TIDMTRP
RNS Number : 9943A
Tower Resources PLC
04 June 2019
4 June 2019
Tower Resources plc
Preliminary Results to 31 December 2018
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 2018.
Highlights:
-- Thali PSC $1.2 million (2017: $431k) exploration and
evaluation expenditure;
-- Publication of Cameroon Reserves Report by Oilfield
International Limited;
-- Award of new Petroleum Agreement for an 80% operated interest
in blocks 1910A, 1911 and 1912B, offshore Namibia, together with
the National Petroleum Corporation of Namibia (NAMCOR);
-- Reduced loss before impairment of $1.0 million (2017: loss
$1.6 million);
-- Impairment of Zambia licences totalling $2.8 million (2017:
$nil); and
-- Cash balance at year-end of $331k (2017: $2.2 million).
Post-reporting period events:
-- Placing and subscription to raise GBP1.7 million (gross) at
placing price of 1.00 pence per share;
-- Interim financing via a $750,000 Bridging Loan Facility.
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 +44 20 3470 0470
Stuart Gledhill
Caroline Rowe
Turner Pope Investments
(TPI) Limited
Joint Broker
Andy Thacker +44 20 3621 4120
Whitman Howard Limited
Joint Broker
Nick Lovering
Hugh Rich +44 20 7659 1234
Yellow Jersey PR Limited +44 20 3735 8825
Tim Thompson
CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT
During 2018 we made considerable progress towards our goals, and
the general state of our industry improved as well, despite a
weakening in market sentiment during the last couple of months of
the year. The challenge for the industry to maintain or increase
production following the under-investment of the past few years,
coupled with continuing uncertainty about some of the more
politically sensitive sources of supply, have sustained oil price
increases during 2018 and into the first few months of 2019,
despite continuing worries about global slowdown and trade wars.
Encouragingly, a number of recent discoveries have also reminded
the industry of the value of exploration, which still forms a
significant part of our portfolio, and Total's discovery at
Brulpadda in South Africa, after the year-end, is especially
relevant to our own adjoining license.
We made great progress on our Thali license in Cameroon in 2018,
as discussed in the Operational Review below, and we are looking
forward to the NJOM-3 well in 2019, and the prospect of reaching
our first oil production from the Njonji structure in 2020. We were
also delighted to enter a new petroleum agreement in Namibia in
November 2018.
We did not raise any money in 2018, but in January 2019 we
announced the appointment of Turner Pope Investments (TPI) Limited
and Whitman Howard Limited as joint brokers and conducted a small
placing of GBP1.7 million in January 2019. Both brokers have
initiated research coverage of Tower, in February and April of 2019
respectively. We know that we need more funds to drill the NJOM-3
well and we believe we are now well advanced in raising those funds
at the asset level. We raised a small bridging loan of $750,000 in
April 2019 to assist in reaching that goal.
Finally, Graeme Thomson is retiring from the Board with effect
from today, and both I and the rest of the Tower Board take this
opportunity to thank him for his many years of service to the
Company, first as CEO between 2012 and 2016, and then as a
non-executive director and Chairman of our Audit Committee. We will
be adding a new director to the Board and to the audit committee
before the next audit cycle, and we will be fortunate to have an
equally conscientious director in his place.
The year ahead will be crucial for our company in many ways.
Realising our plan for the Thali license in Cameroon can transform
us; and Namibia and South Africa are both attracting a lot of
industry attention, especially since the Brulpadda discovery in
South Africa and recent farm-in activity from Exxon and Tullow in
Namibia. Your board of directors and management appreciate your
support and are excited about the opportunities ahead.
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 also signed a new petroleum agreement in
Namibia, covering blocks that we know well from our previous
license. The Thali PSC also has a high reward 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 are
now supporting 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 a further PSC in Cameroon 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 2017 and 2018 figures confirm.
OPERATIONAL REVIEW
On an operational level, we have had a very busy year and
activity has only stepped up since the year-end.
In Cameroon, we have completed the reprocessing of the 3D
seismic data over our Thali license in the shallow offshore, and
the Environmental and Social Impact Assessment ("ESIA") required
before we can begin drilling at Thali. We also commissioned and
received a Reserve Report from Oilfield International Ltd (OIL)
based on the reprocessed seismic data and some further analysis,
and this has provided us with both an external estimate of the 2C
contingent resources in the Njonji structure in our Thali license,
and also the prospective resources in that Njonji structure and
elsewhere in the license. The Reserve Report has also included an
economic evaluation of those resources. In summary, the main
conclusions of the Reserve Report included:
-- 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 5/15/34MMbbls) and 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);
-- 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);
-- Calculated EMV10s of US$118 million for the contingent
resources, and US$82 million for the prospective resources,
respectively.
Following this work, we received an extension of the current
first exploration phase of our license, to September 2019, and we
contracted with Vantage to charter the Topaz Driller jack-up rig to
drill the NJOM-3 well on the Njonji structure during that
extension. This is planned to be the first in a four-well phase of
work to place the reservoirs in Njonji into an extended well test,
beginning in the first renewal period of the license. We hope this
well test will commence in 2020 and will mark our first substantial
production of oil.
Since the year-end, we have completed the well engineering,
ordered long lead items, and retained Bedrock Drilling, who managed
the two wells on the Etinde block in Cameroon, also using the Topaz
Driller, to manage this well. We have also now selected the full
suite of contractors to provide services for the well including the
test programme. The Topaz Driller is currently scheduled to move to
the site in July.
In Zambia, we were frustrated by the slow progress of the new
petroleum legislation, which has prevented us from agreeing a
further work programme in respect of blocks 40 and 41. In light of
this, we made the decision to write off our investment in Zambia
during 2018, as reflected in our Interim Report. The present
position is that our license obligations have been paid up to date,
and we continue discussions with the Zambian Government, but we
have not yet agreed a basis for moving forward.
In Namibia, we negotiated a new petroleum agreement in respect
of blocks 1910A, 1911 and 1912B, covering 23,297km2 in the Walvis
Basin and Dolphin Graben. This is an under-explored region in which
recent drilling results have proven the presence of a working
oil-prone petroleum system and good quality turbidite and carbonate
reservoirs. This is also an area that we know well, since blocks
1910A and 1911 formed part of Tower's original licence PEL0010,
which Tower and its partners in that license, Repsol Exploration
(Namibia) (Pty) Limited and Arcadia Expro Namibia (Pty) Ltd,
relinquished in 2015. The current agreement is structured to
comprise an Initial Exploration Period of four years (which may be
extended to five in appropriate circumstances), followed by options
for Tower and its partners to enter a First and Second Renewal
Period of two years each. The work programme for the Initial
Exploration Period comprises regional play fairway evaluation and
acreage high-grading activities. Namibia has seen considerable
commercial and operational activity, with the Cormorant and
Prospect S wells being drilled by Tullow and Chariot respectively
in the last quarter of 2018, and more recently Exxon and Tullow
farming into several blocks since the year-end.
In South Africa, our co-venturer and operator NewAge has been
conducting further studies on the considerable amount of 2D and 3D
data that we have on the leads and prospects in the three basins
that are present in our Algoa-Gamtoos license, while also waiting
for the result of Total's Brulpadda well which was drilled on the
license adjoining ours to the West, on a deepwater prospect in the
Outeniqua basin. This basin is one of the three present in the
license, so we were delighted to see, after the year-end, that
Total has made a substantial, 1 billion boe gas/condensate
discovery. NewAge is presently conducting a farm-out process, with
the aim of bringing in an additional co-venturer before we begin
the next two-year renewal phase of the license, which will involve
further 3D seismic data acquisition and processing. Since the
year-end, NewAge also updated its estimates of resources on the
Algoa Gamtoos license, which now comprise unrisked mean prospective
resources of 664 million boe recoverable from five leads and
prospects in the Algoa, Gamtoos and Outeniqua basins, including a
potential 364 million boe Deep Albian structure, analogous to
Brulpadda in the Outeniqua Basin Slope.
PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2018
31 December 2018 31 December 2017
(audited) (audited)
Note $ $
------------------------------------------------- ----- ----------------- -----------------
Revenue - -
Cost of sales - -
------------------------------------------------- ----- ----------------- -----------------
Gross profit - -
Other administrative expenses (1,007,474) (1,594,725)
Pre-licence expenditures (4,829) (18,092)
Impairment of exploration and evaluation assets 12 (2,813,413) -
------------------------------------------------- ----- ----------------- -----------------
Total administrative expenses (3,825,716) (1,612,817)
------------------------------------------------- ----- ----------------- -----------------
Group operating loss 4 (3,825,716) (1,612,817)
Finance income 1,636 113
Finance expense 6 2,397 (2,773)
------------------------------------------------- ----- ----------------- -----------------
Loss for the year before taxation (3,821,683) (1,615,477)
Taxation 7 - -
------------------------------------------------- ----- ----------------- -----------------
Loss for the year after taxation (3,821,683) (1,615,477)
------------------------------------------------- ----- ----------------- -----------------
Other comprehensive income - -
------------------------------------------------- ----- ----------------- -----------------
Total comprehensive expense for the year (3,821,683) (1,615,477)
------------------------------------------------- ----- ----------------- -----------------
Basic loss per share (USc) 10 (1.02c) (1.07c)
------------------------------------------------- ----- ----------------- -----------------
Diluted loss per share (USc) 10 (1.02c) (1.07c)
------------------------------------------------- ----- ----------------- -----------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2018
Share Share (1) Share-based Retained Total
capital premium payments losses
reserve
$ $ $ $ $
At 1 January 2017 12,016,201 142,577,203 6,227,301 (140,354,094) 20,466,611
------------------------------------------- ----------- ------------ ---------------- -------------- ------------
Shares issued for cash net of costs 3,235,379 - - - 3,235,379
Shares issued on settlement of third party
fees 306,515 (215,674) - - 90,841
Share option charge for the year - - 160,107 - 160,107
Total comprehensive expense for the year - - - (1,615,477) (1,615,477)
At 31 December 2017 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 option 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
------------------------------------------- ----------- ------------ ---------------- -------------- ------------
(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 2018
31 December 2018 31 December 2017
(audited) (audited)
Note $ $
----------------------------------- ----- ----------------- -----------------
Non-current assets
Property, plant and equipment 11 - 940
Exploration and evaluation assets 12 19,646,399 21,113,980
----------------------------------- ----- ----------------- -----------------
19,646,399 21,114,920
----------------------------------- ----- ----------------- -----------------
Current assets
Trade and other receivables 14 23,979 123,968
Cash and cash equivalents 331,395 2,151,476
----------------------------------- ----- ----------------- -----------------
355,374 2,275,444
----------------------------------- ----- ----------------- -----------------
Total assets 20,001,773 23,390,364
----------------------------------- ----- ----------------- -----------------
Current liabilities
Trade and other payables 15 1,292,492 1,052,903
----------------------------------- ----- ----------------- -----------------
Total liabilities 1,292,492 1,052,903
----------------------------------- ----- ----------------- -----------------
Net assets 18,709,281 22,337,461
----------------------------------- ----- ----------------- -----------------
Equity
Share capital 16 15,599,626 15,558,095
Share premium 16 142,376,317 142,361,529
Retained losses 17 (139,266,662) (135,582,163)
----------------------------------- ----- ----------------- -----------------
Total shareholders' equity 18,709,281 22,337,461
----------------------------------- ----- ----------------- -----------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2018
31 December 2018 31 December 2017
(audited) (audited)
Note $ $
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash outflow from operating activities
Group operating loss for the year (3,825,716) (1,612,817)
Depreciation of property, plant and equipment 11 549 840
Share-based payments 20 137,184 160,107
Impairment of intangible exploration and evaluation assets 12 2,813,414 -
Loss on disposal of of property, plant and equipment 11 391 53,551
----------------------------------------------------------------------- ----- ----------------- -----------------
Operating cash flow before changes in working capital (874,178) (1,398,319)
(Increase) / decrease in receivables and prepayments 99,989 420,223
Increase / (decrease) in trade and other payables 239,589 (333,260)
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash used in operations (534,600) (1,311,356)
Interest received 1,636 113
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash used in operating activities (532,964) (1,311,243)
----------------------------------------------------------------------- ----- ----------------- -----------------
Investing activities
Exploration and evaluation costs 12 (1,345,833) (649,009)
Net cash used in investing activities (1,345,833) (649,009)
----------------------------------------------------------------------- ----- ----------------- -----------------
Financing activities
Cash proceeds from issue of ordinary share capital net of issue costs 16 56,319 3,326,221
Finance costs 6 2,397 (2,773)
----------------------------------------------------------------------- ----- ----------------- -----------------
Net cash from financing activities 58,716 3,323,448
----------------------------------------------------------------------- ----- ----------------- -----------------
(Decrease) / increase in cash and cash equivalents (1,820,081) 1,363,196
Cash and cash equivalents at beginning of year 2,151,476 788,280
----------------------------------------------------------------------- ----- ----------------- -----------------
Cash and cash equivalents at end of year 331,395 2,151,476
----------------------------------------------------------------------- ----- ----------------- -----------------
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.
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 EU Endorsement
date Status
IFRS 16 Leases 1 January Endorsed
2019
---------------------------- ---------- ---------------
IFRIC 23 Uncertainty over Income Tax 1 January Endorsed
Treatments 2019
---------------------------- ---------- ---------------
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 raise further funds within the next 12
months or agree a farm out or other transaction involving one or
more of the Group's licences, 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 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 written off 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 provision 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
2018 was GBP1 / $ 1.2746 (2017: GBP1 / $1.3494).
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. Provisions 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.
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 has been appealed to the
Tribunal for determination. Whilst the Group believes that it has
complied in all material respects with UK VAT legislation, there
can be no certainty that it will be successful in its legal appeal
against HMRC's decision to withhold future amounts claimed from
them. If the Group fails in its appeal against HMRCs decision, 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 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
either by using the Black Scholes model or by reference to the
value of the fees or remuneration settled by way of granting of
warrants. 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 2018.
Africa Head Office Total
2018 2017 2018 2017 2018 2017
$ $ $ $ $ $
----------------------------------- ------------ ----------- ------------ ------------ ------------ ------------
Administrative expenses (1) (2,845,729) (380,526) (837,425) (1,053,252) (3,683,154) (1,433,778)
Pre-licence expenditures - (127) (4,829) (17,965) (4,829) (18,092)
Share-based payment charges - - (137,184) (160,107) (137,184) (160,107)
Depreciation of property, plant
and equipment - - (549) (840) (549) (840)
Interest income - - 1,636 113 1,636 113
Financing costs (991) (798) 3,388 (1,975) 2,397 (2,773)
Loss by reportable segment (2,846,720) (381,451) (974,963) (1,234,026) (3,821,683) (1,615,477)
Total assets by reportable segment
(2 / 3) 19,653,744 21,263,089 348,029 2,127,275 20,001,773 23,390,364
----------------------------------- ------------ ----------- ------------ ------------ ------------ ------------
Total liabilities by reportable
segment (4) (359) (360) (1,292,133) (1,052,543) (1,292,492) (1,052,903)
----------------------------------- ------------ ----------- ------------ ------------ ------------ ------------
(1) Administrative expenses include $2.8 million (2017: $nil
million) of intangible exploration and evaluation asset impairments
in relation to the Africa segment.
(2) Included within total assets of $20.1 million (2017: $23.4
million) are $6.9 million (2017: $5.7 million) Cameroon, $nil
(2017: $2.8 million) Zambia, $5k (2017: $nil) Namibia and $12.7
million (2017: $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
2018 2017
$ $
------------------------------------------------------------------------------------- ---------- ----------
Share-based payment charges 137,184 160,107
Staff costs 106,983 327,286
Rental of properties - 78,815
Loss on foreign currencies (48,694) (114,581)
Depreciation of property, plant and equipment 549 840
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 40,786 51,447
Fees payable to the Group's auditors for non-audit assurance services 4,843 23,981
Total audit fees 45,629 75,428
---------------------------------------------------------------------------------------- ---------- ----------
During the year the Company impaired assets totalling $2.8
million (2017: $Nil) in accordance with IAS 36 "Impairment of
Assets" in Zambia. Full details of the impairment are provided in
note 12.
5. Employee information
The average monthly number of employees of the Group (including
Directors) was:
2018 2017
Head office 4 4
Africa 3 3
--------------- ----- -----
7 7
------------- ----- -----
Group employee costs during the year (including executive
Directors) amounted to:
2018 2017
$ $
----------------------------- -------- --------
Wages and salaries 92,300 287,544
Social security costs 14,683 39,742
Share-based payment charges 134,575 160,107
241,558 487,393
----------------------------- -------- --------
No bonuses were paid to Directors or employees during the
year.
Key management personnel include the executive and non-executive
Directors whose remuneration, including non-cash share-based
payment charges of $134k (2017: $279k), was $231k (2017: $340k);
see Directors' Report for additional detail. During the year $134k
(2017: $160k) of the full-year share-based payment charge of $137k
(2017: $160k) related to employees.
A portion of the Group's staff costs and associated overheads
are expensed as pre-licence expenditure or capitalised where they
are directly attributable to on-going capital projects. In 2018
this portion amounted to $nil (2017: $59k).
6. Finance costs
During the period covered by these financial statements the
Group incurred costs of $3k (2017: $3k). The Company incurred costs
of $2k (2017: $2k).
7. Taxation
2018 2017
$ $
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 3,821,682 1,615,476
Tax at the UK Corporation tax rate of 19% (2017: 19.3%) (726,120) (311,786)
Tax effects of:
Expenses not deductible for tax purposes 560,613 30,901
Tax losses carried forward not recognised as a deferred tax asset 165,507 280,885
Current tax charge - -
---------------------------------------------------------------------------------------- ---------- ----------
8. Deferred tax
At the reporting date the Group had an unrecognised deferred tax
asset of $3.3 million (2017: $3.2 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 2018 the Parent Company incurred
a loss of $3.5 million (2017: $1.0 million) including the financing
costs of $2k (2017: $2k) referred to in note 6, the share-based
payments charge of $137k (2017: $160k) and impairment provisions
against the investments in its operating subsidiaries and
intercompany loans to them of $3.2 million (2017: $598k). The
Company charged finance interest on intercompany loan accounts of
$636k (2017: $828k) and fees with respect to the provision of
strategic advice and support of $34k (2017: $35k). 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 is 376,252,213 (2017: 150,419,536). 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.
2018 2017
$ $
--------------------------------------------------------------------- ------------ ------------
Loss for the year 3,821,683 1,615,477
Weighted average number of ordinary shares in issue during the year 376,252,213 150,419,536
Dilutive effect of share options outstanding - -
Fully diluted average number of ordinary shares during the year 376,252,213 150,419,536
Loss per share (USc) 1.02c 1.07c
------------------------------------------------------------------------ ------------ ------------
11. Property, plant and equipment
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
------------------------------ -------- --------
Group Company
Year-ended 31 December 2017 $ $
Cost
At 1 January 2017 326,185 91,676
Eliminated on disposal (322,817) (88,308)
At 31 December 2017 3,368 3,368
------------------------------ ---------- ---------
Depreciation
At 1 January 2017 270,854 36,345
Eliminated on disposal (269,266) (34,757)
Charge for the year 840 840
At 31 December 2017 2,428 2,428
------------------------------ ---------- ---------
Net book value
At 31 December 2017 940 940
At 31 December 2016 55,331 55,331
------------------------------ ---------- ---------
12. Intangible Exploration and Evaluation (E&E) assets
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
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)
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
------------------------------ ---------------------------------- ------------ -------------
Exploration and evaluation assets Goodwill Total
Year-ended 31 December 2017 $ $ $
---------------------------------- ------------ --------------
Cost
At 1 January 2017 124,684,401 8,023,292 132,707,693
Additions during the year 649,009 - 649,009
Disposals during the year (35,024,382) - (35,024,382)
At 31 December 2017 90,309,028 8,023,292 98,332,320
------------------------------ ---------------------------------- ------------ --------------
Amortisation and impairment
At 1 January 2017 (104,219,430) (8,023,292) (112,242,722)
Disposals during the year 35,024,382 - 35,024,382
At 31 December 2017 (69,195,048) (8,023,292) (77,218,340)
------------------------------ ---------------------------------- ------------ --------------
Net book value
At 31 December 2017 21,113,980 - 21,113,980
At 31 December 2016 20,464,971 - 20,464,971
------------------------------ ---------------------------------- ------------ --------------
During the year the Group capitalised amounts totalling $1.3
million (2017: $649k) with respect to the following assets:
2018 2017
$ $
-------------- ---------- --------
Cameroon 1,214,414 430,055
Namibia 4,697 -
Zambia 16,297 22,949
South Africa 110,425 196,005
Total 1,345,833 649,009
---------------- ---------- --------
In Cameroon the $1.2 million comprised the costs of reprocessing
existing legacy seismic data, NJOM3 well planning and running the
Cameroon office.
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, an agreement has been made with
Operator with respect to offsetting the balance of costs held on
account totalling $110k following the withdrawal from the Orange
Basin licence against any and all licence costs for Algoa-Gamtoos
in 2018. This represents a material saving for the Group during the
period, however, it will need to pay its proportionate share of
expenditures on the licence from 1 January 2019.
On 7 November 2018, the Group announced the completion of its
applications for licences 1910A, 1911 and 1912B offshore Namibia,
the subsequent modest costs for which have been capitalised in line
with Group policy.
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 only deemed necessary with
respect to Blocks 40 and 41 in Zambia. It was however, noted that
given the nature of these assets this process is inherently
judgmental as it requires the Directors to place a value on
exploration projects that by definition are not in the development
stage and are not therefore cash generating units.
The Directors have not provided for any impairment of the
Company'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 in August 2018, Tower's wholly-owned subsidiary,
Rift Petroleum Limited ("Rift") and its partner, New African Global
Energy SA (Pty) Ltd, agreed 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. The next phase will commence once PASA, the
South African Government hydrocarbons agency, ratifies the renewal
which it has not yet done, however, all licence commitments for the
preceding phase were met and the renewal is merely a matter of due
process.
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 amounts totalling $2.8 million
(2017: $nil million) in accordance with IAS 36 "Impairment of
Assets" due to the lack of clarity regarding both future work
programme and the fiscal terms.
13. Investment in subsidiaries
Loans to subsidiary Shares in subsidiary
undertakings undertakings Total
Company $ $ $
Cost
At 1 January 2018 72,455,598 37,519,722 109,975,320
Net advances during the year 1,907,425 - 1,907,425
At 31 December 2018 74,363,023 37,519,722 111,882,745
-------------------------------- -------------------------------- ------------------------------- -------------
Provision for impairment -
At 1 January 2018 (61,536,711) (19,908,973) (81,445,684)
Provision for impairment (3,189,534) - (3,189,534)
At 31 December 2018 (64,726,245) (19,908,973) (84,635,218)
-------------------------------- -------------------------------- ------------------------------- -------------
Net book value -
At 31 December 2018 9,636,778 17,610,749 27,247,527
At 31 December 2017 10,918,887 17,610,749 28,529,636
-------------------------------- -------------------------------- ------------------------------- -------------
Included within loans made to subsidiary undertakings during the
year of $1.9 million are amounts of $1.4 million Cameroon (2017:
$1.6 million) and $393k (2017: $379k) 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
2017 2017 2017 2016 2017
-------------------- -------------------- ------------- ----------------- ---------------- --------------------
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
(Kenya) Limited Oil and gas
(1) England & Wales Ordinary 100% 100% exploration
Tower Resources
(Namibia) Limited
(1) England & Wales Ordinary 100% 100% Holding company
Tower Resources
Namibia Limited British Virgin Oil and gas
(4) Islands Ordinary 100% 100% exploration
Wilton Petroleum Oil and gas
Limited (1/5) England & Wales Ordinary 100% 100% exploration
Tower Resources
(UK) Limited (1) England & Wales Ordinary 100% 100% Holding company
-------------------- -------------------- ------------- ----------------- ---------------- --------------------
(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) Limited
(5) In liquidation
14. Trade and other receivables
Group Company
2018 2017 2018 2017
$ $ $ $
----------------------------- ------- -------- ------- -------
Trade and other receivables 23,979 123,968 23,977 13,541
----------------------------- ------- -------- ------- -------
15. Trade and other payables
Group Company
2018 2017 2018 2017
$ $ $ $
------------------------------------ ---------- ---------- ---------- ----------
Trade and other payables 1,246,863 999,331 1,246,506 998,971
Accruals 45,629 53,572 45,629 53,572
Loans from subsidiary undertakings - - 6,617,600 6,617,600
1,292,492 1,052,903 7,909,735 7,670,143
------------------------------------ ---------- ---------- ---------- ----------
Included within trade and other payables are amounts totalling
$1.1 million / GBP843k (2017: $965k / GBP715k) with respect to UK
VAT payable.
HMRC have issued assessments totalling GBP843k excluding
interest and penalties. This was appealed and referred to the
first-tier tribunal, in which regard a hearing took place at the
end of May 2019, and a first-instance decision is awaited in due
course.
The Company continues to firmly believe that it has complied in
all material respects with UK VAT legislation. Based on discussions
with its advisors, the Company understands that the strength of
HMRC's claim over the GBP843k is subject to legal
interpretation.
Taking into consideration the uncertainty regarding the appeal
on the withholding of the original receivable and the assessment of
GBP843k, the Company has made full provision for the HMRC
assessment.
Group creditor payment days are approximately 28 days (2017: 35
days).
16. Share capital
2018 2017
$ $
--------------------------------------------------------- ----------- -----------
Authorised, called up, allotted and fully paid
377,335,427 (2017: 374,270,520) ordinary shares of 1.0p 15,599,626 15,558,095
---------------------------------------------------------- ----------- -----------
The share capital issues during 2018 are summarised as
follows:
Number of shares Share capital at nominal value Share premium
$ $
---------------------------------------- ----------------- ------------------------------- --------------
At 1 January 2018 374,270,520 15,558,095 142,361,529
Shares issued in lieu of fees payable 3,064,907 41,531 18,690
Share issue costs - - (3,902)
At 31 December 2018 377,335,427 15,599,626 142,376,317
------------------------------------------ ----------------- ------------------------------- --------------
The shares issued in lieu of fees payable were issued in May
2018 in lieu of a cash bonus to its Cameroon country manager in
recognition of his efforts with respect to the Thali licence.
17. 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.
18. 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 2018 and
31 December 2017.
Carrying amount / fair value
2018 2017
Group $ $
-------------------------------------------------------- --------------- --------------
Financial assets (classified as loans and receivables)
Cash and cash equivalents 331,395 2,151,476
Trade and other receivables 23,979 123,968
Total financial assets 355,374 2,275,444
----------------------------------------------------------- --------------- --------------
Financial liabilities at amortised cost
Trade and other payables 1,292,492 1,052,903
----------------------------------------------------------- --------------- --------------
Total financial liabilities 1,292,492 1,052,903
----------------------------------------------------------- --------------- --------------
Carrying amount / fair value
2018 2017
Company $ $
-------------------------------------------------------- -------------- ---------------
Financial assets (classified as loans and receivables)
Cash and cash equivalents 324,052 2,112,794
Trade and other receivables 23,977 13,541
Loans to subsidiary undertakings 9,636,778 10,918,887
Total financial assets 9,984,807 13,045,222
----------------------------------------------------------- -------------- ---------------
Financial liabilities at amortised cost
Trade and other payables 7,909,735 1,052,543
Total financial liabilities 7,909,735 1,052,543
----------------------------------------------------------- -------------- ---------------
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 does not have any outstanding borrowings
and hence, the Group and Company is only exposed to interest rate
risk on its short-term cash deposits.
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
2018 2017 2018 2017
$ $ $ $
--------------------------- ------- ------- ------- ------
Cash and cash equivalents 11,912 10,184 11,648 9,976
---------------------------- ------- ------- ------- ------
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:
2018 2017
Floating interest Non-interest bearing Floating interest Non-interest bearing
rate rate
$ $ $ $
--------------------- --------------------- ---------------------- ---------------------
Cash and cash
equivalents 330,870 525 2,149,448 2,028
----------------------- --------------------- --------------------- ---------------------- ---------------------
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.
At the year-end the Group and Company maintained the following
cash reserves:
Group Company
2018 2017 2018 2017
Cash and cash equivalents $ $ $ $
-------- ---------- -------- ----------
Cash and cash equivalents held in US$ 313,288 360,804 313,000 360,438
Cash and cash equivalents held in GBP 10,103 1,751,407 10,103 1,751,407
Cash and cash equivalents held in other currencies 8,004 39,265 949 -
----------------------------------------------------- -------- ---------- -------- ----------
331,395 2,151,476 324,052 2,111,845
---------------------------------------------------- -------- ---------- -------- ----------
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.
19. Operating leases and capital commitments
At the reporting date there were no outstanding commitments for
operating lease payments.
The Group is committed to funding the following exploration
expenditure commitments as at 31 December 2018:
Country Interest Net commitment 2019 Net commitment 2020 onwards
Block 40 (1) Zambia 100% - -
Block 41 (1) Zambia 100% - -
Algoa-Gamtoos (2) South Africa 50% $150k $2.35 million
Thali (3) Cameroon 100% $9.12 million -
$10.48 million $2.35 million
---------------------------------- --------- -------------------- ----------------------------
(1) Renewal pending confirmation of petroleum legislation
(2) 2 years to 24 August 2019.
(3) 1 year extension period to 14 September 2019.
20. Share-based payments
2018 2017
$ $
-------- --------
In the statement of comprehensive income the Group recognised the following charge with respect
to its share-based paments 137,184 160,107
------------------------------------------------------------------------------------------------ -------- --------
On 9 November 2017, the Board of the Company determined to
implement a Share Incentive Plan and to make an award to the Chief
Executive covering rights over 15 million shares vesting after
three years and subject to performance conditions. The performance
conditions provide that 5 million of the shares will only be
payable if, during the vesting period, the Company's stock achieves
a closing price at least 25% above the 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 must be achieved for a minimum of five (not
necessarily consecutive) trading days during the vesting period.
Included within the above share-based payment charges for the
period is $53,078 (2017: $nil) with respect to these shares.
Options
Details of share options outstanding at 31 December 2018 are as
follows:
Number in issue
------------------------ ----------------
At 1 January 2018 1,626,800
Lapsed during the year (9,400)
At 31 December 2018 1,617,400
-------------------------- ----------------
No Directors held interests in share options at the year-end
(2017: nil).
Date of Number Option Latest exercise
grant in issue price (GBP) date
----------- ---------- ---- ------------- ----------------
27 Dec 14 16,000 1.750 27 Dec 19
09 Dec 15 48,000 0.475 09 Dec 20
16 Mar 16 53,400 (1) 0.475 16 Mar 21
26 Oct 16 1,500,000 (1) 0.023 25 Oct 21
1,617,400
----------- ---------- ---- ------------- ----------------
(1) These options vest in the beneficiaries in equal tranches on
the first, second and third anniversaries of grant.
Warrants
Details of warrants outstanding at 31 December 2018 are as follows: Number in issue
--------------------------------------------------------------------- ----------------
At 1 January 2018 31,950,609
Lapsed during the year (96,848)
Awarded during the year 11,585,931
At 31 December 2018 43,439,692
----------------------------------------------------------------------- ----------------
The following table shows the interests of the Directors in the
share warrants in issue:
2018 2017
No. No.
---------------- ----------- -----------
Jeremy Asher 16,412,436 10,637,628
Graeme Thomson 9,976,128 7,097,805
Peter Taylor 9,976,128 7,097,805
Total 36,364,692 24,833,238
----------------- ----------- -----------
The weighted average exercise price of the share warrants was
1.13p (2017: 1.93p) with a weighted average contractual life of 4.0
years (2017: 4.9 years). At 31 December 2018 and 2017 all warrants
had fully vested.
In its Statement of Comprehensive Income, the Company recognised
share-based payment charges of $137k (2017: $160k)
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% (2017: 82% and 143%), depending
upon the date of grant, and the risk-free interest rate was 0.50%
and the Dividend Yield was 0% for 2018 and 2017.
The Company's share price ranged between 0.8p and 1.8p (2017:
0.8p and 2.9p) during the year. The closing price on 31 December
2018 was 1.3p per share. The weighted average exercise price of the
share options was 7.0p (2017: 7.0p) with a weighted average
contractual life of 2.75 years (2017: 3.75 years). The total number
of options vested at the end of the year was 1.6 million (2017: 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 (2017: $295,885) in fees for
management services. 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
2018 2017 2018 2017
$ $ $ $
------------------------------------------------------------------------- -------- -------- -------- ----------
Short-term employee benefits 96,980 60,741 96,980 60,741
Fees charged by companies associated with Jeremy Asher (1) 201,300 295,885 - -
Share-based payments 134,455 145,881 134,455 145,881
Finance interest on intercompany loan accounts - - 636,650 831,324
Fees charged with respect to the provision of strategic advice and
support by the parent - - 33,396 34,575
--------------------------------------------------------------------------
432,735 502,507 901,481 1,072,521
------------------------------------------------------------------------- -------- -------- -------- ----------
(1) Charged by Pegasus Petroleum Limited ("Pegasus"), a company
registered in the Channel Islands, to Rift Petroleum Holdings Ltd,
a wholly owned subsidiary of Tower Resources plc registered in the
Isle of Man. Pegasus is owned and controlled by a family trust of
which Jeremy Asher is the settlor and lifetime beneficiary.
22. Control
The Company is under the control of its shareholders and not any
one party.
23. Subsequent events
On 24 January 2019, the Company announced the completion of a
placing of 170 million new ordinary shares at 1.00p to raise GBP1.7
million. The Company also issued 88 million placing warrants,
together with 7.7 million broker warrants, 20 million warrants to
Directors in lieu of fees and 70 million options at 1.25p to
certain employees, consultants and professional advisors at the
same time. The 15 million shares which were the subject of the
Share Incentive Plan (note 20) and whose performance conditions
were fully vested, were also issued.
On 8 February 2019, the Company made comment on the announcement
of the Brulpadda well discovery by Total S.A. of a significant
hydrocarbon find on Blocks 11B / 12B which is immediately adjacent
to its Algoa-Gamtoos licence in South Africa.
On 16 April 2019, the Company announced an operational update on
the progress of the planning for its NJOM3 well on the Thali Block,
offshore Cameroon, which could commence drilling operations as soon
as the end of May 2019 depending on final rig availability.
On 16 April 2019, the Company announced the completion of a
short-term senior secured funding facility of US$750,000 (the
"Bridging Loan") with Pegasus Petroleum Ltd, a company beneficially
owned by the Company's Chairman Jeremy Asher. The material terms of
the facility comprise fees of 2%, interest of 1% per month accrued
and paid on repayment, a fixed and floating charge over the
Company's assets, and the issue of 90 million 5-year warrants
priced at 1.00 pence per share. The Bridging Loan will be due for
repayment on or before 30 June 2019 and has a preferential right of
repayment from any future financing secured by the Company.
On 3 May 2019, the Company announced the assignment of
US$375,000 of the Bridging Loan and associated warrants to certain
clients of Turner Pope Investments (TPI) Limited.
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 EAKKDEEXNEFF
(END) Dow Jones Newswires
June 04, 2019 02:00 ET (06:00 GMT)
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