Tower Resources plc announced that Repsol SA has agreed, subject to the requisite regulatory approvals, to take a 44 percent working interest in the Namibian offshore license 0010 and the related petroleum agreement (the "License") 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 percent carried interest in the License to a 30 percent working interest, subject to the requisite regulatory approvals. Under the terms of the Farm-out Agreement, Neptune is liable to reimburse to Arcadia 30 percent of Arcadia's past costs on the License, amounting to approximately $5.3 million (GBP 3.4 million) and will assume 30 percent of future costs.
Provided that the transfers are completed, the ongoing interests in the License 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 License, 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 program 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 License.
In order to fund the acquisition and ongoing pre-drill costs of its 30 percent working interest in the License and to provide additional working capital, the Company announces that it has raised $9.26 million (GBP 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"). $4.9 million (GBP 3.15 million) is being raised from existing institutional and other investors, with the balance of $4.3 million (GBP 2.75 million) being subscribed by Directors of the Company.
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 license. 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 license."
Tower's CEO, Graeme Thomson, added:
"We are also very pleased that we have increased our holding in the license to 30 percent 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 9.3 billion 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 maximize value for shareholders."
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