Tower Resources reaches Thali farm-out agreement offshore Cameroon
Tower Resources has executed binding heads of terms (HoT) in respect of a farm-out to OilLR Pty (OilLR) of a 24.5% working interest in its Thali Production Sharing Contract (PSC) in Cameroon, conducted through its wholly-owned subsidiary Tower Resources Cameroon SA.
The key economic elements of the transaction set out in the HoT are:
(a) The farm-out covers US$7.5 million towards the cost of the NJOM-3 well that Tower is planning to drill on the Thali block.
(b) OilLR will receive a 24.5% working interest in the PSC, subject to an overriding royalty of 10% for Tower on the contractor share of production under the PSC.
(c) The well cost is currently expected to be approximately US$15-16 million, of which approximately US$3 million has already been spent.
(d) Each party will recover back costs actually funded and recoverable under the PSC, pari passu.
(e) Tower will effectively contribute its non-recoverable costs in consideration of the 10% overriding royalty on the contractor share of production referred to above.
(f) Costs in excess of $15 million, and future costs, will be funded pro-rata with respect to working interests.
Tower Resources Cameroon SA will remain Operator of the Thali PSC under an industry-standard joint operating agreement ("JOA"), and in the event the formal farm-in agreement and approvals cannot be completed in good time then OilLR will instead receive an appropriate share of the Operator's share capital and Tower's intercompany loans to the Operator, subject to a shareholder agreement, in order to reflect the intended farm-in economics and JOA terms.
The HoT are binding even though further documentation is required to effect the transaction, and the parties' intention is to complete the transaction by 15th April 2020, subject to usual confirmatory due diligence and OilLR having provided payments to Tower and into escrow of $7.5 million in total at completion, and Tower having demonstrated that it has funding from its own or other sources for the balance of the US$15 million (such funding to include the funds Tower has already spent on the well). In particular, the HoT will terminate automatically on 29th March 2020 in the event that Tower has not received proof of funding in a form acceptable to it from OilLR by that date.
OilLR is a private company incorporated in Brisbane, Queensland whose principal shareholders are Art Malone and Greg Lee. Art Malone is Managing Director and is a senior energy and resource executive with 15 years oil and gas experience, having recently served as Doriemus' COO.
Greg Lee is Chairman of OilLR and is a Senior Petroleum Engineer with over 30 years of experience including most recently as technical director at Doriemus plc, and previously as one of the founders of Grove Energy, and one of the founding principals of Regal Petroleum Plc. In addition to its farm-in to the Thali license, OilLR is presently in the final stage of acquiring interests in two additional appraisal/production assets.
Tower is still in discussion with several other parties regarding the farm-out of up to a further 24.5% interest in the Thali PSC on similar terms.
Jeremy Asher, Tower's Chairman and CEO, commented: "We are delighted to have the opportunity to work with Greg Lee and Art Malone of OilLR on this project in addition to securing this funding for the well, and we intend to have the balance of the funding in place by the time this transaction completes. This agreement is also consistent with our intention to commence drilling NJOM-3 in June, subject to finalisation of the rig schedule and the service companies' schedules. We expect this well to transform the Company by converting current contingent resources into proven reserves, so putting us firmly on the path to production in 2021."