TIDMTRP
RNS Number : 0218G
Tower Resources PLC
13 March 2020
13 March 2020
Tower Resources plc
Cameroon Reserves Report Update
Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN)),
the AIM listed oil and gas company with its focus on Africa, is
pleased to announce that it has received an updated independent
Reserves Report (the "2020 Reserves Report") from Oilfield
International Limited ("OIL") on behalf of the Company's wholly
owned subsidiary, Tower Resources Cameroon S.A, covering its Thali
production sharing contract, offshore Cameroon (the "PSC"). The
2020 Reserves Report, which conforms to SPE_PRMS guidelines, does
not contain new technical information compared with the previous
report prepared by OIL and announced by the Company on 1(st)
November 2018 (the "2018 Reserves Report"), but the 2020 Reserves
Report reflects updated prices and costs reflecting the changes in
the market over the intervening 16 months or so.
The 2020 Reserves Report, like the 2018 Reserves Report, has
quantified contingent and prospective resources across multiple
fault block prospects on the Thali licence, including the existing
oil discovery at Njonji in the southern part of the licence,
together with their calculated Net Present Value ("NPV") and
Expected Monetary Value ("EMV"), as detailed below. The NPVs and
EMVs have been calculated based on two price sets: a standard North
American forecast methodology using a February 2020 forecast price
for 2021 and a constant money price escalation of 2% pa - the
"Sproule Energy Forecast" - in order to provide comparability with
other reports on other assets using this type of methodology; and
the actual Brent Forward Curve at close of business on 10(th) March
2020, which is the primary focus of this 2020 Reserves Report, to
illustrate the impact of the recent fall in oil prices, and to
confirm the economic viability of the contingent resources in the
current lower price environment.
2020 Reserves Report highlights:
-- Gross mean contingent resources of 18 MMbbls of oil across
the proven Njonji-1 and Njonji-2 fault blocks (with low/best/high
estimates of 5/15/34 MMbbls) are unchanged, with a development
contingency probability of 80% on first phase and 70% on second
phase;
-- Gross mean prospective resources of 20 MMbbls of oil across
the Njonji South and Njonji South-West fault blocks (with
low/best/high estimates of 5/16/39 MMbbls) are also unchanged;
-- Gross mean prospective resources of 111 MMbbls of oil across
four identified prospects located in the Dissoni South and Idenao
areas in the northern part of the Thali licence (with low/best/high
estimates of 21/84/237 MMbbls) are also unchanged;
-- The NPV10 of the Best Estimate of Contingent Resources using
the Sproule Energy Forecast is $179 million, with an EMV10 of $143
million, however it should be noted that these figures are based on
a February 29(th) forecast based on a 2021 Brent price of
$68/barrel;
-- The NPV10 of the Best Estimate of Contingent Resources using
the March 10(th) 2020 Brent Forward Curve is $119 million, with an
EMV10 of $91 million - these figures compare with the 2018 Reserves
Report NPV10 of the Best Estimate of Contingent Resources of $158
million, and an EMV10 of $118 million using the then-current Brent
Forward Curve at a time when the 2019 forward Brent price was over
$71/bbl.
The reasons why the NPV10 and the EMV10 of the Contingent
Resources at Njonji have fallen by less than 25% compared to the
figures in the 2018 Reserves Report, despite an approximate halving
of the oil price, are that:
-- Forward Brent prices have fallen by less than prompt prices,
which is usual when the prompt market is oversupplied, so for
example the average forward price of Brent in 2021 is approximately
$44/barrel;
-- The projected costs of the project, which are low, have
actually fallen a little reflecting the Company's actual experience
in sourcing equipment and services for the NJOM-3 well; and
-- The profit allocation mechanism in the PSC attributes a
greater share of oil to the contractor when oil prices are low, and
a smaller share of oil when prices are high, which can be observed
in the different volumes of recoverable oil "attributable to Tower"
for the different price scenarios, when comparing the tables below
to those in the 2018 Reserves Report.
Jeremy Asher, Chairman and CEO, commented:
"We are pleased to present this updated 2020 Reserves Report on
the Thali licence in Cameroon. I already observed last year that
our project economics were attractive across a wide range of oil
price scenarios, and in September last year I presented one of our
internal cash flow forecasts showing the very attractive cash
generation from the project assuming a flat $40/bbl Brent price,
which can be still be found in our September 2019 corporate
presentation on our website. The 2020 Reserves Report confirms the
attractiveness of the Njonji project economics.
It is also worth noting that the riskier prospective resources
on Thali can be tested at very low cost during the process of
developing the contingent resources already discovered. In
particular, the Phase 1 development process at Njonji will also
test the Njonji South Prospective Resources of 18 million barrels
(Pmean), which would be additional to the 18 million barrels
(Pmean) of existing contingent resources already discovered at
Njonji, thus providing a natural additional upside to the project
which is not reflected in the NPVs and EMV10 of the contingent
resources.
So even in the lower oil price environment in which we now find
ourselves, which echoes the price environment at the end of 2015
shortly after we first entered the Thali license, the Thali license
is an attractive asset which we expect will earn excellent
returns."
2020 Reserves Report details:
The 2020 Reserves Report was independently compiled by UK-based
industry specialist Oilfield International Limited and was based on
the work that Tower undertook during 2018 including a reprocessing
and reinterpretation of all of the existing 3D seismic data over
the licence area, and substantial further analysis of the data
including an independent fault seal analysis undertaken by Dr Tim
Needham of the University of Leeds Institute of Applied Geoscience,
as described in the executive summary of the 2018 Reserves Report,
which is still available in the Company's website. The economic
analysis in the report was updated as described above to reflect
more recent price assumptions and also the Company's more recent
experience with costs.
The tables below are summaries of some of the key tables in the
Executive Summary of the 2020 Reserves Report, which is available
on the Company's website. The "Gross" figures refer to the
recoverable volumes from a given structure, the "Net Attributable
to Tower" figures refer to the equivalent volumes that Tower can
actually expect to receive for its own account in respect of its
cost recovery and profit oil under the terms of its licence, using
the March 10(th) 2020 Brent Forward Curve. As noted above, the
"Gross" volumes are the same as in the 2018 Reserves Report, but
the "Net Attributable to Tower" volumes differ from those in the
2018 Reserves Report because the of the profit allocation
mechanisms in the PSC.
The NPV10 and EMV10 tables presented below are the tables based
on the March 10(th) 2020 Brent Forward Curve, but the full set of
valuation tables including the Sproule Energy Forecast tables are
contained in the Executive Summary available on the Company's
website.
NJONJI - OIL CONTINGENT RESOURCES (Gross, MMbbls)
Operator: Low Estimate Best Estimate High Estimate Mean Estimate (Phase Chance of
Tower 1&2) Development
------------------- --------------------------- -------------------------------- --------------------- -------------------
Development
Unclarified
------------------- --------------------------- -------------------------------- --------------------- -------------------
Phase I 5.0 11.8 19.6 17.9 80%
------------------- --------------------------- -------------------------------- --------------------- -------------------
Phase II 0.0 3.4 14.8 70%
------------------- --------------------------- -------------------------------- --- ------------ -------------------
TOTAL 5.0 15.2 34.4
------------------- --------------------------- -------------------------------- --------------------- -------------------
NJONJI - OIL CONTINGENT RESOURCES (Net Attributable to Tower, MMbbls)
Operator: Low Estimate Best Estimate High Estimate Chance of
Tower Development
------------------- --------------------------- -------------------------------- --------------------- -------------------
Development
Unclarified
------------------- --------------------------- -------------------------------- --------------------- -------------------
Phase I 3.0 7.3 10.4 80%
------------------- --------------------------- -------------------------------- --------------------- -------------------
Phase II 0.0 1.9 7.9 70%
------------------- --------------------------- -------------------------------- --------------------- -------------------
TOTAL 3.0 9.3 18.3
------------------- --------------------------- -------------------------------- --------------------- -------------------
NJONJI - OIL PROSPECTIVE RESOURCES (Gross, MMbbls)
Operator: Low Best Estimate High Estimate Mean Estimate Chance of Chance of Chance of
Tower Estimate Discovery Commercial Success Development
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Prospects
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Njonji South 4.7 14.9 35.4 18.2 42% 70% 30%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Njonji SW 0.2 1.1 3.6 1.6 32% 50% 16%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
TOTAL 4.9 16.0 39.0 19.8
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
NJONJI - OIL PROSPECTIVE RESOURCES (Net Attributable to Tower, MMbbls)
Operator: Low Best Estimate High Estimate Chance of Chance of Chance of
Tower Estimate Discovery Commercial Success Development
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Prospects
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Njonji South 2.6 7.4 16.6 42% 70% 30%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Njonji SW 0.2 0.8 2.1 32% 50% 16%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
TOTAL 2.8 8.2 18.7
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
DISSONI & IDENAO - OIL PROSPECTIVE RESOURCES (Gross, MMbbls)
Operator: Low Best Estimate High Estimate Mean Estimate Chance of Chance of Chance of
Tower Estimate Discovery Commercial Success Development
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Leads
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Dissoni
South A 8.3 30.9 76.2 37.8 24% 80% 19%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Dissoni
South B 1.3 5.6 16.8 7.8 17% 80% 13%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Idenao East
FOI2 5.1 21.2 62.0 28.6 18% 80% 14%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
Idenao East
FOI1 6.4 26.6 82.1 37.1 18% 80% 14%
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
TOTAL 21.2 84.3 237.1 111.3
--------- ------------------- ---------------------- ------------------- -------------- ------------------- ------------
DISSONI & IDENAO - OIL PROSPECTIVE RESOURCES (Net Attributable to Tower, MMbbls)
Operator: Low Estimate Best Estimate High Estimate Chance of Discovery Chance of Commercial Chance of
Tower Success Development
-------------- --------------------- ------------------------- --------------------- ---------------------- -------------
Leads
-------------- --------------------- ------------------------- --------------------- ---------------------- -------------
Dissoni
South A 5.9 17.4 34.7 24% 80% 19%
-------------- --------------------- ------------------------- --------------------- ---------------------- -------------
Dissoni
South B 0.9 3.1 7.6 17% 80% 13%
-------------- --------------------- ------------------------- --------------------- ---------------------- -------------
Idenao East
FOI2 3.6 10.7 26.6 18% 80% 14%
-------------- --------------------- ------------------------- --------------------- ---------------------- -------------
Idenao East
FOI1 3.8 11.8 28.5 18% 80% 14%
-------------- --------------------- ------------------------- --------------------- ---------------------- -------------
TOTAL 14.2 43.0 97.4
-------------- --------------------- ------------------------- --------------------- ---------------------- -------------
NJONJI - CONTINGENT RESOURCES (Attributable to Tower NPV10 and EMV10 US$ millions)
Operator: Tower After Tax NPV10 EMV10
--------------------------------------------- ---------------------- ---------------
Low Estimate Best Estimate High Estimate Chance of Development Swanson's Rule
------------- -------------- -------------- ---------------------- ---------------
Development Unclarified
------------- -------------- -------------- ---------------------- ---------------
Phase I -15 103 158 80% 64
------------- -------------- -------------- ---------------------- ---------------
Phase II 0 16 105 70% 27
------------- -------------- -------------- ---------------------- ---------------
TOTAL -15 119 263 91
------------- -------------- -------------- ---------------------- ---------------
Swanson's Rule: 40% P50+30% P90+30% P10
THALI LICENCE - PROSPECTIVE RESOURCES (Attributable to Tower NPV10 and EMV10 US$ millions)
Operator: Tower After Tax NPV10 EMV10
--------------------------------------------- ---------------------- ---------------
Low Estimate Best Estimate High Estimate Chance of Development Swanson's Rule
------------- -------------- -------------- ---------------------- ---------------
Prospective Resources
------------- -------------- -------------- ---------------------- ---------------
Prospects
------------- -------------- -------------- ---------------------- ---------------
Njonji South 19 92 207 30% 31
------------- -------------- -------------- ---------------------- ---------------
Njonji SW -5 3 22 16% 0
------------- -------------- -------------- ---------------------- ---------------
Leads
------------- -------------- -------------- ---------------------- ---------------
Dissoni South A -5 162 390 19% 33
------------- -------------- -------------- ---------------------- ---------------
Dissoni South B 4 31 94 13% 4
------------- -------------- -------------- ---------------------- ---------------
Idenao East FOI2 16 112 319 14% 19
------------- -------------- -------------- ---------------------- ---------------
Idenao East FOI1 24 125 331 14% 22
------------- -------------- -------------- ---------------------- ---------------
TOTAL 53 525 1363 110
------------- -------------- -------------- ---------------------- ---------------
Swanson's Rule: 40% P50+30% P90+30% P10
The Executive Summary extracted from the 2020 Reserves Report
includes more detailed versions of these tables and additional
figures, tables, details relating to the initial development plan
and a summary of risk factors. The Executive Summary is available
on the Tower Resources website at www.towerresources.co.uk.
A glossary of technical terms is included at the end of this
announcement.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
Contacts
Tower Resources plc +44 20 7157 9625
Jeremy Asher
Chairman and CEO
Andrew Matharu
VP - Corporate Affairs
SP Angel Corporate Finance
LLP
Nominated Adviser and Joint
Broker + 44 20 3470 0470
Stuart Gledhill
Caroline Rowe
Turner Pope Investments
(TPI) Limited
Joint Broker
Andy Thacker
Zoe Alexander + 44 20 3657 0050
Whitman Howard Limited
Joint Broker
Nick Lovering + 44 20 7659 1234
Notes:
In accordance with the guidelines for the AIM market of the
London Stock Exchange, Dr. Mark Enfield, BSc Geology, PhD Geology,
Advisor to the Board of Tower Resources plc, who has over 30 years'
experience in the oil & gas industry, is the qualified person
that has reviewed and approved the technical content of this
announcement.
Tower Resources Cameroon S.A, a wholly-owned subsidiary of Tower
Resources plc, holds a 100% interest in the shallow water Thali
(formerly known as "Dissoni") Production Sharing Contract (PSC), in
the Rio del Rey basin, offshore Cameroon. Tower was awarded the PSC
on 15 September 2015 for an Initial Exploration Period of 3 years.
Extensions to the Initial Exploration Period have been granted
until 14 September 2020.
The Thali PSC covers an area of 119.2 km(2), with water depths
ranging from 8 to 48 metres, and lies in the prolific Rio del Rey
basin, in the eastern part of the Niger Delta. The Rio del Rey
basin has, to date, produced over one billion barrels of oil and
has estimated remaining reserves of 1.2 billion barrels of oil
equivalent ("boe"), primarily at depths of less than 2,000 metres.
The Rio del Rey is a sub-basin of the Niger Delta, an area in which
over 34.5 billion barrels of oil has been discovered, with 2.5
billion boe attributed to the Cameroonian section.
Glossary:
Best Estimate: At least a 50% probability (P50) that the
quantities actually recovered will equal or exceed the Best
Estimate (in statistical terms, a median).
Brent Forward Curve: the prices on a given day for Brent Crude
Oil for forward delivery, month by month, ranging from the first
traded month forward for ten years or more.
Chance of Development: The chance of discovery multiplied by the
chance of commercial success.
Contingent Resources: Those quantities of Petroleum estimated,
as of a given date, to be potentially recoverable from known
accumulations, by the application of development Project(s) not
currently considered to be Commercial due to one or more
contingencies.
DST: Drill Stem Test.
EMV10: Expected Monetary Value derived from a discount rate of
10%.
EWT: Extended Well Test.
High Estimate: At least a 10% probability (P10) that the
quantities actually recovered will equal or exceed the High
Estimate.
Low Estimate: At least a 90% probability (P90) that the
quantities actually recovered will equal or exceed the Low
Estimate.
MDT: Modular Dynamic Formation Test.
Mean Estimate: The expected value of the full probability
distribution of resource volumes.
MMbbls: Millions of barrels.
NPV10: Net Present Value at a discount rate of 10%.
Prospective Resources : Those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects.
Recoverable : Those quantities of hydrocarbons which are
estimated to be producible from accumulations, either discovered or
undiscovered. Note that Contingent and Prospective Resources as
estimated herein are all estimates of recoverable quantities.
Risked: Quantities that have been adjusted for the probability
of success or loss/failure.
Swanson Rule: A methodology for calculating the EMV of an oil or
gas prospect.
Unrisked : Quantities which have not been adjusted for the
probability of success or loss/failure.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDJTMJTMTJBTBM
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