Tower Resources has struck a binding heads of agreement (HoA) to farm out its Cameroonian licence to Beluga Energy.
The new entrant will take a 49% non-operated stake in the Thali production-sharing contract (PSC), in exchange for a $15 million contribution towards drilling plans. The NJOM-3 well should cost $16.8mn, with $3mn already invested.
Tower subsidiary TRCSA will have an overriding royalty of 10% on the contractor share of production that goes to Beluga.
Tower and Nigeria’s Beluga plan to complete the transaction by the end of September. It does require approval from the Minister of Mines, Industry and Technological Development.
If the deal cannot be completed in time, Beluga will take a stake in Tower’s equity capital – subject to shareholder approval.
Beluga CEO Warebibo Soroh said the investment “fits perfectly with our strategy to invest in de-risked upstream assets, and supports the integration of our services from downstream to upstream. Our technical team has extensive experience in developing assets in the Gulf of Guinea and will collaborate with Tower in bringing the Thali block to first oil.”
Tower chairman and CEO Jeremy Asher noted short-cycle developments “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.”
Tower is now negotiating for a rig to drill the NJOM-3 well. It expects to conclude this, and other service contracts, after it has completed the farm-out agreement. The company is also in talks for an option on a mobile oil production unit (MOPU).
Total drilled the Njonji-1 discovery well on the Thali block in 2008. A second well was drilled in 2010 but the company decided it was not commercial. Total sold out of the area in 2011, to Perenco, which relinquished the block. Cameroon awarded the licence to Tower in 2015.
Envoi oversaw the farm-out process for Tower. It said the planned well would flow test oil in the Pliocene sands.
A four-well development on the northern resources alone would be commercial, Envoi said. Production of 8,000 barrels per day would provide annual cash flows of more than $100mn.
There is also an undrilled deep exploration play on the Thali block. This is on trend with the Isongo fields to the southeast.