Tower Resources (LON:TRP) has granted a continuing option over the Uganda license EA5 to partner Global Petroleum (LON:GBP, ASX:GBP), giving it the right to convert the investment it has made so far into a 25% legal and beneficial interest in the project without any obligation to contribute to ongoing expenditure.
Under the terms of the agreement, Global will retain the right to participate until Tower secures sufficient funds from a third party to cover any material operation on the license. Should it elect to participate, Global will have to reimburse Tower for 25% of ongoing costs and if third-party funding is secured, Global will dilute proportionally with Tower.
The companies are expecting to receive interpreted data from the aero gravity survey within a month and have already begun planning for the follow up seismic survey. The gravity gradiometry survey is currently 30% complete.
The data is also being reviewed by potential partners in the project, which could provide funding for the future seismic programme and the commitment well
“This agreement with Global recognises the considerable value of Global's past investment and a shared view that there remains future potential in the EA5 Licence. I welcome their continued involvement in future activities,” said Executive Chairman of Tower Resources Peter Kingston.
Earlier this month, Tower reported that the Iti-1 exploration well on the license had come up dry. The company said that the license area was very large and there was “every chance” that far better reservoir sand quality could be found.
According to the terms of the farm-in agreement between the two companies, Global has the right to earn a 50% interest in the exploration area 5 prospect of Tower’s subsidiary Neptune Petroleum (Uganda) Ltd by meeting the cost of two exploration wells.
Broker Astaire Securities in its Morning Report called the agreement “sensible” in view of Global’s close relationship with Tower and previous involvement in Ugandan block 5, adding that it was now waiting for the agreement on farm-in terms ahead of the commencement of seismic data acquisition.
Disclosure: The author holds no positions in the company