Tower Resources Regulatory News (TRP)

21 Apr 2009 07:00



PRESS RELEASE

21 April 2009

Tower Resources Plc

Final Results for the 12 Months Ended 31 December 2008

Tower Resources plc ('Tower' or 'the Company'), the AIM-listed oil and gas exploration and production company, today announces its final results for the year ended 31 December 2008.

Highlights:

Uganda

Seismic and geochemical survey results confirm prospectivity

Probable recent oil generation and migration independently predicted

Drilling rig en route for May drilling

Costs largely covered by new farmout agreement 

 Namibia

Updated 2D seismic interpretation confirms huge potential over all prospects

Giant structures now require 3D seismic survey to select well locations

Commenting on the results, Peter Kingston, Executive Chairman of Tower said:

"Since early 2008, the interpretations of seismic data in Uganda and Namibia and geochemical surveys in Uganda have significantly increased confidence in the prospectivity of both Licences. The positive oil seep survey results in Uganda EA5 together with the outstanding well results in the adjacent Licence have highlighted the potential for large discoveries. The imminent Ugandan well could have huge implications for the future of the Company. Progress towards drilling a first well in Namibia may be later but the scale of reserve potential confirmed by evaluation work during 2008 has further increased the high expectations of the Tower Board."

Contacts:

CHAIRMAN'S STATEMENT

Your Company is now within a few weeks of drilling its first exploration well - in Uganda Licence EA5. The outstanding success of drilling in Licence EA1, just 80 kms to the south of the two well locations in EA5, has focused attention on the large oil reserve potential of shallow prospects in the Albertine Graben. A contract has been finalized with ASCOM S.A. Group (ASCOM) to supply a MBU-125 land drilling rig, which is now being mobilized from Southern Sudan to Iti-1, the first well site. The estimated spud date is 15th May and the prospective reservoir horizon should be encountered about a week later. Seismic and geochemical surveys completed during 2008 have confirmed the presence of large structures and active hydrocarbon generation and migration respectively. 

Activity in Namibia has continued to be focused on the purchase and detailed interpretation of 2D seismic data. This work is now completed and has confirmed the huge potential of exploration prospects within the Licence area. Given the very large structures and some complexity confirmed in likely reservoir geometry, it has now been recommended that a large 3D seismic survey be acquired in the final quarter of 2009 with detailed interpretation taking place over most of 2010. This approach will substantially reduce the risk of selecting the first well location but would delay drilling of a first well until late 2011 at the earliest.

Both programmes are funded for the immediate future with Global Petroleum Limited (Global) replacing Orca Exploration Inc as the funding partner for the first Uganda well. Arcadia Petroleum Limited (Arcadia) continues to fund all of the Namibia activities. New Licences in Western Sahara were acquired in mid 2008 and negotiations in respect of a Licence award in Tanzania are pending. If the first Uganda well is successful, your company will consider a small number of new exploration ventures in Southern Africa over the coming year.

Although much now depends on the outcome of Iti-1, Namibia (although delayed) remains a very significant follow-up. As exploration prospects go, EA5 in Uganda is low risk and potentially high reward. It promises to be a very exciting month or two ahead.

Financial Highlights

The operating loss for the reporting period from 1 January 2008 to 31 December 2008 was $1,243,808. Capital expenditure on exploration studies, drilling preparations and seismic surveys during that period was $6,355,257. Third party funding received from farm-in partners has covered approximately 61% of our total capital expenditure to date, including a recovery of some back costs. Cash balances at year end totaled $727,028 although significant amounts will be required in the first half of 2009 to meet the cost of operations still underway at the end of 2008. The Company has sufficient capital to fund its activities until the end of 2009 and expects that new funds can be introduced if necessary to meet commitments during 2010. In that respect, new funds were raised in October 2008 and January 2009 and a further fundraising, with director participation, is currently close to finalization - the latter will satisfy going concern requirements for the coming year.

Operations Summary to end of 2008

Uganda

The first half of 2008 was focused on completing the seismic survey, seismic processing and interpretation. The seismic processing confirmed the structural features identified by the gravity interpretation and gave encouragement that the Licence would contain hydrocarbons. The seismic processing revealed, for EA5, that the Miocene sediments prevalent in other areas of the Albertine Basin have a maximum thickness of 1500 metres, which is entirely in line with sediments in Licence EA1 immediately to the south of Tower's Licence EA5, where Heritage has made a world class discovery just 80 kms from the first Neptune (Uganda) well location. It is also similar to the Butiaba area of Licence EA2 where Tullow has also recently made several significant discoveries at depths less than 1000 metres. There is also evidence from the seismic that sediments had been more than 500 metres deeper when source rocks were being deposited. Amplitude anomalies are widespread and AVO analyses also indicate hydrocarbons to be present.

Very significantly, geochemistry field surveys completed during 2008 and early 2009 have confirmed that there is a high probability of an active, mature hydrocarbon source and a migration process taking place which substantially reduces remaining exploration risk. This has always been the main area of risk for exploration in the EA5 area so is very encouraging. Moreover, the samples taken have similar characteristics to surface seeps present in other areas of the Albertine Graben and oil samples taken on well tests. There is also evidence from wells in EA1 and EA2 that geothermal gradients are high north of Lake Albert and this supports the likelihood of current and/or recent oil generation at shallow depth in EA5. Overall, since the start of 2008, the full results of seismic and field work in EA5 and well results in EA1 have substantially improved the probability of success. The results in Licences EA1 and EA2 have also demonstrated that large reserve potential exists even with such shallow reservoirs. The two structures to be drilled first each have 100 million barrel potential.

The first two well locations, Iti-1 and Sambia-1 were selected and agreed with Government early in 2009 based on a combination of seismic, gravity and oil seep data and the Iti-1 well is now scheduled to begin early in May 2009. A MBU-125 land drilling rig has been contracted from ASCOM and this is currently en route to site from Southern Sudan, where it has recently completed a well on ASCOM's own licensed acreage. The drilling operations are being undertaken during a dry season when ground conditions are favourable for moving heavy equipment.

Some delay has occurred from earlier prognoses of timing. This occurred to allow the identification and introduction of a new funding party after Orca Exploration Inc decided that the prospectivity did not meet their demanding risk requirements. Agreement has been reached for Global to fund Iti-1 and also possibly Sambia-1.

Tower and its wholly-owned subsidiary Neptune Petroleum (Uganda) Limited ("Neptune Uganda") announced on 22 December 2008 that they had reached agreement ("Farm Out Agreement") to farm out an interest in Neptune's Uganda acreage to Global Petroleum Limited, an Australian based oil company quoted on ASX and AIM. Full details of the Farm Out Agreement were included in the announcement. The Farm Out Agreement was subject to the consent of the Minister of Energy and Mineral Development of the Government of the Republic of Uganda and this consent was received on February 10th 2009. 

Global has the right to earn a 50% interest in Exploration Area 5 ("EA5"), north-western Uganda, by meeting the cost of two exploration commitment wells. Under the terms of the Farm Out Agreement, Global will earn a 25% interest in the EA5 Licence and Production Sharing Agreement by funding the cost of drilling Iti-1 (subject to a cap), the first well of a two well programme and, at their discretion, an additional 25% interest by drilling Sambia-1, when the results of Iti-1 have been interpreted.

Namibia

Comprehensive processing and interpretation of the 2-D seismic data acquired in late 2007 confirmed that three giant prospects previously identified are viable exploration targets, having apparent four-way structural closure and strong hydrocarbon indications. Geological modelling indicated potentially continuous reservoir sands over these large structures, which can be correlated with high quality sands encountered in the two wells drilled on the Licence. 

The programme of work since then has been focussed on the acquisition and detailed interpretation, using AVO and geological modelling techniques, of additional 2-D seismic data purchased from a number of seismic contractors. The objective of this programme was to evaluate the prospectivity of all three structures and to investigate reservoir continuity. It was originally intended to acquire 3000 kms of new seismic data early in 2009 over at least one of the prospects to allow a well location to be chosen with some confidence for drilling as early as late 2010. The updated interpretation including all of the new data, while confirming the scale and prospectivity of the defined structures has concluded that a full 3D seismic survey is required to confidently select a first well location. Such a programme has been agreed between Neptune Petroleum (Namibia) Limited ("Neptune Namibia") and Arcadia and has been proposed to the Namibian Government.

It is currently planned to move into the Second Exploration Period effective end September 2009 and to begin shooting 3D seismic (currently expected to amount to 1500 square kilometres) before the end of 2009. Detailed processing and interpretation is likely to take until end 2010 before a firm well location can be selected. A well is, therefore unlikely before end 2011.

No definitive result of exploration well Kunene 1, drilled in Block 1711 located in the Namibe Basin, about 200 kms north of Tower's most northerly prospect, has yet been published. However, the reported substantial gas shows are encouraging for prospectivity in the Tower acreage. 

Other Ventures

Little progress has been made to date with negotiations pertaining to the conditional Licence award in Tanzania and it is not clear that agreement will be reached. Further contact is planned once the results of the Uganda well are available. The acquisition of two Licences in Western Sahara, via the purchase of Comet Petroleum, was completed in 2008 but it is expected to be some years before the political uncertainties can be resolved. Accordingly, Uganda and Namibia remain the principal areas of activity of your Company.

Since Year-end and Looking Forward 

Uganda

Activity to date in 2009 has largely involved finalisation of the farm in arrangements with Global and the completion of contracts to drill Iti-1. The opportunity was taken to undertake a full review of operational alternatives and updated security assessments. Discussions were held with other operators to investigate the possible use of the rig which has successfully made discoveries in Licences EA1 and EA2 but these ultimately did not bear fruit. The increase of military activity against the Lord's Resistance Army (LRA) in DRC also instigated a review of security issues in transporting a rig from Sudan. The Board believes that the arrangements currently being pursued will be effective from both perspectives.

I am pleased to report again this year that the small operating organisation, comprising mostly Ugandan nationals, developed to manage the seismic programme and now actively involved in preparing for drilling operations, has performed effectively and this promises well for the future. I am also very pleased that the local company's continued interaction with local communities is successful and that a variety of carefully targeted social investment initiatives has been greatly appreciated. These socio-economic activities will be further developed in the event of successful drilling operations with a particular emphasis on sustainability and widespread benefit. Further details of these programmes are given in the Directors Report.

Namibia

The seismic interpretation work was completed early in 2009 and plans are being prepared for the 3D seismic survey towards the end of the year.

Corporate Outlook

The year 2008 saw a great deal of positive progress for your Company and a first well in Uganda is now imminent.  Much now depends on this well and the Board believes that there is a very good chance of a successful outcome. With a positive outcome, the added shareholder value will be immediately substantial and the further exploration of EA5 will be pursued vigorously to assess most of the value of EA5 as soon as possible. Namibia operations, although delayed, have confirmed the added company making potential of this project to Tower, avoiding too much dependence on Uganda for ultimate success. 

Thank you for your continued support.

Peter Kingston

Chairman

20th April 2009

TOWER RESOURCES PLC

CONSOLIDATED INCOME STATEMENT 

FOR THE YEAR ENDED 31 DECEMBER 2008

The results shown above relate entirely to continuing operations

  TOWER RESOURCES PLC

GROUP & COMPANY STATEMENTS OF CHANGE IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2008

  TOWER RESOURCES PLC

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2008

The financial statements were approved by the Board of Directors on 20 April 2009 and signed on its behalf by:

Peter Kingston

Chairman   TOWER RESOURCES PLC

CONSOLIDATED CASH FLOW STATEMENT 

FOR THE YEAR ENDED 31 DECEMBER 2008

  NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2008

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 1985. The Parent Company's financial statements have also been prepared in accordance with IFRS and the Companies Act 1985. 

1.2 Going concern

During the year ended 31 December 2008 the Group made a loss of $1,243,808 (2007: $1,119,803). At the balance sheet date the Group had net assets of $14,725,502 (2007: $14,089,131). The Group has expected exploration expenditure commitments of $12,800,000 due within one year from the balance sheet date and a no commitments currently due between one and two years. 

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 concluded an agreement with Orca Exploration Group Inc under which that Company contributed $7.6 million to the Seismic costs involved in respect of the Group's Uganda licence. Orca did not take up their option to fund the drilling commitment programme. The Group concluded an agreement with Global Petroleum Limited to fund the first drilling commitment well (subject to a cap) and, at Global's discretion, 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

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 31 December 2008.

4. Intangible assets

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

The additional goodwill in the year arose from the Company's acquisition of Comet Petroleum Limited, as follows:

Fair value of Net assets acquired $ 50,145

Consideration paid $ 93,935

Positive Goodwill arising $ 43,790

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 and Namibian licences together with its new licences in SADR acquired with the acquisition during the year of Comet Petroleum Ltd. 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

The share capital issues during 2008 are summarised as follows:

The Company's share price ranged between 1.50p and 11.00p during the year. The closing share price as at 31 December 2008 was 2.25p per share.

7 The Annual General Meeting will be held at 11.00am on 24th June 2009 at One America Square, Crosswall,  London, EC3N 2SG