Tower Resources inks binding farm-out deal in Cameroon

Africa-focussed oil and gas company Tower Resources has executed a binding heads of agreement over a farm-out to Beluga Energy, of a 49% non-operating working interest in its Thali production sharing contract in Cameroon, it announced on Tuesday.

The AIM-traded firm said the deal was conducted through its wholly-owned subsidiary, Tower Resources Cameroon.

It said the farm-out covered $15m towards the cost of the NJOM-3 well that Tower was planning to drill on the Thali block.

Beluga would receive a 49% working interest in the production sharing contract (PSC), subject to an overriding royalty of 10% for Tower Cameroon on the contractor share of production, accruing to Beluga under the PSC.

The well cost was currently expected to be around $16.8m, of which about $3m had already been spent.

Each party would recover costs actually funded and recoverable under the PSC, pari-passu, the board confirmed.

Tower would effectively contribute its non-recoverable costs in consideration of the 10% overriding royalty on the contractor share of production, and costs in excess of $15m, and future costs, would be funded pro-rata with respect to Tower's and Beluga's working interests.

The board said the heads of agreement were binding subject only to final documentation, a financing contingency requiring Beluga's shareholders' approval, and approval of the Minister of Mines, Industry and Technological Development in Cameroon.

“We are delighted to have the opportunity to work with Warebibo Soroh and his colleagues at Beluga, and to fulfil our shared ambition to move this project forward to oil production in Cameroon,” said chairman and chief executive officer Jeremy Asher.

“Short-cycle oil and gas development projects such as this have excellent economics, which reflect their importance to Africa's overall energy balance.

“The Njonji structure on which we are drilling the NJOM-3 well is one of several attractive structures on the Thali block, and we are looking forward to a great future developing these resources together.”

At 1604 BST, shares in Tower Resources were down 2.45% at 0.5p.