Tower Resources plc, 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.
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."