Tower Resources Regulatory News (TRP)

30 September 2020

Tower Resources plc

Interim Results to 30 June 2020

Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN)), the AIM-listed oil and gas company with its focus on Africa, announces its Interim Results for the six months ended 30 June 2020.

HIGHLIGHTS

§ Extension of the initial period of the Exploration Phase of the Thali PSC, offshore Cameroon by one year (from 15 September 2019) for the purposes of completing the NJOM-3 well, and declaration of Force Majeure with effect from 17 March 2020 due to travel and operational restrictions arising from the Covid-19 pandemic;

§ Thali PSC, offshore Cameroon, site survey successfully completed by the Geoquip Marine survey vessel MV Investigator with the drilling of three boreholes to a depth of 80 metres each;

§ Binding Heads of Terms executed with respect to a farm-out of the Thali PSC with OilLR Pty Ltd for a 24.5% working interest covering US$7.5 million of the costs of the NJOM-3 well;

§ March 2020 Placing of 133.33 million new ordinary shares at 0.375p to raise £0.5 million (gross), together with issuance of broker commission shares;

§ Release of an updated independent Reserves Report from Oilfield International Limited ("OIL") covering the Thali PSC, confirming Gross mean contingent resources of 18 MMbbls of oil across the proven Njonji-1 and Njonji-2 fault blocks with an NPV10 of US$179 million and EMV10 of US$143 million.

POST REPORTING PERIOD EVENTS

§ Further extension of the Loan Facility with Pegasus Petroleum Limited ("Pegasus") to 15 August 2020, the terms of which included the issue of 4.5 million five-year warrants with a strike price of 0.35 pence, being a premium of 11.1% to the closing price on 30 June 2020. Jeremy Asher, as a director of the Company, and Pegasus, are considered to be "related parties" as defined under the AIM Rules and accordingly, the extension and issue of warrants constituted related party transactions for the purposes of Rule 13 of the AIM Rules.

§ Issue of 15,219,338 warrants to Directors in lieu of £34,000 (in aggregate) of Directors fees to Peter Taylor and David M Thomas (non-executive directors), and Jeremy Asher (as Chairman) in settlement of fees due for the period from 1 July 2020 to 30 September 2020, to conserve the Company's working capital. The warrants are exercisable at a strike price of 0.35 pence, which is a premium of 11.1% to the closing share price on 30 June 2020, and are exercisable for a period of five years from the date of issue;

§ Update on Namibian licences and farm-out discussions on PEL 96 included a significant announcement of updated resource estimates by Global Petroleum Ltd on its adjoining PEL 94, which includes the Welwitschia Deep Albian Carbonate prospect, a large part of which is within the Company's PEL 96;

§ Agreement of a six-month loan facility of US$500,000 with Shard Merchant Capital Ltd ("Shard"). The terms of the facility included the issue of 31,446,541 attached three-year warrants at a strike price of 0.6 pence and 5,761,198 shares to pre-pay interest;

§ Further six-month extension to the existing Pegasus US$750,000 Loan Facility, as part of which 47,169,811 three-year 0.6 pence warrants were issued and Pegasus agreed to subscribe for 37,854,971 shares to convert the accrued interest on the Pegasus Loan Facility into shares, and to pre-pay interest;

§ Subscription to raise gross proceeds of US$200,000 through the issue of approximately 38,407,989 new ordinary shares at a price of 0.393 pence per share to clients of Shard. The Subscription Price of 0.393 pence per share represented a discount of 9.7% to the midpoint price of the Company's shares at the close of trading on 28 August 2020.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

Contacts

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2020

Dear Shareholder,

The first six months of 2020 have presented enormous challenges both to our Company and to the industry as a whole. In our annual report I already discussed the events of this period up to 6 June 2020, and since that time we have continued to work on finding solutions to the challenge of executing the NJOM-3 well while accommodating the various health and travel restrictions in place, and also the natural concerns of a range of personnel across a number of different subcontractors. We are confident that this can be done, but it is not simple. We have also continued working on our well financing and the second stage financing that will be required after we have the appraisal results from the NJOM-3 well, but naturally this is also linked to finalising the well schedule itself.

In July we had interesting news from our neighbours in Namibia, Global Petroleum Ltd, regarding their updated assessment of the Welwitschia Deep Albian carbonate prospect. As I mentioned at the time, Global's estimates of recoverable resources in respect of this prospect, if they materialise, would imply some 224 million barrels of recoverable resources in Tower's PEL 96 section of that structure, of which about 179 million barrels would be attributable to Tower. To see these estimates materialise would require Global to drill this prospect successfully, but the important point is that this would not require any investment on Tower's part.

In mid-August, we were pleased to see the spudding of Total's Luiperd exploration well on Blocks 11B/12B offshore South Africa, following its successful 1-billion boe Brulpadda discovery on the same blocks. Africa Energy, a minority partner in the well, has said that it believes the chance of success of this well is over 80%, and we certainly hope this proves correct. The Luiperd well, if successful, will further de-risk the whole Outeniqua basin in South Africa. Tower, together with operator NewAge, hold the block immediately to the East of Total's blocks 11B/12B, which contains a substantial prospect in the Outeniqua basin, analogous to Brulpadda.

At the end of August 2020, we extended our loan facility provided by Pegasus Petroleum Ltd, and added a second loan facility on similar terms with Shard Merchant Capital Ltd as well as issuing new shares to Shard and to Pegasus for further cash and in lieu of past and future interest on those facilities. This provided the Company with, in aggregate, just under US$700,000 of additional funds net of fees, which provides us with further runway to get the NJOM-3 well underway, and its financing completed. I remain confident that this will be done.

At the end of September we also welcome Paula Brancato to the Board of Directors, and say goodbye to David Thomas. David has been with us since 2017 and has been very supportive of the Company and helpful in working through our options in Cameroon, and he now wishes to reduce his time commitments and prioritise his role in Orion Energy plc. Peter Taylor and I have greatly appreciated David's contributions over the past three years, and wish him well. Paula is a US-based financial services industry professional, an MBA and a FINRA-registered broker and investment advisor, as well as a member of the CFA Society New York, who will take over the role of Chair of the Audit Committee and will bring her decades of experience in financial roles to our Board.

These are challenging times, but we do believe that we will surmount these challenges. We are excited about our Thali project in Cameroon, and our Namibian and South African projects, and we believe that there are still more great opportunities to create value in the oil and gas business in Africa. We look forward to capitalising on these opportunities in the months and years ahead.

Jeremy Asher

Chairman and Chief Executive

29 September 2020

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Signed on behalf of the Board of Directors

Jeremy Asher

Chairman and Chief Executive

29 September 2020

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

1 The share-based payment reserve has been included within the retained loss reserve and is a non-distributable reserve.

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE INTERIM FINANCIAL INFORMATION

1. Accounting policies

a) Basis of preparation

This interim financial report, which includes a condensed set of financial statements of the Company and its subsidiary undertakings ("the Group"), has been prepared using the historical cost convention and based on International Financial Reporting Standards ("IFRS") including IAS 34 'Interim Financial Reporting' and IFRS 6 'Exploration for and Evaluation of Mineral Reserves', as adopted by the European Union ("EU").

The condensed set of financial statements for the six months ended 30 June 2020 is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. They have been prepared using accounting bases and policies consistent with those used in the preparation of the audited financial statements of the Company and the Group for the year ended 31 December 2019 and those to be used for the year ending 31 December 2020. The comparative figures for the half-year ended 30 June 2019 are unaudited. The comparative figures for the year ended 31 December 2019 are not the Company's full statutory accounts but have been extracted from the financial statements for the year ended 31 December 2019 which have been delivered to the Registrar of Companies and the auditors' report thereon was unqualified and did not contain a statement under sections 498(2) and 498(3) of the Companies Act 2006.

This half-yearly financial report was approved by the Board of Directors on 29 September 2020.

b) Going concern

The Group will need to complete its agreed farm-out and/or another asset-level transaction within the next twelve months, or otherwise raise further funds, in order to meet its liabilities as they fall due, particularly with respect to the forthcoming drilling programme in Cameroon. The Directors believe that there are a number of options available to them through either, or a combination of, capital markets, farm-outs (including the farm-out already agreed) or asset disposals with respect to raising these funds. There can, however, be no guarantee that the required funds may be raised or transactions completed within the necessary time frame, which raises uncertainty as to the application of going concern in these accounts. Having assessed the risks attached to these uncertainties on a probabilistic basis, the Directors are confident that they can raise sufficient finance in a timely manner and therefore believe that the application of going concern is both appropriate and correct.

Operating segments

The Group has two reportable operating segments: Africa and Head Office. Non-current assets and operating liabilities are located in Africa, whilst the majority of current assets are carried at Head Office. The Group has not yet commenced production and therefore has no revenue. Each reportable segment adopts the same accounting policies. In compliance with IAS 34 'Interim Financial Reporting' the following table reconciles the operational loss and the assets and liabilities of each reportable segment with the consolidated figures presented in these Financial Statements, together with comparative figures for the period-ended 30 June 2019.

1 Carrying amounts of segment assets exclude investments in subsidiaries.

2 Carrying amounts of segment liabilities exclude intra-group financing.

2. Loss per ordinary share

3. Intangible Exploration and Evaluation (E&E) assets

In accordance with the Group's accounting policies and IFRS 6 the Directors' have reviewed each of the exploration license areas for indications of impairment. Having done so, based on the financial constraints on the Group, and specific issues associated with each license it was concluded that a full ongoing impairment was only necessary in the case of the Zambian licenses 40 and 41, the circumstances of which have not changed since previous reporting period.

The additions during the period represent $1.2 million in Cameroon (2019: $2.4 million), $80k in South Africa (2019: $80k), $21k in Namibia (2019: $nil) and $nil in Zambia (2019: $31k). The focus of the Group's activities during this period has been on preparing for and acquiring inventory and services with respect to the anticipated drilling of the Njonji-3 appraisal well later in 2020 or early in 2021.

4. Trade and other receivables

Trade and other receivables comprise prepaid expenditures.

5. Trade and other payables

Included within trade and other payables are amounts totalling $1.1 million (2019: $1.2 million) with respect to UK VAT payable.

HMRC has issued assessments totalling £843k excluding interest and penalties for VAT it has historically repaid to the Company and was the subject of the initial appeal which was referred to the first-tier tribunal, in which regard a hearing took place at the end of May 2019, and a first-instance decision was issued in favour of the Company on 8 July 2019.

VAT which was incorrectly charged to the Company for land-related services totaling £903k has been reimbursed to the Company by various suppliers and is due to HMRC, but has been withheld by the Company while HMRC has withheld VAT repayments totaling £1.1 million to 30 June 2020.

Taking into consideration all of the above, the net position at 30 June 2020 following the decision of the first-tier tribunal in favour of the Company, if upheld, should be a net repayment to the Company of £205k. However, following HMRC's subsequent petition and the court's granting of leave to appeal to the Upper Tribunal, a date for which has been set for April 2021, the Company has not reflected the net receivable of £205k which it believes is due from HMRC in the financial statements, but instead the Company has made full provision for VAT payable to HMRC as if it were not entitled to claim for input tax which has been reimbursed by suppliers as outlined above. for the land-related services creditor of £903k.

Work programme-related accruals of $975k (2019: $331k) comprise $570k with respect to Cameroon (2019: $nil|) and $405k with respect to South Africa (2019: 332k).

In respect of Cameroon, our subsidiary TRCSA has accrued $570k in respect of services from a supplier, which may become due for payment in the future. The supplier has filed a claim for these services in the High Court in England, together with a further claim for additional charges that TRCSA and the Company believe to be outside of the terms of the service agreement between the supplier and TRCSA and which, based on legal advice, it has rejected. The Company has valid defences to both claims and is litigating them, and also intends to raise its own counterclaims in respect of the services rendered, and therefore the eventual quantum of liability cannot be estimated with certainty.

6. Borrowings

During the period, the Company incurred interest expense on long-term loans, inclusive of accretion of facility costs, of $55k (2019: $70k). A total of $nil was settled in cash (2019 - $nil) with all interest being rolled forwards to be settled on redemption of the loan on 28 February 2020.

In addition to the interest charge, 4.5 million (2019: 93 million) warrants were awarded over the ordinary shares in the Company on drawdown and extension of the facility. The charges recognised for these warrants are:

The carrying amount of the borrowings at 30 June 2020 and 31 December 2019 includes transaction costs of $15k (net of accretion). At 30 June 2020 and 31 December 2019, the carrying amount of the bridging loan facility approximates its fair value as the loan's effective interest rate approximates market rates commercially available.

The loan is secured by a fixed and floating charge over the Company's assets in favour of Pegasus Petroleum Ltd, including the shares of the Company's Cameroon intermediary holding subsidiary, Tower Resources Cameroon Limited.

During the period, the Company secured a Business Bounceback loan from its principal banker, Barclays Bank plc totalling $62k (£50k). The loan term is six years and there are no fees or interest repayments due within the first 12-month period. Incurred interest expense on long-term loans inclusive of accretion of facility costs of $104 were recognised during the period. A total of $nil was settled in cash with all interest being rolled forwards to be repaid during years two to six. The final repayment on the loan will be made on 26 May 2026, although the Company does have the option to repay the loan earlier if it so chooses.

The carrying amount of the borrowings at 30 June 2020 includes transaction costs of £189 ($232) (net of accretion). At 30 June 2020, the carrying amount of the bridging loan facility approximates its fair value as the loan's effective interest rate approximates market rates commercially available. The loan is unsecured.

7. Share capital

The share capital issues during the period are summarised below:

At the annual general meeting of the company held on 6 July 2020, shareholders approved the acquisition and subsequent cancellation of all Deferred Shares and all B Deferred Shares.

8. Share-based payments

Options

Details of share options outstanding at 30 June 2020 are as follows:

These options vest in the beneficiaries in equal tranches on the first, second and third anniversaries of grant.

Warrants

Details of warrants outstanding at 30 June 2020 are as follows:

9. Subsequent events

1 July 2020: Further extension of the Loan Facility with Pegasus Petroleum Limited ("Pegasus") to 15 August 2020 the terms of which included the issue of 4.5 million five-year warrants with a strike price of 0.35 pence, being a premium of 11.1% to the closing price on 30 June 2020. Jeremy Asher, as a director of the Company, and Pegasus, are considered to be "related parties" as defined under the AIM Rules and accordingly, the extension and issue of warrants constituted related party transactions for the purposes of Rule 13 of the AIM Rules.

1 July 2020: Issue of 15,219,338 warrants to Directors in lieu of £34,000 (in aggregate) of Directors fees to Peter Taylor and David M Thomas (non-executive directors), and Jeremy Asher (as Chairman) in settlement of fees due for the period from 1 July 2020 to 30 September 2020, to conserve the Company's working capital. The warrants are exercisable at a strike price of 0.35 pence, which is a premium of 11.1% to the closing share price on 30 June 2020, and are exercisable for a period of five years from the date of issue.

6 July 2020: All the resolutions proposed in the notice of the 2020 Annual General Meeting were duly passed;

28 July 2020: Update on Namibian licences and farm-out discussions on PEL 96 including a significant announcement of updated resource estimates by Global Petroleum Ltd on its adjoining PEL 94, which includes the Welwitschia Deep Albian Carbonate prospect, a large part of which is within the Company's PEL 96;

28 August 2020: Agreement of a six-month loan facility of $500,000 with Shard Merchant Capital Ltd ("Shard"). The terms of the facility include the issue of 31,446,541 attached three-year warrants at a strike price of 0.6 pence and 5,761,198 shares to pre-pay interest;

28 August 2020: Further six-month extension to the existing Pegasus $750,000 Loan Facility with, as part of which 47,169,811 attached three-year 0.6 pence warrants were issued and Pegasus agreed to subscribe for 37,854,971 shares to convert the current accrued interest on the Pegasus Loan Facility into shares, and to pre-pay interest;

28 August 2020: Subscription to raise gross proceeds of $200,000 through the issue of approximately 38,407,989 new ordinary shares at a price of 0.393 pence per share to clients of Shard. The Subscription Price of 0.393 pence per share represented a discount of 9.7% to the midpoint price of the Company's shares at the close of trading on 28 August 2020.