Tower Resources

SPECULATIVE BUY

08/07/2010 Robert Tyerman

An independent report on Tower Resources' Namibian licence 0010 suggests that the company's stake could be worth £464m, or 45p a share.

AIM-quoted Tower, with a present stock market value of £38m, has 15% of 0010, whose operator is Arcadia Petroleum, part of the mighty John Frederickson diversified Norwegian shipping group. An independent 'Competent Person's Report' (in the jargon of the trade) by technical consultant Oilfield International argues that Tower's share there is 170m barrels of oil or their equivalent in gas.

Peter Kingston, Tower's chairman, says the London-based company's interests in Namibia could eventually add up to as much as 2.5bn to 3bn barrels of oil or their equivalent in gas. He explains that Tower has a free carried interest in 0010 and so needs to contribute nothing towards the development of the first well in the licence, which he argues could come into production in 2020 at a cost – not borne by Tower – of some £33m.

Shares in Tower, which also has interests in Uganda, have already rallied from a depressed annual low of 1.15p to 3.15p. Progress at 0010 could put more life into them yet.

Tags: AIM, Commodities, Emerging markets

Sector: Oil & Gas Producers

Companies: Tower Resources

Market cap: £38m

PE Forecast: n/a

Share price: 3.15p