Tower Resources (LON:TRP) has raised £5.2mln in a share placing to fund its new project offshore Cameroon, in the Niger Delta.
The proceeds will also fund ventures in Namibia, which the company describes as “an under-explored and highly prospective’ area.
M&G Investments is a cornerstone participant in the placing, subscribing for £2.3mln of new shares and acquiring 18% of the group’s enlarged share capital.
Directors and other Tower staff members have also participated in the placing.
The placing sees a total of 2.9bn new shares issued at a price of 0.19p, which was Tuesday’s closing price on AIM. The new equity will subsequently represent around 56% of the company.
Investors appeared to welcome the injection and proposed acquisitions positively, as Tower shares advanced around 10% in Wednesday’s early deals to 0.21p.
“I am extremely pleased with the support that this oversubscribed placing has received from existing and new institutional investors and from the directors, staff, consultants and others connected persons of the company,” chief executive Graeme Thomson said.
The Thali Block, the Cameroon asset, is located in shallow water in a proven sub-basin and has known oil and gas discoveries, as well as identified exploration opportunities.
A production sharing contract with the Cameroon government is expected to be signed imminently, and this will lead to a three-year appraisal and exploration programme (including a well in 2017/18).
Thomson describes the entry to the Thali Block as a shift in the company’s risk profile from ‘frontier’ areas to ‘proven’ basins.
This transition has been more than eighteen months in the making, he added.
“Located in the Rio Del Rey Basin, a sub-basin of the highly petroliferous Niger Delta, the Thali Block provides Tower with lower risk appraisal and exploration potential in this shallow water proven-producing region while maintaining significant upside potential for the company and its investors both there and in frontier areas,” he said.
In Namibia, meanwhile, Tower says it is negotiating additional acreage positions with a view to building economies of scale and lower risk exploration in the future.
Whilst Namibia has been something of a graveyard for AIM-quoted explorers, according to Tower, the country remains ‘highly prospective’ and industry interest in the area remains high.
The company highlights that Shell (LON:RDSB) and OMV/Murphy plan wells in 2016/17 and it believes Chariot Oil & Gas (LON:CHAR) and Tullow (LON:TLW) are also likely to drill in a similar timeframe.
Some cash from the placing will also be directed to Tower’s projects in Zambia, where the company says early field work has shown excellent mature source rocks for gas and potential for oil. More field work is planned later this year, ahead of a possible airborne surveying, and 3D seismic shoot by 2017.
A farm-out programme is underway to partner up in the Zambia project.