Repsol takes 44 per cent interest in Tower Resources licence

Tower Resources, an oil and gas producer, has said that Repsol has agreed to take a 44 per cent working interest in the Namibian offshore licence 0010, in addition to becoming the operator.

Tower's subsidiary, Neptune Petroleum, has also entered into a farm-out agreement with Arcadia Expro Namibia to convert Tower's 15% carried interest in the 0010 licence to a 30% working interest, under which Neptune is liable to reimburse to Arcadia 30% of Arcadia's past costs on the licence, amounting to around $5.3m (£3.4m) and will assume 30% of future costs.

Once the transactions are made, the ongoing interests in the licence will be Repsol 44%, Tower 30% and Arcadia 26%.

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In order to fund the acquisition and on-going pre-drill costs of its 30% working interest in the licence and to provide additional working capital, the company announces that it has raised £5.9m before expenses through a conditional placing of 196.67m new ordinary shares at a price of 3p per share.

Some £3.15m is being raised from existing institutional and other investors, with the balance of £2.75m 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 Chief Executive Officer, Graeme Thomson, added: "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."

Tower also unveiled its six months results, during which its losses widened significantly, from £0.76m to £9.28m, largely the result of a £7.3m impairment of exploration and evaluation assets at the Mvule-1 exploration well in Uganda Licence EA5, which was found to be water bearing.

Net cash inflow during the period was $0.18m.

In a statement the firm said: "With all this commercial activity going on, the interim results themselves are, by comparison, somewhat less exciting. The loss of $9.2m includes the $7.3m costs of the unsuccessful Mvule-1 well previously announced in February, as well as $0.7m in fees and costs.

"Underlying administrative costs remain steady, although we did have costs in the period associated with adverse currency movements, one-off board recruitments and depreciation of Ugandan assets in the period. Our cash balances improved slightly in the period to $2.4m, of which $0.3m is restricted.

"Although Namibia has been our main area of focus during the past few months, we have also remained active in Uganda and Western Sahara during this period. In Uganda we have been overseeing an orderly winding up of operations in licence EA5 including site restitution and disposal of tailings, and while we are reducing staff in Uganda, we have maintained a dialogue with the government in anticipation of the next developments there.

"In Western Sahara, in addition to our existing interests in three large blocks, we have also signed an agreement, together with Wessex Petroleum, to study shale gas opportunities in Western Sahara in an area close to the Algerian border. We shall seek new ventures that broaden the company's portfolio, but wish to continue to focus on high potential areas only."

The share price rose 6.84% to 3.12p by 08:52.

NR