U.K. oil and gas company Tower Resources has signed two farm-out agreements with Prime Global Energies for minority, non-operated interests in its Thali license, offshore Cameroon, and PEL96 offshore Namibia.
Through its wholly-owned subsidiary, Tower Resources Cameroon, the company has agreed to farm-out a 42.5% non-operated interest in the Thali license to Prime in exchange for a $15 million cash contribution towards the Thali work program and drilling of the NJOM-3 well in 2025, and further payments.
Although multiple rigs are currently available to drill the NJOM-3 well in 2025, the exact timing of the well will now depend on the timing of the government approval for the Thali farm-out transaction, as well as government approval for an extension to the First Exploration Period from the current date of 4 February 2025.
The well timing will therefore be dictated in large part by the sequence of feasible rig slots after completion, considering the normal lead times for mobilization of equipment and personnel.
In addition, via Tower Resources (Namibia), Prime has also agreed to farm-in to PEL96, offshore Namibia, for a 25% non-operated interest.
As part of the arrangements, Tower will also receive further payments including $937,500 in cash immediately and a further $3.4 million cash on completion of the two farm-out agreements, for a total of $4.4 million in cash.
Completion of both farm-out agreements is expected to take place by the end of the first quarter of 2025 subject to government, partner and regulatory consents.
"For our Thali license, the funding provided should enable Tower to drill the NJOM-3 commitment well, which will mark a significant milestone for the company. Whilst this has been our priority, we have also made great efforts over the past few years to understand better the huge prospectivity of the PEL96 license, offshore Namibia, and I'm very pleased that its potential has also been recognized through this additional agreement with Prime as a non-operating partner.
"These negotiations required flexibility from all of us and, as a result, there have been some changes to the Pegasus Facility Agreement giving rise to the production-based payments already agreed in respect of the Thali farm-out.
“These payments were originally intended to be similar to those agreed in our earlier potential farm-out agreements, a portion of which were to be paid on to Pegasus as consideration for funding previously provided, but paid from the farm-out partner's share of production, so that Tower would incur no net cost.
“However, during these negotiations we agreed to amend the basis and reduce the amount of these payments in return for Tower retaining a larger participating interest in the license, alongside some cash payments to Tower and Pegasus at execution and completion. Pegasus will be using 50% of its share of these cash payments to subscribe for shares in Tower, half of which will be locked in for a year.
"Our goal remains to achieve progress across the company's entire asset base and deliver value for all stakeholders, and the additional liquidity these transactions will generate, upon completion, should allow us to proceed with all our work programs with greater confidence,” said Jeremy Asher, Tower Resources Chairman and CEO.