Home Money SMALL CHAPTER IDEA: Tower Resources awaits approval of oil well in Cameroon

SMALL CHAPTER IDEA: Tower Resources awaits approval of oil well in Cameroon

0 comments
NJOM-3 could be the first well in a multi-well campaign that would establish a

Tower Resourcesa small-cap explorer listed on London’s AIM is now breathing rarefied air thanks to a deal announced in early January.

The transfer of rights agreement was a long time coming, as the company had been trying to reach an agreement for several years, in a market context that was much more challenging than when the process began.

In truth, many but the most patient and loyal investors had probably written off the explorer’s chances of closing a deal.

Tower will receive $4.38 million in cash from new partner Prime Global Energies, a UK company with significant manufacturing assets in Pakistan, which has also committed to investing around $15 million in Tower’s flagship assets. once the transaction is completed.

With a deal already closed and an injection of funds on the way, Tower and his team led by President and CEO Jeremy Asher are entering 2025 with two things going for them than most other small oil and gas companies. capitalization they do not have: an asset, well funded in its entirety this year and sufficient capital to be able to concentrate on its assets without issuing new shares.

Some uncertainties remain

Rig boss Asher is confident the explorer will achieve its plan to drill the NJOM-3 well at the Njonji discovery in Cameroon on schedule later this year.

The success of the well will initiate a field development project that will ultimately generate cash flows and revenues, but, as Asher explains, some regulatory boxes need to be checked before a rig contract can be signed and a schedule finalized. .

NJOM-3 could be first well in multi-well campaign that would establish ‘early production’

Asher is optimistic about the well’s prospects and has high confidence that the project will be commercially viable.

What the NJOM-3 well is intended to do is confirm some specificity about the volumes. It will provide concrete data to enable more targeted development and early production planning.

NJOM-3 follows the original discovery wells drilled by Total, more than a decade ago, which were untested at the time; Furthermore, subsequent analysis shows that these wells were not optimally located nor did they access all possible reservoir zones in the area.

With updated knowledge, based on the technical work of its team, Tower aims to determine a more definitive measure of the field’s potential.

Low risk, high potential

The field’s production potential could range from a few thousand barrels per day to several tens of thousands of barrels per day, but, in the relatively shallow waters where Njonji is located, even the lowest parts of the field will still have commercial value. for Tower. And there are many more potential structures to explore once the Njonji structure is evaluated and developed.

Perhaps this is the most attractive aspect of the project for investors.

The threshold for success is quite low, meanwhile, there is still substantial potential for the well to significantly exceed its production.

NJOM-3 could be the first well in a multi-well campaign that would establish “early production.”

In this way, Asher describes it as a classic early production approach, in which the initial wells provide the basis for debt financing for an eventual much larger project.

First, however, the next well must provide reliable data to put the project on track for commercialization.

“If you look at the original CPRs for the Njonji discovery, we see that there is a wide range of potential outcomes at this time because Total never tested the reservoirs it found, and also, even if they had, their two discovery wells for each of them were not at the optimal points.

“As a result, they did not cross all of the reservoirs that appeared to be present in the seismic. That’s why there is a wide range of uncertainty around this development, which we expect the NJOM-3 well to largely resolve.

‘If you look at that CPR, we have a minimum estimate of 1,000 barrels per day, a base case of 2,000 barrels per day and a maximum of just 2,500 per day.

‘This is based on the fact that there are wells nearby with initial production rates of three thousand barrels per day, but in general there are also significant decline rates to take into account. We are aware that we could find production volumes anywhere within those types of ranges.

‘As far as we know, any of them can be economical at current prices.

“Obviously, we would prefer to have higher volumes than lower volumes, but the most important thing of all is knowing what you have because if you know it’s 1,800 barrels a day, you can set up all the planning and budgeting.” and equipment accordingly and would work very well.

“You just don’t want to oversize to get high volume and then find lower volumes.”

Success can unlock non-dilutive financing

For Tower, the priority is to have a reliable number of NJOM-3 tests that Asher and his team can then take to the bank, to secure debt financing for the rest of the wells needed for the field to reach early production that generates cash. .

‘We have figures in mind, we have already shared them publicly. “It’s not a secret, but it’s also not a secret that there is a wide range of possible rates, and that’s why we’re drilling this well the way we’re doing it.”

Tower now has a few weeks and months to clear remaining regulatory requirements in the country, secure a rig and nail down a drilling schedule.

These will be the next catalysts for shareholders and new investors, if we are to be rewarded for their patience and Tower Resources delivers on what has always been a high potential speculative investment.

DIY INVESTMENT PLATFORMS

Easy investing and ready-to-use portfolios

AJ Bell

Easy investing and ready-to-use portfolios

AJ Bell

Easy investing and ready-to-use portfolios

Free Fund Trading and Investment Ideas

Hargreaves Lansdown

Free Fund Trading and Investment Ideas

Hargreaves Lansdown

Free Fund Trading and Investment Ideas

Fixed fee investing from £4.99 per month

interactive inverter

Fixed fee investing from £4.99 per month

interactive inverter

Fixed fee investing from £4.99 per month

Get £200 back in trading fees

sax

Get £200 back in trading fees

sax

Get £200 back in trading fees

Free trading and no account commission

Trade 212

Free trading and no account commission

Trade 212

Free trading and no account commission

Affiliate links: If you purchase a This is Money product you may earn a commission. These offers are chosen by our editorial team as we think they are worth highlighting. This does not affect our editorial independence.

Compare the best investment account for you

Some links in this article may be affiliate links. If you click on them, we may earn a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

You may also like