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Thursday, April 27, 2023
Tower Resources has provided an update on its activities in respect of its Thali Production Sharing Contract (PSC), in the Rio Del Rey sedimentary basin offshore Cameroon, including an extension of the license and upcoming drilling plans.
Extension of the initial exploration period of the PSC
Tower 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 further extension.
Rig availability and NJOM-3 well timing
Tower 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 in June of last year, 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® workbench software from Geophysical Insights, 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.
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,” he added.
For the full release, including a summary of the recoverable resources and the NJOM-3 well budget, view Tower’s release here.
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