Tower Resources PLC

Tower Resources PLC - Final Results to 31 Dec 2007

RNS Number:8218R Tower Resources PLC 08 April 2008 Press Release For immediate release: 08 April 2008 Tower Resources Plc Final Results for the 12 Months Ended 31 December 2007 Tower Resources plc ('Tower' or 'the Company'), the AIM-listed oil and gas exploration and production company today announces its final results for the 12 months ended 31 December 2007. Highlights: Uganda - 2D seismic survey completed early 2008 - Two wells planned to be drilled in 2008 - Costs largely covered by farmout agreement Namibia - 2D seismic survey completed - Giant structures identified as viable exploration targets - First exploration well may now be drilled in 2009 - Costs covered by farmout agreement Commenting on the results, Peter Kingston, Executive Chairman of Tower said: 'Year 2007 saw progress with seismic surveys in Uganda and Namibia and Tower Resources is now entering an exciting 1-2 year period during which the potential of its current two Licences in Namibia and Uganda will be tested by wells. The potential of each licence is such that a successful exploration well in either would be classed as a 'company maker'. The Board is also hoping to add a limited number of new ventures during the course of 2008.' For further information, please contact: Tower Resources plc www.towerresources.co.uk Peter Kingston, Executive Chairman 01985 211780 Blue Oar Securities 020 7448 4400 Aquila Financial Limited www.aquila-financial.com Peter Reilly 0118 979 4100 TOWER RESOURCES PLC CHAIRMAN'S STATEMENT Year 2007 saw progress with seismic surveys in Uganda and Namibia. The Namibia seismic data was collected in August and early September 2007 and is in the final stages of interpretation. A forward programme will be recommended by the operator, Arcadia, by the end of April 2008. There is a reasonable chance that a well will be drilled in 2009. Seismic operations in Uganda have been much more complex given its onshore location in the far northwest region of the country. The survey was completed successfully on 12 February 2008 and detailed processing of the data is currently underway. A forward programme is expected to be agreed in May, with two wells currently expected to be completed before the end of 2008. Significantly, Tower completed negotiations with partners that enable funding of operations to be largely covered by third parties in both licences. Arcadia Petroleum Limited is funding all of the future Namibia costs up to and including two wells. Orca Exploration Group Inc (Orca) is funding most of the Uganda seismic costs and, if it chooses to continue into the drilling commitment programme, it will meet most of the cost of drilling two commitment wells. Further details are given below. Your Company is now entering an exciting 1-2 year period during which the potential of its current two licences will be tested by wells. The potential of each licence is such that a successful exploration well in either would be classed as a 'company maker'. The Company's strategy remains to concentrate on such high impact opportunities, which can largely be funded by farminees. This approach dictates that the exploration portfolio will remain small to avoid quality dilution. Notwithstanding, the Board is hoping to add a limited number of new ventures during the course of 2008. Financial Highlights Operating loss over the reporting period from 1 January 2007 to 31 December 2007 was $1,284,471. Capital expenditure was $7,651,416 being the capitalised expenditure on exploration studies and seismic surveys. Third party funding was agreed from farm- in partners to meet $8,752,398 of the total investment commitment including recovery of some back costs. Cash balances at year end were $5,534,815 although significant amounts will be required in the first half of 2008 to meet the cost of operations still underway at the end of 2007. There is sufficient capital to fund the Company's activities over at least the next six months and an expectation that new funds can be introduced if necessary to meet commitments for the remainder of 2008 and 2009. Operations Summary to end of 2007 Uganda The first half of 2007 was focused on completing technical evaluations; preparing for seismic operations; and holding discussions with potential funding partners. A six-month extension to the First Exploration Period, to 27 March 2008, was approved in February 2008. This allowed for expected delays in starting the seismic programme (the Second Exploration Period is now in effect). In mid-2007, a small operational organisation was put in place to manage the seismic programme led by Marilyn Hill, a former oil and gas banker having wide experience of working in developing countries at senior levels of government. While Neptune Petroleum (Uganda) Limited, Tower's Uganda operating subsidiary, prepared to conduct seismic operations, an Option Agreement was finalised in August with Orca Exploration Group Inc, a Toronto TSX Exchange listed company which operates the Songo Songo gas production and distribution venture in Tanzania. Under the terms of the Agreement, Orca undertook to fund 83.33% of seismic operations and certain back costs up to a contribution by them of $US6 million. Above a gross cost of $US7.2 million, costs were to be shared 50% each. In return for this funding, Orca has an option to participate in a two well drilling commitment programme, funding 83.33% of drilling costs ($10 million out of the first $12 million) and a like proportion of testing costs ($5 million out of the first $6 million) with cost sharing beyond the agreed limits to be 50% each. Orca would become a 50% Licence interest holder on committing to the drilling programme. Orca has an agreed period from completion of seismic processing work to make further commitments which, in effect, gives them until about end May 2008 to reach a decision on whether it wishes to proceed. The commencement of seismic recording was delayed until 6th December 2007 because of bad weather related delays to programmes with other operators. After a slow, weather affected start, the programme was completed in very good time, on 12th February 2008. Additional gravity data was also recorded, to fill in gaps to the north and south of the seismic recording area and to provide a direct correlation with recorded seismic. Namibia Seismic operations began on 25th August 2007 and 735 kms of 2-D seismic data were recorded in the period to 2nd September 2007. The prime area of focus was in the north west of the licence where interpretation of bought seismic data had revealed giant structures under deep water (up to 1,500 metres) with indications of hydrocarbons. The new data is of high quality and a comprehensive data processing and interpretation programme was still underway at year end. On 20th September 2007 the Minister of Mines and Energy of the Republic of Namibia approved the farm-out of an 85% interest in Tower's licence, covering offshore blocks 1910A, 1911 and 2011A, to Arcadia Petroleum Limited (Arcadia). The Minister also approved the transfer of the Operatorship of the licence to Arcadia. He had previously agreed an extension of the initial exploration period from two years to four years to accommodate Arcadia's proposed programme. Under the terms of the farm-out, Arcadia has committed to fully fund a programme of activity in four parts which includes: * shooting and interpreting the recently completed 2-Dimensional seismic programme; * recording and interpreting a 3-Dimensional seismic programme, presently contemplated in early 2008; * an exploration commitment well; * a second well which might be an appraisal well or a second exploration well. Arcadia has the option to withdraw from its commitment at the end of each of these four stages of operation or to assign all or part of its interest to a third party agreeing to meet the funding commitment. In the case of withdrawal and failure to assign, the full 85% interest will revert to Neptune. Arcadia has also reimbursed 85% of certain historic costs to Tower amounting to about US$1.6 million. Arcadia Petroleum Limited is a substantial trader of oil and related products. They bring considerable financial strength to the licence as well as access to very relevant expertise in exploration, development and shipment of oil and natural gas. Since Year-end and Looking Forward Uganda The basic seismic processing is now complete and it has confirmed the structural features identified by the gravity interpretation. More specific processing will now be targeted at optimising and ranking specific drilling locations and investigating the presence of hydrocarbon indications. This work is important to thoroughly assess and rank the probability of success for each well location. Confirmation has been received that your Company is authorised to continue as the sole Licensee into the Second two-year Exploration Period. Orca Exploration Group is expected to decide on their future intentions under the terms of the Option Agreement by end-May. It is expected that a recommendation in respect to the forward 2008 programme will be made to the Tower Board and subsequently to the Uganda Government by end-June 2008. It is particularly pleasing that the small operating organisation, comprising mostly Ugandan nationals, developed to manage the seismic programme has performed effectively and this promises well for the future. I am also very pleased that the local company's interaction with local communities has been successful and that a variety of carefully targeted social investment initiatives has been greatly appreciated. These socio-economic activities will be further developed during the drilling phase of operations with a particular emphasis on sustainability and widespread benefit. Further details on these programmes are given in the Directors Report. Namibia Comprehensive processing and interpretation of the 2-D seismic data is near completion. Results to date have confirmed that the giant prospects previously identified are viable exploration targets, having apparent four-way structural closure and strong hydrocarbon indications. However, geological modeling has indicated a potentially different reservoir type and construction and this changed perception is currently being built into the assessment of future programme priorities. Recommendations are presently expected to be finalised by Arcadia for partner and government approval by end May 2008. Corporate Outlook The year 2007 saw a great deal of positive progress for your Company. In 2008 we will build strongly on this even though the first well in Uganda may be delayed to the final quarter. The procedures that need to be followed with partners and government are naturally time consuming and it is important to delay commitments to contractors until a definite timetable can be guaranteed. The delay will allow minimisation of well location risk and may offer opportunities to work with the other Operators in Uganda, to coordinate use of drilling rigs and associated services, thereby substantially reducing costs. Your Board is very pleased that both Uganda and Namibia are being confirmed to have company making potential thus avoiding too much dependence on a single project. Activity continues to identify similar high quality ground floor opportunities. Thank you for your continued support. Peter Kingston Chairman 7 April 2008 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Year ended 18 Months ended 31 December 2007 31 December 2006 $ $ Revenue - - Cost of sales - - Gross profit - - Administrative expenses before charge for share-based payments (913,652) (954,399) Share-based payments (370,819) (174,841) Total administrative expenses (1,284,471) (1,129,240) Group operating loss (1,284,471) (1,129,240) Finance income 164,668 122,518 ______________________________________________________________________________ Loss before taxation (1,119,803) (1,006,722) Taxation - - Loss for the period (1,119,803) (1,006,722) Attributable to: Equity holders of the Company (1,119,803) (1,006,722) Loss per share (cents) Basic (0.21) c (0.30) c Diluted (0.21) c (0.30) c The results shown above relate entirely to continuing operations. GROUP STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2007 Share-based Share Share Payments Retained Total Capital Premium Reserve Losses Equity $ $ $ $ $ Balance at 1 July 2005 244,875 1,146,015 - (308,715) 1,082,175 Share issues 652,999 10,866,884 - - 11,519,883 Loss for 2006 - - 174,841 (1,006,722) (831,881) _______________________________________________________________________________________ Balance at 1 January 2007 897,874 12,012,899 174,841 (1,315,437) 11,770,177 Share issues 154,631 2,913,307 - - 3,067,938 Loss for 2007 - - 370,819 (1,119,803) (748,984) _______________________________________________________________________________________ Balance at 31 December 2007 1,052,505 14,926,206 545,660 (2,435,240) 14,089,131 _______________________________________________________________________________________ CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 31 December 2007 31 December 2006 $ $ ASSETS Non-Current Assets Plant and equipment 106,967 3,339 Goodwill 7,979,502 7,979,502 Intangible exploration and evaluation assets 711,590 1,408,868 8,798,059 9,391,709 Current Assets Trade and other receivables 3,121,389 55,116 Cash and cash equivalents 5,534,815 2,456,825 8,656,204 2,511,941 Total Assets 17,454,263 11,903,650 LIABILITIES Current Liabilities Trade and other payables (3,365,132) (133,473) Total Liabilities (3,365,132) (133,473) Net Assets 14,089,131 11,770,177 EQUITY Capital and Reserves Share capital 1,052,505 897,874 Share premium 14,926,206 12,012,899 Share-based payments reserve 545,660 174,841 Retained losses (2,435,240) (1,315,437) Shareholders' Funds 14,089,131 11,770,177 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 Year ended 18 Months ended 31 December 2007 31 December 2006 $ $ Cash flow from operating activities Group operating loss for the year (1,284,471) (1,129,240) Adjustments for items not requiring an outlay of funds: Depreciation of plant and equipment 2,241 753 Share-based payments charge 370,819 174,841 Operating loss before changes in working capital (911,411) (953,646) Increase in receivables and prepayments (3,066,272) (48,564) Increase in trade and other payables 3,231,658 76,154 Cash used in operations (746,025) (926,056) Interest received 164,668 122,518 Net cash used in operating activities (581,357) (803,538) Investing activities Funds used in exploration and evaluation (8,055,120) (1,316,094) Funds received from farm-in partners 8,752,398 - Payments to purchase plant and equipment (105,869) (4,092) Costs of acquiring subsidiaries - (143,308) Cash acquired with subsidiary undertakings - 48,553 Net cash from/(used in) investing activities 591,409 (1,414,941) Financing activities Cash proceeds from issue of shares 3,067,938 3,915,078 Share issue costs - (234,116) Net cash from financing activities 3,067,938 3,680,962 Increase in cash and cash equivalents 3,077,990 1,462,483 Cash and cash equivalents at beginning of period 2,456,825 994,342 Cash and cash equivalents at end of period 5,534,815 2,456,825 NOTES TO THE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2007 1 Basis of preparation The Group's financial statements, from which this financial information has been extracted, are prepared on a going concern basis, under the historical cost convention and in accordance with International Financial Reporting Standards, as adopted by the European Union ('IFRS'), including IFRS6 'Exploration for and Evaluation of Mineral Resources' and in accordance with the Companies Act 1985. The financial information contained in this report does not constitute full statutory accounts within the meaning of Section 240 of the Companies Act 1985. The figures are extracted from the audited financial statements for the year ended 31 December 2007 which will be filed with the Registrar of Companies, sent to shareholders and will be available on the Company's website at www.towerresources.co.uk in due course. The comparative figures for the eighteen months ended 31 December 2006 are not the statutory accounts for that financial period. Those accounts, which were prepared under IFRS, have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2 Going concern During the year ended 31 December 2007 the Group made a loss of $1,119,803 (18 months to year end 31.12.2006 - $1,006,722). At the balance sheet date the Group had net assets of $14,089,131 (2006 - $11,770,178). The Group has expected exploration expenditure commitments of $3,571,900 due within one year from the balance sheet date and a further $16,000,000 due between one and two years. The operation of the Group is currently being financed from funds which the Company raised from private and public placings of its shares together with monies raised under a farm-out agreement with Arcadia Petroleum Limited in respect of its Namibian licence. In addition, the Group has concluded an agreement with Orca Exploration Group Inc under which that Company is contributing an agreed proportion of the Seismic and Drilling costs involved in respect of the Group's Uganda licence. Whilst the Company may have to raise additional equity towards the end of 2008 in order to meet its share of the exploration expenditure commitments of its two licenses, the Directors believe that the Group will be able to secure these funds and, accordingly, are satisfied that the going concern basis remains appropriate for the preparation of these financial statements. 3 Loss per share Year ended 18 Months ended 31 December 2007 31 December 2006 $ $ Loss for the year/period (1,119,803) (1,006,722) Weighted average number of share in issue 526,897,228 337,507,589 Basic loss per share (0.21)c (0.30)c The diluted loss per share has been calculated using a weighted average number of shares in issue and to be issued of 530,895,322 (2006: 338,718,970). The diluted loss per share has been kept the same as the basic loss per share as the conversion of share options decreases the basis loss per share, thus being anti-dilutive. 4 Dividends No dividend is proposed in respect of the financial year. 5 Annual general meeting The annual general meeting of the Company will take place at 12pm on 28th May 2008 at the office of: Sprecher Grier Halberstam LLP 1 America Square, Crosswall, London, EC3N 2SG 6 Intangible assets Exploration and evaluation assets Goodwill Total $ $ $ Cost At 1 January 2007 1,408,868 7,979,502 9,388,370 Additions 8,055,120 - 7,545,547 Monies received under farm-out agreements (8,752,398) - (8,752,398) At 31 December 2007 711,590 7,979,502 8,181,519 Amortisation and impairment At 1 January 2007 - - - Amortisation for the year - - - Impairment loss for the year - - - At 31 December 2007 - - - Net book value At 31 December 2007 711,590 7,979,502 8,181,519 At 31 December 2006 1,408,868 7,979,502 9,388,370 Goodwill arose on the acquisition of the Company's subsidiary undertakings. The Group tests goodwill for impairment annually and when there are indicators of impairment. The amounts for intangible exploration and evaluation (E & E) assets represent costs incurred in relation to the Group's Ugandan and Namibian licences. These amounts will be written off to the income statement as exploration expenses unless commercial reserves are established or the determination process is not completed and there are no indicators of impairment. The outcome of ongoing exploration and evaluation, and therefore whether the carrying value of E & E assets will ultimately be recovered, is inherently uncertain. The Directors have assessed the value of the oil and gas exploration and evaluation expenditure carried as intangible assets and in their opinion no provision for impairment is currently necessary. As discussed in the Chairman's statement, during 2007 the Group entered into two farm-out agreements. The farm-out partners have contributed $8,752,398 towards past and future exploration and evaluation costs. These receipts have been deducted from the past E & E costs of the Group, as shown above. The net E & E costs consist of $514,000 in Uganda and $198,000 in Namibia. 7 Share capital and options 31 December 2007 31 December 2006 $ $ Authorised 10,000,000,000 ordinary shares of 0.1p each 19,900,000 19,900,000 Allotted, called up and fully paid 537,107,878 (2006: 458,333,333) ordinary shares of 0.1p each 1,052,505 897,874 The share capital issues during 2007 are summarised as follows: Number of Share capital Share 0.1p shares at nominal value premium $ $ At 1 January 2007 458,333,333 897,874 12,012,899 Shares issued for cash 78,774,545 154,631 2,913,307 At 31 December 2007 537,107,878 1,052,505 14,926,206 The details of share options outstanding at 31 December 2007 are as follows: Number of Share options At 1 January 2007 9,000,000 Granted during the period 6,000,000 Exercised during the period (1,000,000) Lapsed during the period (2,000,000) At 31 December 2007 12,000,000 Date of Grant Number of options Option price Exercisable between 21 December 2005 3,000,000 1.5p 21/12/05 - 21/12/10 28 February 2006 1,000,000 1.5p 28/02/07 - 28/02/11 28 February 2006 2,000,000 1.5p 28/02/09 - 28/02/11 8 February 2007 1,000,000 3.125p 08/02/07 - 08/02/12 3 May 2007 3,000,000 2.25p 03/05/08 - 03/05/12 20 September 2007 2,000,000 2.75p 20/09/08 - 20/09/12 The Company's share price ranged between 1.65p and 3.68p during the year. The closing share price as at 31 December 2007 was 2.75p per share. This information is provided by RNS The company news service from the London Stock Exchange END FR GGGGDRNMGRZM

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