NOTES TO THE INTERIM FINANCIAL INFORMATION

1.   Accounting policies

a)       Basis of preparation

This interim financial report, which includes a condensed set of financial statements of the Company and its subsidiary undertakings ("the Group"), has been prepared using the historical cost convention and based on International Financial Reporting Standards ("IFRS") including IAS 34 'Interim Financial Reporting' and IFRS 6 'Exploration for and Evaluation of Mineral Reserves', as adopted by the United Kingdom ("UK").

The condensed set of financial statements for the six months ended 30 June 2022 is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. They have been prepared using accounting bases and policies consistent with those used in the preparation of the audited financial statements of the Company and the Group for the year ended 31 December 2021 and those to be used for the year ending 31 December 2022. The comparative figures for the half year ended 30 June 2021 are unaudited. The comparative figures for the year ended 31 December 2021 are not the Company's full statutory accounts but have been extracted from the financial statements for the year ended 31 December 2021 which have been delivered to the Registrar of Companies and the auditors' report thereon was unqualified and did not contain a statement under sections 498(2) and 498(3) of the Companies Act 2006.

This half-yearly financial report was approved by the Board of Directors on 30 September 2022.

b)       Going concern

The Group will need to complete its farm-out and/or another asset-level transaction within the coming months, or otherwise raise further funds, in order to meet its liabilities as they fall due, particularly with respect to the forthcoming drilling programme in Cameroon. The Directors believe that there are a number of options available to them through either, or a combination of, capital markets, farm-outs or asset disposals with respect to raising these funds. There can, however, be no guarantee that the required funds may be raised, or transactions completed within the necessary timeframes, which raises uncertainty as to the application of going concern in these accounts. Having assessed the risks attached to these uncertainties on a probabilistic basis, the Directors are confident that they can raise sufficient finance in a timely manner and therefore believe that the application of going concern is both appropriate and correct.

2.   Operating segments

The Group has two reportable operating segments: Africa and Head Office. Non-current assets and operating liabilities are located in Africa, whilst the majority of current assets are carried at Head Office. The Group has not yet commenced production and therefore has no revenue. Each reportable segment adopts the same accounting policies. In compliance with IAS 34 'Interim Financial Reporting' the following table reconciles the operational loss and the assets and liabilities of each reportable segment with the consolidated figures presented in these Financial Statements, together with comparative figures for the period-ended 30 June 2021.

3.   Loss per ordinary share

4.   Intangible Exploration and Evaluation (E&E) assets

In accordance with the Group's accounting policies and IFRS 6 the Directors' have reviewed each of the exploration license areas for indications of impairment. Having done so, based on the financial constraints on the Group, and specific issues associated with each license it was concluded that a full ongoing impairment was only necessary in the case of the Zambian licenses 40 and 41, the circumstances of which have not changed since previous reporting period.

The additions during the period represent Cameroon $618k (2021: $587k), $54k in South Africa (2021: $197k) and $115k in Namibia (2021: $77k). The focus of the Group's activities during this period has been on preparing for and acquiring inventory and services with respect to the anticipated drilling of the Njonji-3 appraisal well alongside ongoing subsurface evaluation in Namibia.

5.   Trade and other receivables

Trade and other receivables comprise prepaid expenditures.

6.   Trade and other payables

The future ability of the Group to recover UK VAT has been confirmed by the Upper Tier Tribunal in its judgement in favour of the Company on 20 May 2021 and is no longer the subject of a dispute with HMRC.

Work programme-related accruals of $1.2 million (2021: $1.8 million) comprise $422k with respect to Cameroon (2021: $1.1 million) and $769k with respect to South Africa (2021: $723k).

7.   Borrowings

During the period, the Group and Company entered into no new facilities (2021: $nil).

On 21 January 2021, the Company repaid in full the $500k loan facility with Shard Merchant Capital Ltd. The terms of the Shard Facility included the issue of 31,446,541 attached three-year warrants at a strike price of 0.6 pence and 5,761,198 shares to pre-pay interest charged at 12% per annum. The loan was secured by a fixed and floating charge over the Company's assets in favour of Shard Merchant Capital Ltd. The repayment of the loan included facility transaction costs of $35k.

On 4 March 2021, the Pegasus Petroleum Limited loan facility, to which Jeremy Asher is a controlling party, was extended to the end of November 2021. Consideration for the extension comprised an increase in the production-based payments, the amount depending on whether the loan would be repaid by 15 July or only in November 2021. Additionally, simple interest would accrue at 12% per annum pro rata, commencing on 4 March 2021, and would only be paid at the end of the facility period. The 15 July date was subsequently extended to 20 August 2021, with the production-based payments effectively limited to 3.75% of the Contractor share of revenues from the production sharing contract, net of the Government share and net of all Petroleum Taxes, and the facility was fully repaid on 20 August 2021.

8.   Share capital

The share capital issues during the period are summarised below:

9.   Share-based payments

Options

Details of share options outstanding at 30 June 2022 are as follows:

These options vest in the beneficiaries in equal tranches on the first, second and third anniversaries of grant.

Warrants

Details of warrants outstanding at 30 June 2022 are as follows:

10.  Subsequent events

1 July 2022: Issue of warrants in lieu of £30,000 (in aggregate) of Directors fees to Paula Brancato (3,366,248 warrants), Mark Enfield (3,366,248 warrants), and Jeremy Asher (6,732,496 warrants) in settlement of fees due for the period from 1 July 2022 to 30 September 2022. The warrants are exercisable at a strike price of 0.295 pence, which is the same as the closing share price of 0.295 pence per share on 30 June 2022. The warrants are exercisable for a period of 5 years from the date of issue.

2 August 2022: Placing and subscription for approximately 857,142,286 new ordinary shares of 0.001 pence each raising gross proceeds of £1,499,999 at a price of 0.175 pence per Placing Share. The Company also issued a broker warrant in favour of Novum granting it the right to acquire 10,588,228 ordinary shares for a period of two years at a price of 0.425p per share. While the financing discussions in respect of the NJOM-3 well are concluded, the funds have been raised in preparation for the drilling of the NJOM-3 well, including payments on account of services associated with the well, and for working capital purposes via the Placing and subscription. A small portion of the funds raised will also be used to advance the Company's other 2022 work programs in Namibia and South Africa, including the basin modelling work currently underway on the Company's Namibian license PEL 96.

16 August 2022: Grant of Options under Annual Long Term Incentive Plan over a total of 148 million new ordinary shares in the capital of the Company were awarded at an exercise price of 0.30 pence per ordinary share, being a premium of 48% over the closing price of the Shares on that day. The Options will vest in three equal tranches being 12, 24 and 36 months respectively after issue and will expire, if not previously exercised, on the fifth anniversary of their issue, and will be governed by the terms of the Company's existing share option scheme. The award of options under the Long-Term Incentive plan is an annual event, which normally takes place in the first quarter of each year, but was delayed in 2022 due to a closed period and other factors.

30 August 2022: Issue of 11,200,000 Ordinary shares in the Company to Bedrock Drilling Ltd on 27 August 2022 in lieu of fees to the value of £25,200. The Company has issued shares in lieu of fees on previous occasions to Bedrock Drilling, which provides well project management, well engineering services and drilling consultancy services to Tower's operations on the Thali block, offshore Cameroon, both to reduce cash costs and above all to align long term incentives with our well management team.