Tower Resources PLC (LON:TRP) has told investors that it is still possible to spud the NJOM-3 well before 15 September 2020 despite the current Force Majeure, caused by coronavirus (COVID-19), but added that this is “inherently uncertain”.
In any event, the company said it remains committed to drilling NJOM-3 - a test of the Njoni project located inside the Thali PSC area - as quickly as possible.
The explorer noted that its preliminary agreement, head of terms, with OilLR has been extended to get a new completion date of 30 June.
Both parties agree that the transaction cannot be completed until the environment stabilises sufficiently for the project to move forward.
Tower acknowledged that it is satisfied that OilLR's intended investors have the funds to complete the intended farm-in. It added that both parties are committed to completing the transaction.
At the same time, Tower is continuing talks with other potential investors in the Thali PSC. It has been agreed with OilLR that, if it receives additional offers totalling over US$15mln and, only if, OilLR isn’t able to make agreed escrow payment, then Tower would have the right to adjust the farm-out deal, reducing OilLR’s interest down to at least US$5mln.
"We are glad that our partners at OilLR remain committed to the Thali project despite recent market upheavals and despite the operational delays required by the global response to the Covid-19 pandemic,” Jeremy Asher, Tower chairman and chief executive said in a statement.
He added: “The Force Majeure provisions of our PSC are designed to provide breathing space in precisely this kind of situation, and we are already planning and discussing with service companies how we can move forward as quickly as possible when things return closer to normal."
Earlier this month, Tower received a new reserves report which confirmed the project’s “attractiveness”.
It updated a prior reserves report and whilst it did not mark any changes in terms of technical information, it reflected price and cost changes over the past 16 months.
The new third-party assessment, authored by Oilfield International, confirmed 18mln barrels of proven reserves in the Njonji-1 and Njonji-2 fault blocks (unchanged on previous estimates) along with 20mln barrels of mean prospective resources across the Njonji South and Njonji South-West fault blocks.
Gross mean prospective resources estimated across four identified prospects in the Dissoni South and Idenao areas are also unchanged at 111mln barrels.
The report gives a NPV10 asset valuation of US$179mln for ‘best estimate’ contingent resources, though that was based on an oil price figure from February (US$68 per barrel) so did not reflect prevailing market prices.
A similar value estimate, for the ‘mean estimate’ of contingent referenced a March 2020 Brent price and reduced to US$119mln compared against the US$158mln estimated in 2018 which referenced US$71 per barrel crude.
Tower highlighted that the forward Brent costs used in the estimates have fallen by less than the ‘prompt prices’ – for example, it notes that a 2021 forward price comes in at around US$44 per barrel. It also noted that projected costs were already deemed to be low and have fallen lower amid the recent industry turmoil.