Tower Resources Updates Uganda Financing
Tower has entered into an £8m Standby Equity Distribution Agreement (SEDA) and a US $3.125 million SEDA-backed Loan Agreement (Loan Agreement) with YA Global Master SPV Ltd, an investment fund managed by Yorkville Advisors LLC (Yorkville), in order to provide flexibility over future funding, and in part to fund the costs of drilling the third and final commitment well, Mvule-1 on Tower's EA5 license area in Uganda.
The Loan Agreement will be used to provide the immediate funding required to drill the Mvule-1 well, and can be increased in tranches of US $1 million up to a maximum of US $6.125 million if required. The SEDA will be available to finance repayments of the Loan Agreement and any balance of the well costs and to provide flexible funding options to the Company going forward. Tower has budgeted US $6.8 million for Mvule-1 on a dry hole basis.
Tower's wholly owned subsidiary, Neptune, has reached agreement with all interested parties to use the OGEC K900 drilling rig, currently committed to Tullow, to drill Mvule-1. It is planned that site preparation will begin shortly with a view to spudding the well by the middle of February 2012. The well is anticipated to reach a total drilled depth of about 600 meters within two weeks of spud. The well is testing estimated recoverable resource potential of 80 million bbls.
Global Petroleum Ltd had retained an option to earn an interest in EA5 as a result of its contribution to the funding of the first two wells. Accordingly, Global carried out an independent technical review of the Mvule prospect, to its satisfaction. Following further discussions between the two companies, however, Global has ultimately chosen not to take up its option.
Peter Kingston, Chief Executive Officer of Tower, said, "I am very pleased that we have entered into this agreement with Yorkville. The arrangement provides flexible funding options which represent the best and most cost effective opportunity to drill the highly prospective Mvule-1 well. If successful, the well has the potential to create a great deal of value for our shareholders."
Jeremy Asher, Chairman, added, "We are excited both about the Mvule-1 well, which we believe represents our best and most de-risked shot at the EA5 license in Uganda; and also about the progress that Arcadia is making towards funding our first Namibian well, discussed in our last update, which is targeting an estimated 811 million bbls of recoverable resource potential, net to Tower. The Board has been keen to minimize the near-term equity dilution associated with funding the Mvule-1 well, since we are already fully carried financially in the Namibian well. We believe our arrangements with Yorkville allow us to meet that objective and maximize the return to shareholders from both of these attractive opportunities."
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