Tower Resources plc, the AIM-listed oil and gas company with its focus on Africa, is pleased to announce updates in respect of its Thali Production Sharing Contract ("PSC") in Cameroon, conducted through its wholly-owned subsidiary Tower Resources Cameroon SA, and its binding heads of terms ("HoT") in respect of a farm-out of a 24.5% interest in the PSC to OilLR Pty Ltd.
Petroleum operations in Cameroon have already been affected by consequences of the Covid-19 pandemic, including international travel restrictions, and the Republic of Cameroon introduced its own travel restrictions on March 17th. Service providers are therefore temporarily limited in what they can do locally, as is Tower itself, and so the Company last week notified the Ministry of Mines, Industry and Technological Development ("MINMIDT") of an event of Force Majeure under the terms of the PSC. During a period of Force Majeure the parties' obligations under the agreement are temporarily suspended, so that the same period of about seven months remaining under the current exploration period as at 17th March should still remain once the Force Majeure period ends, without any further extension being requested.
The Company has informed MINMIDT that at this stage it is still possible that NJOM-3 could be spudded prior to 15th September 2020 despite the Force Majeure, if the situation returns to normal quickly enough, but this is now inherently uncertain; however in any event the Company remains committed to drilling NJOM-3 as quickly as possible.
The Company and OilLR have also agreed to amend their HoT to extend the proposed completion date to 30th June, 2020. Tower is satisfied that OilLR's intended investors have the funds to complete the intended farm-in, and both Tower and OilLR are still committed to completing the transaction, but both parties also agree that the transaction cannot be completed until the environment stabilises sufficiently for the project to move forward.
The Company is continuing discussions with other potential investors in the Thali PSC, and while it fully expects OilLR to complete the agreed farm-in as set out in the HoT, the Company has also agreed with OilLR that in the event it receives additional offers of firmly committed funds which aggregate to more than $15 million, and if (and only if) OilLR is unable to make an escrow payment on an agreed schedule, then the Company will have the right to reduce OilLR's share of the total farm-out down to a minimum of $5 million to accommodate the other potential investors. This is to ensure that extending the completion schedule will not materially delay the Company's access to funding from other sources as well.
The other terms of the HoT with OilLR are unchanged.
Jeremy Asher, Tower's Chairman and CEO, commented:
"We are glad that our partners at OilLR remain committed to the Thali project despite recent market upheavals and despite the operational delays required by the global response to the Covid-19 pandemic. As our recently released update to the Oilfield International Reserve Report has highlighted, the Thali project economics remain very attractive at current Brent prices, with forward prices still well above $40 per barrel during our expected production period. The Force Majeure provisions of our PSC are designed to provide breathing space in precisely this kind of situation, and we are already planning and discussing with service companies how we can move forward as quickly as possible when things return closer to normal."