Tower Resources PLC (AIM:TRP) said it is redrawing its funding plans for drilling the NJOM-3 well at the Thali project, offshore Cameroon to give a less dilutive outcome for shareholders.
A planned farm-out of 49% to Beluga Energy for US$15mln has been shelved with a new proposal being worked on by all the parties, said a statement from the junior.
“In particular, the company has been in discussion with local banks in Cameroon and the company now believes that debt financing may be available to cover a significant portion of the well cost.
“This should allow a restructured transaction which would require less of the equity in the project to be given.”
A new proposal would not require government approval, Tower added, noting that the Minister of Mines, Industry and Technological Development (MINMIDT) in Cameroon had also granted an extension of the exploration timetable until 11 May 2023.
The junior said it expects to complete shortly a letter of intent (LOI) with Shelf to cover the drilling and testing of the NJOM-3 well in the fourth quarter of 2022 using the Trident VIII jack-up unit.
Rig day rates, fuel and other costs all have risen during the past year and the overall budget for the well is around 20% higher than the original figure of around US$15mln, said the statement.
Having already spent US$4mln, Tower currently estimates the remaining cost at around US$14mln though one of the budget uncertainties is the number of separate zones that the company will test and how far down it goes.
During the last six months, the company said it has also continued to work on both the subsurface dataset and also the plans for additional wells and early production from the Njonji structure, following the drilling of the NJOM-3 well.
"The updated dataset has allowed us to further clarify the NJOM-3 well objectives, and Tower has also had the opportunity to discuss alternative platform and Mobile Offshore Production Unit (MOPU) designs with potential contractors and partners."
Next steps will include the finalisation of the well's financing, the rig contract and other service contracts in the third quarter of 2022, by which time a narrower range for the planned mobilisation of the rig will also be announced.
Jeremy Asher, Tower's chairman and CEO, added: "We are pleased that we can finally share concrete news regarding the progress on the NJOM-3 well on the Thali PSC area, and we are grateful as always to MINMIDT, and to the President and Prime Minister of the Republic of Cameroon, as well as our partners at SNH, for their continued support.
"We realise that it has taken longer than any of us would have liked to reach this point, but we also feel that we have been able to make good use of the extra time both to enhance our understanding of the subsurface and our plans for the next steps on Thali, and also (we hope) to improve the terms of the well financing.“