WTI (Nov) $70.58 -$3.25, Brent (Dec) $74.25 -$3.21, Diff -$3.67 +19c
USNG (Nov) $2.50 -13c, UKNG (Nov) 100.19p +1.74p, TTF (Nov) €40.435 +€0.39

Oil price

After the five dollar fall since Friday, oil has settled down, trying to decide what Israel means by ‘targeted attacks.With no API stats due to the Colombus Day holiday the market is in pause mode.

Zephyr Energy

Zephyr has announced that the Company’s lender, North-Dakota based First International Bank & Trust, has completed its semi-annual redetermination of the Company’s revolving credit facility (“RCF”).

The redetermination process reaffirmed the total collateral value of Zephyr’s non-operated asset portfolio and resulted in no change to the amount available under Zephyr’s existing US$15.15 million RCF. In addition, the interest rate on the RCF has been reduced to 10% per annum (from 11% per annum).

Following the redetermination process, the Group borrowings are circa US$27.4 million, a reduction from US$35.3 million at 1 January 2024, and consist of:

• US$7.2 million of amortising term loan (at 6.74% interest per annum) 
• US$5.2 million of amortising term loan (at 10% interest per annum)
• US$15.0 million of debt drawn on the RCF (at 10% interest per annum). 

The impact of the revised borrowing rates has resulted in a reduction in the Company’s blended interest rate to 9.1% (down from 9.5% at 30 June 2024) and an overall reduction in annualised interest costs of circa US$150,000.

The next semi-annual redetermination for the RCF is scheduled to take place in the second quarter of 2025.

Colin Harrington, Zephyr’s Chief Executive, said:
“I am delighted at the outcome of this semi-annual redetermination which both affirms the substantial value of our non-operated portfolio and further reduces our cost of capital.

“Our non-operated assets are long-lived and high margin and continue to provide a stable platform for our growth.  I would once again like to thank our partners at FIBT for their strong support of Zephyr.”

Not a lot to say about this, an unchanged semi-annual redetermination of $15.15m but with a point off the rate to 10%, that brings the rate overall to 9.1%. Using the Williston Basin assets with its high quality helps a great deal and that leaves the company in good nick.

I would suggest that Zephyr are sitting pretty, the good result at the Paradox Basin has led to an imminent lateral well on the property and being funded by a new partner but only in the one well. With so much potential upside across the whole Basin the outlook does indeed look very exciting for Zephyr.

Tower Resources

Tower has provided an update on the farm-out process in respect of its Thali production-sharing contract in Cameroon.

The Company is also announcing a placing of 4,401,851,851 ordinary shares of 0.001p each (the “Subscription Shares”) at a price of 0.027p per Placing Share (the “Placing”), representing a discount of approximately 22.9% to the closing bid price of the Company’s shares on 15 October 2024.

The Placing has been arranged by the Company’s joint broker, Axis Capital Markets Limited.

Cameroon Farm-out Update

The Company has received an updated proposal from the party whose financing proposal was first announced together with the Company’s Interim Results on 30 September 2024, and is also still in discussions with other parties and expecting another proposal in due course.

The updated proposal the Company has received is more detailed and would now provide in excess of US$15 million of funding for the Thali PSC work programme, including drilling the NJOM-3 well (which is already partly funded), in return for a minority interest in the PSC, and with Tower remaining as the Operator. It also provides for future production-based payments to the Company, a portion of which are committed to Pegasus Petroleum Limited (“Pegasus”, wholly owned by a trust of which the Company’s CEO and Chairman is a lifetime beneficiary) pursuant to agreements made in 2019 arising from the working capital facility that Pegasus had provided to the Company at that time and as announced on 4 March 2021 (the “Production Payment Agreements”).

The proposal has normal conditions precedent, including the Cameroon Government’s approval for the farm-out and drilling schedule, and the proposal would also require amending the Production Payment Agreements, which the Company believes can be agreed. Importantly, the proposal does not contain any financing contingency as the counterparty has available funds, and a portion of the funding would be secured by a bank guarantee.

The Company is presently reviewing the current proposal and clarifying its terms where appropriate, and expects to work on detailed contracts with this partner, or one of the other parties, over the coming weeks. The Company does not intend to comment further on these negotiations until a final agreement is reached.

The Company is also continuing its discussions with African banks about either or both of a short-term facility to enable earlier production from the NJOM-3 well, and also a longer-term facility to finance production from the subsequent wells the Company intends to drill on the Njonji structure. The Company has now signed a mandate to BDEAC, the Development Bank of the Central African States, for it to provide a guarantee in respect of such a facility, following a lengthy process of due diligence, and that proposal is now being reviewed at the highest levels of the bank.

While we remain confident of achieving a positive funding result, there can be no certainty in respect of the final outcome of discussions or the timing thereof until we have signed definitive agreements.

Placing

The Placing is being made to fund working capital, including work commitments on the Company’s licenses. The objective of the Placing is to remove any funding pressure while the Company concludes its Cameroon farm-out negotiations, and to allow the Company to keep operational preparations for drilling the NJOM-3 well moving forward without delay in the meantime; and also to fund the Company’s ongoing work on the PEL 96 license in Namibia and to a lesser extent the Algoa-Gamtoos license in South Africa.

The Placing will raise gross proceeds of £1,188,500 through the issue of 4,401,851,851 ordinary shares of 0.001p each at a price of 0.027p per Subscription Share, representing a discount of approximately 22.9% to the closing bid price of the Company’s shares on 15 October 2024.

The Subscription Shares will be issued in two tranches with a first tranche of 1,243,851,851 shares (“First Tranche Subscription Shares”) and a second tranche of 3,158,000,000 shares (“Second Tranche Subscription Shares”).

The Company has agreed to issue the broker, Axis Capital Markets Limited, warrants over 220,092,592 new ordinary shares for arranging the Placing (“Broker Warrants”). The period of the Broker Warrants will be three years at a strike price of 0.027p per share.

Share Capital following the Subscription

Application has been made for the Subscription Shares to be admitted to trading on AIM. It is expected that Admission of the First Tranche Subscription Shares will become effective and that dealings will commence at 8.00 a.m. on or around 22 October 2024. It is expected that Admission of the Second Tranche Subscription Shares will become effective and that dealings will commence at 8.00 a.m. on or around 6 November 2024.

Following admission of the Subscription Shares, the Company’s enlarged issued share capital will comprise 22,375,689,275 Ordinary Shares of 0.001p each with voting rights in the Company. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in the interest in, the share capital of the Company under the FCA’s Disclosure and Transparency Rules.

Warrants and Options in Issue

Following the issue of the Broker Warrants, and the expiry of 10,990,933 existing warrants, the total number of warrants in issue is 1,868,424,957 equating to 7.17% of the Company’s enlarged share capital assuming full exercise of all warrants and options.

Tower Resources Chairman & CEO, Jeremy Asher, commented:
“We are very pleased with the progress of the farm-out process and look forward to finalising an agreement in the near future. Although the Thali farm-out is a key priority for us, we also want to move forward with our work programme in Namibia and we must ensure that we can also keep well planning on track while financing discussions are completed. This is a very exciting time for the Company.”

The inevitable raise for Tower following a previous announcement regarding the sale of part of the asset has come, raising £1.885M AT 0.027p per share plus warrants for the brokers of course. That’s for working capital and the partner has offered a different proposal for a stake and will fund a large proportion of the well. 

I could never take with anything Chairman Jeremy Asher says with anything other than total belief so after all this time when he has kept Tower on it’s feet on his own it really may be ‘a very exciting time for the Company’. 

Chariot

Chariot Limited has announced that Andrew Hockey, currently a Non-Executive Director, has been appointed to the role of Non-Executive Chairman of the Company. Andrew succeeds George Canjar, who has retired from the Board, with both changes taking effect immediately.

George Canjar commented:
“It has been a real pleasure to work alongside everyone at Chariot throughout the time I have been involved with the business but I feel that now is the right time for me to retire from the Board. I welcome Andrew in taking over from me as Chairman and wish the Company all the best for the future.”

Andrew Hockey, Non-Executive Chairman, commented, 
“I would like to thank George for his hard work and dedication to Chariot. Having worked together for the past five years, I look forward to a seamless transition and we as a Board remain fully focused on maximising value for shareholders.”

Adonis Pouroulis, CEO of Chariot, commented:
“I would also like to thank George for all his wise counsel and support during his time on the Board. As Chairman he helped steer the Company through some critical times and we very much appreciate the significant contributions he made throughout his tenure. He will be a missed member of the team and we wish him well with his retirement.

We continue to make good progress with our Transitional Power financing, our new venture opportunity and we are pursuing various funding avenues for our Green Hydrogen business. We are also working alongside our partners to determine the next steps for Chariot’s gas business and we will provide further updates on this in due course. As we set out in our interim results, we are looking to preserve capital and have already taken steps to reduce costs where appropriate whilst we consider our forward work programmes.”

I don’t normally comment on board appointments but here it is worth noting comments by CEO Adonis Pouroulis with regard to the power business and the discussions ongoing within the gas business show that all is not lost.

KeyFacts Energy Industry Directory: Malcy's Blog