Tower Resources, the AIM-listed oil and gas company focused on Africa, has executed two farm-out agreements and associated documentation with Prime Global Energies for minority, non-operated interests in its Thali license, offshore Cameroon, and PEL96 offshore Namibia.
Through its wholly-owned subsidiary, Tower Resources Cameroon S.A. ('TRCSA'), the Company has agreed to farm-out a 42.5% non-operated interest in the Thali license to Prime in exchange for a US$15,000,000 cash contribution towards the Thali work programme and drilling of the NJOM-3 well in 2025, and further payments as set out below. In addition, via Tower Resources (Namibia), Prime has also agreed to farm-in to PEL96, offshore Namibia, for a 25% non-operated interest. As explained below, as part of these arrangements, Tower will also receive further payments including US$937,500 in cash immediately and a further US$3,437,500 cash on completion of the two farm-out agreements, for a total of US$4,375,000 in cash.
Completion of both farm-out agreements is expected to occur by the end of Q1 2025 subject to government, partner and regulatory consents.
Prime is a UK-incorporated company with more than three decades of upstream operational experience. In 2022, Prime's parent company, Prime International Oil and Gas Company Limited ('PIOGCL'), acquired the assets of ENI in Pakistan (which included the former interests of Lasmo in Pakistan) and is a substantial upstream company with significant technical resources and production from both operated and non-operated production in Pakistan.
Highlights
- Prime will acquire a 42.5% non-operated interest in the Thali license, in return for a US$15,000,000 contribution to the Thali work programme costs;
- Prime is also acquiring a 25% non-operated interest in PEL96, offshore Namibia, with Tower receiving US$2,500,000 cash on completion (of which US$1,875,000 will be held back pending completion of the Thali farmout as well as the PEL96 farmout);
- In recognition of existing production-based payment agreements in place with Pegasus Petroleum Limited ("Pegasus") on the Thali license, which Pegasus has agreed to modify in Prime and Tower's favour, Prime will commit to production-based payments of 10% of Prime's after-tax share of profit oil from Thali to Tower, which will, in turn, be passing the majority of those payments on to Pegasus and also retaining a portion itself, as previously disclosed; other aspects of the transaction include:
- A payment of US$1,875,000 will be made to Tower upon the farm-out agreement execution; 50% to be paid to Pegasus and 50% to be retained by Tower;
- A further payment of US$1,875,000 to Tower on completion of the Thali farm-out; 50% to be paid to Pegasus and 50% to be retained by Tower;
- The issue of 5,650,483,681 Ordinary shares in Tower to Pegasus in consideration of the cash retentions by Tower noted above.
- Therefore, in aggregate Tower will be in receipt of a total of US$4,375,000 in cash on completion of both the Thali and PEL96 farm-out agreements;
- Agreement in principle for Tower and Prime to work together on other projects in Cameroon, with Prime participating up to 42.5% depending on the project.
Tower Resources Chairman & CEO, Jeremy Asher, commented:
'I am delighted to announce the execution of these transformational farm-out agreements for our Cameroon and Namibia licenses. In Prime, we have secured a partner with substantial technical and financial resources and a track record of operational success, and we are very pleased to be working closely with them on these two highly valuable projects.
'For our Thali license, the funding provided should enable Tower to drill the NJOM-3 commitment well, which will mark a significant milestone for the Company. Whilst this has been our priority, we have also made great efforts over the past few years to understand better the huge prospectivity of the PEL96 license, offshore Namibia, and I'm very pleased that its potential has also been recognised through this additional agreement with Prime as a non-operating partner.
'These negotiations required flexibility from all of us and, as a result, there have been some changes to the Pegasus Facility Agreement giving rise to the production-based payments already agreed in respect of the Thali farm-out. These payments were originally intended to be similar to those agreed in our earlier potential farm-out agreements, a portion of which were to be paid on to Pegasus as consideration for funding previously provided, but paid from the farm-out partner's share of production, so that Tower would incur no net cost. However, during these negotiations we agreed to amend the basis and reduce the amount of these payments in return for Tower retaining a larger participating interest in the license, alongside some cash payments to Tower and Pegasus at execution and completion. Pegasus will be using 50% of its share of these cash payments to subscribe for shares in Tower, half of which will be locked in for a year. Whilst this results in a significant increase in my beneficial shareholding in the Company due to my personal involvement in Pegasus, it achieves a similar purpose to the previous, more generous, production payment structure in that both are largely contingent on Thali's success, and it serves to further align my interests with those of my fellow-shareholders while also contributing significantly to the Company's current working capital position.
'Our goal remains to achieve progress across the Company's entire asset base and deliver value for all stakeholders, and the additional liquidity these transactions will generate, upon completion, should allow us to proceed with all our work programmes with greater confidence.
'Deals of this nature require complex negotiation, lengthy documentation, and are often strategic for our partners as well as for ourselves. That is especially so in this case, where we and Prime are also keen to work together on further projects in Cameroon in the future. But our whole team understands that this also requires patience and support from investors, so we would all like to acknowledge our appreciation for the trust and commitment demonstrated by so many of our valued shareholders whilst these conversations have been ongoing. We would also like to thank Mike Lakin of Envoi for introducing us to Prime last year. I look forward to keeping you updated with our further progress.'
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Source: Tower Resdources
