Tower Resources PLC (AIM:TRP) shares gained around 25% at one point on Friday as the firm landed a hotly anticipated farm-out deal that will enable drilling later this year, to unlock the AIM firm’s flagship project offshore Cameroon.
As well, it also looks set to help Tower open up its high-potential exploration in Namibia, and, potentially open up other new opportunities in the future.
Tower has inked a pair of farm-out deal with Prime Global Energies. Prime will pay Tower £4.38 million in cash, and commits to invest $15 million in the drilling of the hotly anticipated NJOM-3 well, in Cameroon, this year.
It will also invest to advance the earlier stage exploration project in Namibia, where it will support seismic data reprocessing.
In exchange for the investments, Prime acquires a 42% interest in the Thala licence in Cameroon (which hosts NJOM) and 25% of the offshore Namibia licence (PEL96).
NJOM-2 is expected to confirm the commerciality of the Njonji oil discovery and de-risk a future development, according to stockbroker SP Angel.
The broker, in a note, said it had upped its core valuation for the Cameroon project to the equivalent of 0.16p per share - suggesting significant upside to Tower’s current price of 0.04p.
A substantial partner
Tower chief executive Jeremy Asher described Prime as “a partner with substantial technical and financial resources and a track record of operational success”.
“We are very pleased to be working closely with them on these two highly valuable projects,” Jeremy Asher said.
"For our Thali license, the funding provided should enable Tower to drill the NJOM-3 commitment well, which will mark a significant milestone for the company.
“Whilst this has been our priority, we have also made great efforts over the past few years to understand better the huge prospectivity of the PEL96 license, offshore Namibia, and I'm very pleased that its potential has also been recognised through this additional agreement with Prime as a non-operating partner.”
Asher added: “Our goal remains to achieve progress across the company's entire asset base and deliver value for all stakeholders, and the additional liquidity these transactions will generate, upon completion, should allow us to proceed with all our work programmes with greater confidence.”
He also told investors the Tower and Prime are keen to work together on further projects in Cameroon in the future.
Tower, meanwhile, noted changes to a prior deal with Pegasus Petroleum (a company in which Asher is a beneficial shareholder), to enable a more positive farm-out with Prime.
It means that there’ll be production-based payments equivalent to 10% of Prime's after-tax profit oil share from the Thali license, passed on to Pegasus. The investment agreement with Pegasus has been amended so that 50% of the proceeds will be used to buy new Tower shares.