Tower Resources has signed up financial support for its Cameroon well from BGFI Bank, putting it on course to drill the NJOM-3 well in the fourth quarter of the year.
Tower said BGFI would provide around $7.1 million under the agreement. This would cover roughly 40% of the well’s $18mn cost.
Tower’s TRCSA subsidiary has paid 25% of the costs already. It will provide the remaining 35%.
Company chairman and CEO Jeremy Asher said Tower would continue looking for options to finance. These talks may include Beluga Energy and its investors.
“We are also keeping an open mind on other financing alternatives, but whichever path we follow, as we explained in May, we expect the result to be considerably more favourable for shareholders than the farm-out structure previously contemplated. We plan to conclude financing discussions in the third quarter of this year, as previously intimated, and then to press on with the well,” he said.
Tower struck a farm-out deal with Beluga and began talks with the government in September 2021. The company opted not to press ahead with this deal, citing changes in the market environment.
At the time, it said that a deal with a bank would require Tower to give up less equity.
The BGFI loan will run for five years and is secured through a restricted cash balance or bank guarantee, with a parent company guarantee. The plan is to pay the loan back with revenues from Njonji production. Interest on the loan is 8% per year, frozen for the first year.
The term sheet is not yet binding. It will only come into effect on the signing of definitive documents and Tower coming up with the rest of the financing for the well.
The company also reported an updated resource on the Njonji structure. The original discovery, it now thinks, holds 24.9 million barrels recoverable.
Asher said the company had already purchased long-lead items for the well. It has also carried out impact assessments and surveys.
In May, Tower said it was working on a letter of intent (LoI) with Shelf Drilling for the Shelf Drilling Trident VIII jack up. Higher day rates and fuel costs have pushed up the price from the previous estimate of $15mn for the well to $18mn.
The first exploration period on the Thali production-sharing contract (PSC) runs until May 2023.