Final Results

RNS Number : 0775B

Tower Resources PLC

28 March 2013

 



Tower Resources plc

("Tower" or the "Company")

Final Results for the 12 months ended 31 December 2012

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.'

For more information on Tower Resources, please visit; www.towerresources.co.uk 

Contacts:

Tower Resources
Jeremy Asher (Chairman)		020 7253 6639
Graeme Thomson (CEO)
Northland Capital Partners Limited (Nominated Adviser and Joint Broker)
Gavin Burnell, Edward Hutton		0207 796 8800
John-Henry Wicks / Alice Lane (Broking)
Investec (Joint Broker)
Ben Colegrave, Chris Sim		0207 597 4000
M Communications
Patrick d'Ancona, Chris McMahon, Andrew Benbow		020 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

27 March 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

	Notes	Year Ended 31 December 2012 $	Year Ended 31 December 2011 $
Continuing operations
Revenue		-	-
Cost of sales		-	-
Gross profit		-	-
Administrative expenses before share-based payments and impairment		(1,734,554)	(1,450,570)
Share-based payments		(764,264)	(179,276)
Impairment of exploration and evaluation assets	3	(8,584,979)	(25,055,120)
Impairment of goodwill		-	(3,989,751)
Total administrative expenses		(11,083,797)	(30,674,717)
Group operating loss		(11,083,797)	(30,674,717)
Finance costs	4	(681,251)	-
Finance income		56,116	52,862
Loss before taxation		(11,708,932)	(30,621,855)
Taxation		-	-
Loss for the period		(11,708,932)	(30,621,855)
Other comprehensive income		-	-
Total comprehensive income		(11,708,932)	(30,621,855)
Attributable to:
Equity holders of the Company		(11,708,932)	(30,621,855)
Loss per share (cents):	2
Basic		(0.79c)	(2.78c)
Diluted		(0.79c)	(2.78c)

The results shown above relate entirely to continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

	Share Capital $	Share Premium $	Share-Based Payments Reserve $	Retained Losses $	Total Equity $
CONSOLIDATED
Balance at 1 January 2011	1,897,411	30,047,220	1,373,801	(6,036,280)	27,282,152
Share issues less costs	312,893	10,243,129	-	-	10,556,022
Total comprehensive income for the year	-	-	179,276	(30,621,855)	(30,442,579)
Balance at 31 December 2011	2,210,304	40,290,349	1,553,077	(36,658,135)	7,395,595
Share issues less costs	627,016	17,982,200	-	-	18,609,216
Total comprehensive income for the year	-	-	764,264	(11,708,932)	(10,944,668)
Transfers between reserves	-	-	(576,602)	576,602	-
Balance at 31 December 2012	2,837,320	58,272,549	1,740,739	(47,790,465)	15,060,143

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2012

	Notes	31 December 2012 $	31 December 2011 $
ASSETS
Non-Current Assets
Plant and equipment		-	149,124
Goodwill		4,033,541	4,033,541
Exploration and evaluation assets	3	1,157,668	1,050,307
		5,191,209	5,232,972
Current Assets
Trade and other receivables		1,282,975	1,044,668
Cash and cash equivalents		4,478,375	1,876,937
Restricted cash	3	5,600,000	300,000
		11,361,350	3,221,605
Total Assets		16,552,559	8,454,577
LIABILITIES
Current Liabilities
Trade and other payables		(1,492,416)	(1,058,982)
Total Liabilities		(1,492,416)	(1,058,982)
Net Assets		15,060,143	7,395,595
EQUITY
Capital and Reserves
Share capital		2,837,320	2,210,304
Share premium		58,272,549	40,290,349
Share-based payments reserve		1,740,739	1,553,077
Retained losses		(47,790,465)	(36,658,135)
Shareholders' Equity		15,060,143	7,395,595

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2012

	Notes	Year Ended 31 December 2012 $	Year Ended 31 December 2011 $
Cash outflow from operating activities
Group operating loss for the year		(11,083,797)	(30,674,717)
Adjustments for items not requiring an outlay of funds:
Depreciation and impairment of plant and equipment		103,731	42,268
Share-based payments charge		764,264	179,276
Disposal of plant and equipment		45,550	-
Impairment of exploration and evaluation assets	3	8,584,979	25,055,120
Impairment of goodwill		-	3,989,751
Operating loss before changes in working capital		(1,585,273)	(1,408,302)
Increase in receivables and prepayments		(238,306)	(769,721)
Increase in trade and other payables		433,434	527,760
Cash used in operations		(1,390,145)	(1,650,263)
Interest received		56,116	52,862
Net cash used in operating activities		(1,334,029)	(1,597,401)
Investing activities
Funds used in exploration and evaluation	3	(8,692,340)	(7,974,397)
Payments to purchase  plant and equipment		(158)	(20,715)
Restricted cash held in escrow account	3	(5,300,000)	-
Net cash used in investing activities		(13,992,498)	(7,995,112)
Financing activities
Proceeds from issue of ordinary share capital		18,922,221	11,082,596
Share issue costs		(313,005)	(526,574)
SEDA loan received	4	3,125,000	-
SEDA loan repaid	4	(3,125,000)	-
Finance costs	4	(681,251)	-
Net cash inflow from financing activities		17,927,965	10,556,022
Increase in cash and cash equivalents		2,601,438	963,509
Cash and cash equivalents at beginning of year		1,876,937	913,428
Cash and cash equivalents at end of year		4,478,375	1,876,937

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2012

1.             Accounting policies

The accounting policies adopted in the preparation of the financial statements have been consistently applied to all the years presented. The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards IFRSs and IFRIC interpretations, issued by the International Accounting Standards Board (IASB) as endorsed for use in the EU ('IFRSs') and those parts of the Companies Act 2006 that are applicable to companies that prepare their financial statements under IFRS.

The financial information for the years ended 31 December 2012 and 31 December 2011 does not constitute statutory accounts as defined by section 435 of the Companies Act 2006 but is extracted from the audited accounts for those years. The 31 December 2011 accounts have been delivered to the Registrar of Companies. The 31 December 2012 accounts will be delivered to Companies House within the statutory filing deadline. The auditor's report on those financial statements was and did not contain a statement under s498 (2) - (3) of Companies Act 2006.

1.1.          Going concern

The operations of the Group are currently being financed from funds which the Company has raised from private and public placings of its shares.  The Group has not yet earned revenue as it is still in the exploration phase of its business. The Group is reliant on the continuing support from its existing and future shareholders.

The Company holds cash balances of $3.5 million at 26 March 2013 and has facilities over £28 million conditionally available under its Equity Financing Facility ("EFF") and Standby Equity Distribution Agreement ("SEDA") (see note 16).  The Group has a 30% interest in Licence 0010 in Namibia where an exploration well must be drilled by 22 August 2014. Whilst the timing of the exploration well and related expenditures for the Second Renewal Period has not yet been approved by the Joint Venture, it is currently estimated by the directors that the Group's share of costs related to the Licence, including the cost of the exploration well, could total up to $30 million.

In order to fund its share of the exploration well and other Licence costs, to meet day-to-day operating expenditures and add further exploration interests to the Group, it will need to raise further funds from the EFF, SEDA, other equity issues, or from a sale or farmout of part of its interest in Licence 0010.

The Board believes that the Group will be able to raise, as required, sufficient cash or reduce its commitments to enable it to continue its operations, including the pursuit of future exploration opportunities, and to continue to meet, as and when they fall due, its liabilities for at least the next twelve months from the date of approval of these financial statements.  The financial statements have, therefore, been prepared on the going concern basis. 

However, there can be no guarantee that the required funds will be raised within the necessary timeframe. Consequently a material uncertainty exists that may cast significant doubt on the Group's ability to fund this cash shortfall and therefore be able to meet its commitments and discharge its liabilities in the normal course of business for a period not less than twelve months from the date of this report.

The financial statements do not include the adjustments that would result if the Group was unable to continue in operation.

2.             Loss per share

	Year ended 31 December 2012 $	Year ended 31 December 2011 $
Loss for the year	(11,708,932)	(30,621,855)
Weighted average number of shares in issue	1,490,138,567	1,102,053,167
Basic loss per share	(0.79c)	(2.78c)
Diluted loss per share	(0.79c)	(2.78c)

The diluted weighted average number of shares in issue and to be issued is 1,492,100,983. The diluted loss per share has been kept the same as the basic loss per share because the conversion of share options and share warrants would decrease the basic loss per share, and is thus anti-dilutive.  

3.             Intangible assets

Group:	Exploration and evaluation assets $	Goodwill $	Total $
Cost
At 1 January 2012	26,105,427	8,023,292	34,128,719
Additions during the year	8,692,340	-	8,692,340
At 31 December 2012	34,797,767	8,023,292	42,821,059
Amortisation and impairment
At 1 January 2012	(25,055,120)	(3,989,751)	(29,044,871)
Impairment during year	(8,584,979)	-	(8,584,979)
At 31 December 2012	(33,640,099)	(3,989,751)	(37,629,850)
Net book value
At 31 December 2012	1,157,668	4,033,541	5,191,209
At 31 December 2011	1,050,307	4,033,541	5,083,848

Goodwill arose on the acquisition of the Company's subsidiary undertakings in prior years. 

At 31 December 2012 the aggregate capitalised Exploration and Evaluation ("E&E") costs in relation to the Group's Ugandan licence was $33,640,099.  In the Statement of Comprehensive Income for the year ended 31 December 2011, full impairment was made for the costs incurred or accrued relating to the Ugandan licence as at that date amounting to $25,055,120.   During 2012 additional expenditure of $8,584,979 was capitalised in relation to the Uganda licence, which expired in March 2012.  As no hydrocarbons were discovered, the Directors have decided that full impairment should be made in the Statement of Comprehensive Income for the year ended 31 December 2012 for those costs.

The remaining amount of capitalised E&E costs shown as an intangible asset at 31 December 2012 was $1,157,668 of which $932,554 related to the Group's Namibian licence and $225,114 related to the Group's SADR licence. These amounts have not been impaired because commercial reserves have not yet been established or the determination process has not been completed.  In accordance with IFRS 6, the Directors have assessed whether any indication of impairment exists in respect of those intangible assets.  In their opinion, based on a review of the expiry dates of licences and the likelihood of their renewal, available funds and the intention to continue exploration and evaluation, no indications of impairment were identified.

In December 2012 the Company's wholly owned subsidiary, Neptune Petroleum (Namibia) Limited reached agreement with Arcadia Expro Namibia (Pty) Ltd ("Arcadia") and Repsol Exploration (Namibia) Pty Ltd ("Repsol") to double its interest in Licence 0010 in Namibia.  As a result Repsol has replaced Arcadia as the operator with a 44% interest, and Tower has increased its interest from 15% to 30% with Arcadia retaining 26%. Completion occurred in January 2013 at which time an amount of $5.3 million was transferred from an escrow account (shown as Restricted Cash at 31 December 2012 in the Statements of Financial Position) in consideration for the increase in Tower's interest in the licence. This $5.3 million will be included in E&E assets in 2013.

4.             Finance costs                                                                  

                On 6 January 2012 the Company entered into an £8 million Standby Equity Distribution Agreement ("SEDA") and a managed $3.125 million SEDA-backed Loan Agreement with YA Global Master SPV Ltd., an investment fund managed by Yorkville Advisors LLC.  The Loan can be increased in tranches of $1 million up to a maximum of $6.125 million if required, whilst the SEDA will be available to finance repayments of the Loan.  Taken together these provide flexibility over future equity funding requirements. 

On 23 March 2012 the Company entered into a £20 million Equity Finance Facility ("EFF") with Darwin Strategic Limited ("Darwin"). Darwin is majority owned by funds managed by the Henderson Volantis Capital team.

The costs incurred in connection with these facilities during the period covered by these financial statements, which was used to help part-fund the costs of drilling the third and final commitment well in Uganda, amounted to $681,251 and have been shown as Finance Costs in the Consolidated Statement of Comprehensive Income.

5.             Subsequent events

On 29 June 2010, and in accordance with the Production Sharing Agreement for Exploration Area 5 (EA5) signed between the Government of Uganda and the Company's local operating subsidiary, Neptune Petroleum (Uganda) Ltd, the Company provided a $0.3 million Performance Bond in respect of the Minimum Exploration Expenditure requirement for its two-year exploration period that ended on 26 March 2012.  On 5 March 2013 the Permanent Secretary of the Uganda Ministry of Energy and Mineral Development confirmed that all obligations under that PSA have been duly fulfilled and authorised the release and repayment of that deposit in full.  These funds were received on 13 March 2013.

 On 30 July 2012, the Group announced a conditional agreement with Arcadia Expro Namibia (Pty) Ltd ("Arcadia") to increase its interest in Namibia offshore Licence 0010 to a 30% working interest. On 31 January 2013 all pre-conditions relating to this farmout were completed, including the release from restricted cash by the Group of approximately $5.3 million to Arcadia. The Group assumed payment of 30% of Licence 0010 costs from 1 July 2012. On the same date the acquisition of a 44% interest in the Licence 0010 by Repsol Exploration (Namibia) Pty Ltd from Arcadia also became unconditional. Arcadia has an interest of 26% in the Licence and Repsol is now operator.

On 11 March 2013, the Company issued 4 million share options with an exercise price of 2.10p per share, vesting in equal tranches 12, 24 and 36 months after issue.

 

END

 

 

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