Tower Resources (LSE:TRP) updated the market with an operational update today including the release of an independent Reserves Report for its Thali license in Cameroon. The report was prepared by Oilfield International Limited and suggests that the gross mean contingent resources across the proven Njonji-1 and Njonji-2 fault blocks are 18 MMbbls of oil. This is based on low/best/high estimates of 5/15/34 MMbbls and the development contingency probability has been stated as 80% on the first phase and 70% on the second phase. The report also contains an estimate for the Njonji South and Njonji South-West fault blocks of 20MMbbls gross, with a total across all identified prospects in the Dissoni South and Idenao areas in the northern part of the Thali licence of 111 MMbbls.
The figures released are based on the work that Tower has undertaken during the past year including the reprocessing and reinterpretation of existing 3D seismic data over the licence area, and substantial further analysis of the data including an independent fault seal analysis.
Tower has also developed a preliminary plan for the further exploration and development of the licence, subject to agreement with the Société National de Hydrocarbures in Cameroon. The first phase will include the drilling of four wells at Njonji including the proposed NJOM-3 well which is currently planned for April 2019 with an extended well test (to follow at the end of 2019. These activities would proceed in parallel with additional exploration in the northern part of the Thali licence. The NJOM-3 well is identified in the Reserves Report as a key gateway for development at Njonji. It will provide flow rates from the Njonji reservoirs, which can presently only be inferred from wireline modular formation tests on the previous two wells because the previous operator did not conduct flow tests to surface. It’s anticipated that a successful drill stem test may then allow a reclassification of much of the Phase 1 contingent resources into reserves.
Oilfield International has calculated an EMV10 (Expected Monetary Value) of US$118 million for the contingent resources on Njonji-1 and Njonji-2, equivalent to approximately US$6.50 per mean bbl of oil, which is the risked value of the contingent resources before making the investment required to develop them.
NJOM-3 well
Tower also confirmed that its subsidiary Tower Resources Cameroon S.A has also executed a Letter of Commitment (LoC) for the jack-up rig, to drill the NJOM-3 well between April and June 2019. The LoC is subject to contract, which Tower expects to be completed by the end of November 2018. The economics set out in the LoC are consistent with current drilling cost estimates and further details about the rig will be released when the contract is completed
Tower has also received a proposal for a partnership on the Thali licence, including possible project financing for the NJOM-3 well. Reserve-based financing options are also being discussed which could be established on a successful flow test of NJOM-3.
Jeremy Asher, Chairman and CEO, commented:
“We are delighted to present our Reserve Report on the Thali licence in Cameroon, the first such report on this licence. The 18 million barrels of Pmean Contingent Resources on the Njonji structure, which we expect the NJOM-3 well to transform into Reserves, are crucial and transformative for our Cameroon project. We are already planning for production from NJOM-3 as early as the end of 2019, with three further wells being designed to increase production and also access considerable further reserves. The current EMV10 of $118 million is a good starting point for us to aim for in terms of delivering value to shareholders, but we hope to go much further as the development unfolds.
We are also pleased to be negotiating final terms of a contract for an excellent jack-up rig that is already proven in Cameroon waters and other West African territories”.
Author: Stuart Langelaan
Disclosure: The Author does not own shares in the company mentioned above