One multimillion-dollar offer for stake in UK player’s asset off Cameroon on the table with more anticipated as talks continue

The UK-based oil and gas company Tower Resources has received an updated and more detailed offer for the farm-out process regarding its production-sharing contract (PSC) off the coast of Cameroon. However, the firm’s discussions with other interested players are still ongoing, thus, it expects to receive at least one more offer soon.

According to the UK player, the updated proposal was received from the party whose financing proposal was announced with the company’s interim results, when it was described as “a substantial upstream company with existing production.” Furthermore, Tower says it is still in discussions with other parties and expects another proposal shortly.

The updated proposal the company has received is said to be more detailed, providing over $15 million of funding for the Thali PSC work program, including drilling the NJOM-3 well, which is already partly funded. In return, the bidder would receive a minority interest in the PSC, with Tower staying on as the operator.

It also provides for future production-based payments to the company, a portion of which are committed to Pegasus Petroleum under agreements made in 2019 arising from the working capital facility that Pegasus had provided to the company at that time, as announced in March 2021.

Jeremy Asher, Tower Resources Chairman and CEO, noted: “We are very pleased with the progress of the farm-out process and look forward to finalising an agreement in the near future. Although the Thali farm-out is a key priority for us, we also want to move forward with our work programme in Namibia and we must ensure that we can also keep well planning on track while financing discussions are completed. This is a very exciting time for the Company.”

The proposal is said to have normal conditions precedent, including the Cameroon government’s approval for the farm-out and drilling schedule. It would also require amending the agreement with Pegasus, which the company believes can be arranged. The proposal does not contain any financing contingency as the counterparty has available funds, and a portion of the funding would be secured by a bank guarantee.

As stated by Tower, discussions with African banks are still ongoing about a short-term facility to enable earlier production from the NJOM-3 well and/or a longer-term facility to finance production from the subsequent wells the company intends to drill on the Njonji structure.

A mandate has reportedly been signed for BDEAC, the Development Bank of the Central African States, to provide a guarantee in respect of such a facility, and that proposal is being reviewed at the highest levels of the bank. 

This February, the UK player secured an extension of the first exploration period of the Thali PSC to February 4, 2025. Its principal obligation during the first exploration period is the drilling of a single well – NJOM-3. While the spudding was expected to take place in Q2 or possibly Q3 2024, Borr Drilling’s Norve jack-up rig is expected to start the assignment in early 2025.

Furthermore, Tower intends to place ordinary shares to raise £1,188,500, or approximately $1,549,570, to fund its working capital. The placing of shares, issued in two tranches, will be put toward removing funding pressure while the firm concludes its Cameroon farm-out talks and continues its work on the PEL 96 license in Namibia and, to a lesser extent, the Algoa-Gamtoos license in South Africa.

In August, the Namibian Ministry of Mines and Energy (MME) notified the UK player that it plans to extend the initial exploration period of the PEL 96 license to October 31, 2024, inviting it to apply for an extension lasting two to three years. The MME will also defer the company’s commitment to acquire 1,000 km² of new 3D seismic data to the first renewal period.