16th Feb 2016 09:07
LONDON (Alliance News) - Tower Resources PLC Tuesday said it will not progress an ultra deep-water development in South Africa as the company opts to focus on a different project in the country which offers "greater near-term potential".
Tower Resources said it has agreed with its partner, New African Global Energy SA (Pty) Ltd, not to submit an application to convert the the SW Orange Basin technical co-operation permit into an exploration right.
Tower said it had decided not to progress the "ultra deep-water" project because it is high cost and by exiting the project it can focus on better opportunities within the country.
As a result, New African Global Energy will repay the USD500,000 paid by Tower back in 2013 to acquire its 50% stake in the permit - reducing Tower's commitments and providing funding to conduct work on its other joint venture project with New African Global Energy in the country.
"Tower's exit from this high cost ultra deep-water frontier basin is consistent with its move towards a more balanced portfolio of proven and emerging basins. This decision will enable the company to focus its efforts in South Africa on the Algoa-Gamtoos [exploration right], which offers greater near-term potential," said the company.
"We are concentrating on the area in South Africa with the greatest near-term commercial potential, have enhanced our funding position and have also reduced our contingent commitments. The proceeds from this withdrawal mean that our South African work programme for 2016 is now self-funding," added Graeme Thomson, chief executive of the company.
The USD500,000 refund will be important to the company as it reported a cash balance of only USD1.2 million at the end of June last year. Tower also issued a substantial amount of shares back in December to pay for outstanding fees owed for services provided to the company as it tried to retain cash.
Tower holds a 50% stake in the Algoa-Gamtoos exploration right alongside the same partner, New African Global Energy, and the pair secured approval from authorities for the planned 2016 work programme and budget for the area back in September last year.
"The work programme will include further geophysical work and the interpretation of previously acquired 3D seismic data with a view to seeking a partner for the next stage of operational activity," said Tower.
The Algoa-Gamtoos exploration area is comprised of three basins and "multiple plays", and the pair plan to reprocess an older 3D survey covering the area with the aim of identifying prospects for drilling in either 2017 or 2018.
The licence also includes "many leads" defined on 2D seismic in the Gamtoos basin, and the joint venture said it will be evaluating the potential to better define these with the acquisition of additional 2D or 3D seismic in 2017.
Tower said the initial focus will be on the shallow areas of the exploration area, but said it does have some unexplored deep-water acreage within the Outeniqua basin.
In 2014, oil giant Total attempted to drill the Brulpadda-1 exploration well in Block-11B/12B adjacent to the Algoa-Gamtoos licence, but was forced to abandon the well due to "mechanical difficulties", according to Tower.
However, Tower added that Total is considering restarting drilling sometime in 2016 or 2017, which, if successful, would boost its own acreage.
"In the event of success at Brulpadda, the prospectivity of the deep-water part of Algoa-Gamtoos block would be significantly enhanced," said Tower.
Tower shares were up 0.8% to 0.0806 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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