Investing in Energy. Oil & Gas Licensing; An Operators Perspective. UK-Zambia Trade & Investment Forum 4th November 2015, London, UK

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1 UK-Zambia Trade & Investment Forum 4th November 2015, London, UK Investing in Energy Oil & Gas Licensing; An Operators Perspective 2015 Tower Resources plc Badada-1 Well, Kenya Block 2B; TRP 15% WI, February

2 Disclaimer Important Notice DISCLAIMER The information contained in these slides has been prepared by Tower Resources plc (the Company ). This Presentation is being made for information purposes only and does not constitute an offer or invitation for the sale or purchase of securities or any of the assets described in it nor shall they nor any part of them form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever or otherwise engage in any investment activity (including within the meaning specified in section 21 of the Financial Services and Markets Act 2000). The information in this Presentation does not purport to be comprehensive and has not been independently verified. While this information has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the Company or any of its officers, employees, agents or advisers as to, or in relation to, the accuracy or completeness of this Presentation, and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any future projections, management estimates or prospects contained in this Presentation. Such forward-looking statements, estimates and forecasts reflect various assumptions made by the management of the Company and their current beliefs, which may or may not prove to be correct. A number of factors could cause actual results to differ materially from the potential results discussed in such forward-looking statements, estimates and forecasts including: changes in general economic and market conditions, changes in the regulatory environment, business and operational risks and other risk factors. Past performance is not a guide to future performance. The cover photo in this Presentation is for illustrative purposes only and is not a photo of the Company s assets. The Presentation is not a prospectus nor has it been approved by the London Stock Exchange plc or by any authority which could be a competent authority for the purposes of the Prospectus Directive (Directive 2003/71/EC). This Presentation has not been approved by an authorised person for the purposes of section 21 of the Financial Services and Markets Act The information contained in this Presentation is subject to change, completion or amendment without notice. However, the Company gives no undertaking to provide the recipient with access to any additional information, or to update this Presentation or any additional information, or to correct any inaccuracies in it or any omissions from it which may become apparent. Recipients of this Presentation in jurisdictions outside the UK should inform themselves about and observe any applicable legal requirements. This Presentation does not constitute an offer to sell or an invitation to purchase securities in any jurisdiction Tower Resources plc 2

3 Presentation Outline Tower Resources in Africa Frontier to Proven basins Rift Petroleum in Zambia Blocks 40 & 41 Considerations for Licensing Rounds Rift Experiences on Zambian Petroleum Exploration Licences Summary 2015 Tower Resources plc 3

4 Frontier to Proven Basins Tower today Listed on London AIM market since 2005 Strong asset portfolio with manageable commitments; large upside Adding lower risk proven basin exposure to balance frontier activity Zambia (Frontier) Cameroon Thali block (Proven) Namibia & South Africa (Frontier) Structured for growth Dedicated & experienced core team Flexible overhead & resource availabilities Proactive deal generation 2015 Tower Resources plc 4

5 Why Zambia?... There is no oil there. But has anyone really looked? No The Mid-Zambezi Basin: A 25,000+ km 2 rift basin with source and reservoir but no oil & gas exploration wells, nor even any seismic data Historic focus 25-30yrs ago in Luangwa Basin Only two wells drilled Excellent potential for a gas to power market, good infrastructure Tower Resources Blocks 40 & 41-6,526km 2 position in untested Mid-Zambezi Basin Exploration in Zimbabwe portion of basin concluded best prospectivity lay in Zambia 250 km 2015 Tower Resources plc 5

6 Rift s Blocks 40 & 41, PEL s 25 and 24 Applications made in June 2013, Petroleum Exploration Licences (PEL s) 24 & 24 for Blocks 41 & 40 awarded 2 nd December 2013 PEL duration 4 years, a staged approach as defined by the 2008 Petroleum Act 2008 with minimum work & financial commitments Initial Period - Year 1 - $500k per block Secondary Work Period - 3 year duration Year 2 - $ 250k Year 3 - $ 1.75mm Year 4 - $ 3.0mm Licence awarded Application / Pre-award Annual decision points during the Secondary Period approved by MMEWD in February 2015 Open Acreage Initial Period & Secondary Period Year 2 work programmes fulfilled, and cumulative minimum financial commitments met Data Analysis from year 1 and 2 encouraging, all of the elements required for a petroleum system appear to be present Rift Zambia Blocks 40 & Tower Resources plc 6

7 PEL Structure Secondary Period & Beyond Summary of the proposed revision to the exploration work programme for Blocks 40 and 41, which has annual decision points inserted into the Secondary Work Period to allow for iterative review of the potential prospectivity of the blocks based on the new data acquired in each period Initial Period Initial field studies Secondary Period A Further field studies 2x $250k + ground based gravity acquisition Secondary Period B Airborne Gravity & Magnetics 2x $1.75MM + contingent 2D seismic Secondary Period C 2D seismic 2x $3MM &/OR contingent well in one of the blocks 1st Renewal Period ~$25mm x1 firm per Block 2nd Renewal Period ~$25mm x1 firm per Block End of Phase Report End of Phase Report End of Phase Report End of Phase Report End of Phase Report DECISION POINT DECISION POINT DECISION POINT DECISION POINT Future Capital Expenditure in Years 3 & 4 approx. $5-10 mm, subject to annual decision points. Well costs could be in the order of $25m and may fail to find any petroleum. DECISION POINT 2015 Tower Resources plc 7

8 LOWER KAROO [Delta Plain] [Lacustrine] UPPER KAROO [Fluvial] Proven Source Rocks & Reservoirs Key play elements proven in Blocks 40 & 41 by initial field work in 2014, with additional work in 2015: Widespread source rocks Excellent Gas potential Additional Oil potential Multiple reservoirs Thick regional seals 2015 fieldwork focussed on evaluation of the proven plays PLAY ELEMENTS SOURCE RESERVOIR SEAL Presence Effectiveness Presence Effectiveness Presence Effectiveness Oil & Gas Prone Multiple Plays Thick & Regional AGE (Ma) ~250 ~300 Play Stratigraphy of Blocks 40 & 41 JURA. ~200 = STAGE SUPER- GROUP TERT. PERMIAN TRIASSIC CARB? DELTA- FRONT ALLUVIAL FAN BASEMENT KALAHARI SSTS BATOKA BASALT RED SST INTERBEDDED SANDS AND MUDS ESCARPMENT GRIT MADUMABISA MUDSTONES GWEMBE MUDSTONES & COALS SUB-GWEMBE SSTS BASAL COARSE CLASTICS 2015 Tower Resources plc 8

9 Risk and Uncertainties, Above Ground Risk 1. Political Risk 2. Market & Volatility in Price of Oil / Gas 3. Clarity and stability on the Fiscal and Regulatory regime for petroleum exploration and production Below Ground Risk 1. Geological Chance of Success 2. Commercial Chance of Success 3. Finding costs for Oil or Gas 4. Volume of Oil & Gas in Place 5. Recoverable volume 6. Development costs to recover these volumes 2015 Tower Resources plc 9

10 Considerations in Zambian Petroleum Exploration Licensing PSC Agmt. Fiscal Regimes Tax-Royalty Regime Risk-Reward Balance on frontier Basins Clear regulatory framework for Petroleum licences Licensing Procedure Bidder Pre-Qual? Host Govt. Statutory/ Legal Framework Attracting Int. Investment Above ground and below ground risk IOC s Capital Seeks Stability, ie. clear Petroleum fiscal terms NOC Capability $ / bbl Price Global Benchmarks Petroleum capital requirements and phasing very different to Mining, fiscal terms need to reflect this 2015 Tower Resources plc 10

11 Rift Working with GRZ on PEL s Excellent engagement with GSD, (have presented findings of Year 1 studies) to them, also Permitting agency ZEMA very good interaction, permits obtained for fieldwork GRZ shows active licence management, June 2015 ministry indications of licence revocation for non performance GRZ available for engagement with companies, but recognised that oil and gas regulatory capabilities are developing Priority need to establish links and engage with new Ministry of Energy Have not yet had engagement with other Governmental stakeholders, eg. Ministry of Finance Ministry of Trade Commerce Industry Ministry of Finance & National Planning Points in the Petroleum (Exploration & Production) Act 2008 need urgent clarification Petroleum Royalty Rate (Part XI 74 (3) The Minister of Finance shall.prescribe the amount of royalties payable.. ) State participation (back-in) (Part III 13 (4) agree to the state acquiring an interest in any venture.in the exploration area ) 2015 Tower Resources plc 11

12 In Summary Rift / Tower have entered into Petroleum Exploration Licences in Zambia and met the financial and work programme requirements for the first 2 years They are the only company to have met their commitments from the 2013 awards and to date have spent about $3mm, with a potential further $5-10mm in Indications from fieldwork campaigns are encouraging, all of the elements required for a petroleum system appear to be present But significant unknowns still remain - Critical technical issues relate to the hydrocarbon generation potential and whether any accumulations could have been retained in the sub-surface, there is still significant work to do to in the Secondary Period to assess the petroleum potential of Blocks 40 and 41 Economic modelling of potential returns is not possible due to an unknown Petroleum Royalty and also the potential of a State back-in at some point in any successful project. These unknowns are factored into the annual decision point process 2015 Tower Resources plc 12