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Tower Resources and Repsol Exploration (Namibia), operator,reached an agreement over the disputed costs associated with the drilling of the Welwitschia prospect offshore Namibia. Tower had previously reported in September that Repsol’s estimate of well and other related costs for the drilling of the Welwitschia prospect, which was completed in June, increased to $33 million net to Tower. At that date, Tower’s subsidiary, Neptune Petroleum (Namibia), had settled $25.3 million of these costs.
Following amicable discussions an agreement was reached settling Neptune’s share of costs at $28.3 million. Consequently, a final cash payment of $3 million is being made by Neptune in full and final settlement of all costs associated with the well and the license exploration period which ended on August 22. This represents a net reduction of $4.7 million against the previous estimate.
A firm budget has been agreed for the next exploration period which extends to August 22, 2015. This work program is designed to obtain a fuller understanding of the results of the well and of its implications for the remaining prospectivity of the license, especially the large untested deeper targets, including the Albian carbonates, now there is a well-tie to the existing 3D seismic.
Following the final $3 million payment, Tower’s cash position will be approximately $7.5 million. The company is adequately funded for its remaining commitments with respect to the drilling of the Badada-1 well, onshore Block-2B, Kenya, which is expected to spud by early January 2015 and for which further cash costs of $1.9 million are budgeted.
Graeme Thomson, CEO, commented: “We are pleased to have resolved these matters and now to be working to improve our understanding of the untested prospectivity in our Namibia license. We can now focus on our exciting and potentially play-opening well onshore Kenya and continue developing our African portfolio.”