TIDMTRP
RNS Number : 6149X
Tower Resources PLC
27 April 2023
27 April 2023
Tower Resources plc
Cameroon Update
Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN)),
the AIM-listed oil and gas company with a focus on Africa, is
pleased to provide an update on its activities in respect of its
Thali Production Sharing Contract ("PSC"), in the Rio Del Rey
sedimentary basin offshore Cameroon.
Highlights:
-- Applied for a one-year extension of the initial exploration
period of the PSC, following positive discussions with the Minister
of Mines, Industry and Technological Development and ("MINMIDT")
and the Prime Minister of the Republic of Cameroon.
-- Discussions continue with rig owners and operators with the
aim to secure rig availability in the third and fourth quarter of
this year to drill at NJOM-3.
-- Discussion for a term loan of approximately $7 million with
BGFI Bank Group ("BGFI") is ongoing and the Company is also
actively discussing asset-level financing with several parties.
-- Updated resource estimates and risks for the reservoirs
connected to the NJOM-1 and the NJOM-2 discovery wells,
substantially lowering risk attributed to PS9 Sup and PS3 HW
reservoirs, and increasing total risked pMean prospective resources
to 35.4 million bbls.
-- Deployment of Paradise(R) software [1] to conduct detailed
attribute analysis of the reprocessed 3D seismic data to identify
the oil and gas elements of the reservoirs in the Njonji-1 and
Njonji-2 fault blocks, resulting in a clearer picture of the pay
zones in both fault blocks.
Jeremy Asher, Tower's Chairman and CEO, commented:
"We are very pleased with the progress that we are making on the
Thali PSC and the NJOM-3 well, and we believe that we are close to
having a final schedule for this well, which will be
transformational for the Company.
"We are finally able to see viable rig slots appearing, and we
are now working on the assumption that we will be able to get the
NJOM-3 well spudded over the next nine months.
"Every additional piece of subsurface work also increases our
confidence in the size and value of the resource that we are
targeting, both in terms of the volumes connected to the existing
discovery wells and the substantial upside in additional
reservoirs.
"We also have a number of different financing options, which we
expect to combine to obtain the funds needed for the well.
"We are as excited as ever about the Thali PSC, and very
grateful to MINMIDT and the Republic of Cameroon for their
continued support."
Extension of the initial exploration period of the PSC
The Company has formally applied to MINMIDT, with copy to the
Societe Nationale de Hydrocarbures, for a further one-year
extension of the initial exploration period of the PSC (which
currently runs to 11 May 2023) following meetings with the Minister
of MINMIDT and the Prime Minister of the Republic of Cameroon.
During those meetings, in which the Company explained the status of
current rig discussions, both Ministers indicated that they would
support the further extension.
Rig availability and NJOM-3 well timing
The Company has continued to maintain discussions with rig
owners and operators throughout the past year. As previously
announced, rig owners are reluctant to commit rigs to a single well
except when gaps appear in other operators' schedules, this is due
to balancing the risk of losing long term contracts for a single
well contract. At present, the Company is looking closely at two
possible rig availabilities, with different rigs and owners, one in
the third quarter of 2023 and one in the fourth quarter. In order
to take advantage of either, when available, the Company will need
to have put sufficient financing in place to cover a significant
level of prepayments. The expected cost of the well is discussed in
more detail below. At this stage there is no certainty on
availability of the rigs; however, as soon as this changes the
Company will update the market.
Cameroon financing
As announced on 29 June 2022, the Company has been discussing a
term loan of approximately $7 million with BGFI Bank Group, the
largest bank group in Central Africa, which is supported by the
Cameroon bank but is now subject to a review by the bank's group
credit committee. The Company understands that this review is
linked to a broader review of the capital available to the Cameroon
bank for writing new business in the year ahead, which has impacted
the time taken, and therefore the outcome remains uncertain.
However, the Company has been assured that the process is still
ongoing, and that the Cameroon bank continues to support the
Company's plan.
Tower has also continued to pursue possible financing at the
asset level, whether in the form of a farm-out or a financial
investment in the Company's operating subsidiary, Tower Resources
Cameroon SA ("TRCSA"), to achieve a similar economic result without
the need for a formal approval process. Discussions are taking
place with multiple credible groups, who have all executed NDAs and
are all currently working within the virtual data room.
The Company's objective remains to raise up to $15 million
through a combination of asset financing in the form of debt or
equity, with asset-level financing preferred to issuing corporate
level equity. Tower will update the market as, and when, any
agreements are reached.
Cameroon updated internal resource estimates
Since the Company's updated internal resource estimates last
year (see announcement of 29 June 2022), Tower has continued to
undertake further G&G work with two objectives: first, to
further refine the Company's understanding of the additional
reservoir potential that was identified, and second, to refine the
choice of well location for the NJOM-3 well.
In particular, the Company has conducted a more detailed
attribute analysis of the reprocessed 3D seismic data which Tower
obtained in 2018, using the AI-driven Paradise(R) workbench
software from Geophysical Insights (www.geoinsights.com), to
identify more clearly the location of the oil and gas elements of
the reservoirs in the Njonji-1 and Njonji-2 fault blocks which were
connected to the original NJOM-1 and NJOM-2 wells drilled by
Total.
The Paradise AI workbench analysis has resulted in higher
resolution of the PS9 (Sup) and PS3 pay zones in the Njonji-1 fault
block which has both confirmed the additional volumes identified in
Tower's previous estimates and also substantially de-risked them.
The analysis also provides better resolution of the PS9-R1
reservoir in the Njonji-2 fault block, including identifying an
additional potential oil leg below the gas encountered in the
NJOM-2 well, which was not included in the contingent resource
estimates as only its gas cap was connected to the well.
The Company has therefore prepared updated internal resource
estimates and risk estimates for the reservoirs connected to the
NJOM-1 and the NJOM-2 discovery wells, and has also reviewed the
risking of the PS9 Sup 1 and 2 reservoirs which appear to be
present in the Njonji-1 fault block but were not connected to the
NJOM-1 well. These updated internal resource estimates are set out
in detail in the linked presentation, and also in the Notes section
of this announcement. While the underlying volumetrics are
unchanged, the improved risking has led to an increase in the
risked pMean recoverable resources compared with the estimates of
prospective resources published in June 2022, which were themselves
a little higher than those contained in the OIL Reserves/Resources
Report dated 12 March 2020.
The latest company estimate of risked pMean recoverable
resources is now 35.4 million barrels. The changes from previous
internal company estimates can be summarised as follows:
-- Risked pMean recoverable resources in fault block 1 increased from 10.5 to 12.9 million bbls
-- Risked pMean recoverable resources in fault block 2 increased from 4.1 to 4.9 million bbls
-- Risked pMean recoverable resources in South fault block unchanged at 17.6 million bbls
The Company will update its CPR to SPE/PRMS standards in due
course.
NJOM-3 well budget
One outcome of the better imaging of the PS9-R1 and PS-3
reservoirs afforded by the attribute analysis has been a review of
the optimal point of intersection for the NJOM-3 well. Based on
Tower's latest prognosis, the Company believes that the NJOM-3 well
can intersect as much as 75 metres of net pay in the PS9-R1 and
PS3-R1 sands alone, with substantial further pay zones expected to
be encountered in the PS9 Sup 1 & 2 and the PS3-HW reservoirs.
However, this will require either moving the well somewhat to the
northwest or deviating the well to achieve the same result.
The Company has had to take account of additional factors that
may increase the expected cost to drill the well, including: higher
costs associated with the well planning (including the survey costs
and change of location or deviation); and higher rig rates and
service company and vessel costs. On the other hand, these may be
somewhat mitigated by lower fuel costs (since the peak level of oil
prices) and Tower also expects lower mobilisation/demobilisation
costs with the rigs it is currently considering. Furthermore, the
Company is now working on the assumption that it may no longer be
practical to undertake a full DST (flow test to surface)
immediately, given the long lead times on test equipment,
especially if the Company is to drill in the third quarter or early
in the fourth quarter of this year, but the Company is working on
an alternative method to achieve a shorter period flow test which
will also reduce costs.
The Company's current cost estimate to complete the NJOM-3 well
is approximately $15.5 million.
Presentation:
A copy of the technical presentation discussing the attribute
analysis, the de-risking of the volumetrics and the implications
for well location can be found on the Tower website at
https://www.towerresources.co.uk/investor-relations/downloads/
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 Asher
Chairman and CEO
Andrew Matharu
VP - Corporate Affairs
SP Angel Corporate Finance
LLP
Nominated Adviser and Joint
Broker
Stuart Gledhill
Caroline Rowe +44 20 3470 0470
Novum Securities Limited
Joint Broker
Jon Beliss
Colin Rowbury +44 20 7399 9400
Panmure Gordon (UK) Limited
Joint Broker
John Prior
Hugh Rich +44 20 7886 2500
BlytheRay
Financial PR
Tim Blythe
Megan Ray +44 20 7138 3204
Notes:
Geophysical Research LLC (Geophysical Insights)
Geophysical Insights ( www.geoinsights.com ) develops and
applies advanced analytic technology for seismic interpretation to
reduce the risk and time associated with oil & gas exploration.
Offering consulting services and training, the company applies
their analytic developments to the benefit of any energy-related
companies who seek deeper insights into the results of seismic
surveys.
Geophysical Insights proprietary Paradise software is an
AI-driven workbench system for seismic interpretation which applies
machine learning technologies to generate detailed reservoir
descriptions.
BGFI Bank Group
BGFI Bank Group is a large financial services conglomerate in
Central, West and East Africa, with subsidiaries in ten countries,
including Gabon, where the Group was founded, and Cameroon. The
member institutions serve both individuals and businesses, with
emphasis on small-to-medium enterprises (SMEs). As of December
2020, the Group's assets were in excess of EUR5 billion, and BGFI
Bank Group is described as the largest bank group in Central Africa
(the CEMAC zone).
Qualified Person Statement
In accordance with the guidelines for the AIM market of the
London Stock Exchange, Dr Mark Enfield, BSc, PhD, and a member of
the Board of Tower Resources plc, who has over 30 years' experience
in the oil & gas industry, is the qualified person that has
reviewed and approved the technical content of this
announcement.
Updated internal volumetrics and risk estimates
(not presented to SPE/PRMS standard)
Fault block 1 Previous Updated
Fault Reservoir Hydrocarbon Gross Unrisked CoS Risked CoS Risked
Block Type Recoverable (oil Rec (oil Rec
(MMBBL) present) (MMBBL) present) (MMBBL)
P90 P50 P10 Pmean Pmean Pmean
----- ----- ------ -------- --------
PS.9
Nijoni Sup
1 (1) Oil 1 2.2 4.1 2.4 24% 0.6 70% 1.7 +1.1
----------- ------------- ----- ----- ------
PS.9
Nijoni Sup
1 (2) Oil 0.2 0.6 1.2 0.7 24% 0.2 70% 0.5 +0.3
----------- ------------- ----- ----- ------
Nijoni PS.9
1 R1 Oil 2.4 5.2 8.9 5.5 100% 5.5 100% 5.5 -
----------- ------------- ----- ----- ------ -------- -------- -----
Nijoni PS3
1 R1 Oil 0.4 1.8 4.4 2.2 100% 2.2 100% 2.2 -
----------- ------------- ----- ----- ------ -------- -------- -----
Nijoni PS3
1 HW Oil 0.9 2.9 7.5 3.7 32% 1.2 60% 2.2 +1
----------- ------------- ----- ----- ----- -------- --------
Nijoni PS5
1 HW Oil 1.1 3.3 8 4.1 23% 0.9 23% 0.9 -
----------- ------------- ----- ----- -------- --------
Nijoni
1 -
SUM 18.4 10.5 12.9 +2.4
----- ----- ------ -------- -------- -----
Fault block 2 Previous
Updated
Fault Reservoir Hydrocarbon Gross Unrisked CoS Risked CoS Risked
Block Type Recoverable (oil Rec (oil Rec
(MMBBL) present) (MMBBL) present) (MMBBL)
P90 P50 P10 Pmean Pmean Pmean
----- ----- ------ -------- --------
Oil
Nijoni PS.9 (Gas
2 R1 Cap) 0.6 1.4 2.7 1.6 - - 50% 0.8 +0.8
----------- ------------- ----- ----- ------ -------- -------- -----
Nijoni
2 S1 Oil 0.7 2 3.9 2.2 100% 2.2 100% 2.2 -
----------- ------------- ----- ----- ----- -------- --------
Nijoni PS3
2 R1 Oil 0.4 1.5 3.9 1.9 100% 1.9 100% 1.9 -
----------- ------------- ----- ----- -------- --------
Nijoni
2 -
SUM 5.7 4.1 4.9 +0.8
----- ----- ------ -------- -------- -----
Southern fault block Unchanged
Fault Reservoir Hydrocarbon Gross Unrisked CoS Risked
Block Type Recoverable (oil Rec
(MMBBL) present) (MMBBL)
P90 P50 P10 Pmean Pmean
----- ----- ------ ---------
Nijoni PS.9
South R1 Oil 6.0 13.2 23.1 14.0 94% 13
----------- ------------- ----- ----- ------ ---------
Nijoni PS3
South R1 Oil 1.2 3.0 6.0 3.4 51% 1.7
----------- ------------- ----- ----- ----- ---------
Nijoni PS3
South HW Oil 2.5 9.2 24.6 11.9 23% 2.7
----------- ------------- ----- ----- ---------
Nijoni
South -
SUM 29.3 17.6
----- ----- ------ ---------
Glossary:
Best Estimate: At least a 50% probability (P50) that the
quantities actually recovered will equal or exceed the Best
Estimate (in statistical terms, a median).
Brent Forward Curve: the prices on a given day for Brent Crude
Oil for forward delivery, month by month, ranging from the first
traded month forward for ten years or more.
Chance of Development: The chance of discovery multiplied by the chance of commercial success.
Contingent Resources: Those quantities of Petroleum estimated,
as of a given date, to be potentially recoverable from known
accumulations, by the application of development Project(s) not
currently considered to be Commercial due to one or more
contingencies.
DST: Drill Stem Test.
EMV10: Expected Monetary Value derived from a discount rate of
10%.
EWT: Extended Well Test.
High Estimate: At least a 10% probability (P10) that the
quantities actually recovered will equal or exceed the High
Estimate.
Low Estimate: At least a 90% probability (P90) that the
quantities actually recovered will equal or exceed the Low
Estimate.
MDT: Modular Dynamic Formation Test.
Mean Estimate: The expected value of the full probability
distribution of resource volumes.
MMbbls : Millions of barrels.
NPV10: Net Present Value at a discount rate of 10%.
Prospective Resources : Those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects.
Recoverable : Those quantities of hydrocarbons which are
estimated to be producible from accumulations, either discovered or
undiscovered. Note that Contingent and Prospective Resources as
estimated herein are all estimates of recoverable quantities.
Risked : Quantities that have been adjusted for the probability
of success or loss/failure.
Swanson Rule: A methodology for calculating the EMV of an oil or
gas prospect.
Unrisked : Quantities which have not been adjusted for the
probability of success or loss/failure.
[1] Geophysical Research LLC (Geophysical Insights) - Paradise
(R) AI (Artificial Intelligence) Workbench Software
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