tower - round 3

Tower is going for Round 3. Now we need to wait and see if GBP follow suit.

Tower Resources stays committed to Uganda for another two years

23 March 2010

Oil and gas group Tower Resources has applied to extend its exploration licence in Uganda for another two years despite having drilled two dry wells on the acreage so far.

Towers Ugandan arm, Neptune Petroleum, has applied to Ugandas Minister of Energy and Mineral Development to take licence EA5 into a third exploration period, which extends until March 26, 2012.

Details are still being worked out with government technical specialists, but a forward programme is expected to comprise geophysical activity followed by a further exploration well. Tower said an agreement to proceed with the exploration programme was expected soon.

Tower saw its share price collapse in the aftermath of last months disappointing results from the drilling of the Avivi-1 well. However, it reckons that together with the results of the similarly fruitless Iti-1 well last year, the well information demonstrates that considerable exploration potential still exists in the licence.

In particular, Avivi-1 is understood to have encountered thick sequences of organic rich sediments which are likely to represent good mature source rocks in the deeper areas of the basin. The thick clays should also provide very effective trap sealing properties. Tower said that wireline logs and water samples demonstrated that the Avivi structure is water bearing but mid-mature oil was entrained in the sampled water confirming that oil has been generated in the licence and is currently migrating.

It pointed out that the lack of good quality reservoir at either well location had increased the emphasis on identifying structures in the deepest area of the basin, where the chances of encountering better reservoir are improved. It said the forward work programme would involve increasing the seismic coverage in those areas.

It is understood that most of the funding for the programme in the third exploration period is expected to come from third parties and that Tower is confident of raising the cash it needs. It expects to have cash of about $3.5 million after well costs are satisfied and this is sufficient to meet costs for the immediate future.

Elsewhere, in Namibia, a 3D seismic survey is now scheduled to begin in early May but it is still expected that processing and interpretation can be completed around the end of 2010. There is no change to the estimated end 2011 date for drilling the first exploration well. There will likely be growing focus on the northern area of Namibia and the prospectivity of the 0010 Licence during 2010.