Tower Resources has now released its preliminary results for the year ended 2015.

As the group is still just an explorer, there was no revenue or gross profit. Share based payments seem very high, however, and increased by $686K to $2.4M. Other admin expenses grew by about $500K but pre-license costs declined by $1.6M and impairments of exploration assets decreased by $46.4M but were still $4.1M. This all gave an operating loss of $9.8M, a positive movement of $46.8M year on year. With minimal finance costs, this was broadly the same as the profit for the year.

When compared to the end point of last year, total assets declined by $1.5M driven by a $4.4M fall in cash and a $112K decline in receivables, partially offset by a $3M growth in exploration and evaluation assets. Total liabilities also declined due to a $2.5M fall in payables. The end result is a net tangible asset level of $4.2M, a decline of $2M year on year.

Before movements in working capital, the cash loss reduced by $1.1M to $3.3M. There was a further cash outflow from working capital movements due to a decline in payables to give a net cash outflow from operations of $5.7M, an increase of $2.3M year on year. The group also spent $7.1M on exploration so that the cash outflow before financing stood at $12.9M. After an $8.4M receipt of cash from the issue of new shares, the cash outflow for the year was $4.4M and the cash level at the year-end was $3.5M.

A major event during the year was the signing in September of the Thali PSC in the Rio Del Rey shallow water area of Cameroon. The group has a 100% interest in the block which already has three discovery wells. In a difficult market, the company raised $8M to fund the acquisition which brought a major new shareholder into the fold in the form of M&G Investment with an 18% holding. They have also reduced and deferred other near-term commitments and have withdrawn from areas where they see little chance of commerciality in the medium term.

The board want to use this period of low costs to further strengthen their asset base by assembling a larger portfolio of low risk exploration and appraisal opportunities in proven and emerging basins. They continue to seek sizable working interests, ideally as operator, which allows them to determine the precise nature, cost and timing of their activity. They intend to keep near-term commitments low and to finance the higher cost activities through farm outs to larger companies.

In Namibia the group was committed to a 2015 work programme designed to obtain a fuller understanding of the results of the well and its implications for the remaining prospectivity of the license, especially the large untested deeper targets including the Albian carbonates. This has now been completed and the license relinquished. In Kenya the group made the decision to withdraw from the license following completion of the Badada-1 well and subsequent assessment of remaining prospectivity on the block. All costs capitalised with respect to this license are impaired as of the year-end.

In South Africa the group made the decision not to pursue the joint application with New Age for an Orange Basin license and subsequently impaired capitalised costs totalling $867K. A further $500K is included within receivables with respect to amounts owed to the group by New Age at the year-end relating to the initial farm out arrangement 2013 and is considered recoverable.

At the year-end the group had cash balances of $3.5M and they are expected to need to raise additional funds in 2016/2017 in order to maintain sufficient cash resources for their working capital needs and their committed capital expenditure programmes over the next year or so. The directors are confident that they can raise sufficient funds from the capital markets, private investment, farm-outs or assets disposals. It is possible, though, that the group may need no more cash from the market this year.

The group have taken out operating leases on their office properties with about $78K due within the year. They are also committed to funding various exploration expenditures. In Kenya there is a net commitment of $100K in 2016 on Block 2B which was relinquished in August. In South Africa on the Algoa-Gamtoos block, there is a $100K commitment in 2016 and a $2.1M commitment in 2017. In Cameroon, on the Thali license there is a commitment of $13.3M over 2017 and 2018.

At the AGM the board are proposing to restructure and consolidate the company’s shares so that for each 250 shares currently held, shareholders will receive one new share. As well as reducing the volatility of the shares, this will enable them to issue new shares if needed as the market price is currently below the nominal value. The board, staff and consultants who own over 15% of the issued share capital have undertaken to vote in favour of these resolutions and I am sure the majority of the other shareholders will too, as it is pretty essential really.

In February 2016 it was announced that non-executive director Peter Blakey had decided to retire from the board. He is now 75 years old and one of the founders of the company. During the year the group appointed Phil Frank as a non-executive director and Nigel Quinton as exploration director.

Overall then, the group seems to be treading water a bit at the moment. The acquisition of the Thali block in Cameroon does look to be a sensible move and the positioning towards lower risk, lower reward concessions is probably a sensible one. There is $3.5M of cash left in the bank but not much in the way of commitments over the coming year. There is much more in 2017, however, by which time the company will have to raise more capital in one way or the other. Until that happens I am sitting on the side lines (or rather, more accurately, sitting on my shares which are pretty much worthless).

On the 16th March the group announced that it had granted options over 134,400,000 shares at a premium of 150% over the current price (0.19p) which is very nice for the directors, but at least there is a sensible exercise price included.