
4. Intangible assets
Group: Exploration
and evaluation
assets Goodwill Total
$ $ $
Cost
At 1 January 2009 7,116,989 8,023,292 15,140,281
Additions 3,225,676 - 3,225,676
Amounts receivable from farm-in partners (178,596) - (178,596)
At 31 December 2009 10,164,069 8,023,292 18,187,361
Exploration
and evaluation
assets Goodwill Total
$ $ $
Amortisation and impairment
At 1 January 2009 - - -
Amortisation for the year - - -
Impairment loss for the year - - -
At 31 December 2009 - -
Net book value
At 31 December 2009 10,164,069 8,023,292 18,187,361
At 31 December 2008 7,116,989 8,023,292 15,140,281
Goodwill arose on the acquisition of the Company's subsidiary undertakings.
The Group tests goodwill for impairment annually and when there are indicators of impairment.
The amounts for intangible exploration and evaluation (E & E) assets represent expenditure incurred in relation to the Group's Ugandan, Namibian and SADR licences. These amounts will be written off to the income statement as exploration expenses unless commercial reserves are established or the determination process is not completed and there are no indicators of impairment. The outcome of ongoing exploration and evaluation, and therefore whether the carrying value of E & E assets will ultimately be recovered, is inherently uncertain.
The Directors have assessed the value of Goodwill and Intangible E & E costs and in their opinion no provision for impairment is currently necessary.
5. Share capital
31 December 2009 31December 2008
$ $
Authorised
10,000,000,000 ordinary shares of 0.1p each 19,900,000 19,900,000
Allotted, called up and fully paid
1,007,162,756 (2008: 589,329,422) ordinary shares of 0.1p each 1,858,511 1,156,948
The share capital issues during 2009 are summarised as follows:
Number of Share capital Share
0.1p shares at nominal value premium
$ $
At 1 January 2009 589,329,422 1,156,948 16,390,564
Shares issued for cash 417,833,334 701,563 13,222,463
Cost of share issues - - (583,467)
At 31 December 2009 1,007,162,756 1,858,511 29,029,560
The Company's share price ranged between 1.80p and 7.25p during the year. The closing share price on 31 December 2009 was 3.876p per share.
6. The full Report and Accounts will be posted to shareholders shortly and a copy will be available on the Company's website www.towerresources.co.uk.
7. The Annual General Meeting will be held at 11.00am on 29th June 2010 at One America Square, Crosswall, London, EC3N 2SG
This information is provided by RNS
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