London-based, independent oil and gas company Tower Resources Plc has sighed with relief after the repayment of its $750,000 short term loan facility was extended to August 31 this year to enable the company finalize arrangements for the drilling of the NJOM-3 well on Thali licence in the Rio del Rey basin located to the east of the Niger Delta, offshore Cameroon.
“The purpose of the extension is to allow additional time to progress farm-out discussions and arrange for refinancing of the facility (loan),” said Tower in a statement on Tuesday.
Tower has previously said for the development of its upstream projects it prefers the financing route of “concluding a transaction with an industry partner on terms that are favorable to shareholders, and that may obviate or minimize the need for further equity financing.”
“However, depending on the terms of the asset-level deal achieved, it may also be necessary or in shareholders' interests to raise a portion of the additional finance via the issue of further corporate equity,” the company said in an earlier statement.
In addition to the $750,000 short-term loan facility, Tower Resources is also proposing to raise approximately $182,557 for working capital purposes via a subscription for shares even as the Thai license farm-out and financing discussions continue.
At the moment, the pan-African regional focused exploration company says it is “continuing farm-out discussions with multiple parties and is hopeful of achieving a first term sheet in the near future” for the 119.2 km² Thali license in water depths ranging from 8 to 48 meters.
Extension of the repayment of the short term loan comes two months after Tower announced a delay by two months in drilling of a new well at the company’s 100% owned and operated shallow water Thali license after “additional data indicated further site preparation work would be required before a rig moves to site.”
“Therefore the company has agreed with Vantage to move the planned mobilization of the Topaz Driller to July 2019 instead of May 2019 in order to allow sufficient time for additional site preparation work to be completed,” Tower said in May.
Tower Resources plc’s wholly owned subsidiary, Tower Resources Cameroon S.A, signed in December 2018 a contract with Vantage Drilling International for the Topaz Driller jack-up to provide drilling operations for the NJOM-3 well, which is planned to spud in the third quarter of this year.
Vantage had earlier said the Topaz Driller “is a Baker Marine Pacific Class 375 jack-up, which was recently mobilized to Cameroon by NewAge as operator for the Etinde license for two appraisal wells and is currently employed in Gabon.”
According to Tower, the NJOM-3 well “will be targeting gross mean contingent (2C) resources of 18 million barrels across the Njonji-1 and Njonji-2 fault blocks located in the south of the Thali licence with an EMV10 of US$118 million, as identified by the recent Oilfield International Limited Reserves Report announced on the 1 November 2018.”
“Furthermore, the NJOM-3 well is expected to de-risk an additional 20 million barrels of gross mean prospective resources across Njonji South and Njonji South-West,” said Tower.
Tower has had the goodwill of its partners and Cameroonian authorities who earlier extended the company’s 2015 PSC exploration period for a further year ending on September 15, 2019.
For Cameroon the drilling of NJOM-3 and similar oil search missions is important because the country has already reported a drop in oil production because of the depleted oil fields.
By April of this year, Cameroon’s dip in oil production, which was captured in government reports of 2017, continued to stand at 8.10 million barrels by April 2019. This was nearly 1.53% less compared with April 2018 because of what the country’s national oil company said was the “natural depletion of oil fields.”
The West Africa nation also increased its natural gas production by more than 219% by April this year from the 748 million cubic meters to 26,414 cubic meters. The increase had previously been supported by “the launching in May 2018, of LNG exports from the Hilli Episeyo floating liquefied natural gas plant.”
For Tower Resources, the outcome of the planned drilling of NJOM-3 well will be very significant in the company’s investment plan in Cameroon and West Africa in general. There is optimism in the air largely because the Rio del Rey basin has, to date, produced over one billion barrels of oil and has estimated remaining reserves of 1.2 billion barrels of oil equivalent primarily within depths of less than 2,000 meters according to Tower.
The confidence of operators of blocks in the Rio del Rey is also pegged on the fact that the area is a sub-basin of the Niger Delta, an area in which over 34.5 billion barrels of oil has been discovered, out of which 2.5 billion boe are attributed to the Cameroonian section. Other companies operating in this basin include Glencore, Perenco Cameroon, Orion Energy and Heta Oil & Gas.