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Preliminary Results to 31 December 2021

Tue, 31st May 2022 07:00

RNS Number : 3148N
Tower Resources PLC
31 May 2022
 

31 May 2022

 

Tower Resources plc

Preliminary Results to 31 December 2021

 

Tower Resources plc (the "Company", the "Group" or "Tower" (TRP.L, TRP LN)), the AIM listed oil and gas company with its focus on Africa, announces its preliminary results for the 12 months ended 31 December 2021.

Highlights:

· Cameroon exploration and evaluation expenditure on the Thali PSC amounted to $1.3 million (2020: $2.2 million). Extension of the First Exploration Period of the PSC was granted to 11 May 2022 (and further extension to 11 May 2023 was subsequently agreed);

· In Cameroon, the Group also negotiated a farm-out agreement in respect of the Thali PSC, however the agreement has not to date been approved by the Government of Cameroon;

· In South Africa, operator NewAge completed interpretation of the reprocessing of 4,500 line kms of 2D seismic data on behalf of the joint venture. The data set incorporated both existing JV data and further data acquired from the Petroleum Agency of South Africa ("PASA") including lines from the Brulpadda discovery across the Outeniqua basin to the JV license area at Algoa-Gamtoos. The work identified a deeper-level slope play similar to that seen at Brulpadda, with three distinct reservoir sections containing unrisked Pmean recoverable resources of 1.4 billion barrels of oil equivalent;

· In Namibia the Group began basin modelling work as envisaged in the license work plan;

· The Group received a favourable ruling in the UK from the Upper Tribunal ("UTTC") supporting the previous (2019) favourable ruling from the First Tier Tax Tribunal ("FTT") in respect of the Group's UK VAT position;

· Administrative costs net of share-based payment charges of $762k (2020: $508k) include legal fees incurred totalling $263k (2020: $56k);

· Cash balance at year-end of $10k (2020: $10k).

Post-reporting period events:

· 14 January 2022

Placing for cash to raise £1.5 million (gross) via a subscription of 576,923,077 new ordinary shares of 0.001p each at a price of 0.26 pence per share;

 

· 7 February 2022

Announcements by the National Petroleum Corporation of Namibia ("Namcor"), and also operator Shell Namibia Upstream B.V. ("Shell"), and partner QatarEnergy, confirming that the Graff-1 well on PEL 39 has made a discovery in both its primary and secondary targets, and proved a working petroleum system for light oil in the Orange Basin, offshore Namibia. The Company provided an analysis of the implications of this successful well for the prospectivity of other operators' acreage in Namibia, including its own, and observed that Tower's net acreage position of 18,637 km2 is believed to be the third largest net acreage position in the Namibian offshore, after Exxon and Eco Atlantic Oil & Gas;

 

· 1 April 2022:

Issue of warrants in lieu of £30,000 (in aggregate) of Directors fees and a further £7,500 employment costs, to conserve the Company's working capital at a strike price of 0.2625 pence, and exercisable over five years;

 

· 9 May 2022:

The Company was notified by the Government of Cameroon of a further extension of the First Exploration Period of the Thali PSC to 11 May 2023. The Company also announced that it was negotiating an LOI with Shelf Drilling for Shelf's Trident VIII jack-up drilling rig to drill the NJOM-3 well on the Thali block in the fourth quarter of 2022.

 

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this announcement via Regulatory Information Service ('RIS'), this inside information is now considered to be in the public domain.

 

 

Contacts:

 

Tower Resources plc

+44 20 7157 9625

Jeremy AsherChairman and CEO

 

 

Andrew MatharuVP - Corporate Affairs

 

 

 

SP Angel Corporate Finance LLPNominated Adviser and Joint Broker

Stuart Gledhill

Caroline Rowe

 

+44 20 3470 0470

Novum Securities LimitedJoint Broker

Jon Beliss

Colin Rowbury

 

+44 20 7399 9400

 

 

Panmure Gordon (UK) LimitedJoint Broker

Nick Lovering

Hugh Rich

 

+44 20 7886 2500

 

 

 

 

CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

 

During 2021 we continued to encounter problems arising from the pandemic, but these gradually receded in importance, and by the end of the year - and even before the conflict in Ukraine - the world had woken up to the consequences of several years of underinvestment in the oil and gas industry, with the price of Brent pushing $80/bbl and European gas prices already reflecting physical shortages. Since the year-end we have seen the Brent price for prompt delivery move above $110/bbl, and even forward prices, which are usually less volatile, have risen substantially, with Brent for 2025 delivery having increased from below $60/bbl a year ago to around $80/bbl now.

Naturally, this has increased the potential value of all of our projects. The prospectivity and value of our license interests in Namibia and South Africa have also been enhanced both by work that we and our partners have undertaken in 2021 and in the year to date, and also by the exciting drilling results achieved by TotalEnergies and Shell in Namibia during the same period. This work is discussed in more detail in the Operational Review section below.

Our Cameroon project is also positively affected by the increase in oil prices, though this increase also presents us with short term challenges. Our Njonji development plans on the Thali PSC represent our path to near-term production, and in that sense are more sensitive to the increase in oil prices than our other assets - our internal cash flow projections have certainly improved from those we presented to shareholders in 2021. However, I should also emphasise something we have said in the past: that the economics of the Njonji development are very solid at a wide range of oil prices, and therefore the positive impact of the current high prices, while welcome, is not critical. Our priority is to get the NJOM-3 well drilled, as this is the gateway to the rest of the development. And with higher oil prices leading to increased drilling activity around the world, there are also some additional challenges to address in the form of longer lead times and higher prices for rigs and services.

The Government of Cameroon has recognised this, in providing us with a further extension of the First Exploration Period of the Thali PSC to May 2023, which should give us plenty of time to get the NJOM-3 well drilled, tested and evaluated before entering the next Exploration Period. And with this extension in hand, we are now finalising a binding LOI for a rig to drill the NJOM-3 well prior to the year-end. As we have already explained in our recent Cameroon update, although costs have risen a bit, this is somewhat mitigated by our having already completed a lot of the work for the well and acquired all the long lead items, which are in place in our facility in Douala.

At the time of writing, we are in discussions regarding the final financing arrangements for the well, and as we previously announced, we do not intend to go forward with the previously agreed farm-out as originally planned. It now appears that we can raise some debt financing at the level of our Cameroon subsidiary to help with the NJOM-3 costs, which (if it can be done) would obviously be preferable to the asset-level dilution of the farm-out as originally structured. We do not want to comment further on these discussions at this stage, and we cannot be certain what the final arrangements will be, but we do believe that we will be able to achieve a better overall outcome than the farm-out, while also avoiding a further approval process.

The remainder of 2022 looks like being a crucial period for our Company, and I hope it will also be a very successful period.

 

 

STRATEGIC REPORT

 

Our strategy over the past several years has been to focus in the near term on lower risk appraisal and development within proven basins where there is still low-risk exploration upside, such as our Thali PSC in Cameroon, while still maintaining selective exposure to longer term and high risk/reward exploration in areas where we have existing relationships, such as Namibia and South Africa.

Even before the current conflict in Ukraine, markets were becoming aware by the end of 2021 that the global underinvestment in exploration and production since 2015 was already having a profound effect on both oil and gas supply, and on prices. This has reinforced the benefits, both short and long term, of a strategy based on achieving short term production as quickly as we can, while also continuing to develop potential resources for the future.

Totalenergies' 2020 success in South Africa with its Brulpadda and Luiperd wells in the Outeniqua basin, and its recent success in Namibia at Venus-X1 coupled with Shell's recent success in Namibia with its Graff-1 well, indicate that in Namibia and South Africa we have chosen promising countries for our exposure to high risk, high reward exploration. These successes have also resulted in a renaissance of investor interest in exploration, and especially in these countries, as both the scale of these opportunities and the need for the resulting oil and gas over the next decade have become apparent.

In the near term, our strategy still requires reaching first oil in Cameroon as soon as possible, especially now that production is worth so much more than a few years ago. Our Cameroon license also has substantial exploration upside, but this can only be unlocked once we have the existing discovery appraised and in production.

This activity requires financing, and while there is still non-dilutive financing available (within limits) for producing assets, the equity requirements for the earlier stages of exploration and development usually require some trade-offs between the amount of a project one can retain and the speed with which it can be developed. We always look at the alternatives of financing our activity at the asset level, whether via debt or other non-dilutive financing, or via farm-outs, or at the corporate level, again with debt or equity, in order to achieve the best expected outcome for our shareholders.

Although we have both operated and non-operated interests, our preference is to operate assets, in order to control costs and timing more directly, and to build up our local relationships and internal knowledge of reservoirs and petroleum systems, and this remains the case in 2021 and now.

Over the past few years, keeping costs low and flexible without losing access to our people and their skills has also been critical to survival, and we believe will continue to be critical to success in future - not merely in being able to keep costs to a minimum in periods where activity is necessarily low, as we have recently seen, but also in being able to ramp up the resources and technology we are able to bring to our projects in the future when needed. This is why our technical-subsurface relationship with EPI, which has served us well since 2015, and our more recent relationship with Bedrock Drilling on well design and management, are an essential part of our strategy.

Finally, as noted in our last annual report, our strategy is to enable and to support the wider strategic and environmental plans of each of the countries in which we operate, to increase power generation from cleaner sources, including both renewables and natural gas, both to aid economic development and to displace less efficient diesel and fuel-oil based power generation, and to reduce imports of liquid fuels by increasing local production where possible. These countries' strategic plans depend critically on the continued development of local oil and gas production in the near term, in order to meet the national goals and COP26 and other climate commitments which they have set for the next decade.

 

OPERATIONAL REVIEW

 

In 2021, much of our activity remained constrained by the impact of the pandemic and associated travel and other restrictions. In Namibia and South Africa, where our work programme naturally comprised more planning activity in any case, this was less of a problem than in Cameroon, where our original intention had been to be drilling already. Nevertheless, we were able to make progress on all three licenses.

In Cameroon the first half of the year was dominated by the discussions with MINMIDT and the other elements of government in Cameroon regarding the extension of the initial exploration period of our PSC in the unusual circumstances, and the negotiation of a farm-out agreement with Beluga Energy. The discussions with the government were substantially complete in March and the extension itself was formalised in May, and we were able to announce the terms of the farmout in August. Although we worked hard to complete the farm-out documentation with Beluga as quickly as possible, and submitted a request to government to approve the farmout in September, we waited a long time for any feedback on the approval process (and to date have still not received a formal approval). However, we used the time to update our drilling plans, and in particular to advance our planning for the next steps following the NJOM-3 well, including identifying potential contractors for the wellhead platform and refining the design, and also identifying candidates for the Mobile Oil Production Unit ("MOPU") and potential partners for its provision. At the time of writing our plan is to drill the NJOM-3 well in the fourth quarter of 2022.

In Namibia, we began basin modelling work as planned, and by the end of the year we felt ready to begin a more formal piece of work integrating all the well information and seismic data we could obtain to understand the subsurface better and to prioritise the various leads in our license area. This area, spanning three blocks over 23,297 km2 (gross), is one of the largest acreage positions in Namibia - we believe that only Exxon and Eco Atlantic, following their acquisition of the Azinam interests in Namibia, have larger acreage - and so the importance of the initial subsurface work to narrow down the areas of interest and to prioritise the leads is critical. We expect to complete this work by the end of the summer of 2022 and will have more to say about it at that time. As noted elsewhere in this report, the success of Shell's Graff-1 well and TotalEnergies' Venus-X1 well in early 2022 have given this work additional impetus and excitement since the year-end.

In South Africa, our 50% partner NewAge, as operator of the Algoa-Gamtoos block, announced in 2021 an update to its resources estimate following the 2020 reprocessing of 4,500 kms of 2D seismic together with two post-stacked merged 3D seismic surveys over the Algoa basin. On the deep-water section of the licence the operator has identified a deeper level slope play, similar to that seen at TotalEnergies' Brulpadda discovery in the adjoining blocks in the Outeniqua basin, with three distinct reservoir sections containing unrisked Pmean recoverable resources of 1.4 billion barrels of oil equivalent:

· A shallow section with 470 million boe recoverable resources;

· A deeper slope section with 231 million boe recoverable resources;

· A basin floor fan section with 710 million boe recoverable resources.

In the second half of the year, our focus in South Africa shifted to preparing for acquisition of additional 3D seismic data over this promising deep-water prospect in the Outeniqua basin. We worked with NewAge on the specification and terms of either a stand-alone survey or participation in a multi-client survey linked to adjoining acreage. In the event, unresolved environmental issues delayed one of the surveys in adjoining acreage, and we and our partners concluded that it would be best to defer the 3D seismic acquisition while these issues were clarified, a decision which the Petroleum Authority supported. This remains the next step before we move into the next phase of the license.

The operator NewAge continued to engage in farmout discussions supported by Envoi in 2021, and have some interested parties in discussion at the time of writing. Our own view is that the terms of a farmout have to be right for us to participate in it, as the cost of the 3D acquisition is not great (compared to a well, for example) and the timing is anyway still uncertain, but most importantly, we believe that the prospect itself has substantial value.

 

 

 

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

31 December 2021(audited)

31 December 2020(audited)

Note

$

$

Revenue

 

-

-

Cost of sales

-

-

Gross profit

 

-

-

Other administrative expenses

(1,284,136)

(755,605)

VAT provision

1,480,683

(174,752)

Total administrative expenses

196,547

(930,357)

Group operating profit / (loss)

4

196,547

(930,357)

Finance expense

6

(149,248)

(430,379)

Profit / (loss) for the year before taxation

 

47,299

(1,360,736)

Taxation

7

-

-

Profit / (loss) for the year after taxation

47,299

(1,360,736)

Other comprehensive income

-

-

Total comprehensive income / (expense) for the year

47,299

(1,360,736)

 

Basic profit / (loss) per share (USc)

10

0.00c

(0.11c)

Diluted profit / (loss) per share (USc)

10

0.00c

(0.11c)

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

31 December 2021(audited)

31 December 2020(audited)

 

Note

$

$

Non-current assets

 

Exploration and evaluation assets

12

28,780,391

27,080,202

28,780,391

27,080,202

Current assets

 

Trade and other receivables

14

8,239

8,805

Cash and cash equivalents

10,227

10,054

18,466

18,859

Total assets

 

28,798,857

27,099,061

Current liabilities

 

Trade and other payables

15

2,336,336

3,796,111

Borrowings

16

13,801

1,262,937

2,350,137

5,059,048

Non-current liabilities

 

Borrowings

46,548

68,763

Total liabilities

 

2,396,685

5,127,811

Net assets

 

26,402,172

21,971,250

Equity

 

Share capital

17

18,264,803

18,254,040

Share premium

17

148,747,595

145,343,446

Retained losses

18

(140,610,226)

(141,626,236)

Total shareholders' equity

 

26,402,172

21,971,250

 

 

 

The financial statements of Tower Resources plc, registered number 05305345 were approved by the Board of Directors and authorised for issue on 30 May 2022.

Signed on behalf of the Board of Directors

 

Jeremy Asher - Chairman and Chief Executive

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

Sharecapital

Sharepremium

1 Share-basedpaymentsreserve

Retainedlosses

Total

 

$

$

$

$

$

At 1 January 2020

18,251,117

144,294,128

7,659,308

(148,452,837)

21,751,716

Shares issued for cash

2,265

856,595

-

-

858,860

Shares issued on settlement of third-party fees

70

26,150

-

-

26,220

Shares issued in settlement of loan interest

588

225,568

-

-

226,156

Share issue costs

-

(58,995)

-

-

(58,995)

Share-based payment charge for the year

-

-

528,029

-

528,029

Total comprehensive expense for the year

-

-

-

(1,360,736)

(1,360,736)

At 31 December 2020

18,254,040

145,343,446

8,187,337

(149,813,573)

21,971,250

Shares issued for cash

10,403

3,838,243

3,848,646

Shares issued on settlement of third-party fees

360

110,068

-

-

110,428

Share issue costs

-

(544,162)

(544,162)

Share-based payment charge for the year

-

-

968,711

-

968,711

Transfer to retained losses

-

-

(6,272,250)

6,272,250

-

Total comprehensive income for the year

-

-

-

47,299

47,299

At 31 December 2021

18,264,803

148,747,595

2,883,798

(143,494,024)

26,402,172

 

1 The share-based payment reserve has been included within the retained loss reserve on the consolidated statement of financial position and is a non-distributable reserve.

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

31 December 2021(audited)

31 December 2020(audited)

 

Note

$

$

Cash outflow from operating activities

 

Group operating profit / (loss) for the year

196,547

(930,357)

Share-based payments

20

968,711

264,416

Shares issued on settlement of third-party fees

110,428

26,220

Operating cash flow before changes in working capital

 

1,275,686

(639,721)

Decrease in receivables and prepayments

566

44,643

(Decrease) / increase in trade and other payables

(1,459,775)

1,980,391

Cash (used in) / from operations

 

(183,523)

1,385,313

Interest paid (net)

(2,631)

(10,916)

Cash (used in) / from operating activities

 

(186,154)

1,374,397

Investing activities

 

Exploration and evaluation costs

12

(1,700,189)

(2,764,386)

Net cash used in investing activities

 

(1,700,189)

(2,764,386)

Financing activities

 

Repayment of loan facilities

16

(1,278,451)

-

Proceeds from borrowings

16

-

561,742

Cash proceeds from issue of ordinary share capital net of issue costs

17

3,304,484

799,865

Interest paid

16

(139,516)

(226)

Net cash from financing activities

 

1,886,517

1,361,381

Increase / (decrease) in cash and cash equivalents

173

(28,608)

Cash and cash equivalents at beginning of year

10,054

38,662

Cash and cash equivalents at end of year

 

10,227

10,054

 

COMPANY STATEMENT OF FINANCIAL POSITION

 

 

31 December 2021(audited)

31 December 2020(audited)

 

Note

$

$

Non-current assets

 

Loans to subsidiary undertakings

13

17,475,903

15,330,438

Investments in subsidiary undertakings

13

12,307,766

12,307,766

29,783,669

27,638,204

Current assets

 

Trade and other receivables

14

8,237

8,803

Cash and cash equivalents

6,232

7,236

14,469

16,039

Total assets

 

29,798,138

27,654,243

Current liabilities

 

Trade and other payables

15

226,194

1,444,429

Borrowings

16

13,801

1,262,937

 

 

239,995

2,707,366

Non-current liabilities

 

Borrowings

46,548

68,763

Total liabilities

 

286,543

2,776,129

Net assets

 

29,511,595

24,878,114

Equity

Share capital

17

18,264,803

18,254,040

Share premium

17

148,747,595

145,343,446

Retained losses

18

(137,500,803)

(138,719,372)

Total shareholders' equity

 

29,511,595

24,878,114

 

In accordance with the provisions of Section 408 of the Companies Act 2006, the Company has not presented a statement of comprehensive income and for the year-ended 31 December 2021 the Company made a profit of $250k (2020: $247k)

The financial statements of Tower Resources plc, registered number 05305345 were approved by the Board of Directors and authorised for issue on 30 May 2022.

Signed on behalf of the Board of Directors

Jeremy Asher - Chairman and Chief Executive

COMPANY STATEMENT OF CHANGES IN EQUITY

 

Sharecapital

Sharepremium

1 Share-basedpaymentsreserve

Retainedlosses

Total

 

$

$

$

$

$

At 1 January 2020

18,251,117

144,294,128

7,659,308

(147,154,189)

23,050,364

Shares issued for cash

2,265

856,595

-

-

858,860

Shares issued on settlement of third-party fees

70

26,150

-

-

26,220

Shares issued on settlement of loan interest

588

225,568

-

-

226,156

Share issue costs

-

(58,995)

-

-

(58,995)

Share option charge for the year

-

-

528,029

-

528,029

Total comprehensive expense for the year

-

-

-

247,480

247,480

At 31 December 2020

18,254,040

145,343,446

8,187,337

(146,906,709)

24,878,114

Shares issued for cash

10,403

3,838,243

-

-

3,848,646

Shares issued on settlement of third-party fees

360

110,068

-

-

110,428

Share issue costs

-

(544,162)

-

-

(544,162)

Share option charge for the year

-

-

968,711

-

968,711

Transfer to retained losses

-

-

(6,272,250)

6,272,250

-

Total comprehensive expense for the year

-

-

-

249,858

249,858

At 31 December 2021

18,264,803

148,747,595

2,883,798

(140,384,601)

29,511,595

 

1 The share-based payment reserve has been included within the retained loss reserve on the Company statement of financial position and is a non-distributable reserve.

COMPANY STATEMENT OF CASH FLOWS

 

31 December 2021(audited)

31 December 2020(audited)

 

Note

$

$

Cash outflow from operating activities

 

Operating profit for the year

214,817

444,590

Share-based payments

20

968,711

264,416

Shares issued on settlement of third-party fees

110,428

26,220

Operating cash flow before changes in working capital

 

1,293,956

735,226

Increase in receivables and prepayments

566

44,643

(Decrease) / increase in trade and other payables

(1,218,235)

248,517

Cash from operations

 

76,287

1,028,386

Interest received

181,658

222,353

Cash from operating activities

 

257,945

1,250,739

Investing activities

 

Loans granted to subsidiary undertakings

13

(2,145,465)

(7,919,922)

Impairment of subsidiary undertaking

13

-

5,302,983

Net cash used in investing activities

 

(2,145,465)

(2,616,939)

Financing activities

 

Repayment of loan facilities

16

(1,278,451)

-

Proceeds from loan facilities

16

-

561,742

Cash proceeds from issue of ordinary share capital net of issue costs

17

3,304,484

799,865

Interest paid

16

(139,516)

(226)

Net cash from financing activities

 

1,886,517

1,361,381

Increase / (decrease) in cash and cash equivalents

(1,004)

(4,819)

Cash and cash equivalents at beginning of year

7,236

12,055

Cash and cash equivalents at end of year

 

6,232

7,236

 

NOTES TO THE FINANCIAL STATEMENTS

 

1. Accounting policies

a) General information

Tower Resources plc is a public company incorporated in the United Kingdom under the UK Companies Act. The address of the registered office is 134 Buckingham Palace Road, London, SW1W 9SA. The Company and the Group are engaged in the exploration for oil and gas.

These financial statements are presented in US dollars as this is the currency in which the majority of the Group's expenditures are transacted and the functional currency of the Company and have been prepared in accordance with UK-adopted International Accounting Standards, and in compliance with the requirements of the Companies Act 2006.

b) Basis of accounting and adoption of new and revised standards

Changes in accounting policies

A number of new standards are effective from 1 January 2021 but they do not have material effect on the Group's financial statements.

New and amended standards

The following amended standards and interpretation are effective for financial years commencing on or after 1 January 2022. The Group does not intend to adopt the standards below, before their mandatory application date.

 

Standard

Description

IASB Issue Date

IASB Effective Date

Secretary of State Adoption Date

IAS 37 (Amendments)

Onerous Contracts - Cost of Fulfilling a Contract

14 May 2020

1 January 2022

Endorsed

IAS 16 (Amendments)

Property, Plant and Equipment - Proceeds before Intended Use.

14 May 2020

1 January 2022

Endorsed

IFRS 3 (Amendments)

Reference to the Contractual Framework.

14 May 2020

1 January 2022

Endorsed

IAS 1 (amendments)

Classification of Liabilities as Current or Non-current.

23 January 2020

1 January 2023

Endorsed

IFRS 17

Insurance contracts.

25 June 2020

1 January 2023

Endorsed

IAS 12 (Amendments)

Deferred tax related to assets and liabilities arising from a single transaction.

7 May 2021

1 January 2023

Endorsed

IAS 8 (amendments)

Definition of accounting estimates.

12 February 2021

1 January 2023

Endorsed

IAS 1 and IFRS Practice Statement 2 (amendments)

Disclosure of accounting policies.

12 February 2021

1 January 2023

Endorsed

Future accounting pronouncements

The Company intends to adopt the above listed standards and interpretations in its financial statements for the annual period beginning 1 January 2022. The Company does not expect the implementation to have a material impact on the financial statements.

c) Going concern

The Group will need to complete its agreed farm-out and/or another asset-level transaction within the coming 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 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 timeframes, 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.

This point is also discussed in note 2 of the financial statements

d) Basis of consolidation

The consolidated financial statements incorporate the accounts of the Company and its subsidiaries and have been prepared by using the principles of acquisition accounting ("the purchase method") which includes the results of the subsidiaries from their date of acquisition. Intra-group sales, profits and balances are eliminated fully on consolidation.

The results of subsidiaries acquired or disposed of are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

As a Consolidated Statement of Comprehensive Income is published, a separate Statement of Comprehensive Income for the Parent Company has not been published in accordance with section 408 of the Companies Act 2006.

e) Jointly controlled operations

Jointly controlled operations are arrangements in which the Group holds an interest on a long-term basis which are jointly controlled by the Group and one or more ventures under a contractual arrangement. The Group's exploration, development and production activities are sometimes conducted jointly with other companies in this way. Since these arrangements do not constitute entities in their own right, the consolidated financial statements reflect the relevant proportion of costs, revenues, assets and liabilities applicable to the Group's interests.

f) Oil and Gas Exploration and Evaluation Expenditure

Costs incurred before the acquisition of a license or permit to explore an area are expensed to the income statement.

All exploration and evaluation costs incurred following a license or permit to explore being obtained or acquired on the acquisition of a subsidiary are capitalised in respect of each identifiable project area. These costs are classified as intangible assets and are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves (successful efforts).

Costs incurred by Directors' and employees of the parent Company on the exploration activities are recharged to the subsidiaries and capitalised as exploration assets accordingly.

Other costs are expensed unless commercial reserves have been established or the determination process has not been completed. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

When production commences the accumulated costs for the relevant area of interest are transferred from intangible assets to tangible assets as 'Developed Oil and Gas Assets' and amortised over the life of the area according to the rate of depletion of the economically recoverable costs.

g) Impairment of Oil and Gas Exploration and Evaluation assets

The carrying value of unevaluated areas is assessed when there has been an indication that impairment in value may have occurred. The impairment of unevaluated prospects is assessed based on the Directors' intention with regard to future exploration and development of individual significant areas and the ability to obtain funds to finance such exploration and development.

h) Decommissioning costs

Where a material liability for the removal of production facilities and site restoration at the end of the field life exists, a provision for decommissioning is made. The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements. An asset of an amount equivalent to the provision is also created and depreciated on a unit of production basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated asset.

i) Property, plant and equipment

Property, plant and equipment is stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life as follows:

Computers and equipment, fixtures, fittings and equipment: straight line over 4 years

Leasehold and office refurbishment costs: over duration of lease

The assets' residual values and useful lives are reviewed and adjusted if necessary, at each year-end. Profits or losses on disposals of plant and equipment are determined by comparing the sale proceeds with the carrying amount and are included in the statement of comprehensive income. Items are reviewed for impairment if and when events indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset's net selling price and value in use.

j) Investments

The Parent Company's investments in subsidiary companies are stated at cost less any expected credit loss for impairment and are shown in the Company's Statement of Financial Position.

k) Share-based payments

The Company makes share-based payments to certain Directors, employees and consultants by the issue of share options or warrants. The fair value of these payments is calculated either using the Black Scholes option pricing model or by reference to the fair value of the remuneration settled by way of the grant of such options or warrants. The expense is recognised on a straight-line basis over the period from the date of award to the date of vesting, based on the Company's best estimate of shares that will eventually vest.

l) Foreign currency translation

i Functional and presentational currency

Items included in the financial statements are shown in the currency of the primary economic environment in which the Company operates ("the functional currency") which is considered by the Directors to be the U.S Dollar. The exchange rate at 31 December 2021 was £1 / $1.3479 (2020: £1 / $1.3649).

ii Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

Transactions in the accounts of individual Group companies are recorded at the rate of exchange ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling at the year-end. All differences are taken to the statement of comprehensive income.

m) Taxation

i Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible on other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

ii Deferred taxation

Deferred income taxes are provided in full, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income taxes are determined using tax rates that have been enacted or substantially enacted and are expected to apply when the related deferred income tax asset is realised or the related deferred income tax liability is settled.

The principal temporary differences arise from depreciation or amortisation charged on assets and tax losses carried forward. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.

n) Financial instruments

The Group's Financial Instruments comprise of cash and cash equivalents, loans and receivables. There are no other categories of financial instrument.

i Cash and cash equivalents

Cash and cash equivalents are carried at cost and comprise cash in hand, cash at bank, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

ii Receivables

Receivables are measured at amortised cost unless the time value of money is immaterial. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the assets' carrying amount and the recoverable amount. Expected credit losses for impairment of receivables are included in the statement of comprehensive income.

iii Payables

Payables are recognised initially at fair values and subsequently measured at amortised cost using the effective interest method.

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the asset of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

o) Share capital

Ordinary shares are classified as equity. Proceeds received from the issue of ordinary shares above the nominal value are classified as Share Premium. Costs directly attributable to the issue of new shares are shown in equity as a deduction from the Share Premium account.

p) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group would be required to settle that obligation. Provisions are measured at the managements' best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material.

q) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision makers have been identified as the executive Board members.

r) Leases

The Group do not have any leases with a term of 12-months or more that contain an option to purchase or where the underlying asset has anything other than a low value and has elected for exemption to the reporting requirements of IFRS 16 (Leases).

 

2. Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on managements' best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRS also require management to exercise its judgement in the process of applying the Group's accounting policies.

The prime areas involving a higher degree of judgement or complexity, where assumptions and estimates are significant to the financial statements, are as follows:

Recoverability of inter-company balances

Determining whether inter-company balances are impaired requires an estimation of whether there are any indications that their carrying values are not recoverable details of which are included in note 13.

Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether it successfully recovers the related exploration and evaluation asset through sale. Factors which could impact the future recoverability include the level of proved, probable and inferred resources, future technological changes which could impact the cost of drilling and extraction, future legal changes (including changes to environmental restoration obligations), changes to commodity prices and licence renewal dates and commitments.

To the extent that capitalised exploration and evaluation expenditure is determined to be irrecoverable in the future, this will reduce profits and net assets in the period in which this determination is made. In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage which permits reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent that it is determined in the future that this capitalised expenditure should be written off, this will reduce profits and net assets in the period in which this determination is made. Details of impairments of capitalised exploration and evaluation expenditure are included in note 12.

VAT receivable

On 21 May 2021 the Company announced that it had received a favourable ruling from the Upper Tribunal upholding the First-Tier Tax Tribunal's decision in the Company's favour and dismissing HMRC's appeal against the First-Tier Tax Tribunal's decision.

The First-Tier Tax Tribunal's decision, which was announced by the Company in July 2019, allowed the Company's appeal against HMRC's 2016 decisions to deny it credit for input VAT. The Upper Tribunal's decision affirmed the First-Tier Tax Tribunal's decision, and no subsequent appeal was made by HMRC to the Court of Appeal. There remains a further appeal to the First-Tier Tax Tribunal by HMRC on procedural grounds which is yet to be heard, however, the Company does not assess that this appeal has any basis in fact and has released provisions previously made totalling $1.5 million (2020: provisioned $175k). Included within trade and other payables (note 15) are amounts totalling $72k / £53k (2020: $1.2 million / £903k) with respect to UK VAT payable.

Capital markets / going concern

The Group relies on the UK equities market and the market for equity participations in oil and gas exploration assets in order to raise the funds required to operate as a listed entity and complete the respective work programmes for its oil and gas exploration assets. From time to time, and especially in light of the present Covid-19 pandemic, general economic and market conditions may deteriorate to a point where it is not possible to raise equity finance to fund exploration projects, nor debt to develop projects.

Additional financing may therefore not be available to the Group restricting the scope of operations, risking both its long-term expansion programme, its obligations under contracts which may be withdrawn or terminated for non-compliance and ultimately the financial stability of the Group to continue as a going concern.

Please see note 1 (c) for a more detailed discussion of going concern matters.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black Scholes model and by reference to the value of the fees or remuneration settled by way of granting of warrants. The determination of fair value using the Black Scholes methodology is based on the input parameters chosen and will therefore contain an element of judgement and uncertainty. Details of share-based payment transactions are included in note 20.

 

3. 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 IFRS 8 'Operating Segments' 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 year-ended 31 December 2021.

Africa

Head Office

Total

 

2021

2020

2021

2020

2021

2020

$

$

$

$

$

$

Administrative expenses 1

73,931

111,635

598,396

(805,452)

672,327

(693,817)

Pre-licence expenditures

-

-

-

(243)

-

(243)

Share-based payment charges

-

-

(475,780)

(236,297)

(475,780)

(236,297)

Interest income

-

(416)

(1,226)

161

(1,226)

(255)

Financing costs

(643)

(117)

(147,379)

(430,007)

(148,022)

(430,124)

Gain / (loss) on disposal of subsidiary undertaking

-

1,314,617

-

(1,314,617)

-

-

Loss by reportable segment

73,288

1,425,719

(25,989)

(2,786,455)

47,299

(1,360,736)

Total assets by reportable segment 2 / 3

28,784,388

27,083,022

14,469

16,039

28,798,857

27,099,061

Total liabilities by reportable segment 4

(2,110,144)

(2,351,684)

(286,541)

(2,776,127)

(2,396,685)

(5,127,811)

 

1 Administrative expenses include credits of $1.4 million (2020: expense $175k) of VAT provision write-backs following the successful defence of VAT claims made against the Company by HMRC at the chambers of the second-tier tax tribunal.

2 Included within total assets of $28.8 million (2020: $27.0 million) are $14.3 million Cameroon (2020: $13.0 million), $368k Namibia (2020: $320k) and $14.0 million South Africa (2020: $13.7 million).

3 Carrying amounts of segment assets exclude investments in subsidiaries.

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

 

4. Group operating profit / (loss)

Profit from operations is stated after charging/(crediting):

Total

 

2021

2020

$

$

Share-based payment charges included within staff costs

475,780

236,297

Share-based payment charges included within professional costs

67,364

20,632

Share-based payment charges included within finance costs

-

263,613

Staff costs

-

2,203

(Loss) / gain on foreign currencies

(21,367)

164,951

An analysis of auditor's remuneration is as follows:

 

Fees payable to the Group's auditors for the audit of the Group and subsidiary annual accounts

49,095

39,329

Fees payable to the Group's auditors for non-audit assurance services

4,442

9,884

Total audit fees

53,537

49,213

 

5. Employee information

The average monthly number of employees of the Group (including Directors) was:

 

2021

2020

Head office

 

 

3

3

Africa

 

 

3

3

 

 

6

6

 

Group employee costs during the year (including executive Directors) amounted to:

2021

2020

$

$

Wages and salaries

-

2,060

Social security costs

-

143

Share-based payment charges

475,780

236,297

475,780

238,500

During 2021, no awards were made under the Group share incentive scheme.

Key management personnel include the executive and non-executive Directors whose remuneration, including non-cash share-based payment charges of $481k (2020: $399k), was $481k (2020: $399k); see Directors' Report for additional detail. During the year $581k (2020: $244k) of the full-year share-based payment charge of $969k (2020: $528k) related to employees and their remuneration as employees.

The highest paid Director was Jeremy Asher $401k (2020: $305k).

 

6. Finance costs

During the year covered by these financial statements the Group incurred finance costs of $149k (2020: $430k). Included within these charges is share-based payment costs of $nil (2020: $264k) relating to warrants issued on drawdown and extension of the bridging loan facility and the settlement of interest due. The Company incurred finance costs of $147k (2020: $430k).

 

7. Taxation

 

2021

2020

$

$

Current tax

UK Corporation tax

-

-

Total current tax charge

 

 

-

-

The tax charge for the period can be reconciled to the loss for the year as follows:

 

Group loss before tax

(47,299)

1,360,733

Tax at the UK Corporation tax rate of 19% (2020: 19.3%)

8,986

(258,540)

Tax effects of:

 

Expenses not deductible for tax purposes

90,398

44,896

Tax losses carried forward not recognised as a deferred tax asset

(99,384)

213,644

Current tax charge

-

-

 

 

8. Deferred tax

At the reporting date the Group had an unrecognised deferred tax asset of $4.1 million (2020: $4.3 million) relating to unused tax losses. No deferred tax asset has been recognised due to the uncertainty of future profit streams against which these losses could be utilised.

 

9. Parent company income statement

For the year-ended 31 December 2021 the Parent Company made a profit of $250k (2020: loss of $247k) including financing costs of $147k (2020: $430k). Included within finance costs are $nil of share-based payments with respect to warrants issued to lenders (2020: $264k). The Company charged finance interest on intercompany loan accounts of $185k (2020: $233k) and fees with respect to the provision of strategic advice and support of $91k (2020: $39k). In accordance with the provisions of Section 408 of the Companies Act 2006, the Parent Company has not presented a statement of comprehensive income.

 

10. Profit / (loss) per share

The fully diluted weighted average number of shares in issue and to be issued as at 31 December 2021 is 1,900,696,681 (2020: 1,244,247,074). At 31 December 2021 the dilutive effect of share options outstanding was 35,416,521. At 31 December 2020, the fully diluted profit per share has been kept the same as the basic profit per share because the conversion of share options and share warrants would decrease the basic loss per share and is thus anti-dilutive. The number of anti-dilutive shares that were excluded from this computation of profit per share was 32,615,562.

Basic & Diluted

 

2021

2020

$

$

Profit / (loss) for the year

47,299

(1,360,736)

Weighted average number of ordinary shares in issue during the year

1,865,280,160

1,244,247,074

Dilutive effect of share options outstanding

35,416,521

-

Fully diluted average number of ordinary shares during the year

1,900,696,681

1,244,247,074

Profit / (loss) per share (USc)

0.00c

(0.11c)

 

 

11. Property, plant and equipment

Group

Company

Year-ended 31 December 2021

 

$

$

Cost

 

At 1 January 2021

1,046

1,046

At 31 December 2021

1,046

1,046

Depreciation

 

At 1 January 2021

1,046

1,046

At 31 December 2021

1,046

1,046

Net book value

 

 

At 31 December 2021

 

-

-

At 31 December 2020

-

-

 

Year-ended 31 December 2020

 

$

$

Cost

 

At 1 January 2020

1,046

1,046

At 31 December 2020

1,046

1,046

Depreciation

 

At 1 January 2020

1,046

1,046

At 31 December 2020

1,046

1,046

Net book value

At 31 December 2020

-

-

At 31 December 2019

-

-

 

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

 

Exploration and evaluation assets

Goodwill

Total

Year-ended 31 December 2021

$

$

$

Cost

 

At 1 January 2021

99,088,664

8,023,292

107,111,956

Additions during the year

1,700,189

-

1,700,189

At 31 December 2021

100,788,853

8,023,292

108,812,145

Amortisation and impairment

 

At 1 January 2021

(72,008,462)

(8,023,292)

(80,031,754)

Impairment during the year

-

-

-

At 31 December 2021

(72,008,462)

(8,023,292)

(80,031,754)

Net book value

 

At 31 December 2021

28,780,391

-

28,780,391

At 31 December 2020

27,080,202

-

27,080,202

 

Exploration and evaluation assets

Goodwill

Total

Year-ended 31 December 2020

$

$

$

Cost

 

At 1 January 2020

96,324,278

8,023,292

104,347,570

Additions during the year

2,764,386

-

2,764,386

At 31 December 2020

99,088,664

8,023,292

107,111,956

Amortisation and impairment

 

At 1 January 2020

(72,008,462)

(8,023,292)

(80,031,754)

Impairment during the year

-

-

-

At 31 December 2020

(72,008,462)

(8,023,292)

(80,031,754)

Net book value

 

At 31 December 2020

27,080,202

-

27,080,202

At 31 December 2019

24,315,816

-

24,315,816

 

During the year the Group capitalised amounts totalling $1.7 million (2020: $2.7 million) with respect to the following assets:

2021

2020

$

$

Cameroon

1,314,854

2,233,492

Namibia

47,880

91,338

South Africa

337,455

439,556

Total

1,700,189

2,764,386

 

In Cameroon the $1.3 million of capitalised expenditure comprised ongoing NJOM-3 appraisal drilling preparation costs plus the capitalised cost of operating the local office in Douala.

In South Africa, Rift Petroleum Limited, Tower's wholly owned subsidiary, and its JV partner and operator  New African Global Energy SA (Pty) Ltd, completed the reprocessing of existing sub-surface data, further corroborating management's view of the prospectivity of the Algoa-Gamtoos block.

In Namibia, the Group made various licence commitment payments to the Government of the Republic of Namibia in addition to commencing basin modelling work and other work in line with the work programme commitments.

In accordance with the Group's accounting policies and IFRS 6 'Exploration for and Evaluation of Mineral Resources' the Directors have reviewed each of the exploration license areas for indications of impairment. Having done so, it was concluded that a full impairment review was not required on the Cameroon, South Africa or Namibian licences,.

The Directors have not provided for any impairment of the Group's investment in the Thali license, because potential transactions and funding discussions with third parties support the Directors' view that the current carrying value is recoverable. Furthermore, the operating company, Tower Resources Cameroon SA, was awarded a 12-month extension of the First Exploration Period of the license to May 2022 by the Government of the Republic of Cameroon, which has now been further extended to 11 May 2023.

In South Africa, PASA formally approved the application to enter the second renewal period, submitted by the Operator NewAge Energy Algoa (Pty) Ltd, on 17 November 2020, having confirmed that the first renewal period work programme had been completed to its satisfaction. The second renewal period commits the JV to the acquisition of 700km of 2D seismic acquisition or the acquisition of 300km of 3D seismic. The minimum spend is $5.0 million in total to the JV and is to be completed by 16 November 2022, representing a commitment to acquire a minimum of 700km 2D or 300km of 3D seismic over the block. Acquiring the additional seismic data in 2022 is now no longer possible, not least because of environmental concerns raised in the fourth quarter of 2021 over Shell's acquisition of seismic data in the adjoining license areas to the East. As a result, the JV partners do not expect to acquire the new 3D seismic data over the block until 2023 at the earliest, the operator has told the Company that the Petroleum Authority of South Africa ("PASA") accepts this position and merely requires that the seismic acquisition obligation is completed before the JV enters the next renewal period.

The Directors' view is that the recent TotalEnergies discoveries at Brulpadda and Luiperd, and the analysis conducted by the JV indicating that the deepwater lead in the JV license area conducted in 2021, support the current valuation of the license.

In Namibia, the Company's investment in the current license is currently just $368k (2020: $320k), which appears well supported by the valuations implied by recent transactions in the region, allowing for the early stage of the evaluation and appraisal process. Furthermore, the Directors continue to believe firmly that the relatively modest amounts of expenditure incurred on acquiring and securing tenure to the licence is fully supported by their initial view of its prospectivity based on the information that is currently available.

 

13. Investment in subsidiaries

Loans to subsidiary undertakings

Shares in subsidiary undertakings

Total

Company

$

$

$

Cost

At 1 January 2021

80,192,564

32,216,739

112,409,303

Net advances during the year

2,145,464

-

2,145,464

At 31 December 2021

82,338,028

32,216,739

114,554,767

Provision for impairment

 

 

-

At 1 January 2021

(64,862,126)

(19,908,973)

(84,771,099)

At 31 December 2021

(64,862,126)

(19,908,973)

(84,771,099)

Net book value

 

 

-

At 31 December 2021

17,475,902

12,307,766

29,783,668

At 31 December 2020

15,330,438

12,307,766

27,638,204

 

Included within loans made to subsidiary undertakings during the year of $2.1 million (2020: 1.3 million) are amounts of $1.3 million Cameroon (2020: $1.0 million), $394k South Africa (2020: $25k), $415k Rift Petroleum Holdings (2020: $256k) and $51k (2020: $15k) Namibia.

Loans made by the parent company to subsidiary undertakings are interest-bearing in accordance with loan agreements made in 2015, and are repayable to the parent company on demand.

The subsidiary undertakings at the year-end are as follows (these undertakings are included in the Group accounts):

Country of

Class of

Proportion of voting rights held

Nature of business

 

incorporation

shares held

2020

2020

2020

2019

2020

Tower Resources Cameroon Limited 1

England & Wales

Ordinary

100%

100%

Holding company

Tower Resources Cameroon SA 2

Cameroon

Ordinary

100%

100%

Oil and gas exploration

Rift Petroleum Holdings Limited 1

Isle of Man

Ordinary

100%

100%

Holding company

Rift Petroleum Limited 3

Zambia

Ordinary

100%

100%

Oil and gas exploration

Rift Petroleum Limited 3

Isle of Man

Ordinary

100%

100%

Oil and gas exploration

Tower Resources (Namibia) Holdings Limited 1

England & Wales

Ordinary

100%

100%

Holding company

Tower Resources (Namibia) Limited 4

England & Wales

Ordinary

100%

100%

Oil and gas exploration

1 Held directly by the Company, Tower Resources plc

2 Held directly or indirectly through Tower Resources Cameroon Limited

3 Held directly or indirectly through Rift Petroleum Holdings Limited

4 Held directly or indirectly through Tower Resources (Namibia) Holdings Limited

14. Trade and other receivables

Group

Company

 

2021

2020

2021

2020

$

$

$

$

Trade and other receivables

8,239

8,805

8,237

8,803

 

15. Trade and other payables

Group

Company

 

2021

2020

2021

2020

$

$

$

$

Trade and other payables

344,601

1,763,182

173,172

1,386,925

Accruals

1,991,735

2,032,929

53,022

57,504

Loans from subsidiary undertakings

-

-

-

-

2,336,336

3,796,111

226,194

1,444,429

 

On 21 May 2021 the Company announced that it had received a favourable ruling from the Upper Tribunal upholding the First-Tier Tax Tribunal's decision in the Company's favour and dismissing HMRC's appeal against the First-Tier Tax Tribunal's decision.

The First-Tier Tax Tribunal's decision, which was announced by the Company in July 2019, allowed the Company's appeal against HMRC's 2016 decisions to deny it credit for input VAT. The Upper Tribunal's decision affirmed the First-Tier Tax Tribunal's decision, and no subsequent appeal was made by HMRC to the Court of Appeal. There remains a further appeal to the First-Tier Tax Tribunal by HMRC on procedural grounds which is yet to be heard, however, the Company does not assess that this appeal has any basis in fact and has released provisions previously made totalling $1.5 million (2020: provisioned $175k). Included within trade and other payables are amounts totalling $72k / £53k (2020: $1.2 million / £903k) with respect to UK VAT payable.

Group creditor payment days are approximately 32 days (2020: 29 days).

Accruals include a number of cash calls in respect of current or proposed work in South Africa which have not yet been agreed or approved by the JV partners, and which the Company expects will ultimately change.

 

16. Borrowings

Total borrowings for the Group and Company are noted below:

Group

Company

 

 

 

2021

2020

2021

2020

 

 

$

$

$

$

 

Principal balance at beginning of year

1,338,726

770,480

1,338,726

770,480

 

Amounts drawn down during the year

-

561,742

-

561,742

 

Principal repaid during the year

(1,278,451)

-

(1,278,451)

-

 

Currency revaluations at year end

(743)

6,504

(743)

6,504

 

Principal balance at end of year

59,532

1,338,726

59,532

1,338,726

 

 

 

Financing costs at beginning of year

(7,026)

70,010

(7,026)

70,010

 

Changes to financing costs during the year

47,383

(3,013)

47,383

(3,013)

 

Interest expense

99,997

152,372

99,997

152,372

 

Interest paid during the year

(139,516)

(226,382)

(139,516)

(226,382)

 

Currency revaluations at year end

(20)

(13)

(20)

(13)

 

Financing costs at the end of the year

818

(7,026)

818

(7,026)

 

 

 

Carrying amount at end of period

60,349

1,331,700

60,349

1,331,700

 

Current

13,801

 

1,262,937

-

1,262,937

 

Non-current

46,548

68,763

60,349

68,763

 

 

PRINCIPAL REPAYMENT DATES

Group

Company

 

 

2021

2020

2021

2020

 

 

$

$

$

$

 

Due within 1 year

13,801

1,270,960

13,802

1,270,960

 

Due within years 2-5

46,548

55,010

46,548

55,010

 

Due in more than 5 years

-

5,730

-

5,730

 

 

60,349

1,331,700

60,349

1,331,700

 

During the year, the Group and Company entered into no new facilities (2020: $562k) and repaid its Shard Merchant Capital Ltd loan in January 2021 and its Pegasus Petroleum Limited loan in August 2021.

On 21 January 2021, the Company repaid in full the $500k loan facility with Shard Merchant Capital Ltd. The terms of the Shard 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 charged at 12% per annum. The loan was secured by a fixed and floating charge over the Company's assets in favour of Shard Merchant Capital Ltd. The repayment of the loan included facility transaction costs of $35k. During the period the Company recognised interest charges totalling $21k (2020: $43k) and made repayments totalling $535k (2020: $30k).

On 4 March 2021, the Pegasus Petroleum Limited loan facility, to which Jeremy Asher is a controlling party, was extended to the end of November 2021. Consideration for the extension comprised an increase in the production-based payments, the amount depending on whether the loan would be repaid by 15 July or only in November 2021. Additionally, simple interest would accrue at 12% per annum pro rata, commencing on 4 March 2021, and would only be paid at the end of the facility period. The 15 July date was subsequently extended to 20 August 2021, with the production-based payments effectively limited to 3.75% of the Contractor share of revenues from the production sharing contract, net of the Government share and net of all Petroleum Taxes, and the facility was fully repaid on 20 August 2021.

 

17. Share capital

2021

2020

$

$

Authorised, called up, allotted and fully paid

 

2,109,172,592 (2020: 1,325,296,032) ordinary shares of 0.001p

18,264,803

18,254,040

 

The share capital issues during 2021 are summarised as follows:

Number of shares

Share capital at nominal value

Share premium

 

$

$

 At 1 January 2021

1,325,296,032

18,254,040

145,343,446

 Shares issued for cash

757,556,560

10,403

3,838,243

 Shares issued on settlement of third party fees

26,320,000

360

110,068

 Shares issued in settlement of loan interest

-

-

-

 Share issue costs

-

-

(544,162)

 At 31 December 2021

 

2,109,172,592

18,264,803

148,747,595

 

In January 2021, the Company raised £1.3 million by placing 384,615,384 shares for cash and 20,000,000 shares in settlement of third party fees at 0.325 pence per share.

In June 2021, the Company raised £50k by placing 20,000,000 shares for cash at 0.25 pence per share.

In July 2021, the Company raised £16k by placing 6,320,000 shares in settlement of third fees at 0.25 pence per share.

In August 2021, the Company raised £1.5 million by placing 352,941,176 shares for cash at 0.425 pence per share.

 

18. Reserves

Reserves within equity are as follows:

Share capital

Amounts subscribed for share capital at nominal value.

Share premium account

The share premium account represents the amounts received by the Company on the issue of its shares which were in excess of the nominal value of the shares.

Retained losses

Cumulative net gains and losses recognised in the Statement of Comprehensive Income less any amounts reflected directly in other reserves.

 

19. Financial instruments

Capital risk management and liquidity risk

Capital structure of the Group and Company consists of cash and cash equivalents held for working capital purposes and equity attributable to the equity holders of the Parent, comprising issued capital, reserves and retained losses as disclosed in the Statement of Changes in Equity. The Group and Company uses cash flow models and budgets, which are regularly updated, to monitor liquidity risk.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each material class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

Due to the short-term nature of these assets and liabilities such values approximate their fair values at 31 December 2021 and 31 December 2020.

Carrying amount / fair value

 

2021

2020

Group

 

$

$

Financial assets (classified as loans and receivables)

 

Cash and cash equivalents

10,227

10,054

Trade and other receivables

8,239

8,805

Total financial assets

 

18,466

18,859

Financial liabilities at amortised cost

 

Trade and other payables

2,336,336

3,796,111

Bridging loan facility

60,349

1,331,700

Total financial liabilities

 

2,396,685

5,127,811

 

Carrying amount / fair value

 

2021

2020

Company

 

$

$

Financial assets (classified as loans and receivables)

 

Cash and cash equivalents

6,232

7,236

Trade and other receivables

8,237

8,803

Loans to subsidiary undertakings

17,475,903

15,330,438

Total financial assets

 

17,490,372

15,346,477

Financial liabilities at amortised cost

 

Loans from subsidiary undertaking

17,475,903

15,330,438

Borrowings

60,349

1,331,700

Total financial liabilities

 

17,536,252

16,662,138

 

Financial risk management objectives

The Group's and Company's objective and policy is to use financial instruments to manage the risk profile of its underlying operations. The Group continually monitors financial risk including oil and gas price risk, interest rate risk, equity price risk, currency translation risk and liquidity risk and takes appropriate measures to ensure such risks are managed in a controlled manner including, where appropriate, through the use of financial derivatives. The Group and Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Interest rate risk management

The Group and Company borrowings carry a fixed interest rate of 1% per month and are therefore not exposed to any sensitivity risk.

Interest rate sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and assuming the amount of the balances at the reporting date were outstanding for the whole year.

A 100-basis point change represents management's estimate of a possible change in interest rates at the reporting date. If interest rates had been 100 basis points higher and all other variables were held constant the Group's profits and equity would be impacted as follows:

Group

Company

 

Increase

Increase

 

2021

2020

2021

2020

$

$

$

$

Cash and cash equivalents

484

402

419

243

Borrowings

7,725

(9,599)

7,725

(9,599)

8,209

(9,197)

8,144

(9,356)

 

The Group's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates on classes of financial assets and financial liabilities, was as follows:

2021

2021

2020

2020

Floating interest rate

Non-interest bearing

Floating interest rate

Non-interest bearing

$

$

$

$

Cash and cash equivalents

6,935

3,292

7,795

2,259

Foreign currency risk

The Group's and Company's reporting currency is the US dollar, being the currency in which the majority of the Group's revenue and expenditure is transacted. The US dollar is the functional currency of the Company and the majority of its subsidiaries. Less material elements of its management, services and treasury functions are transacted in pounds sterling. The majority of balances are held in US dollars with transfers to pounds sterling and other local currencies, as required to meet local needs. The Group does not enter into derivative transactions to manage its foreign currency translation or transaction risk as it does not believe such risks are material.

At the year-end the Group and Company maintained the following cash reserves:

Group

Company

 

2021

2020

2021

2020

Cash and cash equivalents

$

$

$

$

Cash and cash equivalents held in US$

921

255

921

255

Cash and cash equivalents held in GBP

8,337

9,095

5,311

6,981

Cash and cash equivalents held in XAF

703

559

-

-

Cash and cash equivalents held in other currencies

266

145

-

-

10,227

10,054

6,232

7,236

 

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group or Company. The Group and Company reviews the credit risk of the entities that it sells its products to or that it enters into contractual arrangements with and will obtain guarantees and commercial letters of credit as may be considered necessary where risks are significant to the Group or Company.

The Group has cash and cash equivalents of $22,792 as at 31 December 2020 (2020: $10,054). The cash and cash equivalents are held with financial institutions which are rated below. Wherever possible ratings are provided by Fitch Ratings, however, where no rating was available from either Fitch Ratings or either of the other major international credit rating agencies such as Standard & Poors or Moodys, the bank's local credit rating was used:

Group

Company

 

2021

2020

2021

2020

Cash and cash equivalents

Rating

$

$

$

$

Barclays Bank plc

A+

6,232

7,236

6,232

7,236

Royal Bank of Scotland

A

3,292

2,259

-

-

First Afriland Bank

No rating

324

414

-

-

BGFI Bank

A+

379

145

-

-

10,227

10,054

6,232

7,236

 

20. Share-based payments

2021

2020

$

$

In the statement of comprehensive income the Group recognised the following charge with respect to its share-based payments

968,711

528,029

 

The share-based payments include the cost of warrants issued in respect of the company's equity financings and bridging loan, and also share-based payments for a number of services to the Group's various contractors and brokers and payments in lieu of Director fees.

 

Options

Details of share options outstanding at 31 December 2021 are as follows:

 

 

 

Number in issue

At 1 January 2021

157,552,800

Lapsed during the year

(1,552,800)

Awarded during the year

88,000,000

At 31 December 2021

 

 

244,000,000

 

Date of grant

Number in issue 1

Option price (pence)

Latest exercise date

24 Jan 2019

70,000,000

1.250

24 Jan 2024

18 Dec 2020

86,000,000

0.450

18 Dec 2025

01 Apr 2021

88,000,000

0.450

01 Apr 2026

244,000,000

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

 

The following Directors held interests, directly or indirectly, in share options at the year-end:

2021

2020

 

No.

No.

Jeremy Asher

 

180,000,000

120,000,000

Total

 

180,000,000

120,000,000

 

Warrants

Details of warrants outstanding at 31 December 2021 are as follows:

 

 

 

Number in issue

At 1 January 2021

620,444,335

Awarded during the year

186,191,309

At 31 December 2021

 

 

806,635,644

 

Date of grant

Number in issue

Warrant price (pence)

Latest exercise date

09 Nov 2017

31,853,761

1.000

09 Nov 2022

01 Jan 2018

2,542,372

1.000

01 Jan 2023

01 Apr 2018

2,083,333

1.500

01 Apr 2023

01 Jul 2018

2,272,726

1.780

30 Jun 2023

01 Oct 2018

4,687,500

1.575

30 Sep 2023

24 Jan 2019

92,212,000

1.250

23 Jan 2022

24 Jan 2019

19,999,999

1.200

23 Jan 2024

16 Apr 2019

90,000,000

1.000

14 Apr 2024

30 Jun 2019

4,285,714

1.000

28 Jun 2024

30 Jul 2019

3,000,000

1.000

28 Jul 2024

15 Oct 2019

9,600,000

0.500

14 Oct 2022

15 Oct 2019

170,774,151

1.000

14 Oct 2022

15 Oct 2019

10,990,933

0.500

14 Oct 2024

31 Mar 2020

49,816,850

0.200

30 Mar 2025

29 Jun 2020

19,719,338

0.350

28 Jun 2025

28 Aug 2020

78,616,352

0.600

28 Aug 2023

01 Oct 2020

10,960,907

0.390

30 Sep 2025

01 Dec 2020

4,930,083

0.375

30 Nov 2025

31 Dec 2020

12,116,316

0.450

30 Dec 2025

01 Apr 2021

16,998,267

0.450

31 Mar 2026

01 Jul 2021

24,736,149

0.250

30 Jun 2026

14 Jan 2021

128,205,128

0.650

14 Jan 2023

01 Oct 2021

16,233,765

0.425

30 Sep 2026

806,635,644

 

 The following table shows the interests of the Directors in the share warrants in issue:

2021

2020

 

No.

No.

Jeremy Asher

281,164,127

258,277,029

Paula Brancato

17,212,856

5,769,306

Mark Enfield

15,369,008

3,925,458

Total

 

313,745,991

267,971,793

 

The weighted average exercise price of the share warrants was 0.82p (2020: 0.89p) with a weighted average contractual life of 2.4 years (2020: 3.4 years). At 31 December 2020 and 2019 all warrants had fully vested.

In its Statement of Comprehensive Income, the Company recognised share-based payment charges of $446k (2020: $521k).

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 20% and 111% (2020: 20% and 143%), depending upon the date of grant, and the risk-free interest rate was 0.25% (2020: 0.25%) and the Dividend Yield was nil% for 2021 and 2020.

The Company's share price ranged between 0.2p and 0.5p (2020: 0.2p and 0.7p) during the year. The closing price on 31 December 2021 was 0.4p per share (2020; 0.4p). The weighted average exercise price of the share options was 0.7p (2020: 0.8p) with a weighted average contractual life of 3.5 years (2020: 4.0 years). The total number of options vested at the end of the year was 131.8 million (2020: 25.9 million).

 

21. Related party transactions

The key management of the Group comprises the Directors of the Company. Except as disclosed, there are no transactions with the Directors other than their remuneration and interests in shares, share options and warrants. As noted in the Directors' Report, Pegasus Petroleum Ltd ("Pegasus"), a company owned and controlled by Jeremy Asher, received $231,952 (2020: $257,155) in fees for management services, and provided a loan facility set out in note 16. Further information on Directors' remuneration is detailed in the Directors' Report and their total remuneration in each of the categories specified in IAS 24 'Related Party Disclosures' is shown below:

Group

Company

 

2021

2020

2021

2020

$

$

$

$

Short-term employee benefits

-

-

-

-

Fees charged by companies associated with Jeremy Asher 1

231,952

257,155

-

-

Interest charged on borrowings by companies associated with Jeremy Asher 1

124,743

108,456

124,743

108,456

Share-based payments 2

481,042

399,400

481,042

263,613

Share incentive scheme awards 3

-

-

-

-

Finance interest on intercompany loan accounts

184,873

234,652

184,873

234,652

Fees charged with respect to the provision of strategic advice and support by the parent

90,975

170,049

90,975

170,049

1,113,585

1,169,712

881,633

776,770

1 Charged by Pegasus Petroleum Limited ("Pegasus"), a company registered in the Channel Islands, to Rift Petroleum Holdings Limited, a wholly owned subsidiary of Tower Resources plc and registered in the Isle of Man. Pegasus Petroleum Limited ("Pegasus") is owned and controlled by a family trust of which Jeremy Asher is the settlor and lifetime beneficiary. Included in the Group's operating loss is an amount of $231,952 (2020: $257,155) paid to Pegasus in respect of charges for management services received during 2021.

2 Includes $nil (2020: $163,103) of charges for share warrants arising from the issue and extension of the loan facility made to Tower Resources plc by Pegasus in 2019; also includes $160,711 (2020: $169,597) in respect of Director warrants issued in lieu of fees to Directors.

The warrants issued to Pegasus and Mr Asher were on identical terms to those issued to third parties participating in the loan facility and share subscriptions.

 

22. Control

The Company is under the control of its shareholders and not any one party.

 

23. Leases and capital commitments

The Group is committed to funding the following exploration expenditure commitments as at 31 December 2021:

Country

Interest

2022

2023 onwards

Cameroon Thali 1

Cameroon

100%

$9.03 million

-

South Africa Algoa-Gamtoos 2

South Africa

50%

$3.16 million

-

Namibia Blocks 1910A, 1911 and 1912B 3

Namibia

80%

$4.50 million

-

$16.69 million

-

1 1 year to 11 May 2023 for initial exploration period

2 2 years to 16 November 2022, Operator has informed the Group that further time will be allowed for fulfillment of this commitment prior to entering the next phase of work.

3 First period expiration 5 November 2023, right of extension available

 

24. Subsequent events

14 January 2022: Placing for cash to raise £1.5 million via a subscription of 576,923,077 new ordinary shares of 0.001p each at a price of 0.26 pence per share, a discount of 29% to the closing share price on 13 January 2022.

7 February 2022: The Company noted the announcements by the National Petroleum Corporation of Namibia ("Namcor"), and also operator Shell Namibia Upstream B.V. ("Shell"), and partner QatarEnergy, confirming that the Graff-1 well on PEL 39 has made a discovery in both its primary and secondary targets, and proved a working petroleum system for light oil in the Orange Basin, offshore Namibia. The Company provided an analysis of the implications of this successful well for the prospectivity of other operators' acreage in Namibia, including its own, and observed that Tower's net acreage position of 18,637 km2 is believed to be the third largest net acreage position in the Namibian offshore, after Exxon and Eco Atlantic Oil & Gas (following Eco's acquisition of Azinam's Namibian acreage).

1 April 2022: Issue of warrants in lieu of £30,000 (in aggregate) of Directors fees and a further £7,500 employment costs, to conserve the Company's working capital. The warrants are exercisable at a strike price of 0.2625 pence ("Warrants"), which is just above the placing announced on 14 January 2022 and equal to the closing share price of 0.2625 pence per share on 31 March 2022. The Warrants are exercisable for a period of 5 years from the date of issue.

9 May 2022: The Company was notified by the Government of Cameroon of a further extension of the First Exploration Period of the Thali PSC to 11 May 2023. The Company also announced that it was negotiating an LOI with Shelf Drilling for Shelf's Trident VIII jack-up drilling rig to drill the NJOM-3 well on the Thali block in the fourth quarter of 2022. The Company also announced that it had not yet received the approval of its 2021 farmout agreement, and intended not to continue to seek approval of that farmout in its current form, due to the Company's belief that better financing alternatives were now available.

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END
 
 
FR WPUBUAUPPPGU
Date   Source Headline
16th Aug 20227:00 amRNSGrant of Options under Annual LTIP
2nd Aug 202211:06 amRNSSecond Price Monitoring Extn
2nd Aug 202211:00 amRNSPrice Monitoring Extension
2nd Aug 20227:00 amRNSPlacing and Subscription to raise £1.5 million
1st Jul 20227:00 amRNSIssue of Warrants to Directors

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