TIDMTRP
RNS Number : 4583P
Tower Resources PLC
10 June 2020
10 June 2020
Tower Resources plc
Preliminary Results to 31 December 2019
Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN)),
the AIM listed oil and gas company with its focus on Africa,
announces its preliminary results for the 12 months ended 31
December 2019.
Highlights:
-- Thali PSC $3.9 million (2018: $1.2 million) exploration and evaluation expenditure.
-- Licence payments securing 80% operated interest in blocks
1910A, 1911 and 1912B, offshore Namibia, together with the National
Petroleum Corporation of Namibia (NAMCOR) of $229k (2018: 5k);
-- Administrative costs net of impairments and share-based
payment charges $987k (2018: $924k); and
-- Cash balance at year-end of $39k (2018: $331k).
Post-reporting period events:
-- January 2020: Award of extension to the initial exploration
period of the Thali licence to 15 September 2020;
-- February 2020: Completion of NJOM-3 appraisal well site
survey by the Geoquip Marine survey vessel MV investigator;
-- March 2020: Cameroon Reserves Report update reconfirming
gross mean contingent resources of 18 MMbbls of oil across the
proven Njonji-1 and Njonji-2 fault blocks, with an NPV10 of the
Best Estimate Contingent Resources of $119 million using the March
10(th) 2020 Brent Forward Curve, and an EMV10 of $91 million;
-- March 2020: Completion of placing and subscription to raise
GBP500k at placing price of 0.375 pence per share;
-- March 2020: Notification to the Government of Cameroon of an
event of Force Majeure in respect of the Covid-19 pandemic,
affecting the timing for completion of the Group's work programme
in the Initial Exploration Period of the Group's Thali Production
Sharing Contract.
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 info@towerresources.co.uk
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
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
2019 proved to be a challenging year and so far 2020 has been
even more challenging, in ways which have affected everyone in our
industry and in most other sectors. The impact on oil demand of the
Covid-19 lockdowns was dramatic and, at least in recent history,
unprecedented, and the potential for a simultaneous price war among
the OPEC nations and Russia initially exacerbated the problem.
Fortunately, the dramatic collapse in prompt oil prices resulted in
rapid action to cut production by both governments and private
companies. The potential for a second wave of Covid-19 infections
remains a concern, but the market for prompt delivery is now
stabilising and much improved, with Brent for August 2020 delivery
now trading at around $40 per barrel as I write.
Given our expected production profile, it is the price of Brent
for forward delivery that is most important for us, and it is worth
remembering that the price of Brent for forward delivery was not
affected as much by the difficulties in the prompt crude market. At
the end of 2019, Brent for prompt delivery was trading above $68
per barrel, but at the same time the price for delivery in December
2025 was around $58 per barrel. As noted above, Brent for August
2020 delivery is now trading at around $40 per barrel, but the
price for delivery in December 2025 is still above $52 per barrel.
Capital expenditure is being reduced across the industry, and the
impact of the reductions in prior years' capital expenditures and
shifts towards shorter-life US production have yet to be fully
felt. Therefore we believe there is the potential for supply to be
tighter in future if demand returns to pre-Covid-19 levels.
However, even if forward prices were to slide back to the $45
range, where prices for delivery in 2022 currently stand, our
projects remain attractive.
This has been reinforced by the updated Reserves and Resources
Valuation report on our Thali license in Cameroon, which we
received from Oilfield International Ltd in March 2020. The
executive summary is available on our website, and explains that
using the forward curve of 10 March 2020, the OIL estimate of the
NPV10 of their Best Estimate of Contingent Resources is $119
million, with an EMV10 of $91 million. It has also been reinforced
by the farm-out agreement with OilLR, announced at the end of
February 2020, which we still expect to complete in the near
future, and the interest from other parties in a similar
transaction.
The fact that Exxon, Total, and independents like Africa Energy
and their partners are pressing ahead with further exploration
wells in South Africa and Namibia reinforces the attractive
economics of these wells, even at current oil prices and despite
their geological risks.
We raised money twice in 2019, first in January and again in
October/November. I participated in both fundraisings myself and I
also assisted in providing a working capital loan over the summer,
which I then took over completely in November. These fundraisings
provided a total of about GBP3.2 million and $750,000 to the
company, which allowed it to complete the acquisition of all long
lead items for the NJOM-3 well and to complete the well planning
and design, and also to get the site survey underway, as well as
keeping work underway on the our other licenses. This was reflected
in the $4.7 million of net investment in oil and gas assets that we
made during 2019. We also completed a further small fundraising of
GBP500,000 in March 2020.
We had intended to appoint a further director to the board in
the current quarter, to replace Graeme Thomson, and we have
identified a candidate with a suitable financial background.
However, one less serious consequence of the Covid-19 pandemic is
that this process is not yet complete, though we hope to complete
it in the third quarter.
We do not yet know if the rest of 2020 will see us continuing to
wrestle with the frustrations of the pandemic, or sprinting towards
our goals as things return to normal, or somewhere in between.
However, we did not wish to delay preparation of our annual report,
despite the inherent uncertainties at this moment. I do believe
that our assets are as attractive as they have always been; our
plans are further advanced than they were a year ago; and our
determination to achieve our goals is undiminished. We hope to have
more concrete news for shareholders over the coming weeks and
months.
STRATEGIC REPORT
Our strategy remains to shift our near-term focus towards lower
risk exploration and development within proven basins, best
characterised by our 2015 signature of the Thali PSC in the Rio Del
Rey basin, offshore Cameroon. We have not abandoned high
risk/reward exploration: we have a highly prospective license in
South Africa, and we have a new license in Namibia, covering blocks
that we know well from our previous license there, and a number of
other companies are now investing in these areas. The Thali
Production Sharing Contract ("PSC") also has a high-reward
exploration upside in the deeper formations, which have not yet
been tested by historical drilling. We continue to believe that all
of our assets are attractive and valuable. But our strategy is to
focus our current investment on the lower risk, earlier reward
opportunities in Thali during this phase of the market cycle,
before pursuing the other higher risk opportunities.
This strategy requires finding external finance at the asset
level for our existing exploration commitments wherever possible,
which is why we took the decision some time ago to convert our
working interest in the SADR to a royalty interest, and why we
continue to support our partner and operator, NewAge Energy Algoa
(Pty) Ltd (50%), in seeking a farm-in partner for our Algoa-Gamtoos
block in South Africa. Our financial strategy remains to explore
asset-level financing even for assets that we could also finance
with our own equity, to achieve the most economic financing for
each asset and the best value for shareholders.
As an operator, we believe that the scale of local operations is
also important to create savings and synergies across blocks in the
same basin. To some extent, this can be achieved and reinforced
through good relations with other local operators, but controlling
multiple blocks oneself is the most obvious way to achieve such
synergies (where they can be found) to the benefit of one's host
nation, one's partners, and one's investors alike. To this end, we
are continuing to discuss the possibility of a further PSC in
Cameroon in the future, even while undertaking development of our
existing one.
Keeping overhead costs appropriately low, and managing operating
costs well, are always important, but especially so in this phase
of the market cycle. We have always sought to keep fixed costs
down, and total costs flexible, through outsourcing important
functions such as our technical-subsurface relationship with the
EPI Group, and we have reduced our corporate costs substantially
since 2016, as our last few years' financial figures confirm.
OPERATIONAL REVIEW
On an operational level, most of our activity in 2019 and the
first few months of 2020 has been in Cameroon.
As already explained in our Interim Results statement issued on
11 September 2019, our original plan to drill the NJOM-3 well was
frustrated by the lack of adequate site survey data, which only
became apparent in April 2019. Most of the rest of the year was
spent specifying and preparing for the site survey, and obtaining
the agreement of the Republic of Cameroon to the requisite
extension of the First Exploration Period of our Thali PSC. This
was obtained and the site survey was completed in February
2020.
The survey confirms the suitability of the proposed NJOM-3 well
location, but unfortunately by the time we received the complete
survey report the Covid-19 pandemic was already underway, and so as
I write this we are not yet in a position to conclude a rig
contract or other service contracts for drilling the well. As a
result, we have notified the Ministry ("MINMIDT") of a state of
Force Majeure, and since that time we have had meetings with both
MINMIDT and the Société Nationale des Hydrocarbures ("SNH") to
discuss the way forward. No-one can be certain of the progression
of the pandemic, the associated restrictions, or a potential second
wave. However, with the goodwill and support of all involved, we
expect that we will restart the drilling preparations as soon as
possible.
We received an updated Reserves and Resources Valuation report
from Oilfield International Ltd in March 2020, after the initial
collapse in crude oil prices which was reflected in the report, and
the executive summary is available on our website.
In Namibia, the new petroleum agreement that we signed in 2018
in respect of blocks 1910A, 1911 and 1912B covering 23,297km2 in
the Walvis Basin and Dolphin Graben, culminated in the issue of
license PEL 96 during the course of 2019. We completed negotiation
of the JOA with Namcor and our local partners, and we also received
an unsolicited approach from a major oil company regarding the
license in the second half of 2019. That company has told us that
they remain interested in working on this project, but have not
prioritised it during the first half of 2020, and we expect
discussions with them to remain on the back burner in the second
half of the year, or at least until the pandemic situation is
clearer. This has not affected our own plans for the license, and
we await with great interest the outcome of the wells currently
being prepared in the area.
In South Africa, our Algoa Gamtoos block is immediately to the
East of Total's block 11B/12B where it made its recent Brulpadda
discovery. Our co-venturer and operator NewAge has been
reprocessing existing seismic data in anticipation of acquiring new
3D data over the next exploration period. NewAge and we have been
seeking a farm-in partner to fund this work, and we have had
interest including a concrete proposal before the pandemic slowed
everything down. Total is still planning further wells and 3D
acquisition in the area immediately to the East of its Brulpadda
discovery in the Outeniqua basin. Perhaps of even greater interest
to us is the 2D data they intend to acquire further along the
Outeniqua basin, further to the East and towards our own Algoa
Gamtoos offshore block where we have our own Outeniqua prospect,
with prospective resources of 364 million boe according to the
Operator NewAge's estimates.
PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2019
31 December 2019 31 December 2018
(audited) (audited)
Note $ $
------------------------------------------------- ----- ----------------- --- -----------------
Revenue - -
Cost of sales - -
------------------------------------------------- ----- ----------------- --- -----------------
Gross profit - -
Other administrative expenses (2,240,313) (1,012,303)
Impairment of exploration and evaluation assets 12 - (2,813,413)
------------------------------------------------- ----- ----------------- --- -----------------
Total administrative expenses (2,240,313) (3,825,716)
------------------------------------------------- ----- ----------------- --- -----------------
Group operating loss 4 (2,240,313) (3,825,716)
Finance income 703 4,033
Finance expense 6 (421,973) -
------------------------------------------------- ----- ----------------- --- -----------------
Loss for the year before taxation (2,661,583) (3,821,683)
Taxation 7 - -
------------------------------------------------- ----- ----------------- --- -----------------
Loss for the year after taxation (2,661,583) (3,821,683)
------------------------------------------------- ----- ----------------- --- -----------------
Other comprehensive income - -
------------------------------------------------- ----- ----------------- --- -----------------
Total comprehensive expense for the year (2,661,583) (3,821,683)
------------------------------------------------- ----- ----------------- --- -----------------
Basic loss per share (USc) 10 (0.40c) (1.02c)
------------------------------------------------- ----- ----------------- --- -----------------
Diluted loss per share (USc) 10 (0.40c) (1.02c)
------------------------------------------------- ----- ----------------- --- -----------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2019
Share Share (1) Share-based Retained Total
capital premium payments losses
reserve
$ $ $ $ $
At 1 January 2018 15,558,095 142,361,529 6,387,408 (141,969,571) 22,337,461
------------------------------------------- ----------- ------------ ---------------- -------------- ------------
Shares issued on settlement of third party
fees 41,531 14,788 - - 56,319
Share-based payment charge for the year - - 137,184 - 137,184
Total comprehensive expense for the year - - - (3,821,683) (3,821,683)
At 31 December 2018 15,599,626 142,376,317 6,524,592 (145,791,254) 18,709,281
------------------------------------------- ----------- ------------ ---------------- -------------- ------------
Shares issued for cash 2,411,297 1,890,659 4,301,956
Shares issued on settlement of third party
fees 240,194 255,415 - - 495,609
Share issue costs - (228,263) (228,263)
Share-based payment charge for the year - - 1,134,716 - 1,134,716
Total comprehensive expense for the year - - - (2,661,583) (2,661,583)
At 31 December 2019 18,251,117 144,294,128 7,659,308 (148,452,837) 21,751,716
------------------------------------------- ----------- ------------ ---------------- -------------- ------------
(1) The share-based payment reserve has been included within the
retained loss reserve and is a non-distributable reserve.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
31 December 2019 31 December 2018
(audited) (audited)
Note $ $
----------------------------------- ----- ----------------- -----------------
Non-current assets
Property, plant and equipment 11 -
Exploration and evaluation assets 12 24,315,816 19,646,399
----------------------------------- ----- ----------------- -----------------
24,315,816 19,646,399
----------------------------------- ----- ----------------- -----------------
Current assets
Trade and other receivables 14 53,448 23,979
Cash and cash equivalents 38,662 331,395
----------------------------------- ----- ----------------- -----------------
92,110 355,374
----------------------------------- ----- ----------------- -----------------
Total assets 24,407,926 20,001,773
----------------------------------- ----- ----------------- -----------------
Current liabilities
Trade and other payables 15 1,815,720 1,292,492
Bridging loan facility 16 840,490 -
----------------------------------- ----- ----------------- -----------------
Total liabilities 2,656,210 1,292,492
----------------------------------- ----- ----------------- -----------------
Net assets 21,751,716 18,709,281
----------------------------------- ----- ----------------- -----------------
Equity
Share capital 17 18,251,117 15,599,626
Share premium 17 144,294,128 142,376,317
Retained losses 18 (140,793,529) (139,266,662)
----------------------------------- ----- ----------------- -----------------
Total shareholders' equity 21,751,716 18,709,281
----------------------------------- ----- ----------------- -----------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2019
31 December 2019 31 December 2018
(audited) (audited)
Note $ $
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash outflow from operating activities
Group operating loss for the year (2,240,313) (3,825,716)
Depreciation of property, plant and equipment 11 - 549
Share-based payments 20 1,134,716 137,184
Impairment of intangible exploration and evaluation assets 12 - 2,813,414
Loss on disposal of of property, plant and equipment 11 - 391
----------------------------------------------------------------------- ----- ----------------- -----------------
Operating cash flow before changes in working capital (1,105,597) (874,178)
(Increase) / decrease in receivables and prepayments (29,469) 99,989
Increase in trade and other payables 523,228 239,589
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash used in operations (611,838) (534,600)
Interest received 703 1,636
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash used in operating activities (611,135) (532,964)
----------------------------------------------------------------------- ----- ----------------- -----------------
Investing activities
Exploration and evaluation costs 12 (4,669,417) (1,345,833)
Net cash used in investing activities (4,669,417) (1,345,833)
----------------------------------------------------------------------- ----- ----------------- -----------------
Financing activities
Proceeds from bridging loan facility 16 770,480
Cash proceeds from issue of ordinary share capital net of issue costs 17 4,569,302 56,319
Finance costs 6 (351,963) 2,397
----------------------------------------------------------------------- ----- ----------------- -----------------
Net cash from financing activities 4,987,819 58,716
----------------------------------------------------------------------- ----- ----------------- -----------------
Decrease in cash and cash equivalents (292,733) (1,820,081)
Cash and cash equivalents at beginning of year 331,395 2,151,476
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash and cash equivalents at end of year 38,662 331,395
----------------------------------------------------------------------- ----- ----------------- -----------------
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
a) General information
Tower Resources plc is a public company incorporated in the
United Kingdom under the UK Companies Act. The address of the
registered office is 140 Buckingham Palace Road, London, SW1W 9SA.
The Company and the Group are engaged in the exploration for oil
and gas.
These financial statements are presented in US dollars as this
is the currency in which the majority of the Group's expenditures
are transacted and the functional currency of the Company and have
been prepared in accordance with International Financial Reporting
Standards ("IFRS") and Interpretations ("IFRIC") as adopted by the
EU.
b) Basis of accounting and adoption of new and revised standards
i New and amended standards adopted by the Group:
No standards adopted this year had a material effect on the
Group or Company financial statements.
ii Standards, amendments and interpretations, which are
effective for reporting periods beginning after the date of these
financial statements which have not been adopted early:
Standard Description Effective date EU Endorsement Status
IFRS 3 (amendments Definition of a Business 1 January 2020 Endorsed
------------------------------- --------------- ----------------------
IAS 1 and IAS 8 (amendments) Definition of Material 1 January 2020 Endorsed
------------------------------- --------------- ----------------------
IFRS 9, IAS 39 and IFRS 7 (Amendments) Interest Rate Benchmark Reform 1 January 2020 Endorsed
------------------------------- --------------- ----------------------
IFRS 17 Insurance Contracts 1 January 2021 Endorsed
------------------------------- --------------- ----------------------
The Directors have not fully assessed the impact of all
standards but do not expect them to have a material impact.
c) Going concern
The Group will need to complete its agreed farm-out and/or
another asset-level transaction within the time frame presently
contemplated or during the following quarter, or otherwise raise
further funds, in order to meet its liabilities as they fall due,
particularly with respect to the forthcoming drilling programme in
Cameroon. The Directors believe that there are a number of options
available to them through either, or a combination of, capital
markets, farm-outs (including the farm-out already agreed) or asset
disposals with respect to raising these funds. There can, however,
be no guarantee that the required funds may be raised or
transactions completed within the necessary timeframes which raises
uncertainty as to the application of going concern in these
accounts. Having assessed the risks attached to these uncertainties
on a probabilistic basis, the Directors are confident that they can
raise sufficient finance in a timely manner and therefore believe
that the application of going concern is both appropriate and
correct.
d) Basis of consolidation
The consolidated financial statements incorporate the accounts
of the Company and its subsidiaries and have been prepared by using
the principles of acquisition accounting ("the purchase method")
which includes the results of the subsidiaries from their date of
acquisition. Intra-group sales, profits and balances are eliminated
fully on consolidation.
The results of subsidiaries acquired or disposed of are included
in the consolidated statement of comprehensive income from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation.
As a Consolidated Statement of Comprehensive Income is
published, a separate Statement of Comprehensive Income for the
Parent Company has not been published in accordance with section
408 of the Companies Act 2006.
e) Goodwill
Goodwill is the difference between the amount paid on
acquisition of subsidiary undertakings and the aggregate fair value
of their net assets, of which oil and gas exploration expenditure
is the primary asset. Goodwill is capitalised as an intangible
asset and in accordance with IFRS3 'Business Combinations' is not
amortised but tested for impairment annually and when there are
indications that its carrying value is not recoverable. Goodwill is
shown at cost less any provision for impairment in value. If a
subsidiary undertaking is sold, any unimpaired goodwill arising on
its acquisition is reflected in the calculation of any profit or
loss on sale.
f) Jointly controlled operations
Jointly controlled operations are arrangements in which the
Group holds an interest on a long-term basis which are jointly
controlled by the Group and one or more ventures under a
contractual arrangement. The Group's exploration, development and
production activities are sometimes conducted jointly with other
companies in this way. Since these arrangements do not constitute
entities in their own right, the consolidated financial statements
reflect the relevant proportion of costs, revenues, assets and
liabilities applicable to the Group's interests.
g) Oil and Gas Exploration and Evaluation Expenditure
Costs incurred before the acquisition of a license or permit to
explore an area are expensed to the income statement.
All exploration and evaluation costs incurred following a
license or permit to explore being obtained or acquired on the
acquisition of a subsidiary are capitalised in respect of each
identifiable project area. These costs are classified as intangible
assets and are only carried forward to the extent that they are
expected to be recouped through the successful development of the
area or where activities in the area have not yet reached a stage
which permits reasonable assessment of the existence of
economically recoverable reserves (successful efforts).
Costs incurred by Directors' and employees of the parent Company
on the exploration activities are recharged to the subsidiaries and
capitalised as exploration assets accordingly.
Other costs are expensed unless commercial reserves have been
established or the determination process has not been completed.
Accumulated costs in relation to an abandoned area are written off
in full against profit in the year in which the decision to abandon
the area is made.
When production commences the accumulated costs for the relevant
area of interest are transferred from intangible assets to tangible
assets as 'Developed Oil and Gas Assets' and amortised over the
life of the area according to the rate of depletion of the
economically recoverable costs.
h) Impairment of Oil and Gas Exploration and Evaluation assets
The carrying value of unevaluated areas is assessed when there
has been an indication that impairment in value may have occurred.
The impairment of unevaluated prospects is assessed based on the
Directors' intention with regard to future exploration and
development of individual significant areas and the ability to
obtain funds to finance such exploration and development.
i) Decommissioning costs
Where a material liability for the removal of production
facilities and site restoration at the end of the field life
exists, a provision for decommissioning is made. The amount
recognised is the present value of estimated future expenditure
determined in accordance with local conditions and requirements. An
asset of an amount equivalent to the provision is also created and
depreciated on a unit of production basis. Changes in estimates are
recognised prospectively, with corresponding adjustments to the
provision and the associated asset.
j) Property, plant and equipment
Property, plant and equipment is stated at cost less
depreciation. Depreciation is provided at rates calculated to write
off the cost less estimated residual value of each asset over its
expected useful life as follows:
Computers and equipment, fixtures, fittings and equipment:
straight line over 4 years
Leasehold and office refurbishment costs: over duration of
lease
The assets' residual values and useful lives are reviewed and
adjusted if necessary at each year-end. Profits or losses on
disposals of plant and equipment are determined by comparing the
sale proceeds with the carrying amount and are included in the
statement of comprehensive income. Items are reviewed for
impairment if and when events indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount
by which the carrying amount of the asset exceeds its recoverable
amount which is the higher of an asset's net selling price and
value in use.
k) Investments
The Parent Company's investments in subsidiary companies are
stated at cost less any expected credit loss for impairment and are
shown in the Company's Statement of Financial Position.
l) Share-based payments
The Company makes share-based payments to certain Directors,
employees and consultants by the issue of share options or
warrants. The fair value of these payments is calculated either
using the Black Scholes option pricing model or by reference to the
fair value of the remuneration settled by way of the grant of such
options or warrants. The expense is recognised on a straight-line
basis over the period from the date of award to the date of
vesting, based on the Company's best estimate of shares that will
eventually vest.
m) Foreign currency translation
i Functional and presentational currency
Items included in the financial statements are shown in the
currency of the primary economic environment in which the Company
operates ("the functional currency") which is considered by the
Directors to be the U.S Dollar. The exchange rate at 31 December
2019 was GBP1 / $1.3204 (2018: GBP1 / $1.2746).
ii Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement
of comprehensive income.
Transactions in the accounts of individual Group companies are
recorded at the rate of exchange ruling on the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rates ruling at the year-end. All
differences are taken to the statement of comprehensive income.
n) Taxation
i Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible on other years and
it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the reporting
date.
ii Deferred taxation
Deferred income taxes are provided in full, using the liability
method, for all temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
financial statements. Deferred income taxes are determined using
tax rates that have been enacted or substantially enacted and are
expected to apply when the related deferred income tax asset is
realised or the related deferred income tax liability is
settled.
The principal temporary differences arise from depreciation or
amortisation charged on assets and tax losses carried forward.
Deferred tax assets relating to the carry forward of unused tax
losses are recognised to the extent that it is probable that future
taxable profit will be available against which the unused tax
losses can be utilised.
o) Financial instruments
The Group's Financial Instruments comprise of cash and cash
equivalents, loans and receivables. There are no other categories
of financial instrument.
i Cash and cash equivalents
Cash and cash equivalents are carried at cost and comprise cash
in hand, cash at bank, deposits held at call with banks, and other
short-term highly liquid investments with original maturities of
three months or less.
ii Receivables
Receivables are measured at amortised cost unless the time value
of money is immaterial. A provision for impairment of receivables
is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of the receivables. The amount of the provision is the
difference between the assets' carrying amount and the recoverable
amount. Expected credit losses for impairment of receivables are
included in the statement of comprehensive income.
iii Payables
Payables are recognised initially at fair values and
subsequently measured at amortised cost using the effective
interest method.
p) Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the asset of the Group after deducting all of
its liabilities. Equity instruments issued by the Company are
recorded at the proceeds received net of direct issue costs.
q) Share capital
Ordinary shares are classified as equity. Proceeds received from
the issue of ordinary shares above the nominal value are classified
as Share Premium. Costs directly attributable to the issue of new
shares are shown in equity as a deduction from the Share Premium
account.
r) Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event and it is probable that the
Group would be required to settle that obligation. Provisions are
measured at the managements' best estimate of the expenditure
required to settle the obligation at the reporting date and are
discounted to present value where the effect is material.
s) Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision makers.
The chief operating decision makers have been identified as the
executive Board members.
t) Leases
The Group do not have any leases with a term of 12-months or
more that contain an option to purchase or where the underlying
asset has anything other than a low value and has elected for
exemption to the reporting requirements of IFRS 16 (Leases).
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with
International Financial Reporting Standards requires the use of
accounting estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during
the reporting period. Although these estimates are based on
managements' best knowledge of current events and actions, actual
results ultimately may differ from those estimates. IFRS also
require management to exercise its judgement in the process of
applying the Group's accounting policies.
The prime areas involving a higher degree of judgement or
complexity, where assumptions and estimates are significant to the
financial statements, are as follows:
Recoverability of inter-company balances
Determining whether inter-company balances are impaired requires
an estimation of whether there are any indications that their
carrying values are not recoverable details of which are included
in note 13.
Impairment of capitalised exploration and evaluation
expenditure
The future recoverability of capitalised exploration and
evaluation expenditure is dependent on a number of factors,
including whether it successfully recovers the related exploration
and evaluation asset through sale. Factors which could impact the
future recoverability include the level of proved, probable and
inferred resources, future technological changes which could impact
the cost of drilling and extraction, future legal changes
(including changes to environmental restoration obligations),
changes to commodity prices and licence renewal dates and
commitments.
To the extent that capitalised exploration and evaluation
expenditure is determined to be irrecoverable in the future, this
will reduce profits and net assets in the period in which this
determination is made. In addition, exploration and evaluation
expenditure is capitalised if activities in the area of interest
have not yet reached a stage which permits reasonable assessment of
the existence or otherwise of economically recoverable reserves. To
the extent that it is determined in the future that this
capitalised expenditure should be written off, this will reduce
profits and net assets in the period in which this determination is
made. Details of impairments of capitalised exploration and
evaluation expenditure are included in note 12.
VAT receivable
The future ability of the Group to recover UK VAT is currently
the subject of a dispute with HMRC and on 8 July 2019 the Company
received a judgement in its favour from the First-Tier Tribunal
(Tax Chamber). This judgement is now subject to a further appeal by
HMRC to the Upper Tribunal, which will probably not be heard for
some time. Whilst the Group believes that it has complied in all
material respects with UK VAT legislation, and now has the benefit
of the First-Tier Tribunal judgement in its favour, there can be no
certainty that this judgement will be upheld by the Upper Tribunal.
If the Group ultimately fails in its dispute with HMRC, it will be
deregistered for VAT and unable to recover the VAT charged to it by
UK suppliers. This would increase the UK element of its cost base
accordingly. The Directors have made the judgement that the
certainty over the Group's continued UK VAT registration status
cannot be guaranteed and have therefore provided against the VAT
payables in note 15.
Capital markets / going concern
The group relies on the UK equities market and the market for
equity participations in oil and gas exploration assets in order to
raise the funds required to operate as a listed entity and complete
the respective work programmes for its oil and gas exploration
assets. From time to time, and especially in light of the present
Covid-19 pandemic, general economic and market conditions may
deteriorate to a point where it is not possible to raise equity
finance to fund exploration projects, nor debt to develop
projects.
Additional financing may therefore not be available to the Group
restricting the scope of operations, risking both its long-term
expansion programme, its obligations under contracts which may be
withdrawn or terminated for non-compliance and ultimately the
financial stability of the Group to continue as a going
concern.
Please see note 1 (c) for a more detailed discussion of going
concern matters.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
by using the Black Scholes model and by reference to the value of
the fees or remuneration settled by way of granting of warrants.
The determination of fair value using the Black Scholes methodology
is based on the input parameters chosen and will therefore contain
an element of judgement and uncertainty. Details of share-based
payment transactions are included in note 20.
3. Operating segments
The Group has two reportable operating segments: Africa and Head
Office. Non-current assets and operating liabilities are located in
Africa, whilst the majority of current assets are carried at Head
Office. The Group has not yet commenced production and therefore
has no revenue. Each reportable segment adopts the same accounting
policies. In compliance with IFRS 8 'Operating Segments' the
following table reconciles the operational loss and the assets and
liabilities of each reportable segment with the consolidated
figures presented in these Financial Statements, together with
comparative figures for the year-ended 31 December 2019.
Africa Head Office Total
2019 2018 2019 2018 2019 2018
$ $ $ $ $ $
----------------------------------- ----------- ------------ ------------ ------------ ------------ ------------
Administrative expenses (1) (187,893) (2,845,729) (1,249,856) (837,425) (1,437,749) (3,683,154)
Pre-licence expenditures - - (810) (4,829) (810) (4,829)
Share-based payment charges - - (801,754) (137,184) (801,754) (137,184)
Depreciation of property, plant
and equipment - - - (549) - (549)
Interest income - - 703 1,636 703 1,636
Financing costs (1,031) (991) (420,942) 3,388 (421,973) 2,397
Loss by reportable segment (188,924) (2,846,720) (2,472,659) (974,963) (2,661,583) (3,821,683)
Total assets by reportable segment
(2 / 3) 24,342,425 19,653,744 65,501 348,029 24,407,926 20,001,773
----------------------------------- ----------- ------------ ------------ ------------ ------------ ------------
Total liabilities by reportable
segment (4) (619,810) (359) (2,036,400) (1,292,133) (2,656,210) (1,292,492)
----------------------------------- ----------- ------------ ------------ ------------ ------------ ------------
(1) Administrative expenses include $65k (2018: $2.8 million) of
intangible exploration and evaluation asset impairments in relation
to the Africa segment.
(2) Included within total assets of $24.4 million (2018: $20.0
million) are $10.8 million (2018: $6.9 million) Cameroon, $229k
(2018: $5k) Namibia and $13.3 million (2018: $12.7 million) South
Africa.
(3) Carrying amounts of segment assets exclude investments in
subsidiaries.
(4) Carrying amounts of segment liabilities exclude intra-group
financing.
4. Loss from operations
Loss from operations is stated after charging/(crediting): Total
2019 2018
$ $
--------------------------------------------------------------------------------------- -------- ----------
Share-based payment charges 801,754 137,184
Staff costs 328,221 106,983
Rental of properties - -
Gain / (loss) on foreign currencies 118,916 (48,694)
Depreciation of property, plant and equipment - 549
Impairment of exploration and evaluation assets - 2,813,413
An analysis of auditor's remuneration is as follows:
Fees payable to the Group's auditors for the audit of the Group and subsidiary annual
accounts 33,054 40,786
Fees payable to the Group's auditors for non-audit assurance services 1,749 4,843
Total audit fees 34,804 45,629
------------------------------------------------------------------------------------------ -------- ----------
5. Employee information
The average monthly number of employees of the Group (including
Directors) was:
2019 2018
Head office 4 4
Africa 3 3
--------------- ----- -----
7 7
------------- ----- -----
Group employee costs during the year (including executive
Directors) amounted to:
2019 2018
$ $
----------------------------- ---------- --------
Wages and salaries 315,343 92,300
Social security costs 12,878 14,683
Share-based payment charges 801,754 134,575
1,129,975 241,558
----------------------------- ---------- --------
Jeremy Asher received an award of 15 million shares under the
Group share incentive scheme, a charge for which has been
recognised within the Group income statement of $142,266 (2018:
$53,078).
Key management personnel include the executive and non-executive
Directors whose remuneration, including non-cash share-based
payment charges of $339k (2018: $134k), was $462k (2018: $231k);
see Directors' Report for additional detail. During the year $206k
(2018: $134k) of the full-year share-based payment charge of $801k
(2018: $137k) related to employees and their remuneration as
employees.
The highest paid Director was Jeremy Asher $350,401
(2018:$314,813).
6. Finance costs
During the period covered by these financial statements the
Group incurred costs of $422k (2018: $nil). Included within these
charges is share-based payment costs of $333k (2018: $nil) relating
to warrants issued on drawdown and extension of the bridging loan
facility. The Company incurred costs of $416k (2018: $2k).
7. Taxation
2019 2018
$ $
Current tax
UK Corporation tax - -
-------------------------------------------------------------------------------------- ---------- ----------
Total current tax charge - -
-------------------------------------------------------------------------------------- ---------- ----------
The tax charge for the period can be reconciled to the loss for the year as follows:
Group loss before tax 2,661,584 3,821,682
Tax at the UK Corporation tax rate of 19% (2018: 19.3%) (505,701) (726,120)
Tax effects of:
Expenses not deductible for tax purposes 152,333 560,613
Tax losses carried forward not recognised as a deferred tax asset 353,368 165,507
Current tax charge - -
---------------------------------------------------------------------------------------- ---------- ----------
8. Deferred tax
At the reporting date the Group had an unrecognised deferred tax
asset of $4.0 million (2018: $3.3 million) relating to unused tax
losses. No deferred tax asset has been recognised due to the
uncertainty of future profit streams against which these losses
could be utilised.
9. Parent company income statement
For the year-ended 31 December 2019 the Parent Company incurred
a loss of $1.6 million (2018: $3.5 million) including the financing
costs of $421k (2018: $2k). Included within these finance costs are
$333k of share-based payments with respect to warrants issued to
the lenders ((2018: $nil) referred to in note 6, the share-based
payments charge of $801k (2018: $137k) and impairment expected
credit losses against the investments in its operating subsidiaries
and intercompany loans to them of $136k (2018: $3.2 million). The
Company charged finance interest on intercompany loan accounts of
$853k (2018: $636k) and fees with respect to the provision of
strategic advice and support of $198k (2018: $34k). In accordance
with the provisions of Section 408 of the Companies Act 2006, the
Parent Company has not presented a statement of comprehensive
income.
10. Loss per share
The diluted weighted average number of shares in issue and to be
issued as at 31(st) December 2019 is 671,779,970 (2018:
376,252,213). The diluted loss per share has been kept the same as
the basic loss per share because the conversion of share options
and share warrants would decrease the basic loss per share and is
thus anti-dilutive. The number of anti-dilutive shares that have
been excluded from the computation of EPS is 1,296 (2018:
6,679,923).
Basic & Diluted
2019 2018
$ $
--------------------------------------------------------------------- ------------ ------------
Loss for the year 2,661,583 3,821,683
Weighted average number of ordinary shares in issue during the year 671,779,970 376,252,213
Dilutive effect of share options outstanding - -
Fully diluted average number of ordinary shares during the year 671,779,970 376,252,213
Loss per share (USc) 0.40c 1.02c
---------------------------------------------------------------------- ------------ ------------
11. Property, plant and equipment
Group Company
Year-ended 31 December 2019 $ $
Cost
At 1 January 2019 1,046 1,046
Eliminated on disposal - -
At 31 December 2019 1,046 1,046
------------------------------ ------ --------
Depreciation
At 1 January 2019 1,046 1,046
Eliminated on disposal - -
Charge for the year - -
At 31 December 2019 1,046 1,046
------------------------------ ------ --------
Net book value
At 31 December 2019 - -
At 31 December 2018 - -
------------------------------ ------ --------
Group Company
Year-ended 31 December 2018 $ $
Cost
At 1 January 2018 3,368 3,368
Eliminated on disposal (2,322) (2,322)
At 31 December 2018 1,046 1,046
------------------------------ -------- --------
Depreciation
At 1 January 2018 2,428 2,428
Eliminated on disposal (1,931) (1,931)
Charge for the year 549 549
At 31 December 2018 1,046 1,046
------------------------------ -------- --------
Net book value
At 31 December 2018 - -
At 31 December 2017 940 940
------------------------------ -------- --------
12. Intangible Exploration and Evaluation (E&E) assets
Exploration and evaluation assets Goodwill Total
Year-ended 31 December 2019 $ $ $
---------------------------------- ------------ -------------
Cost
At 1 January 2019 91,654,861 8,023,292 99,678,153
Additions during the year 4,669,417 - 4,669,417
At 31 December 2019 96,324,278 8,023,292 104,347,570
------------------------------ ---------------------------------- ------------ -------------
Amortisation and impairment
At 1 January 2019 (72,008,462) (8,023,292) (80,031,754)
Impairment during the year - - -
At 31 December 2019 (72,008,462) (8,023,292) (80,031,754)
------------------------------ ---------------------------------- ------------ -------------
Net book value
At 31 December 2019 24,315,816 - 24,315,816
At 31 December 2018 19,646,399 - 19,646,399
------------------------------ ---------------------------------- ------------ -------------
Exploration and evaluation assets Goodwill Total
Year-ended 31 December 2018 $ $ $
---------------------------------- ------------ -------------
Cost
At 1 January 2018 90,309,028 8,023,292 98,332,320
Additions during the year 1,345,833 - 1,345,833
Disposals during the year - - -
At 31 December 2018 91,654,861 8,023,292 99,678,153
------------------------------ ---------------------------------- ------------ -------------
Amortisation and impairment
At 1 January 2018 (69,195,048) (8,023,292) (77,218,340)
Impairment during the year (2,813,414) - (2,813,414)
Disposals during the year - - -
At 31 December 2018 (72,008,462) (8,023,292) (80,031,754)
------------------------------ ---------------------------------- ------------ -------------
Net book value
At 31 December 2018 19,646,399 - 19,646,399
At 31 December 2017 21,113,980 - 21,113,980
------------------------------ ---------------------------------- ------------ -------------
During the year the Group capitalised amounts totalling $4.7
million (2018: $1.3 million) with respect to the following
assets:
2019 2018
$ $
-------------- ---------- ----------
Cameroon 3,908,484 1,214,414
Namibia 223,962 4,697
Zambia - 16,297
South Africa 536,971 110,425
Total 4,669,417 1,345,833
-------------- ---------- ----------
In Cameroon the $3.9 million comprised the acquisition of
long-lead items, the environmental and social impact assessment and
preparation for the site survey required for the NJOM-3 appraisal
well.
Activities in Zambia have been limited to licence maintenance
while a hiatus remains in-place pending confirmation by Government
of the new fiscal regime.
In South Africa, Rift Petroleum Limited, Tower's wholly owned
subsidiary continues its efforts to seek a farm-in partner in and
reprocess existing sub-surface data. This effort is being led by
the operator of the licence New African Global Energy SA (Pty)
Ltd.
On 7 November 2018, the Group announced the completion of its
applications for blocks 1910A, 1911 and 1912B offshore Namibia.
During 2019 the Group secured its tenure to these blocks by
completing its various regulatory payments to the Government of the
Republic of Namibia, culminating on the issue of the new license
PEL 0096
In accordance with the Group's accounting policies and IFRS 6
the Directors' have reviewed each of the exploration license areas
for indications of impairment. Having done so, it was concluded
that a full impairment review was not required on the Cameroon,
South Africa or Namibian licences, however, in-line with the
treatment adopted at 31 December 2018, full ongoing impairment of
the Zambian licences is considered appropriate at this time.
The Directors have not provided for any impairment of the
Group's investment in the Thali license, because potential
transactions and funding discussions with third parties support the
Directors' view that the current carrying value is recoverable.
In South Africa, Tower's wholly-owned subsidiary Rift Petroleum
Limited and its partner, New African Global Energy SA (Pty) Ltd,
agreed in 2018 to enter the next phase of the Algoa-Gamtoos
licence, the net commitment for which was approximately $2.5
million to Tower for 2019 and beyond and is disclosed in note
19.
In the case of the Group's Zambian license, the Directors
continue to await the review of the country's petroleum law and
have not yet agreed with the Government of Zambia the next phase of
work, if any, in respect of Blocks 40 and 41. This uncertainty has
led the Directors to fully impair these assets in accordance with
IAS 36 "Impairment of Assets" due to the lack of clarity regarding
both future work programme and the fiscal terms.
In Namibia, the Company's investment in the current license is
currently just $224k, which appears well supported by the
valuations implied by recent transactions in the region, allowing
for the early stage of the evaluation and appraisal process.
Furthermore, the Directors continue to believe firmly that the
relatively modest amounts of expenditure incurred on acquiring and
securing tenure to the licence is fully supported by the their
initial view of its prospectivity based on the information that is
currently available.
13. Investment in subsidiaries
Loans to subsidiary undertakings Shares in subsidiary undertakings Total
Company $ $ $
Cost
At 1 January 2019 74,363,024 37,519,722 111,882,746
Net advances during the year 5,310,120 - 5,310,120
At 31 December 2019 79,673,144 37,519,722 117,192,866
------------------------------ --------------------------------- ---------------------------------- -------------
Provision for impairment -
At 1 January 2019 (64,726,246) (19,908,973) (84,635,219)
Provision for impairment (135,879) - (135,879)
At 31 December 2019 (64,862,125) (19,908,973) (84,771,098)
------------------------------ --------------------------------- ---------------------------------- -------------
Net book value -
At 31 December 2019 14,811,019 17,610,749 32,421,768
At 31 December 2018 9,636,778 17,610,749 27,247,527
------------------------------ --------------------------------- ---------------------------------- -------------
Included within loans made to subsidiary undertakings during the
year of $5.3 million are amounts of $3.5 million Cameroon (2018:
$1.4 million), $1.2 million South Africa (2018: $24k) and $563k
(2018: $393k) Namibia.
Loans made by the parent company to subsidiary undertakings are
interest-bearing in accordance with loan agreements made in 2015,
and are repayable to the parent company on demand.
The subsidiary undertakings at the year-end are as follows
(these undertakings are included in the Group accounts):
Country of Class of
incorporation shares held Proportion of voting rights held Nature of business
2019 2019 2019 2018 2019
--------------------- ------------------- ------------- ----------------- ---------------- --------------------
Tower Resources
Cameroon Limited
(1) England & Wales Ordinary 100% 100% Holding company
Tower Resources Oil and gas
Cameroon SA (2) Cameroon Ordinary 100% 100% exploration
Rift Petroleum
Holdings Limited
(1) Isle of Man Ordinary 100% 100% Holding company
Rift Petroleum Oil and gas
Limited (3) Zambia Ordinary 100% 100% exploration
Rift Petroleum Oil and gas
Limited (3) Isle of Man Ordinary 100% 100% exploration
Tower Resources
(Namibia) Holdings
Limited (1) England & Wales Ordinary 100% 100% Holding company
Tower Resources
(Namibia) Limited Oil and gas
(4) England & Wales Ordinary 100% 100% exploration
Wilton Petroleum Oil and gas
Limited (1/5) England & Wales Ordinary 100% 100% exploration
--------------------- ------------------- ------------- ----------------- ---------------- --------------------
(1) Held directly by the Company, Tower
Resources plc
(2) Held directly or indirectly through Tower Resources
Cameroon Limited
(3) Held directly or indirectly through
Rift Petroleum Holdings Limited
(4) Held directly or indirectly through Tower Resources
(Namibia) Holdings Limited
(5) In liquidation
14. Trade and other receivables
Group Company
2019 2018 2019 2018
$ $ $ $
----------------------------- ------- ------- ------- -------
Trade and other receivables 53,448 23,979 53,446 23,977
----------------------------- ------- ------- ------- -------
15. Trade and other payables
Group Company
2019 2018 2019 2018
$ $ $ $
------------------------------------ ---------- ---------- ---------- ----------
Trade and other payables 1,398,597 1,246,863 1,150,226 1,246,506
Accruals 417,123 45,629 45,686 45,629
Loans from subsidiary undertakings - - 6,617,600 6,617,600
1,815,720 1,292,492 7,813,512 7,909,735
------------------------------------ ---------- ---------- ---------- ----------
Included within trade and other payables are amounts totalling
$1.2 million / GBP903k (2018: $1.1 million / GBP843k) with respect
to UK VAT payable.
HMRC has issued assessments totalling GBP843k excluding interest
and penalties for VAT it has historically repaid to the Company and
was the subject of the initial appeal which was referred to the
first-tier tribunal, in which regard a hearing took place at the
end of May 2019, and a first-instance decision was issued in favour
of the Company on 8 July 2019.
VAT which was incorrectly charged to the Company for
land-related services totaling GBP903k has been reimbursed to the
Company by various suppliers and is due to HMRC, but has been
withheld by the Company while HMRC has withheld VAT repayments
totaling GBP1.069 million to 31 December 2019.
Taking into consideration all of the above, the net position at
31 December 2019 following the decision of the first-tier tribunal
in favour of the Company, if upheld, should be a net repayment to
the Company of GBP166k as of end of 2019. However, following HMRC's
subsequent petition and the court's granting of leave to appeal to
the Upper Tribunal, a date for which is yet to be confirmed, the
Company has not reflected the net receivable of GBP166k which it
believes is due from HMRC in the financial statements, but instead
the Company has made full provision for VAT payable to HMRC as if
it were not entitled to claim for input tax which has been
reimbursed by suppliers as outlined above.
Group creditor payment days are approximately 37 days (2018: 28
days).
16. Borrowings
Group Company
2019 2018 2019 2018
$ $ $ $
------------------------------------------- --------- ----- --------- -----
Principal balance as at 3 May 750,000 - 750,000 -
Further amounts drawndown during the year 20,480 - 20,480 -
------------------------------------------- --------- ----- --------- -----
Principal balance as at 31 December 770,480 - 770,480 -
Net facility costs at 3 May 127,976 - 127,976 -
Amortisation during the year (57,966) - (57,966) -
------------------------------------------- --------- ----- --------- -----
Net financing costs as at 31 December 70,010 - 70,010 -
During the year, the Company incurred interest expense on
long-term loans, inclusive of accretion of facility costs, of $70k
(2018: $nil). A total of $nil was settled in cash (2018 - $nil)
with all interest being rolled forwards to be settled on redemption
of the loan on 30 June 2020.
In addition to the interest charge, 90 million warrants were
awarded over the ordinary shares in the company on drawdown of the
facility, plus a further 3 million warrants on its extension to 31
August 2020. The charge recognised for these warrants within the
financial statements was $333k (2018: $nil).
The carrying amount of the borrowings includes transaction costs
of $15k (net of accretion). At 31 December 2019, the carrying
amount of the bridging loan facility approximates its fair value as
the loan's effective interest rate approximates market rates
commercially available.
The loan is secured by a fixed and floating charge over the
Company's assets in favour of Pegasus Petroleum Ltd, including the
shares of the Company's Cameroon intermediary holding subsidiary,
Tower Resources Cameroon Limited, as referred to in note 21.
The Board are currently in discussions with respect to extending
the loan beyond 30 June 2020.
17. Share capital
2019 2018
$ $
------------------------------------------------------------- ----------- -----------
Authorised, called up, allotted and fully paid
1,104,605,208 (2018: 378,335,427) ordinary shares of 0.001p 18,251,117 15,599,626
-------------------------------------------------------------- ----------- -----------
At 31 December 2018 and 2019 there were 163,370,833,248 Deferred
Shares and 56,515,033,595 B Deferred Shares in issue. The shares
carry no entitlement to receive dividends, participate in any way
in the income or profits of the company and carry no entitlement to
receive notice of, attend, speak or vote at any general meeting of
the Company. The Company is proposing to cancel both the Deferred
Shares and the B Deferred Shares at the forthcoming 2020 AGM,
subject to shareholder approval.
The share capital issues during 2019 are summarised as
follows:
Number of shares Share capital at nominal value Share premium
$ $
---------------------------------------- ----------------- ------------------------------- --------------
At 1 January 2019 377,335,427 15,599,626 142,376,317
Shares issued for cash 646,538,461 2,411,297 1,890,659
Shares issued in lieu of fees payable 80,731,320 240,194 255,415
Share issue costs - - (228,262)
At 31 December 2019 1,104,605,208 18,251,117 144,294,129
----------------------------------------- ----------------- ------------------------------- --------------
In June 2019 the Company subdivided and re-designated its
existing share capital and amended its articles of association, in
order to achieve a reduction in the par value of each Existing
Ordinary Share from GBP0.01 to GBP0.00001 per share. This enabled
the Company to issue shares in the future at an issue price which
exceeds their nominal value, while maintaining the same number of
ordinary shares in issue.
The reorganisation involved the subdivision and redesignation of
565,716,052 ordinary shares of GBP0.01 each in the capital of the
Company into 565,716,052 New Ordinary Shares of GBP0.00001 each and
565,150,335,948 B Deferred Shares of GBP0.00001 each in the capital
of the Company. The B deferred shares have very limited rights and
are effectively valueless. CREST accounts of shareholders were not
credited in respect of any entitlement to B deferred shares and the
Company did not issue any share certificates in respect of B
deferred shares which it proposes to cancel at the 2020 AGM.
18. Reserves
Reserves within equity are as follows:
Share capital
Amounts subscribed for share capital at nominal value.
Share premium account
The share premium account represents the amounts received by the
Company on the issue of its shares which were in excess of the
nominal value of the shares.
Retained losses
Cumulative net gains and losses recognised in the Statement of
Comprehensive Income less any amounts reflected directly in other
reserves.
19. Financial instruments
Capital risk management and liquidity risk
Capital structure of the Group and Company consists of cash and
cash equivalents held for working capital purposes and equity
attributable to the equity holders of the Parent, comprising issued
capital, reserves and retained losses as disclosed in the Statement
of Changes in Equity. The Group and Company uses cash flow models
and budgets, which are regularly updated, to monitor liquidity
risk.
Significant accounting policies
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of each material class of financial asset,
financial liability and equity instrument are disclosed in note 1
to the financial statements.
Due to the short-term nature of these assets and liabilities
such values approximate their fair values at 31 December 2019 and
31 December 2018.
Carrying amount / fair value
2019 2018
Group $ $
-------------------------------------------------------- ---------------- -------------
Financial assets (classified as loans and receivables)
Cash and cash equivalents 38,662 331,395
Trade and other receivables 53,448 23,979
Total financial assets 92,110 355,374
--------------------------------------------------------- ---------------- -------------
Financial liabilities at amortised cost
Trade and other payables 1,815,720 1,292,492
Bridging loan facility 840,490 -
Total financial liabilities 2,656,210 1,292,492
--------------------------------------------------------- ---------------- -------------
Carrying amount / fair value
2019 2018
Company $ $
-------------------------------------------------------- ---------------- -------------
Financial assets (classified as loans and receivables)
Cash and cash equivalents 12,055 324,052
Trade and other receivables 53,446 23,977
Loans to subsidiary undertakings 14,811,019 9,636,778
Total financial assets 14,876,520 9,984,807
--------------------------------------------------------- ---------------- -------------
Financial liabilities at amortised cost
Loans from subsidiary undertaking 6,617,600 7,909,735
Bridging loan facility 840,490 -
Total financial liabilities 7,458,090 7,909,735
--------------------------------------------------------- ---------------- -------------
Financial risk management objectives
The Group's and Company's objective and policy is to use
financial instruments to manage the risk profile of its underlying
operations. The Group continually monitors financial risk including
oil and gas price risk, interest rate risk, equity price risk,
currency translation risk and liquidity risk and takes appropriate
measures to ensure such risks are managed in a controlled manner
including, where appropriate, through the use of financial
derivatives. The Group and Company does not enter into or trade
financial instruments, including derivative financial instruments,
for speculative purposes.
Interest rate risk management
The Group and Company borrowings carry a fixed interest rate of
1% per month and are therefore not exposed to any sensitivity
risk.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the
exposure to interest rates at the reporting date and assuming the
amount of the balances at the reporting date were outstanding for
the whole year.
A 100-basis point change represents management's estimate of a
possible change in interest rates at the reporting date. If
interest rates had been 100 basis points higher and all other
variables were held constant the Group's profits and equity would
be impacted as follows:
Group Company
Increase Increase
2019 2018 2019 2018
$ $ $ $
--------------------------- ------ ------- ------ -------
Cash and cash equivalents 4,869 11,912 4,646 11,648
--------------------------- ------ ------- ------ -------
The Group's exposure to interest rate risk, which is the risk
that a financial instrument's value will fluctuate as a result of
changes in market interest rates on classes of financial assets and
financial liabilities, was as follows:
2019 2019 2018 2018
Floating interest Non-interest bearing Floating interest rate Non-interest bearing
rate
$ $ $ $
---------------------- --------------------- ----------------------- ---------------------
Cash and cash
equivalents 35,626 3,036 330,870 525
----------------------- ---------------------- --------------------- ----------------------- ---------------------
Foreign currency risk
The Group's and Company's reporting currency is the US dollar,
being the currency in which the majority of the Group's revenue and
expenditure is transacted. The US dollar is the functional currency
of the Company and the majority of its subsidiaries. Less material
elements of its management, services and treasury functions are
transacted in pounds sterling. The majority of balances are held in
US dollars with transfers to pounds sterling and other local
currencies, as required to meet local needs. The Group does not
enter into derivative transactions to manage its foreign currency
translation or transaction risk as it does not believe such risks
are material.
At the year-end the Group and Company maintained the following
cash reserves:
Group Company
2019 2018 2019 2018
Cash and cash equivalents $ $ $ $
------- -------- ------- --------
Cash and cash equivalents held in US$ - 313,288 100 313,000
Cash and cash equivalents held in GBP 13,954 10,103 11,470 10,103
Cash and cash equivalents held in XAF 23,571 6,818 - -
Cash and cash equivalents held in other currencies 1,137 1,186 485 949
---------------------------------------------------- ------- -------- -------
38,662 331,395 12,055 324,052
---------------------------------------------------- ------- -------- ------- --------
Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group or Company. The Group and Company reviews the credit risk of
the entities that it sells its products to or that it enters into
contractual arrangements with and will obtain guarantees and
commercial letters of credit as may be considered necessary where
risks are significant to the Group or Company.
20. Share-based payments
2019 2018
$ $
---------- --------
In the statement of comprehensive income the Group recognised the following charge with
respect
to its share-based paments 1,134,716 137,184
---------------------------------------------------------------------------------------------- ---------- --------
The share-based payments include the cost of warrants issued in
respect of the company's equity financings and bridging loan, and
also share-based payments for a number of services to the Group's
various contractors and brokers and payments in lieu of Director
fees.
On 24 January 2019, the Board of the Company determined that all
of the award criteria for the Chief Executive's Share Incentive
Plan had been fulfilled and 15 million shares were issued to Jeremy
Asher, a charge for which has been included within these financial
statements of $142,266 (2018: 53,078). The performance conditions
provided that 5 million of the shares would only be payable if,
during the 3 year vesting period, the Company's stock achieves a
closing price at least 25% above the 14 November 2017 Placing
Price; and 5 million of the shares will only be payable if, during
the vesting period, the Company's stock achieves a closing price at
least 50% above the November 2017 Placing Price. In each case the
target share price had to be achieved for a minimum of five (not
necessarily consecutive) trading days during the vesting
period.
Options
Details of share options outstanding at 31 December 2019 are as
follows:
Number in issue
------------------------- ----------------
At 1 January 2019 1,617,400
Lapsed during the year (16,000)
Awarded during the year 70,000,000
At 31 December 2019 71,601,400
--------------------------- ----------------
Number Latest
Date of in issue Option exercise
grant (1) price (pence) date
----------- ----------- --------------- ----------
09 Dec
09 Dec 15 48,000 0.475 20
16 Mar
16 Mar 16 53,400 0.475 21
25 Oct
26 Oct 16 1,500,000 0.023 21
24 Jan
24 Jan 19 70,000,000 1.250 24
71,601,400
----------- ----------- --------------- ----------
(1) These options vest in the beneficiaries in equal tranches on
the first, second and third anniversaries of grant.
The following Directors held interests in share options at the
year-end:
2019 2018
No. No.
------------- ----------- -----
Jeremy Asher 60,000,000 -
Total 60,000,000 -
------------- ----------- -----
Warrants
Details of warrants outstanding at 31 December 2019 are as
follows:
Number in issue
------------------------- ----------------
At 1 January 2019 43,439,692
Awarded during the year 400,844,797
At 31 December 2019 444,284,489
--------------------------- ----------------
Latest
Date of Number Warrant exercise
grant in issue price (pence) date
----------- ------------ --------------- ----------
09 Nov
09 Nov 17 31,853,761 1.000 22
01 Jan
01 Jan 18 2,542,372 1.000 23
01 Apr
01 Apr 18 2,083,333 1.500 23
30 Jun
01 Jul 18 2,272,726 1.780 23
30 Sep
01 Oct 18 4,687,500 1.575 23
23 Jan
24 Jan 19 112,211,999 1.250 24
14 Apr
16 Apr 19 90,000,000 1.000 24
28 Jun
30 Jun 19 4,285,714 1.000 24
28 Jul
30 Jul 19 3,000,000 1.000 24
13 Oct
15 Oct 19 191,347,084 1.000 24
444,284,489
----------- ------------ --------------- ----------
The following table shows the interests of the Directors in the
share warrants in issue (excluding Graeme Thomson's interest at
December 2018, which was 9,976,128):
2019 2018
No. No.
-------------- ------------ -----------
Jeremy Asher 166,376,171 16,412,436
Peter Taylor 22,276,628 9,976,128
Total 188,652,799 24,833,238
--------------- ------------ -----------
The weighted average exercise price of the share warrants was
1.22p (2018: 1.13p) with a weighted average contractual life of 4.0
years (2018: 4.0 years). At 31 December 2019 and 2018 all warrants
had fully vested.
In its Statement of Comprehensive Income, the Company recognised
share-based payment charges of $801k (2018: $137k).
In compliance with the requirements of IFRS 2 on share-based
payments, the fair value of options or warrants granted during the
year is calculated using the Black Scholes option pricing model.
For this purpose, the volatility applied in calculating the above
charge varied between 20% and 143% (2018: 20% and 143%), depending
upon the date of grant, and the risk-free interest rate was 0.50%
and the Dividend Yield was nil% for 2019 and 2018.
The Company's share price ranged between 0.3p and 1.0p (2018:
0.8p and 1.8p) during the year. The closing price on 31 December
2019 was 0.4p per share. The weighted average exercise price of the
share options was 1.2p (2018: 6.8p) with a weighted average
contractual life of 4.0 years (2018: 2.8 years). The total number
of options vested at the end of the year was 1.6 million (2018: 1.6
million).
21. Related party transactions
The key management of the Group comprises the Directors of the
Company. Except as disclosed, there are no transactions with the
Directors other than their remuneration and interests in shares,
share options and warrants. As noted in the Directors' Report,
Pegasus Petroleum Ltd ("Pegasus"), a company owned and controlled
by Jeremy Asher, received $201,300 (2018: $201,300) in fees for
management services, and provided initially 50% and subsequently
100% of the loan facility set out in note 16: Borrowings. Further
information on Directors' remuneration is detailed in the
Directors' Report and their total remuneration in each of the
categories specified in IAS 24 'Related Party Disclosures' is shown
below:
Group Company
2019 2018 2019 2018
$ $ $ $
----------------------------------------------------------------------- ---------- -------- ---------- --------
Short-term employee benefits 130,337 96,980 130,337 96,980
Fees charged by companies associated with Jeremy Asher (1) 448,666 201,300 - -
Interest charged on borrowings by companies associated with Jeremy
Asher (1) 70,010 - 70,010 -
Share-based payments (2) 556,178 134,455 556,178 134,455
Share incentive scheme awards (3) 142,266
Finance interest on intercompany loan accounts - - 853,202 636,650
Fees charged with respect to the provision of strategic advice and
support by the parent - - 198,768 33,396
------------------------------------------------------------------------
1,347,457 432,735 1,808,495 901,481
----------------------------------------------------------------------- ---------- -------- ---------- --------
(1) Charged by Pegasus Petroleum Limited ("Pegasus"), a company
registered in the Channel Islands, to Rift Petroleum Holdings
Limited, a wholly owned subsidiary of Tower Resources plc and
registered in the Isle of Man. Pegasus Petroleum Limited
("Pegasus") is owned and controlled by a family trust of which
Jeremy Asher is the settlor and lifetime beneficiary. Included in
the Group's operating loss is an amount of $253,555 (2018:
$201,300) paid to Pegasus in respect of charges for management
services received during 2019 plus $195,111 of fees with respect to
performance uplift charges relating to 2018.
(2) Includes $174,202 of charges for warrants issued with
respect to shares subscribed for by Mr Asher during equity placings
in January and October 2019, and $166,481 of charges for share
warrants arising from the issue and extension of the loan facility
made to Tower Resources plc by Pegasus in 2019; also includes
$85,153 in respect of Director warrants issued in lieu of fees to
Jeremy Asher and to Peter Taylor, and the 2019 charge for 60
million share options issued to Jeremy Asher at 1.25 pence per
share on 24 January 2019 vesting in equal tranches in 1 year, 2
years and 3 years respectively.
The warrants issued to Pegasus and Mr Asher were on identical
terms to those issued to third parties participating in the loan
facility and share subscriptions.
(3) Share incentive plan award to Jeremy Asher for 15 million
shares on 24 January 2019.
22. Control
The Company is under the control of its shareholders and not any
one party.
23. Leases and capital commitments
The Group is committed to funding the following exploration
expenditure commitments as at 31 December 2019:
Country Interest Net commitment 2020 Net commitment 2021 onwards
Cameroon Thali (1) Cameroon 100% $5.21 million -
South Africa Algoa-Gamtoos South Africa 50% $447k $2.43 million
Namibia Blocks 1910A, 1911 and 1912B
(2) Namibia 80% - $4.50 million
Zambia Blocks 40 and 41 (3) Zambia 100% - -
$5.66 million -
------------------------------------------------------ --------- -------------------- ----------------------------
(1) 1 year to 15 September 2020.
(2) 4 years to 5 November 2022
(3) Renewal pending confirmation of petroleum
legislation
24. Subsequent events
January 2020: Award of extension to the initial exploration
period of the Thali licence to 15 September 2020;
February 2020: Completion of NJOM-3 appraisal well site survey
by the Geoquip Marine survey vessel MV investigator;
March 2020: Cameroon Reserves Report update reconfirming gross
mean contingent resources of 18 MMbbls of oil across the proven
Njonji-1 and Njonji-2 fault blocks, with an NPV10 of the Best
Estimate Contingent Resources of $119 million using the March
10(th) 2020 Brent Forward Curve, and an EMV10 of $91 million;
March 2020: Completion of placing and subscription to raise
GBP500k at placing price of 0.375 pence per share;
March 2020: Notification to the Government of Cameroon of an
event of Force Majeure in respect of the Covid-19 pandemic,
affecting the timing for completion of the Group's work programme
in the Initial Exploration Period of the Group's Thali Production
Sharing Contract.
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
FR EAPKNEEEEEFA
(END) Dow Jones Newswires
June 10, 2020 02:00 ET (06:00 GMT)
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