Last checked at 7 Mar 2016 07:00
Tower Resources plc
Preliminary Results to 31 December 2015
7 March 2016
Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN)), the AIM-listed Africa-focussed oil and gas exploration company, announces its preliminary results for the 12 months ended 31 December 2015.
Highlights:
· Portfolio refocus towards proven and emerging basins
· Award of a 100% interest in the Thali PSC located in the prolific Rio Del Rey basin, Cameroon
· Institutional placing to raise net US$8 million: Directors subscribed over $1million
· Board strengthened with the appointments of Philip Frank and Nigel Quinton
· Costs reduced and low near-term commitments
· Cash balance at year-end of US$3.5 million (2014: US$7.9 million)
· Look to strengthen asset base in this period of low acquisition and entry costs
Chairman and Chief Executive's Joint Statement
2015 was a year of transition for Tower Resources plc.
We repositioned our portfolio to include interests in proven basins, with the signing in September of the Thali PSC ("Thali") in the prolific Rio Del Rey shallow water area of the Republic of Cameroon. Tower has a 100% interest in Thali and has been accredited as an operator there. Thali already has three discovery wells, and is therefore part-way to reaching a commercial reserve threshold. In a very difficult equity market, we raised US$8 million in July to fund this acquisition and other activities, with the Directors subscribing over US$1 million. As part of this funding we welcomed M&G Investments as a major new shareholder with an 18% shareholding.
We have also moved to reduce and defer our other near-term commitments and associated costs, and by doing so to minimise risk whilst retaining material exposure to longer-term exploration upside. In areas where we see little chance of commerciality in the medium-term, we have withdrawn. We continue to respond to the oil price environment and the negative market sentiment towards the oil sector, by changing the focus of our current activity whilst preserving the best of our longer term exploration opportunities.
Tower wants to use this period of low acquisition and entry costs to further strengthen our asset base by assembling a larger but still focused portfolio of low risk exploration and appraisal opportunities in proven and emerging basins. We continue to seek sizable working interests, ideally as operator, which allows us to determine the precise nature, cost and timing of our activity. We are now operator of our 100% interests in Cameroon and Zambia, and it is as operator that we have applied for new licences in Namibia and elsewhere. We intend to keep near-term commitments and costs low, and to finance the higher cost activities through farm-outs to larger companies where and when appropriate.
Our focus is currently on western and southern Africa. Our criteria for new activity and investment are strict: we need to envisage returns of many multiples of our investment within the medium-term, as we do with Thali. We believe that the current market, difficult as it is, presents outstanding opportunities to assemble an attractive portfolio cost-effectively, including through sector consolidation.
With the increase in operated assets we wanted to bolster the technical skills on our Board, and therefore we appointed the highly experienced Phil Frank as an Independent Non-Executive Director, and Nigel Quinton as Exploration Director, at the end of September.
Our capital needs going forward will largely be a function of the terms and timing of further seismic work on Thali, together with any farm-out we may agree, and the number of additional compelling investment opportunities we find in the coming year. It is possible that we may need no more cash from the market this year, and if we do it will be for specific, value-creating purposes, for which we will seek shareholder support at the time.
At the AGM we are proposing to restructure and consolidate the Company's shares so that for each 250 shares currently held shareholders will receive one new share. The main purposes of this are to reduce the volatility of the Company's share price, which presently reflects the relatively large increments required for any price movement, and to be able to issue shares if needed for existing contractual arrangements, as the market price is currently below the nominal value. A separate circular is to be issued describing the procedure in more detail, together with the other AGM resolutions. The Board, staff and consultants who own over 15% of the issued share capital, have undertaken to vote in favour of these AGM resolutions.
This AGM also marks the retirement of Peter Blakey, 75, a founder of the Company. We are extremely grateful for all Peter has done for Tower, and wish him every happiness and good health.
We believe that Tower now has an attractive, focused portfolio, combining proven and emerging basin interests. Our team is appropriate for today's conditions and our active management of near-term commitments and risk will position us well to reap the upside when the sector recovery comes.
J Asher, Chairman
G Thomson, CEO
The 2015 Annual Report is being printed and is expected to be posted to shareholders early next week.
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
31 December 2015Audited | 31 December 2014Audited | |||
Note | $ | $ | ||
Revenue | - | - | ||
Cost of sales | - | - | ||
Gross profit | - | - | ||
Other administrative expenses | (2,666,908) | (1,447,548) | ||
Pre-licence expenditures | (2,989,213) | (4,584,545) | ||
Impairment of exploration and evaluation assets | 2 | (4,127,023) | (50,569,455) | |
Total administrative expenses | (9,783,144) | (56,601,548) | ||
Group operating loss | (9,783,144) | (56,601,548) | ||
Finance income | 1,630 | 10,066 | ||
Finance expense | (10,655) | (12,007) | ||
Loss for the year before taxation | (9,792,169) | (56,603,489) | ||
Taxation | - | - | ||
Loss for the year after taxation | (9,792,169) | (56,603,489) | ||
Total comprehensive expense for the year | (9,792,169) | (56,603,489) | ||
Basic loss per share (USc) | (0.19c) | (1.64c) | ||
Diluted loss per share (USc) | (0.19c) | (1.64c) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2015 Audited | 31 December 2014 Audited | |||
Note | $ | $ | ||
Non-current assets | ||||
Property, plant and equipment | 72,226 | 2,611 | ||
Exploration and evaluation assets | 2 | 36,982,467 | 34,004,145 | |
37,054,693 | 34,006,756 | |||
Current assets | ||||
Trade and other receivables | 2,202,055 | 2,313,714 | ||
Cash and cash equivalents | 3,494,083 | 7,941,833 | ||
5,696,138 | 10,255,547 | |||
Total assets | 42,750,831 | 44,262,303 | ||
Current liabilities | ||||
Trade and other payables | 1,576,165 | 4,058,445 | ||
Total liabilities | 1,576,165 | 4,058,445 | ||
Net assets | 41,174,666 | 40,203,858 | ||
Equity | ||||
Share capital | 3 | 11,024,090 | 6,346,538 | |
Share premium | 3 | 141,289,445 | 137,554,592 | |
Retained losses | (111,138,869) | (103,697,272) | ||
Total shareholders' equity | 41,174,666 | 40,203,858 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-based | |||||
Share | Share | payments | Retained | ||
capital | premium | reserve | losses | Total | |
$ | $ | $ | $ | $ | |
At 1 January 2014 | 4,398,933 | 73,954,330 | 2,368,079 | (51,126,593) | 29,594,749 |
Shares issued for cash net of costs | 949,602 | 31,066,041 | - | - | 32,015,643 |
Shares issued on acquisition of subsidiary | 920,700 | 31,295,880 | - | - | 32,216,580 |
Shares issued on settlement of third party fees | 60,177 | 841,944 | - | - | 902,121 |
Shares issued on exercise of options/warrants | 17,126 | 396,397 | - | - | 413,523 |
Total comprehensive income for the year | - | - | 1,664,731 | (56,603,489) | (54,938,758) |
Transfers between reserves | - | - | (456,128) | 456,128 | - |
At 31 December 2014 | 6,346,538 | 137,554,592 | 3,576,682 | (107,273,954) | 40,203,858 |
Shares issued for cash net of costs | 4,545,837 | 3,513,822 | - | - | 8,059,659 |
Shares issued on settlement of third party fees | 131,715 | 221,031 | - | - | 352,746 |
Total comprehensive income for the year | - | - | 2,350,572 | (9,792,169) | (7,441,597) |
At 31 December 2015 | 11,024,090 | 141,289,445 | 5,927,254 | (117,066,123) | 41,174,666 |
CONSOLIDATED STATEMENT OF CASH FLOWS
31 December 2015 Audited | 31 December 2014Audited | |||
Note | $ | $ | ||
Cash outflow from operating activities | ||||
Group operating loss for the year | (9,783,144) | (56,601,548) | ||
Depreciation of property, plant and equipment | 9,243 | 563 | ||
Share-based payments | 2,350,572 | 1,664,731 | ||
Impairment of intangible exploration and evaluation assets | 2 | 4,127,023 | 50,569,455 | |
Operating cash flow before changes in working capital | (3,296,306) | (4,366,799) | ||
Decrease / (increase) in receivables and prepayments | 111,659 | (28,333) | ||
(Decrease) / increase in trade and other payables | (2,482,280) | 984,768 | ||
Cash used in operations | (5,666,927) | (3,410,364) | ||
Interest received | 1,630 | 10,066 | ||
Cash used in operating activities | (5,665,297) | (3,400,298) | ||
Investing activities | ||||
Exploration and evaluation costs | 2 | (7,105,345) | (39,429,653) | |
Purchase of property, plant and equipment | (78,858) | (2,208) | ||
Net cash used in investing activities | (7,184,203) | (39,431,861) | ||
Financing activities | ||||
Cash proceeds from issue of ordinary share capital net of issue costs | 8,412,405 | 33,331,287 | ||
Finance costs | (10,655) | (12,007) | ||
Net cash from financing activities | 8,401,750 | 33,319,280 | ||
Decrease in cash and cash equivalents | (4,447,750) | (9,512,879) | ||
Cash and cash equivalents at beginning of year | 7,941,833 | 17,454,712 | ||
Cash and cash equivalents at end of period | 3,494,083 | 7,941,833 |
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
Tower Resources plc is quoted on the AIM market of the London Stock Exchange. It has the TIDM code TRP and is incorporated in England.
The Group's consolidated financial statements for the year ended 31 December 2015, from which this financial information has been extracted, and for the comparative year ended 31 December 2014 are prepared on a going concern basis and in accordance with IFRS as adopted by the EU ("IFRS"), and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial information for the year ended 31 December 2015 set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 but it is derived from those accounts. The financial information for the year ended 31 December 2014 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The Consolidated Statement of Financial Position at 31 December 2015, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes for the year then ended have been extracted from the Group's 2015 statutory financial statements upon which the auditor's opinion is unqualified and includes a going concern 'emphasis of matter' statement.
The announcement has been agreed with the company's auditor for release.
At 31 December 2015 the Group had cash balances of $3.5 million and the Group is expected to need to raise additional funds in 2016/17 in order to maintain sufficient cash resources for its working capital needs and its committed capital expenditure programmes for the next twelve months from the date of this report. The Directors are confident that they can raise sufficient funds from the capital markets, private investment, farm-outs or asset disposals and as a consequence, believe that both the Group and Company are well placed to manage their business risks successfully despite the current uncertain economic outlook.
The Directors have a reasonable expectation that the Group has adequate access to resources to continue in operational existence for the foreseeable future and continue to meet, as and when they fall due, its planned and committed exploration and development activities and other liabilities for at least the next twelve months from the date of approval of these financial statements. For this reason the Directors continue to adopt the going concern basis in preparing these financial statements.
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 doubt on the Group's ability to continue to operate as planned and to 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. Intangible Exploration and Evaluation (E&E) assets
Exploration and evaluation assets | Goodwill | Total | ||
Year-ended 31 December 2015 | $ | $ | $ | |
Cost | ||||
At 1 January 2015 | 114,180,159 | 8,023,292 | 122,203,451 | |
Additions during the year | 7,105,345 | - | 7,105,345 | |
At 31 December 2015 | 121,285,504 | 8,023,292 | 129,308,796 | |
Amortisation and impairment | ||||
At 1 January 2015 | (80,219,804) | (7,979,502) | (88,199,306) | |
Impairment during the year | (4,127,023) | - | (4,127,023) | |
At 31 December 2015 | (84,346,827) | (7,979,502) | (92,326,329) | |
Net book value | ||||
At 31 December 2015 | 36,938,677 | 43,790 | 36,982,467 | |
At 31 December 2014 | 33,960,355 | 43,790 | 34,004,145 |
Exploration and evaluation assets | Goodwill | Total | ||
Year-ended 31 December 2014 | $ | $ | $ | |
Cost | ||||
At 1 January 2014 | 42,533,925 | 8,023,292 | 50,557,217 | |
Additions during the year | 71,646,233 | - | 71,646,233 | |
At 31 December 2014 | 114,180,158 | 8,023,292 | 122,203,450 | |
Amortisation and impairment | ||||
At 1 January 2014 | (33,640,099) | (3,989,751) | (37,629,850) | |
Impairment during the year | (46,579,704) | (3,989,751) | (50,569,455) | |
At 31 December 2014 | (80,219,803) | (7,979,502) | (88,199,305) | |
Net book value | ||||
At 31 December 2014 | 33,960,355 | 43,790 | 34,004,145 | |
At 31 December 2013 | 8,893,826 | 4,033,541 | 12,927,367 |
In Namibia, the Group was committed to a 2015 work programme designed to obtain a fuller understanding of the results of the well and of its implications for the remaining prospectivity of the Licence, especially the large untested deeper targets, including the Albian carbonates. This has now been completed and the licence relinquished.
In Kenya, the Group made the decision to withdraw from the licence following completion of the Badada-1 well and subsequent assessment of remaining prospectivity on the block as announced on 30 September 2015. All costs capitalised with respect to this licence are impaired as at 31 December 2015.
In South Africa, the Group made the decision, as was announced on 16 February 2016, not to continue to pursue the joint application with New Age for an Orange Basin licence and subsequently impaired capitalised costs totalling $867k. A further $500k is included within receivables with respect to amounts owed to Tower by New Age at the year-end and is considered recoverable (see subsequent events note 6).
3. Share capital
2015 | 2014 | |||
$ | $ | |||
Authorised, called up, allotted and fully paid | ||||
6,807,118,052 (2014: 3,804,900,944) ordinary shares of 0.1p | 11,024,090 | 6,346,538 | ||
The share capital issues during 2015 are summarised as follows:
Number of shares | Share capital at nominal value | Share premium | |||
$ | $ | ||||
At 1 January 2015 | 3,804,900,944 | 6,346,538 | 137,554,592 | ||
Shares issued for cash | 2,915,170,197 | 4,545,837 | 4,358,675 | ||
Shares issued in lieu of fees payable | 87,046,911 | 131,715 | 221,031 | ||
Share issue costs | - | - | (844,852) | ||
At 31 December 2015 | 6,807,118,052 | 11,024,090 | 141,289,445 |
The shares issued in lieu of fees payable, were issued quarterly and valued at the average market price for the quarter in which the services were provided.
4. Operating leases and capital commitments
2015 | 2014 | ||
$ | $ | ||
Minimum lease payments under operating leases recognised as an expense during the year | 41,001 | - | |
At the reporting date outstanding commitments for minimum operating lease payments fall due as follows:
2015 | 2014 | ||
$ | $ | ||
Within one year | 77,938 | - | |
In second to fifth year inclusive | 275,881 | - | |
353,819 | - | ||
Operating lease commitments represent payments made for by the Group for its office properties.
The Group is committed to funding the following exploration expenditure commitments as at 31 December 2015:
Country | Interest | Net commitment 2016 | Net commitment 2017 onwards | ||
Block 2B 1 | Kenya | 15% | $100k | - | |
Algoa-Gamtoos 2 | South Africa | 50% | $100k | $2.1 million | |
Thali 3 | Cameroon | 100% | - | $13.3 million | |
$200k | $15.4 million |
1 Interest relinquished on 31 August 2015.
2 2 years to 14 September 2017.
3 3 years to 14 September 2018.
5. Share-based payments
In its Statement of Comprehensive Income the Company recognised share-based payment charges of $2.4 million (2014: $1.7 million) and there were 198.7 million options in issue at the year-end (2014: 209.2 million).
In compliance with the requirements of IFRS 2 on share-based payments, the fair value of options or warrants granted during the year is calculated using the Black Scholes option pricing model. For this purpose the volatility applied in calculating the above charge varied between 82% and 143% (2014: 82% and 140%), depending upon the date of grant, and the risk free interest rate was 0.50% and the Dividend Yield was 0% for 2014 and 2015.
The Company's share price ranged between 0.09p and 0.70p (2014: 0.54p and 6.62p) during the year. The closing price on 31 December 2015 was 0.11p per share. The weighted average exercise price of the share options was 0.39p (2014: 2.05p) with a weighted average contractual life of 4.57 years (2014: 4.28 years). The total number of options vested at the end of the year was 26.2 million (2014: 45.3 million).
6. Subsequent events
On 5 February 2016, Tower announced that Peter Blakey, Non-Executive Director, has decided to retire from the Board and will therefore not stand for re-election at the Company's next AGM.
On 16 February 2016, Tower announced that its subsidiary and its partner had agreed to withdraw an application for the Orange Basin Technical Co-operation Permit in the ultra-deep water offshore South Africa. Its partner, New African Global Energy SA Pty Ltd will reimburse $500k which was paid as part of the original farm-out agreement in 2013, and which is terminated (see intangible exploration and evaluation note 2).
Contacts
Tower Resources
Graeme Thomson (CEO)Andrew Matharu (VP - Corporate Affairs)+44 20 7253 6639
Peel Hunt LLP (Nominated Adviser and Broker)
Richard Crichton/Ross Allister+44 20 7418 8900
Vigo Communications
Chris McMahon/ Alex Aleksandrov+44 20 7830 9702