Namibia Update and Competent

RNS Number : 0111P

Tower Resources PLC

08 July 2010

 



Tower Resources plc

("Tower" or the "Company")

NAMIBIA UPDATE AND COMPETENT PERSONS REPORT

Tower Resources plc (AIM:TRP), the oil and gas exploration company with interests in sub-Saharan Africa, principally in Uganda and Namibia,  is pleased to provide a brief update of its current operations in Namibia and the outcome of a detailed technical and economic evaluation of the 0010 Licence. Tower has a 15% working interest in the Licence and is fully carried financially by Arcadia Petroleum Limited ("Arcadia") through the current 3-D seismic survey and an initial exploration well.

The Tower Board is pleased to announce that the 3-D seismic survey being undertaken by the "Geowave Master" produced its first seismic recordings on Friday 2^nd July in fair weather conditions. It is still expected that processing and interpretation can be completed early in 2011.

The Board is also pleased to issue a letter from Oilfield International ("OIL") (attached and on the Tower Resources plc website) summarising the principal conclusions from their Competent Persons Report ("CPR") which independently appraises the resource potential and Expected Monetary Value ("EMV") of Tower's 15% interest in Licence 0010. The conclusions set out in the CPR and the CPR letter are summarised below.

·     OIL have estimated that the net risked prospective resources attributable to Tower's 15% working interest of Namibia Licence 0010 is 170 million barrels of oil equivalent, having an EMV of US$ 696 million (UK£ 0.45/share)

The OIL review team included two geophysicists, a geologist and a petroleum engineer having a total of 125 years of experience as technical specialists in the oil and gas industry. In particular, two of them have considerable experience of South America where South Atlantic exploration is most advanced. The OIL assessment has been undertaken in compliance with the SPE Petroleum Resources Management System (SPE-PRMS). OIL has had access to all available data from the Licence and a wide variety of regional technical information. They reviewed the work undertaken by Arcadia and Tower and where relevant, undertook technical analysis of their own to accommodate their own wide and relevant experience, particularly of the Brazilian basins, and any publicly available information. Interaction with Arcadia took place to understand their technical approach. OIL confirmed the main structural features as Delta (at two separate levels, Maastrichtian and Palaeocene) and Alpha and Gamma (at the Palaeocene level only) but, also, some significant, high risk resource potential in stratigraphic features between the main 4-way dip closed anticlines. The main conclusions, which reflect assessments for Delta, Gamma and Alpha only, are as follows:

·     The Delta structure at Maastrichtian level ("DeltaM") is classified as a prospect, which, in a technical sense, means it is suitable to drill without further information - the 3-D seismic is still justified to strengthen the interpretation and minimise the risk of penetrating a locally poor reservoir interval with the first well.

·     The Delta, Gamma and Alpha structures at Palaeocene level are classified as Leads, which require further information to raise them to prospect level.

·     OIL has used the seismic data, the two Namibian discoveries and regional data to evaluate the likelihood that the reservoirs would be predominantly light oil-bearing with a possible gas cap; gas condensate-bearing or dry gas-bearing. For Delta, OIL concludes probabilities of 50%, 40%; and 10% respectively. All other structures are rated 45%, 44%, 11% respectively.

·     OIL have calculated prospective resources based on seismic data, well data from two wells drilled on the Licence in the early 1990s and the judgement of its relevant specialists. Prospective resources for the prospect and leads at the 50% probability level have been estimated as follows:

§ In the event of light oil, gross recoverable resources amount to 7.55 billion barrels and 12.4 trillion scft of natural gas. Net figures for Tower are 1.08 billion barrels and 1.8 trillion scft of natural gas.

§ In the event of gas condensate, gross resources amount to 765 million barrels and 28.5 trillion scft of natural gas. Net figures for Tower are 109 million barrels and 4.1 trillion scft natural gas.

§ In the event of dry gas, gross resources amount to 67 million barrels and 27.8 trillion scft natural gas. Net figures for Tower are 10 million barrels and 3.9 trillion scft natural gas.

·     OIL have engineered the most likely development approach and associated capital cost, operating cost and production profiles for each case together with currently traded oil and gas prices (gas into Europe), escalated to 2020 first production and beyond. They have calculated NPV 10% after-tax values on that basis for each case. Each has been valued on an independent standalone basis to avoid trying to determine economies of shared facilities.

·     The final step has been to estimate a geological chance of success ("COS") for each structure. This has made use of all basic technical information but also an intensive review of the AVO data, in particular interpretations prepared by consultants to Arcadia. DeltaM has been assessed as having a 26% COS; DeltaP an 8% COS; GammaP a 12% COS; and AlphaP a 20% COS. An economic confidence factor of about 85% was then applied to the geological COS's to calculate the economic COS used in the EMV calculations.

·     OIL has calculated net risked prospective resources to Tower as 91 million barrels and 474 billion scft natural gas (together ca 170 million barrels oil equivalent).

·     OIL has calculated an EMV for the prospective resources of Tower in Namibia Licence 0010 to be US$ 696 million, or UK£ 0.45 per share. US$ 480 million can be attributed to the Delta Prospect and Delta Lead, both targets for the first well to be drilled.

Peter Kingston, Chairman of Tower Resources plc commented. "I am delighted that such a comprehensive independent review of the prospectivity of Namibia Licence 0010 has confirmed its potential as a world class group of oil and gas prospects. It is also encouraging that the independent view of gross reserve potential and the estimated chance of success for the likely first well are favourable. I have no doubt that the operational progress already planned by ourselves and a number of Namibia operators over the next two years will increase everyone's awareness of the huge potential in the South Atlantic and Namibia in particular."

In accordance with AIM guidelines, Peter Kingston, who is a petroleum reservoir engineer with over 40 years experience in technical, executive and advisory roles in the oil exploration and production industry, and is Executive Chairman of the Company, is the qualified person that has reviewed and approved the technical information contained in this announcement.

For more information on Tower Resources, please visit; www.towerresources.co.uk

Contacts:

Tower Resources plc Peter Kingston	0780 2804852
Astaire Securities (NOMAD and Joint Broker)	020 7492 4750
Gavin Burnell / Toby Gibbs   (NOMAD) Charles Vaughan   (Broking)
Westhouse Securities (Joint Broker)	020 7601 6100
Tim Feather
Walbrook PR	020 7933 8780
Bob Huxford / Leah Kramer

July 2^nd 2010

Tower Resources plc

5 Charterhouse Square

London EC1M 6PX

Dear Sirs

COMPETENT PERSON'S REPORT

EVALUATION OF TOWER RESOURCES Plc NAMIBIAN PETROLEUM ASSETS

Introduction

Oilfield International ("OIL") has assessed the petroleum interests held by Tower Resources plc ("Tower") offshore Namibia. These interests are contained in Licence 0010; Table 0.1 and Figure 0.1 refer. This Competent Persons Report ("CPR") should be read in conjunction with a supplementary report which presents the detailed technical and economic background supporting the conclusions of this CPR. The supplementary report is entitled "TOWER RESOURCES PLC - TECHNICAL SUPPLEMENT TO COMPETENT PERSONS REPORT ON NAMIBIAN PETROLEUM ASSETS.

Tower has made available to OIL geophysical, geological and engineering data and reports, and Licence Information. OIL has relied on the completeness and accuracy of this information when preparing this CPR and undertaken independent assessments and validations where judged necessary.

OIL has not conducted a site visit because the assets are undeveloped.

OIL conducted its assessment in compliance with the SPE Petroleum Resources Management System (SPE-PRMS) sponsored by the Society of Petroleum Engineers/American Association of Petroleum Geologists/World Petroleum Council/Society of Petroleum Evaluation Engineers (SPE/AAPG/WPC/SPEE) in March 2007. An abbreviated form of the SPE-PRMS definitions and guidelines is presented in Appendix 1 of the supplementary report. OIL has attributed Prospective Resources to Licence 0010, using the SPE PRMS definition below. OIL has identified no Reserves or Contingent Resources in Licence 0010.

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity. The subdivisions are Prospect, Lead and Play:-

·      A Prospect is a project associated with a potential accumulation that is sufficiently well defined to represent a viable drilling target. Project activities are focused on assessing the chance of discovery and, assuming discovery, the range of potential recoverable quantities under a commercial development program.

·      A Lead is a project associated with a potential accumulation that is currently poorly defined and requires more data acquisition and/or evaluation in order to be classified as a prospect. Project activities are focused on acquiring additional data and/or undertaking further evaluation designed to confirm whether or not the lead can be matured into a prospect. Such evaluation includes the assessment of the chance of discovery and, assuming discovery, the range of potential recovery under feasible development scenarios.

·      A Play is a project associated with a prospective trend of potential prospects, but which requires more data acquisition and/or evaluation in order to define specific leads or prospects. Project activities are focused on acquiring additional data and/or undertaking further evaluation designed to define specific leads or prospects for more detailed analysis of their chance of discovery and, assuming discovery, the range of potential recovery under hypothetical development scenarios.

OIL has attributed all three subdivisions to Licence 0010.

Regional Prospectivity

Licence 0010 is situated across two prospective sedimentary basins: The Namibe and The Walvis basins. These are currently underexplored areas; only nine exploration wells have been drilled offshore Namibia in an area comparable in regional extent to the North Sea. A number of other licence holders offshore Namibia are actively engaged in similar exploration programmes.

The Kunene-1 well (Figure 0.1) 250 km to the north east in the Namibe basin was a discovery in 2008 and it is thought that it could contain 14 TCF of dry gas. The 1.3 TCF Kudu field (upside 9 TCF) in the Namibian Orange basin 900 km to the south east is scheduled to achieve first gas in 2013 from a $1.2bn 800 MW gas-to-power development.

Three giant 4-way dip closures ("Structures": Alpha, Delta and Gamma) that may contain Upper Cretaceous and Tertiary sandstone reservoirs have been clearly identified in Licence 0010. The presence of 2D seismic AVO anomalies within the closures indicates the possibility of hydrocarbon charge and an effective trapping mechanism. A number of other indicators are also present in the Licence, such as Oil Slicks, and seismic signatures resembling fluid seepages. Both the Structures and the Inter-structural Areas are located at a relatively high point regionally. This favours migration of hydrocarbons to this area from the underlying Cenomanian-Turonian hydrocarbon-source-rock. Furthermore the Cenomanian-Turonian source-rock is generally shallower than it is in the Kunene area to the north-east and this increases the probability that it would have generated heavier hydrocarbons (i.e. volatile oil or wet gas) in Licence 0010 rather than the dry gas observed in Kunene. 

In addition, the Mid Albian-Upper Aptian and Upper Aptian-Barremian; i.e. both the Lower and the Upper Cretaceous, are important potential source rocks for Licence 0010. It is noticeable that Brazil and Namibia share similar geology before the South Atlantic broke out and pulled apart, and that the Upper Aptian-Barremian is an important source rock for Brazil's offshore oil fields. The likelihood that analogous petroleum systems are present is increased by the condensate samples from the Kudu field showing similar "fingerprints" to the Brazilian source rocks. The presence of an active oil system in the recent discoveries in the Falklands basin supports South-Atlantic prospectivity.    

Prospective Resources and Economic Analysis

Tables 0.2-0.4 present the Gross and Net-Attributable-to-Tower Prospective Resources for Licence 0010. Table 0.2 presents the Prospective Resources assuming the reservoirs are charged with Volatile Oil; Table 0.3 with Gas Condensate; and Table 0.4 with Dry Gas. Table 0.5 presents the relative probabilities that the Prospective Resources are charged with Volatile Oil, Gas Condensate and Dry Gas.

OIL has valued the Prospect and Leads, and Table 0.6 presents the NPVs and EMVs (Expected Monetary Values) attributable to Tower.

The reported hydrocarbon volumes and values are estimates based on professional judgement and are subject to future revisions, upward or downward, as additional information becomes available. The NPVs and EMVs presented in this CPR do not represent OIL's opinion of the open market value of Tower's Namibian Petroleum Assets.

OIL does not confirm Tower's legal right to title of its 15% attributable interest in Licence 0010; the detail or the enforceability of its farm-out agreement with Arcadia Petroleum; and the absence or nature of any liens or other encumbrances that might affect Tower's rights to, or value in, Licence 0010.

Qualifications

OIL is a privately owned energy consultancy founded in 1990 that has advised on oil and gas projects in over 40 countries. OIL's shareholders, management and staff are, and always have been, independent of Tower's shareholders, management and staff. 

This CPR was produced by four consultants: Mr David Curia, Mr Victor Ploskiewicz, Mr Stephen Foster and Mr Tim Lines. All hold degrees in geoscience or petroleum engineering.

Mr David Curia has 27 years' experience in geophysical interpretation and 3D modelling. He holds an M.Sc. in Geology, an M.Sc. in Mathematics from the University of Buenos Aires, and a "Post-Degree" in Geophysics (12 geophysical subjects examined over 18 months, without a doctoral thesis) from the University of Mendoza. He has held lectureships in Numerical Analysis and in Geostatistics. He is the author of over 20 papers for a.o. the European Association of Geoscientists and Engineers and the American Association of Petroleum Geologists.

Mr Stephen Foster has 35 years' experience as a geophysicist and holds a B.S. in Geology from the University of California and an M.S. in Earth Science from Massachusetts Institute of Technology. He is Registered Geophysicist No. 910 (California). He has practical experience in seismic data acquisition.

Mr Victor Ploskiewicz has 35 years' experience in geological interpretation and holds an MSc. in geology from the University of Buenos Aires. He was visiting professor in geology at the University of Mendoza. He is author of over ten research papers for a.o. the Society of Exploration Geophysics and the American Association of Petroleum Geologists.

Mr Tim Lines has 28 years' experience in petroleum engineering and economic evaluation. He holds a B.Sc. in Chemistry from Bristol University, an M.Sc. in Petroleum Engineering from Imperial College and an MBA from Cranfield University. He is a chartered engineer and has been Programme Chairman of the London Section of the SPE since 2000.

Basis of Opinion

This CPR is based on OIL's understanding of the current petroleum legislation, taxation and other regulations pertaining to Namibia. It is also based on a forecast from 2020 to 2040 of oil prices in USA and gas prices in Western Europe. It is emphasised that legislation, taxation and commodity-price forecasts can be subject to significant change even in the short term and that any of these could have a significant effect on the NPVs and EMVs presented in this CPR.

Yours sincerely

Tim Lines

B.Sc. M.Sc. MBA C.Eng MIGEM MEI

Figure 0.1 Map of Licence 0010 showing the main Prospective Resources

 

 

Table 0.1 Summary Table of Tower's Namibian Assets (Licence 0010)

Date of Namibia Licence 0010	23rd August 2005	Signed by Neptune Petroleum (Namibia) Ltd, a wholly owned subsidiary of Tower Resources plc.
Offshore Blocks covered by Licence	1910A, 1911, 2011A
Area	23277 km2
Initial Term	4 years	Expired 23rd August 2009. The Work Obligations were fulfilled and the First Renewal Exploration Period commenced.
Date of First Renewal Exploration Period.	23rd August 2009	Work Obligations: a 1583 km2 3D seismic survey over Delta Prospect commenced on 1st July 2010. Its processing and interpretation will fulfill the work obligation for the First Renewal Exploration Period. Relinquishment: 50% of the licence area; this occurred in August 2009.
Term	2 years	Expires 23rd August 2011
Date of Second Renewal Exploration Period	23rd August 2011	Work and Other Obligations: Exploration well; additional seismic if required. Relinquishment: a further 25% of the acreage. A maximum 2-year appraisal programme is permitted following a discovery.
Term	2 years	The Licencees have stated their firm intention to commit to the Second Renewal Exploration Period. This would expire on 23rd August 2013.
Licencees
Arcadia Petroleum Ltd (Operator)	85%	Arcadia farmed into Licence 0010 in September 2007.
Tower Resources plc (through Neptune Petroleum (Namibia) Ltd)	15%	Tower has a free carry through the exploration period.

Table 0.2 Prospective Resources. Net Attributable to Tower as at 1^st June 2010 - Volatile Oil Scenario

Volatile Oil Scenario	Gross			Net Attributable			Geological Chance of Success
	Low Estimate	Best Estimate	High Estimate	Low Estimate	Best Estimate	High Estimate
Oil and Liquids Prospective Resources	MM STB	MM STB	MM STB	MM STB	MM STB	MM STB
Prospect
Delta Maastrichtian-Upper Campanian	1277.5	2393.3	4311.9	182	341	614.4	26%
Leads
Delta Palaeocene	851.7	2183.2	5121.1	121.4	311.1	729.8	8%
Gamma Palaeocene	817	2237.2	5064.1	116.4	318.8	721.6	12%
Alpha Palaeocene	320.1	740.7	1511.7	45.6	105.6	215.4	20%
Plays
AG Inter-structural Area Palaeocene	593.8	1359.2	2962.5	77.5	177.4	386.6	4%
GE Inter-structural Area Palaeocene	725.5	2138.4	5231.6	36.5	107.5	262.9	4%
BA Inter-structural Area Palaeocene	70.5	185.2	422.3	10	26.4	60.2	4%
Total for Oil and Liquids	N/A	11237.3	N/A	N/A	1387.7	N/A
Gas Prospective Resources	BCF	BCF	BCF	BCF	BCF	BCF
Prospect
Delta Maastrichtian-Upper Campanian	2210.0	4080.0	7310.0	315.0	582.0	1040.0	26%
Leads
Delta Palaeocene	1470.0	3720.0	8690.0	210.0	531.0	1240.0	8%
Gamma Palaeocene	1280.0	3470.0	7810.0	183.0	494.0	1110.0	12%
Alpha Palaeocene	503.0	1160.0	2340.0	71.7	165.0	334.0	20%
Plays
AG Inter-structural Area Palaeocene	953.0	2130.0	4590.0	124.0	278.0	599.0	4%
GE Inter-structural Area Palaeocene	1160.0	3310.0	8080.0	58.3	166.0	406.0	4%
BA Inter-structural Area Palaeocene	124.0	276.0	651.0	17.7	39.3	92.7	4%
Total for Gas	N/A	18146	N/A	N/A	2255	N/A

Table 0.3 Prospective Resources. Net Attributable to Tower as at 1^st June 2010 - Gas Condensate Scenario

Gas Condensate Scenario	Gross			Net Attributable			Geological Chance of Success
	Low Estimate	Best Estimate	High Estimate	Low Estimate	Best Estimate	High Estimate
Oil and Liquids Prospective Resources	MM STB	MM STB	MM STB	MM STB	MM STB	MM STB
Prospect
Delta Maastrichtian-Upper Campanian	122.6	287.8	642.0	17.5	41.0	91.5	26%
Leads
Delta Palaeocene	87.7	262.5	745.4	12.5	37.4	106.2	8%
Gamma Palaeocene	51.7	161.5	436	7.4	23	62.1	12%
Alpha Palaeocene	18.8	52.7	135	2.7	7.5	19.2	20%
Plays
AG Inter-structural Area Palaeocene	36.2	100.1	251.5	4.7	13.1	32.8	4%
GE Inter-structural Area Palaeocene	46	156.1	444	2.3	7.8	22.3	4%
BA Inter-structural Area Palaeocene	4.4	13.6	36.6	0.6	1.9	5.2	4%
Total for Oil and Liquids	N/A	1034.3	N/A	N/A	131.8	N/A
Gas Prospective Resources	BCF	BCF	BCF	BCF	BCF	BCF
Prospect
Delta Maastrichtian-Upper Campanian	4750.0	9000.0	15200.0	677.0	1280.0	2170.0	26%
Leads
Delta Palaeocene	3130.0	8210.0	18000.0	447.0	1170.0	2560.0	8%
Gamma Palaeocene	3130.0	8520.0	18400.0	447.0	1210.0	2620.0	12%
Alpha Palaeocene	1210.0	2810.0	5710.0	172.0	401.0	814.0	20%
Plays
AG Inter-structural Area Palaeocene	2310.0	5140.0	10800.0	301.0	671.0	1400.0	4%
GE Inter-structural Area Palaeocene	2800.0	8120.0	19000.0	141.0	408.0	954.0	4%
BA Inter-structural Area Palaeocene	247.0	723.0	1570.0	35.3	103.0	224.0	4%
Total for Gas	N/A	42523	N/A	N/A	5243	N/A

Table 0.4 Prospective Resources. Net Attributable to Tower as at 1^st June 2010 - Dry Gas Scenario

Volatile Oil Scenario	Gross			Net Attributable			Geological Chance of Success
	Low Estimate	Best Estimate	High Estimate	Low Estimate	Best Estimate	High Estimate
Dry Gas Scenario	MM STB	MM STB	MM STB	MM STB	MM STB	MM STB
Prospect
Delta Maastrichtian-Upper Campanian	11.5	21.9	36.4	1.6	3.1	5.2	26%
Leads
Delta Palaeocene	7.5	20.1	43.9	1.1	2.9	6.3	8%
Gamma Palaeocene	6.6	19	41.4	0.9	2.7	5.9	12%
Alpha Palaeocene	3	5.7	12.6	0.4	0.8	1.8	20%
Plays
AG Inter-structural Area Palaeocene	4.8	11.6	24.1	0.6	1.5	3.1	4%
GE Inter-structural Area Palaeocene	5.9	18.3	42.9	0.3	0.9	2.2	4%
BA Inter-structural Area Palaeocene	0.6	1.6	3.5	0.1	0.2	0.5	4%
Total for Oil and Liquids	N/A	98.3	N/A	N/A	12.2	N/A
Gas Prospective Resources	BCF	BCF	BCF	BCF	BCF	BCF
Prospect
Delta Maastrichtian-Upper Campanian	4750.0	8990.0	15200.0	677.0	1280.0	2170.0	26%
Leads
Delta Palaeocene	3110.0	8230.0	18300.0	443.0	1170.0	2610.0	8%
Gamma Palaeocene	2810.0	7960.0	17300.0	401.0	1130.0	2460.0	12%
Alpha Palaeocene	1180.0	2570.0	5470.0	168.0	366.0	780.0	20%
Plays
AG Inter-structural Area Palaeocene	2090.0	4820.0	10200.0	273.0	629.0	1330.0	4%
GE Inter-structural Area Palaeocene	2490.0	7630.0	18100.0	125.0	384.0	909.0	4%
BA Inter-structural Area Palaeocene	241.0	643.0	1430.0	34.4	91.6	204.0	4%
Total for Gas	N/A	40843	N/A	N/A	5051	N/A

 

Notes to Tables 0.2-0.4

[1] Net-Attributable-to-Tower Prospective Resources are stated after deducting 5% royalty to the Namibian government in accordance with current Namibia Tax legislation.

[2] 91.6% of the AG Inter-structural Gross Prospective Resource and 35.3% of the GE Inter-structural Gross Prospective Resource are contained within Licence 0010. Tables 0.2-0.4 present the Gross Prospective Resources irrespective of the Licence 0010 Boundary but the Net-Attributable-to-Tower Prospective Resources present only the Prospective Resources contained within Licence 0010.

[3] The Total Resources for the Low Estimates and High Estimates are not presented because it is not statistically valid to sum these values.

Table 0.5 Relative Probabilities that Prospective Resources contain Volatile Oil, Gas Condensate and Dry Gas 

Prospective Resources in Licence 0010	Volatile Oil Scenario	Gas Condensate Scenario	Dry Gas Scenario
Prospect
Delta Maastrichtian-Upper Campanian	50%	40%	10%
Leads
Delta Palaeocene	50%	40%	10%
Gamma Palaeocene	45%	44%	11%
Alpha Palaeocene	45%	44%	11%
Plays
AG Inter-structural Area Palaeocene	45%	44%	11%
GE Inter-structural Area Palaeocene	45%	44%	11%
BA Inter-structural Area Palaeocene	45%	44%	11%

 

Table 0.6 Prospective Resources. Net Attributable Expected Monetary Value to Tower as at 1st June 2010

 

Prospective Resources	Net Attributable NPV 10%	Net Attributable Cost of Failure	Economic Chance of Success	Net Attributable EMV 10%
	$ million	$ million	%	$ million
Prospect
Delta Maastrichtian-Upper Campanian	1,768	20	22%	373
Leads
Delta Palaeocene	1,805	20	7%	108
Gamma Palaeocene	1,709	20	10%	153
Alpha Palaeocene	463	20	17%	62

Notes to Table 0.6

[1] The NPV used in the EMV calculation for each Prospect/Lead is a weight-average of both the distribution of NPVs by Prospective Resource Estimate and by Reservoir Fluid Type, as follows:-

(i)            Swanson's Rule; i.e.: 0.3*NPV(Low Estimate) + 0.4*NPV(Best Estimate) + 0.3* NPV(High Estimate); and

(ii)           The relative probability that the Prospective Resources are charged with Volatile Oil, Gas Condensate and Dry Gas.

I.e. the presented NPVs are each weight-averages of nine separate NPV evaluations in a 3 x 3 matrix of Low; Best; and High Prospective Resource Estimates for Volatile Oil; Gas Condensate and Dry Gas.

[2] The Economic Chances of Success ("ECOS") were calculated from the Geological Chances of Success (refer Tables 0.2-0.4) by applying an Economic Confidence of 90% to the Volatile Oil Scenario and of 80% to the Gas Condensate and Dry Gas Scenarios.

[3] The Expected Monetary Values were calculated according to the formula: EMV = ECOS*NPV - (1 -ECOS)*Cost of Failure.

[4] The Cost of Failure was calculated as Tower's attributable contribution to the cost of two wells on each Prospective Resource.

 

END

 

 

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