Tower Resources Regulatory News (TRP)

Highlights

·; Repsol to farm in as operator to Namibian offshore licence 0010 with 44% working interest

·; Tower to convert its 15% carried interest to 30% working interest

·; Placing to raise £5.9 million 

·; Interim results for the six months ended 30 June 2012 also announced today.

Tower Resources plc ("Tower"), LN: TRP, the AIM listed oil and gas exploration company, announces that Repsol SA ("Repsol") has agreed, subject to the requisite regulatory approvals, to take a 44% working interest in the Namibian offshore licence 0010 and the related petroleum agreement (the "Licence") and become operator.

Tower's subsidiary, Neptune Petroleum (Namibia) Limited ("Neptune"), has also entered into a farm out agreement (the "Farm-out Agreement") with Arcadia Expro Namibia (Proprietary) Ltd ("Arcadia") to convert Tower's 15% carried interest in the Licence to a 30% working interest, subject to the requisite regulatory approvals. Under the terms of the Farm-out Agreement, Neptune is liable to reimburse to Arcadia 30% of Arcadia's past costs on the Licence, amounting to approximately US$5.3 million (£3.4 million) and will assume 30% of future costs.

Provided that the transfers are completed, the ongoing interests in the Licence will be Repsol 44%, Tower 30% and Arcadia 26%.

An updated Competent Person's Report produced in 2011 identified a number of prospects in the Licence, including five targets in the Delta structure which, if oil and gas bearing, are estimated to contain some 9.3 billion barrels of recoverable oil and 14.5 TCF of gas. Repsol is presently examining a variety of rig options and is consulting with the Namibian government, Arcadia and Tower as it does so. The busy exploration programme offshore Namibia will likely bring a number of rigs to the area and, with the relatively shallow water depth of between 900m to 1,300m over the Delta prospect, several rigs in the region would be suitable to drill the well. Furthermore, Repsol has an active drilling campaign in Angola. An announcement will be made as and when the partners have secured a rig to drill the first well on the Licence.

In order to fund the acquisition and ongoing pre-drill costs of its 30% working interest in the Licence and to provide additional working capital, the Company announces that it has raised £5.9 million before expenses through a conditional placing of 196.67 million new ordinary shares (the "Placing Shares") at a price of 3p per Placing Share (the "Placing"). £3.15million is being raised from existing institutional and other investors, with the balance of £2.75 million being subscribed by Directors of the Company.

The placing price of 3p represents a premium of 2.5% to the closing midmarket price on 27 July 2012.

The Company has published its Interim Results for the six months ended 30 June 2012 in a separate announcement released today.

Tower's Chairman, Jeremy Asher, commented:

"We are delighted to welcome Repsol, one of the foremost experts in West African offshore exploration, as a partner and operator in the 0010 licence. Repsol brings with it a wealth of operational expertise and a very impressive record of exploration success offshore Africa. This partnership further validates our belief in the very large hydrocarbon potential in the licence."

Tower's CEO, Graeme Thomson, added:

"We are also very pleased that we have increased our holding in the licence to 30% subject to the requisite government approvals. We believe that the transaction announced today provides shareholders with an increased holding in a very exciting prospect at a compelling price and materially increases the upside potential per share for all of Tower's shareholders."

"We look forward in due course to updating the market once a rig has been secured to drill the first well on the independently certified 9.3bn barrel Delta Prospect. We will be in dialogue with Repsol regarding a rig and look forward to updating shareholders in due course. We are not willing to overpay for an early slot and are quite prepared to be patient if this achieves the best economics for us."

"We continue to consider opportunities to expand Tower's asset base in Africa and explore various options to maximise value for shareholders."

Contacts:

www.towerresources.co.uk 

Details of the Placing

The Company has raised £5.9 million before expenses through a conditional placing of 196.67 million new ordinary shares (the "Placing Shares") at a price of 3p per Placing Share (the "Placing"). £3.15 million is being raised from existing institutional and other investors, with the balance of £2.75 million being subscribed for by Directors of the Company. The Placing is being arranged by Northland Capital Partners Limited ("Northland") subject to the terms of a conditional agreement entered into between the Company and Northland (the "Placing Agreement").

It is intended that the proceeds of the Placing will be applied to fund the $5.3 million initially due under the Farm-out Agreement and the ongoing costs of Tower's 30% working interest in the Licence before a well, and to provide additional working capital. In the event of well testing, the Company has agreed to pay Arcadia 15% of test costs up to a cap of US$2 million (£1.3 million).

The Placing, which is not being underwritten by Northland or any other person, is being effected under the Company's existing share authorities. The Placing Shares will represent 12.1% of the Company's enlarged issued share capital. 

Application has been made for the Placing Shares to be admitted to trading on AIM ("Admission"). It is expected that Admission will occur on or around 3 August 2012. The Placing Shares will, when admitted, rank pari passu in all respects with the existing ordinary shares. 

The Placing is conditional on Admission. The Placing is also conditional on the Placing Agreement becoming unconditional and not being terminated prior to Admission in accordance with its terms. 

The following table sets out the number of Placing Shares subscribed for by Directors of the Company and, immediately following Admission, their respective shareholdings and percentage interests in the enlarged issued share capital of the Company:

The issue of Placing Shares to the Directors is deemed a related party transaction under the AIM Rules for Companies. Philip Swatman, who is not participating in the Placing, considers, having consulted with Northland (in its capacity as the Company's Nominated Adviser), that the terms of the issue of Placing Shares to Directors are fair and reasonable insofar as the shareholders of the Company are concerned.

 Total voting rights

Following Admission, the Company's total issued share capital will comprise of 1,623,652,227 ordinary shares. As the Company does not hold any ordinary shares in treasury, the total number of voting rights in the Company following Admission is 1,623,652,227. This number may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company following Admission.

Warrant issue to Directors

In accordance with its practice in previous years, the Company has agreed to issue warrants to Directors in sacrifice of fees and salaries. Messrs Asher, Thomson, Taylor and Blakey will each sacrifice £30,000 of their director fees or salary and Mr Swatman will sacrifice £10,000 of his fees. In addition, the Remuneration Committee has agreed that Mr Asher will be entitled to additional remuneration of £76,000 in respect of his increased responsibilities and time requirement in the four month period since Peter Kingston stepped down as Chief Executive. Mr Asher has agreed to take such additional remuneration in the form of warrants. The aggregate amount of the fee/salary sacrifice by the Directors is £206,000.

The exercise price of the warrants will be the higher of the placing price and the middle market price of the Company's shares at the close of business today. The number of warrants to be issued to each Director will be fixed after the close of business today and will be determined by dividing the amount of his fee/salary sacrifice by the fair value of the warrants using the Black Scholes option pricing model plus a 10% premium.

Based on the Placing price of 3p, the aggregated number of warrants to be issued would be approximately 11.6 million, representing 0.7% of the enlarged issued share capital following Admission.

A further announcement will be made following the award of the warrants.

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