Tower Resources Regulatory News (TRP)

20 Sep 2007 07:01

Tower Resources PLC20 September 2007 PRESS RELEASE20 September 2007 Interim results for six months to 30 June 2007 Tower Resources ("Tower" or the "Company"), the AIM listed oil and gasexploration company, has today announced substantial progress with itsoperations in Uganda and Namibia during 2007 with significant milestones beingachieved since mid-year. In Uganda: •Seismic Operations have begun •Orca Exploration Inc. to fund most of the licence commitments over two years •Two exploration wells anticipated in 2008 •Other exploration operators enjoying continuing success in the region In Namibia: €700 km 2-D seismic survey completed early and data quality very high €3-D Seismic survey in planning for 2008 •Farm-out agreement with Arcadia Petroleum Limited The Company had a period end cash balance of £2,136,382 after capitalexpenditure of £479,568 and reported a loss for the six months to 30 June 2007of £252,388. In addition, the Company expects to receive $1.7 million in backcosts as part of the farm-out arrangements. Tower Resources' Executive Chairman, Peter Kingston, said: "The Boards optimism about potential achievements in both the Uganda and NamibiaLicences has continued to grow during 2007 and this is now shared by two verystrong partners. 'The next 18 months will be very exciting; In Uganda, a 2-D seismic survey andtwo exploration wells should be completed by the end of 2008, whilst in Namibia,a programme of 3-D seismic surveys will hopefully be completed by the end of2008. 'With both existing Licences largely funded, the Board will now give greaterpriority to adding additional licence interests, probably in Africa, to itsportfolio" End For further information, please contact: Tower Resources plc www.towerresources.co.ukPeter Kingston, Chairman 07802 804852 Blue Oar SecuritiesRhodri Cruwys 020 7448 4400 Aquila Financial Limited www.aquila-financial.comPeter Reilly 020 7202 2600Yvonne Fraser Notes to Editors Tower Resources Plc is an AIM-listed, independent oil and gas explorationcompany based in London. The Company is focused on sub-Saharan Africa, holding 100% exploration licencesin Namibia and Uganda through its two operating subsidiaries Neptune Petroleum(Namibia) Ltd and Neptune Petroleum (Uganda) Ltd. The Company's assets include; blocks 1910A, 1911 and 2011A offshore Namibia andonshore block 5 in Northern Uganda. CHAIRMAN'S STATEMENT Your Company has made substantial progress with its operations in Uganda andNamibia during 2007 to date with significant milestones being achieved sincemid-year. Seismic operations have begun in Uganda and recording of seismic datais scheduled to begin in early November. A Government approved agreement hasbeen reached with Orca Exploration Inc. ("ORCA") whereby Orca will fund most ofthe past and forward Uganda Licence commitments over the next two years. A twodimensional seismic survey has recently been concluded in Namibia and a farm outhas been agreed with Arcadia Petroleum Limited ("Arcadia"). The Board's optimismabout potential achievements in the Uganda and Namibia Licence areas hascontinued to grow during 2007 and this is now shared by two very strongpartners. Success continues to be achieved by other operators in Uganda with furtherdiscoveries being made and intensive future activity programmed. Their seismicprogrammes are evaluating the region just to the south of Tower's EA5 UgandaLicence and results appear to be very promising. Continuous exploration drillingis now taking place in the Albertine Graben and a high success rate is expected.It seems ever more likely that proven reserves in the province will exceed onebillion barrels and that a major development programme will be initiated in thenext few years, with an export pipeline to Kampala and beyond. In expectation ofsuccessful seismic results, detailed planning for two Tower wells in 2008 hasbegun. In Namibia, I am very pleased to advise you that seismic activities have begunearlier than expected. On being granted a two-year extension of the FirstExploration Period until September 2009, we were able to take advantage of theunseasonably good weather conditions to complete the planned 2-D survey. Thisaccelerated programme will now allow plans to be developed for a 3-D survey tobe undertaken during 2008, a year earlier than previously thought viable. Therecent seismic programme was designed to build on the results of previousinterpretations, which revealed some very large structures coincident withstrong indications of natural gas. Interpretation of the new seismic data and,if this builds successfully on earlier work, the ensuing 3-D interpretation aredesigned to significantly reduce the perceived risk of the identified prospects.The quality of the new data is very good, appearing to provide the level ofdetail required to improve our understanding of prospectivity. Financial highlights The loss for the half-year reporting period to 30 June 2007 was £252,388.Capital expenditure was £479,568 being principally the capitalised expenditureon exploration studies and Uganda and Namibia Licence fees. Cash balances atperiod end were £2,136,382. Now that partners have been contracted to fund mostof the forward commitments, there is sufficient capital to fund the Company'sactivities over the next 18 months. Tower will be completely funded in Namibiagoing forward but will contribute 16.67% of future costs in Uganda.Approximately $1.7 million will be refunded to Tower in the next few months,under the terms of the farm out agreements, as repayment of historic explorationcosts. Operations summary to date Uganda Operations have begun in earnest in Uganda with the start of pre-recordingoperations. A local management and administration has been put in place, both inKampala and Arua, the regional administrative centre in the EA5 Uganda Licencearea. Detailed plans are in place to cover not just seismic activities butinfrastructure improvements, environmental monitoring, security management,health and safety, local community education and liaison, and a targetedprogramme of social investment. It is planned to record 285 kilometres ofseismic, beginning early November, but a limited amount of extra infill data maybe required to better define drilling prospects. The largest structural features identified by the gravity interpretation are ofsignificant size, each up to 35 square kilometres in total area and if this sizeof structure is confirmed by seismic, the reserve potential will be very high.Planning for two wells, as early in 2008 as possible, has begun and theimmediate priority will be to secure a suitable drilling rig for the plannedprogramme. Namibia The recent seismic survey acquired 700 kilometres of two dimensional datatargeted at improving the interpretation of two adjacent, very large structuralfeatures where indications of hydrocarbons had been identified by AmplitudeVariations with Offset ("AVO") analysis of purchased data. The survey wasperformed using recording arrays of length 6000 metres to improve thesuitability of the new data for AVO analysis. The initial on board processing of the data shows remarkable detail and theBoard is greatly encouraged that detailed processing and AVO analysis willsupport a decision to undertake a substantial three dimensional seismic surveyto begin in 2008. The latter survey would be directly targeted at the mostpromising of the two structures to build a detailed interpretation ofprospective reservoirs, with a view to identifying a first well location. Theexploration programme being followed is designed to steadily achieve animproving understanding, and expected reduction, of exploration risk. Ifsuccessful, the applied techniques would provide Tower with the confidence todrill a well on a prospect that could well be low risk as well as very highreward. Farmout agreements Uganda The agreement with Orca provides for Orca to refund 83.33% of past costs and tofund 83.33% of future costs related to the current seismic programme. Theirshare of costs is capped at $5 million based on the current planned size ofprogramme. Orca then has an option to participate in the two-well commitmentprogramme, becoming a 50% licensee on making that commitment, providing 83.33%of the cost of the two wells. There are agreed caps on Orca's share of the wellfunding - $10 million for drilling costs and $5 million for any testingoperations. Tower, through its subsidiary Neptune Petroleum (Uganda) Limited ("Neptune"),will continue as operator for a period of three years, after which Orca willhave the option to assume that responsibility. Orca will, however, on becoming alicensee early in 2008, assume responsibility for managing the drillingprogramme, under the overall supervision of Neptune as the licence operator.Orca's experience with current operations in Tanzania will greatly strengthenthe ability of the partnership to achieve high operational and community relatedstandards. Namibia The farm out agreement recently concluded with Arcadia has now received theapproval of the Minister of Mines and Energy of the Republic of Namibia.Associate companies of Arcadia include offshore drilling companies and a companywhich specialises in LNG technology. This technical, as well as financialstrength, will bring significant benefits to the management of the NamibiaLicence. Arcadia has now assumed operatorship of the Namibia Licence. Under theterms of the farm out agreement, Tower retains a 15% stake carried through amaximum programme of 2-D and 3-D seismic and two wells. In the event that thefarminee, or any assignee of their rights and obligations, opted not to pursuethe full programme, the full Namibia Licence interest would revert to Tower. Corporate outlook The next 18 months will be very exciting. Tower aims to complete seismic and twowells in Uganda by the end of 2008. If successful, Tower will not only betransformed as a business but will be well placed to fully participate indevelopment of a major new oil province. This will bring great challenges aswell as rewards. Neptune has already made good progress in buildingrelationships at local, regional and national levels and has begun a 'NeedsAssessment' for targeted social investments. At present, a preferred focus wouldbe secondary and post graduate education directed at helping build localexpertise and capacity. In Namibia, hopefully, a programme of 3-D seismic will have been completedduring 2008 and will have confirmed an exciting opportunity. If so, a first wellmay be in the planning stage by the end of 2008 or early in 2009. Apart frommaintaining Tower's participation in the existing Namibia Licence, the Boardintends to work with local partners to expand, diversify and improve the profileof its interests. With both the Uganda and Namibia Licences largely funded by very strongpartners, the Board will now give greater priority to adding additional licenceinterests, probably in Africa, to its portfolio. After a two year period ofpatient assessment and farm out activity, your company is well placed to makevery significant progress. Thank you for your ongoing support. Peter KingstonChairman 18 September 2007 CONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2007 Notes Six Months Six Months ended 30 June ended 30 June 2007 2006 (Unaudited) (Unaudited) £ £RevenueSales - -Cost of Sales - - ------------- ------------Gross Profit - - Administrative expenses (242,475) (156,227)Share-based payments 8 (56,033) - ------------- ------------Total administrative expenses (298,508) (156,227) Group operating loss (298,508) (156,227)Finance income 46,120 29,217 ------------- ------------Loss before taxation (252,388) (127,010) Taxation - - ------------- ------------Loss for the period (252,388) (127,010) ------------- ------------ Attributable to:Equity holders of the Company (252,388) (127,010) ------------- ------------ Loss per shareBasic 2 (0.05)p (0.03)pDiluted 2 (0.05)p (0.03)p The results shown above relate entirely to continuing operations. CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2007 Share-based Share Share Payments Retained Total Capital Premium Reserve Losses Equity £ £ £ £ £Six months ended 30June 2007Balance at 1 January2007 458,333 6,132,159 89,250 (671,484) 6,008,258Share issues lesscosts 78,320 1,472,005 - - 1,550,325Loss for the period - - 56,033 (252,388) (196,355) ------- -------- --------- -------- --------Balance at 30 June2007 536,653 7,604,164 145,283 (923,872) 7,362,228 ------- -------- --------- -------- -------- Six months ended 30June 2006Balance at 1 January2006 125,000 585,000 - (323,612) 386,388Share issues lesscosts 333,333 5,564,483 - - 5,897,816Loss for the period - - - (127,010) (127,010) ------- -------- --------- -------- --------Balance at 30 June2006 458,333 6,149,483 - (450,622) 6,157,194 ------- -------- --------- -------- -------- CONSOLIDATED BALANCE SHEETAS AT 30 JUNE 2007 Notes 30 June 2007 31 December (Unaudited) 2006 (Audited) (Restated) £ £ £ £ASSETSNon-Current AssetsPlant and equipment 4 5,560 1,889Goodwill 5 4,073,069 4,073,069Intangible explorationand evaluation assets 5 1,194,784 719,176 -------- -------- 5,273,413 4,794,134 --------- ----------Current AssetsTrade and other receivables 24,290 28,135Cash and cashequivalents 6 2,136,382 1,254,122 -------- -------- 2,160,672 1,282,257 --------- ----------Total Assets 7,434,085 6,076,391 --------- ---------- LIABILITIESCurrent LiabilitiesTrade and other payables 71,857 68,133 --------- ---------- Total Liabilities 71,857 68,133 --------- ---------- Net Assets 7,362,228 6,008,258 --------- ---------- EQUITYCapital and ReservesCalled up share capital 7 536,653 458,333Share premium account 7 7,604,164 6,132,159Share-based payments reserve 145,283 89,250Retained losses (923,872) (671,484) --------- ---------- Total Shareholder's Equity 9 7,362,228 6,008,258 --------- ---------- CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2007 Six months Six months ended ended 30 June 2007 30 June 2006 (Unaudited) (Unaudited) £ £Cash outflow from operating activitiesGroup operating loss (298,508) (156,227)Adjustment for items not requiring an outlay offunds:- Depreciation 289 135- Share-based payments charge 56,033 - ------------ ------------ Operating loss before changes in working capital (242,186) (156,092) - Decrease/(increase) in receivables and prepayments 3,845 (48,730)- Decrease in trade and other payables 3,724 109,078 ------------ ------------ Cash used in operations (234,617) (95,744)Interest received 46,120 29,217 ------------ ------------Net cash used in operating activities (188,497) (66,527) ------------ ------------ Investing activitiesFunds used in exploration and evaluation (475,608) (4,565,721)Payments to purchase plant and equipment (3,960) (1,615) ------------ ------------Net cash used in investing activities (479,568) (4,567,336) ------------ ------------ Financing activitiesProceeds from issue of ordinary share capital 1,565,000 5,897,816Share issue costs (14,675) - ------------ ------------Net cash from financing activities 1,550,325 5,897,816 ------------ ------------ Increase in cash and cash equivalents 882,260 1,263,953 Cash and cash equivalents at beginning of period 1,254,122 449,445 ------------ ------------Cash and cash equivalents at end of period 2,136,382 1,713,398 ------------ ------------ NOTES TO THE FINANCIAL INFORMATIONFOR THE SIX MONTHS ENDED 30 JUNE 2007 1. Basis of preparationThis interim report, which incorporates the financial information of the Companyand its subsidiary undertakings ("the Group") has been prepared using thehistorical cost convention and in accordance with International FinancialReporting Standards ("IFRS") including IAS 34 'Interim Financial Reporting' andIFRS 6 'Exploration for and Evaluation of Mineral Reserves', as adopted by theEuropean Union ("EU") These interim results for the six months ended 30 June 2007 are unaudited and donot constitute statutory accounts as defined in Section 240 of the Companies Act1985. They have been prepared using accounting bases and policies consistentwith those used in the preparation of the financial statements of the Companyand the Group for the eighteen month period ended 31 December 2006 and those tobe used in the year ending 31 December 2007. The financial statements for theeighteen months ended 31 December 2006 have been delivered to the Registrar ofCompanies and the auditors' report on those financial statements was unqualifiedand did not contain a statement made under Section 237(2) or Section 237(3) ofthe Companies Act 1985. 2. Loss per ordinary shareThe basic loss per ordinary share has been calculated using the loss for thefinancial period of £252,388 (six months ended 30 June 2006 - loss of £127,010)and the weighted average number of ordinary shares in issue of 516,740,847 (sixmonths ended 30 June 2006 - 428,867,403). The diluted loss per share has been considered using a weighted average numberof shares in issue and to be issued of 520,252,775 (30 June 2006: 428,867,403).The diluted loss per share has been kept the same as the basic loss per share asthe conversion of the share options decreases the basic loss per share, thusbeing anti-dilutive. 3. Goodwill Goodwill is the difference between the amount paid on the acquisition of thesubsidiary undertaking and the aggregate fair value of its separable net assets- of which oil and gas exploration expenditure is the primary asset. Goodwill iscapitalised as an intangible fixed asset and in accordance with IFRS3 is notamortised but tested for impairment annually or when there are any indicationsthat its carrying value is not recoverable. As such, goodwill is stated at costless any provision for impairment in value. If a subsidiary undertaking issubsequently sold, goodwill arising on acquisition is taken into account indetermining the profit and loss on sale of the subsidiary. 4. Plant and equipment Office equipment £CostAt 1 January 2007 2,315Additions during the period 3,960 -------------------At 30 June 2007 6,275 ------------------- DepreciationAt 1 January 2007 426Charge for the period 289 -------------------At 30 June 2007 715 ------------------- Net book valueAt 30 June 2007 5,560 -------------------At 31 December 2006 1,889 ------------------- 5. Intangible assetsThe movements of the Group's intangible assets during the period were asfollows: Exploration and Goodwill Total valuation assets £ £ £CostAt 1 January 2007 - as previously stated 773,450 4,018,795 4,792,245Fair value adjustment (54,274) 54,274 - ------------ ---------- ----------At 1 January 2007 - as restated 719,176 4,073,069 4,792,245Additions during the period 475,608 - 475,608 ------------ ---------- ----------At 30 June 2007 1,194,784 4,073,069 5,267,853 ------------ ---------- ---------- Amortisation and impairment1 January 2007 - - -Provision for the period - - - ------------ ---------- ----------At 30 June 2007 - - - ------------ ---------- ---------- Net book valueAt 30 June 2007 1,194,784 4,073,069 5,267,853 ------------ ---------- ----------At 31 December 2006 719,176 4,073,069 4,792,245 ------------ ---------- ---------- Goodwill arose on the acquisition of the Company's subsidiary undertaking,Neptune Petroleum Limited. The Group tests goodwill for impairment if there areindicators that its value might be impaired. The amount for intangible exploration and evaluation ("E & E") assets representscosts incurred in relation to the Group's Ugandan and Namibian licences. Theseamounts will be written off to the income statement as exploration expensesunless commercial reserves are established or the determination process is notcompleted and there are no indicators of impairment. When production commencesthe accumulated E & E costs are transferred from intangible assets to tangibleassets as 'Developed Oil and Gas Assets' and amortised over the life of the areaaccording to the rate of depletion of economically recoverable costs. The outcome of ongoing exploration and evaluation, and therefore whether thecarrying value of E & E assets will ultimately be recovered, is inherentlyuncertain. The Directors have assessed the value of the exploration andevaluation expenditure carried as intangible assets and in their opinion noprovision for impairment is currently necessary. The E & E and goodwill balances brought forward at 1 January 2007 have beenrestated by £54,274 to correct the fair values of the E & E costs at the time ofthe Neptune acquisition in 2006. There is no overall effect on the totalintangible assets, or to any other balances in the accounts, at 1 January 2007as a result of this restatement. 6. Cash and cash equivalentsThe cash and cash equivalents at 30 June 2007 includes an amount of £64,070which represents the Sterling equivalent of a US Dollar bank deposit account.This bank account is blocked in support of performance guarantees issued inconnection with the Group's licences in Uganda and Namibia. Interest arising onthat account accrues for the benefit of the Group and is included in the IncomeStatement. 7. Share capital and share options 30 June 2007 31 December 2006 £ £Authorised10,000,000,000 ordinary shares of 0.1p each 10,000,000 10,000,000 --------- ------------Allotted, called up and fully paid536,653,333 (2006 - 458,333,333) ordinaryshares of 0.1p each 536,653 458,333 --------- ------------ The share capital issues in the six months ended 30 June 2007 were are follows: Number of 0.1p Share capital Share Premium shares at nominal value £ £ £As at 1 January 2007 458,333,333 458,333 6,132,159Exercise ofshare optionsat 1.5p each 1,000,000 1,000 14,000Placing ofshares at 2peach 77,000,000 77,000 1,463,000Placing ofshares at3.125p each 320,000 320 9,680Share issuecosts - - (14,675) ---------- ------------ -----------As at 30 June 2007 536,653,333 536,653 7,604,164 ---------- ------------ ----------- The details of share options outstanding at 30 June 2007 are as follows Number of share optionsAt 1 January 2007 9,000,000Granted during the period 4,000,000Exercised during the period (1,000,000)Lapsed during the period (2,000,000)At 30 June 2007 10,000,000 Date of grant Number of Option price Exercisable options between21 December 2005 3,000,000 1.5p 21/12/05 - 21/12/1028 February 2006 1,000,000 1.5p 28/02/07 - 28/02/1128 February 2006 2,000,000 1.5p 28/02/09 - 28/02/118 February 2007 1,000,000 3.125p 08/02/07 - 08/02/123 May 2007 3,000,000 2.25p 03/05/08 - ---------------- 03/05/12 10,000,000 ---------------- The Company's share price during the period ranged between 1.65p and 3.46p. Theclosing share price on 30 June 2007 was 3.08p per share. 8. Share-based payments Six months Six months ended 30 June ended 30 June 2007 2006 £ £The group recognised the following charge inthe income statement in respect of its sharebased payment plans: IFRS 2 charge 56,033 - ----------------- ----------------- The above charge is based on the requirements of IFRS 2 on share-based payments.For this purpose, the weighted average estimated fair value for the shareoptions granted was calculated using a Black-Scholes option pricing model inrespect of options. The volatility measured at the standard deviation ofexpected share price return is based on statistical analysis of the share priceover the period ended 30 June 2007 and this has been calculated at 212%. Therisk free rate has been taken as 5.5%. 9. Reconciliation of movements in shareholders' funds - equity only Six months Eighteen months ended ended 30 June 2007 31 December 2006 £ £Opening shareholders' funds 6,008,258 552,412Loss for the period (252,388) (513,896)Shares issues less placing less costs 1,550,325 5,880,492Share-based payments 56,033 89,250 --------------- --------------Closing shareholders' funds 7,362,228 6,008,258 --------------- -------------- 11. Exploration and evaluation expenditure commitments In order to maintain its interests in the oil and gas permits which have beengranted to it, the Group is obliged to meet certain exploration expenditurecommitments and other obligations. The timing and amount of those commitmentsand obligations are subject to the work programmes required pursuant to thepermit conditions and, depending upon the results of the work performed, mayvary significantly from budgeted or forecast levels. Exploration or evaluationresults in any of the licence areas may also result in variations being requiredto those work programmes and applicable expenditure may be increased ordecreased accordingly. It is the Group's policy to seek joint operating partnersat an early stage in order to reduce its commitments. At 30 June 2007, thebudgeted aggregate amount payable for exploration and evaluation expenditurecommitments was as follows: 30 June 2007 31 December 2006 £ £Due within not more than one year 4,708,000 4,586,000Due between one and two years - 962,000 ------------- ------------ 4,708,000 5,548,000 ------------- ------------ As discussed in the Chairman's Statement, based on farm out agreements enteredinto after 30 June 2007, the Group will not have to fund its Namibia expenditurecommitments and will only be required to contribute 16.67% of its future costsin Uganda. 12. Decommissioning expenditure The Directors have considered environmental issues and the need for anynecessary provision for the cost of rectifying any environmental damages whichmay be required under local legislation and the Group's license obligations. Intheir view, no provision is necessary at 30 June 2007 for any future costs ofdecommissioning or rectifying any environmental damage. 13. Events after the balance sheet date Major events that have occurred subsequent to 30 June 2007 are discussed in theChairman's Statement. This information is provided by RNS The company news service from the London Stock Exchange