TOWER RESOURCES PLC — Interim / Quarterly Report 2015

Nov 19, 2015

Wentworth Resources Limited Condensed Consolidated Interim Financial Statements

For the third quarter and nine months ended September 30, 2015 Unaudited

WENTWORTH RESOURCES LIMITED

Unaudited Condensed Consolidated Interim Statement of Financial Position

United States \$000s, unless otherwise stated

	Note	September 30, 2015	December 31, 2014
ASSETS
Current assets
Cash and cash equivalents		2,282	5,487
Trade and other receivables		2,712	2,613
Prepayments, deposits and advances to partners		226	1,418
Current portion of long-term receivables	4	24,305	14,530
		29,525	24,048
Non-current assets
Long-term receivables	4	13,435	19,472
Exploration and evaluation assets	5	43,434	33,762
Property, plant and equipment	6	95,192	85,035
		152,061	138,269
Total assets		181,586	162,317
LIABILITIES
Current liabilities
Trade and other payables		4,254	7,343
Current portion of contingent liability		3,214	861
Current portion of long-term loans	7	4,333	-
		11,801	8,204
Non-current liabilities
Long-term loans	7	21,437	5,718
Contingent liability		-	2,271
Decommissioning provision		921	782
		22,358	8,771
EQUITY
Share capital		411,493	404,225
Equity reserve		25,510	24,916
Accumulated deficit		(289,576)	(283,799)
		147,427	145,342
Total liabilities and equity		181,586	162,317

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

Approved by the Board of Directors and Management

Robert P. McBean John W.S. Bentley Cameron Barton

Neil Kelly Richard Schmitt Geoff Bury Non-Executive Director Non-Executive Director Managing Director

Chairman of the Board Deputy Chairman Non-Executive Director

WENTWORTH RESOURCES LIMITED Unaudited Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income

United States \$000s, unless otherwise stated

			Quarter ended September 30,	Nine	months ended September 30,
	Note	2015	2014	2015	2014
Total revenue		972	270	1,536	759
Operating expenses
Production and operating	12	(752)	(474)	(2,645)	(1,646)
General and administrative		(1,479)	(1,767)	(4,332)	(5,066)
Share based compensation	9	(136)	(308)	(594)	(785)
Depreciation and depletion	6	(434)	(155)	(662)	(446)
Gain from sale of office assets		-	5	-	60
Loss from operating activities		(1,829)	(2,429)	(6,697)	(7,124)
Finance income	8	1,205	1,437	3,899	4,484
Finance costs	8	(625)	(326)	(2,979)	(878)
Net loss and comprehensive loss		(1,249)	(1,318)	(5,777)	(3,518)
Net loss per ordinary share
Basic and diluted (US\$/share)	11	(0.01)	(0.01)	(0.04)	(0.02)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

WENTWORTH RESOURCES LIMITED

Unaudited Condensed Consolidated Interim Statement of Changes in Equity

United States \$000s, unless otherwise stated

	Note	Number of shares	Share capital \$	Equity reserve \$	Accumulated deficit \$	Total equity \$
Balance at December 31, 2013 Net loss and comprehensive loss Share based compensation Issue of share capital Balance at September 30, 2014	9	153,872,700 - - 250,000 154,122,700	403,998 - - 227 404,225	23,903 - 785 (77) 24,611	(299,076) (3,518) - - (302,594)	128,825 (3,518) 785 150 126,242
Balance at December 31, 2014 Net loss and comprehensive loss Share based compensation Issue of share capital Share issue costs Balance at September 30, 2015	9 10 10	154,122,700 - - 15,412,269 - 169,534,969	404,225 - - 7,639 (371) 411,493	24,916 - 594 - - 25,510	(283,799) (5,777) - - - (289,576)	145,342 (5,777) 594 7,639 (371) 147,427

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

WENTWORTH RESOURCES LIMITED

Unaudited Condensed Consolidated Interim Statement of Cash Flows

United States \$000s, unless otherwise stated

	Quarter ended September 30,			Nine months ended September 30,
	Note	2015	2014	2015	2014
Operating activities
Net loss for the period		(1,249)	(1,318)	(5,777)	(3,518)
Adjustments for:
Share based compensation	9	136	308	594	785
Depreciation and depletion	6	434	155	662	446
Finance loss, net		(580)	(1,111)	(920)	(3,606)
Gain from sale of assets		-	(5)	-	(60)
Change in non-cash working capital		(1,855)	3,760	523	(156)
Cash (used in)/generated from operating activities		(3,114)	1,789	(4,918)	(6,109)
Investing activities
Additions to evaluation and exploration assets	5	(382)	(7,976)	(9,672)	(16,447)
Additions to property, plant and equipment	6	(1,158)	(331)	(10,770)	(1,107)
Net reduction/(increase) of long-term receivable		481	43	(1,472)	235
Conversion of term deposits to cash		-	4,013	-	23,176
Interest income		-	21	-	96
Change in non-cash working capital		(7,777)	-	(2,978)	-
Cash (used in)/from investing activities		(8,836)	(4,230)	(24,892)	5,953
Financing activities
Issue of share capital, net of issue costs		7,268	-	7,268	150
Proceeds from long-term loans	7	5,161	-	20,000	-
Interest paid		(421)	(91)	(663)	(269)
Proceeds from sale of office assets		-	7	-	62
Cash from/(used in) financing activities		12,008	(84)	26,605	(57)
Net change in cash and cash equivalents		58	(2,525)	(3,205)	(213)
Cash and cash equivalents, beginning of the period		2,224	16,813	5,487	14,501
Cash and cash equivalents, end of the period		2,282	14,288	2,282	14,288

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements

1. Nature of business

Wentworth Resources Limited ("Wentworth" or the "Company") is an East Africa-focused upstream oil and natural gas company. These unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries (collectively referred to as "Wentworth Group of Companies" or the "Group"). The Company is actively involved in oil and gas exploration, development and production operations. Wentworth is incorporated in Canada and shares of the Company are widely held and listed on the Oslo Stock Exchange (ticker: WRL) and the AIM Market of the London Stock Exchange (ticker: WRL).

The Company has offices located in Calgary, Canada and Dar es Salaam, Tanzania.

2. Summary of accounting policies

Basis of presentation and statement of compliance

These unaudited condensed consolidated interim financial statements have been prepared by management in accordance with International Accounting Standard 34, "Interim Financial Reporting".

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these unaudited condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended December 31, 2014. These unaudited condensed consolidated interim financial statements have been prepared following the same accounting policies as the annual audited consolidated financial statements for the year ended December 31, 2014 and should be read in conjunction with the annual audited consolidated financial statements and the notes thereto.

These unaudited condensed consolidated interim financial statements were approved by the Board of Directors on November 18, 2015. The disclosures provided below are incremental to those included in the annual consolidated financial statements.

2. Summary of accounting policies (continued)

Recent accounting pronouncements

The following standards and amendments applicable to the Company are issued but not yet effective and have not been early adopted in these consolidated financial statements.

New and Amended Standards		Effective for annual periods beginning on or after
IFRS 15	Revenue from Contracts with Customers	January 1, 2018
IFRS 9	Financial Instruments	January 1, 2018
IFRS 11 (Amendments)	Accounting for Acquisitions of Interests in Joint Operations	January 1, 2016
IFRS 10 and IAS 28 (Amendments)	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	January 1, 2016

The Company intends to adopt these standards and amendments to IFRS in its financial statements for the applicable annual period. The Company has not completed an assessment of the impact of the above standards on the financial statements.

Credit risk

Wentworth's maximum credit risk exposure is equal to the carrying value of its cash and cash equivalents, trade, other and long-term receivables. Trade and other receivables are comprised predominantly of amounts due from government departments in Tanzania, tax input credits for Goods and Services Tax (GST) in Canada and Value Added Tax (VAT) in Tanzania and Mozambique.

At September 30, 2015, an undiscounted long-term receivable of \$35,749 is due from Tanzania Petroleum Development Company ("TPDC"), a partner in the Mnazi Bay Concession. The Company currently receives, directly from the operator of the Mnazi Bay Concession, a significant portion of TPDC's and the government's share of gas sales from the Mnazi Bay Concession to reduce the receivable from TPDC. There is a risk that future production from the Mnazi Bay Concession may not be sufficient to settle the receivable and, should such a determination be made, a provision against the receivable may be made.

At September 30, 2015, an undiscounted long-term receivable of \$6,511 related to the Company's disposal of transmission and distribution assets, and the costs associated with the Mtwara Energy Project incurred by a wholly owned subsidiary of Wentworth. On February 6, 2012, the Company, TANESCO, TPDC and the Ministry of Energy and Minerals ("MEM") reached an agreement that the Company's cost of historical operations in respect of the Mtwara Energy Project should be reimbursed. Wentworth is currently in discussions with TANESCO, TPDC and MEM on agreeing on a method of reimbursement. There is a risk that the cost reimbursement method may not be in cash, but rather in a long-term recovery from other sources.

2. Summary of accounting policies (continued)

Financial instrument classification and measurement

The Company classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including expected interest rate, share prices, and volatility factors, which can be substantially observed or corroborated in the marketplace.

Level 3 – Valuation in this level are those with inputs for the assets or liabilities that are not based on observable market data.

The Company's long-term receivables, long-term loans and other long-term liabilities are considered Level 2 measurements. The Company does not have any fair value measurements considered as Level 3.

3. Segment information

Net loss for the quarter ended September 30, 2015

	Tanzania Operations	Mozambique Operations	Corporate	Consolidated
Natural gas sales	972	-	-	972
Production and operating General and administrative Depreciation and depletion Other Total segment expenses	(752) (711) (387) 708 (1,142)	- (140) - - (140)	- (628) (47) (264) (939)	(752) (1,479) (434) 444 (2,221)
Net loss	(170)	(140)	(939)	(1,249)
Selected Cash Flows for the quarter ended September	30, 2015
Net additions to exploration and	2	380	-	382
evaluation assets Net additions to property, plant and equipment assets	1,116	-	8	1,124

WENTWORTH RESOURCES LIMITED Notes to the Unaudited Condensed Consolidated Interim Financial Statements

United States \$000s unless otherwise stated

3. Segment information (continued)

Net loss for the quarter ended September 30, 2014

	Tanzania Operations	Mozambique Operations	Corporate	Consolidated
Natural gas sales	270	-	-	270
Production and operating	(474)	-	-	(474)
General and administrative	(1,011)	(482)	(274)	(1,767)
Depreciation and depletion	(115)	-	(40)	(155)
Other	1,310	-	(502)	808
Total segment expenses	(290)	(482)	(816)	(1,588)
Net loss	(20)	(482)	(816)	(1,318)
Selected Cash Flows for the quarter ended September 30, 2014

Net additions to exploration and	2,941	5,035	-	7,976
evaluation assets
Net additions to property, plant	328	-	3	331
and equipment assets

Net loss for the nine months ended September 30, 2015

and equipment assets

	Tanzania Operations	Mozambique Operations	Corporate	Consolidated
Natural gas sales	1,536	-	-	1,536
Production and operating General and administrative Depreciation and depletion Other Total segment expenses	(2,645) (2,121) (530) 984 (4,312)	- (394) - - (394)	- (1,817) (132) (658) (2,607)	(2,645) (4,332) (662) 326 (7,313)
Net loss	(2,776)	(394)	(2,607)	(5,777)
Selected balances at September 30, 2015
Current assets Long-term receivables Exploration and evaluation assets Property, plant and equipment assets Current liabilities Non-current liabilities	28,281 13,435 8,089 95,150 10,874 22,358	123 - 35,346 - 288 -	1,121 - - 42 639 -	29,525 13,435 43,435 95,192 11,801 22,358
Selected Cash Flows for the nine	months September 30, 2015
Net additions to exploration and evaluation assets	153	9,519	-	9,672
Net additions to property, plant	10,780	-	39	10,819

WENTWORTH RESOURCES LIMITED Notes to the Unaudited Condensed Consolidated Interim Financial Statements

United States \$000s unless otherwise stated

3. Segment information (continued)

Net loss for the nine months ended September 30, 2014

	Tanzania Operations	Mozambique Operations	Corporate	Consolidated
Natural gas sales	759	-	-	759
Production and operating	(1,646)	-	-	(1,646)
General and administrative	(2,263)	(810)	(1,993)	(5,066)
Depreciation and depletion	(327)	-	(119)	(446)
Other	4,201	(4)	(1,316)	2,881
Total segment expenses	(35)	(814)	(3,428)	(4,277)
Net income/(loss)	724	(814)	(3,428)	(3,518)

Selected balances at September 30, 2014

	Tanzania	Mozambique
	Operations	Operations	Corporate	Consolidated
Segment current assets	14,649	84	13,175	27,908
Long-term receivables	23,210	-	-	23,210
Exploration and evaluation assets	47,230	19,853	-	67,083
Property, plant and equipment assets	18,990	-	167	19,157
Segment current liabilities	2,822	8	1,098	3,928
Segment non-current liabilities	3,763	-	3,425	7,188

Selected Cash Flows for the nine months ended September 30, 2014

Net additions to exploration and evaluation assets	7,413	9,034	-	16,447
Net additions to property, plant and equipment assets	1,067	-	40	1,107

4. Long-term receivables

	Balance at September 30, 2015	Balance at December 31, 2014
TPDC receivable (i) Tanzanian government receivable (Transmission & Distribution) (ii)	32,432 5,308	28,914 5,088
	37,740	34,002
Current portion TPDC receivable (i)	24,305	14,530
Long-term portion TPDC receivable (i) Tanzanian government receivable (Transmission & Distribution) (ii)	8,127 5,308	14,384 5,088
	13,435	19,472

4. Long-term receivables (continued)

The first gas delivery to the new government owned Mtwara to Dar es Salaam gas pipeline commenced on 20 August 2015. The current portion of TPDC receivable as at September 30, 2015 represents those amounts that are expected to be collected within the next twelve months.

i) TPDC receivable

As at September 30, 2015, the undiscounted receivable from TPDC is \$35,749 (\$33,518 at December 31, 2014).

Balance at December 31, 2014	28,914
Accretion	3,441
Change in accounting estimates	(1,395)
Retained gas revenue to offset receivable	(1,442)
Share of TPDC Mnazi Bay Concession costs paid by the Company	2,914
Balance at September 30, 2015	32,432

ii) Tanzanian government receivable

As at September 30, 2015 the undiscounted Tanzanian government receivable is \$6,511 (December 31, 2014 - \$6,511).

Balance at December 31, 2014	5,088
Accretion	357
Change in accounting estimates	(137)
Balance at September 30, 2015	5,308

These receivables are considered financial instruments and are initially recorded at fair value based on discounted cash flows and at each reporting date are accreted using the effective interest method over the expected life of the receivable.

5. Exploration and evaluation assets ("E&E")

Cost
Balance at December 31, 2014	33,762
Additions	9,672
Balance at September 30, 2015	43,434
Carrying amounts
December 31, 2014	33,762
September 30, 2015	43,434

6. Property, plant and equipment ("PP&E")

	Natural gas properties	Office and other equipment	Total
Cost
Balance at December 31, 2014	88,002	489	88,491
Additions (i)	10,780	39	10,819
Balance at September 30, 2015	98,782	528	99,310
Accumulated depreciation and depletion Balance at December 31, 2014	(3,102)	(354)	(3,456)
Depreciation and depletion Balance at September 30, 2015	(530) (3,632)	(132) (486)	(662) (4,118)
Carrying amounts December 31, 2014	84,900	135	85,035
September 30, 2015	95,150	42	95,192

(i) Non-cash additions totalling \$49 (2014 - \$nil) relate to the decommissioning obligation for existing natural gas properties.

7. Long-term loans

Credit facilities from Tanzania based banks

Total credit facilities	26,000
Principal balance drawn on credit facilities at December 31, 2014	6,000
Drawn during the period Principal balance drawn on credit facilities at September 30, 2015	20,000 26,000
Carrying amount of long-term loans at September 30, 2015	25,770
Current	4,333
Non-current	21,437
	25,770

During the quarter and nine months ended September 30, 2015, the Company incurred interest expense, inclusive of the accretion of financing costs, of \$475 and \$1,081 respectively (2014 - \$Nil) on credit facilities from Tanzania based banks of which \$421 and \$663 respectively, was settled in cash (2014 - \$Nil).

At September 30, 2015, the carrying amount of the credit facilities approximates its fair value as the loan's effective interest rate approximates market rates.

8. Finance income and finance costs

	Quarter ended		Nine months ended
	September 30,		September 30,
	2015	2014	2015	2014
Finance income
Accretion - TPDC receivable (Note 4)	1,086	1,293	3,441	4,019
Accretion – Tanzanian government receivable (Note 4)	119	123	357	369
Change in estimates – contingent liability	-	-	101	-
Interest income	-	21	-	96
	1,205	1,437	3,899	4,484
Finance costs
Change in estimates – TPDC receivable (Note 4)	-	-	(1,395)	-
Change in estimates – Tanzanian government receivable (Note 4)	-	-	(137)	-
Interest expense – Tanzania based banks	(475)	-	(1,081)	-
Interest expense – Vitol loan	-	(203)	-	(599)
Accretion – contingent liability	(61)	(57)	(183)	(169)
Accretion – decommissioning provision	(28)	(24)	(89)	(72)
Foreign exchange loss	(61)	(42)	(94)	(38)
	(625)	(326)	(2,979)	(878)

9. Share based payments

Movement in the number of share options outstanding and their related weighted average exercise prices are summarized as follows:

	Number of	Weighted average
	options	exercise price at
		September 30, 2015
Outstanding at December 31, 2014 and September 30, 2015	9,950,000	0.54

The following table summarizes share options outstanding and exercisable at September 30, 2015:

		Outstanding	Exercisable
Exercise Price (NOK)	Exercise Price (US\$) (i)	Number of options	Weighted average remaining life (years)	Number of options
3.15	0.40	1,000,000	5.0	1,000,000
3.52	0.45	500,000	6.3	500,000
3.60	0.46	2,400,000	5.0	2,400,000
4.08	0.52	250,000	7.6	166,667
4.64	0.59	150,000	8.7	50,000
4.70	0.60	200,000	8.7	66,667
4.90	0.62	350,000	6.6	266,667
5.18	0.66	3,500,000	8.1	1,199,993
5.75	0.73	1,600,000	5.5	1,600,000
		9,950,000	6.6	7,249,994

(1) The US Dollar to Norwegian Kroner exchange rate used for determining the exercise price at September 30, 2015 is 0.11764.

9. Share based payments (continued)

The weighted average exercise price of options that have vested and are exercisable at September 30, 2015 is US\$0.51 (NOK 4.34).

Share based payment charge

No options were granted, exercised and forfeited during the quarter and nine months ended September 30, 2015 (2014 - 3,750,000 options were granted during the nine months, 250,000 options were excersed during the quarter and nine months and no options were forfeited during the nine months).

During the quarter and nine months ended September 30, 2015 a total of \$136 and \$594 respectively (2014 - \$308 and \$785 respectively) in share based compensation was expensed with an offsetting charge to equity reserve.

10. Share capital

On July 01, 2015, the Company completed a private placement and issued 15,412,269 new common shares, for cash consideration of \$0.50 (GBP 0.32, NOK 3.88) per share for gross proceeds of \$7.64 million (GBP 4.9 million or NOK 59.7 million). Following the private placement offering the Company had 169,534,969 common shares outstanding.

Expenses incurred in relation to the private placement offering were \$371.

11. Loss Income per share

Basic and diluted loss per share

The calculation of loss per share for the quarter and nine months ended September 30, 2015 is based on a loss attributable to shareholders of the Company of \$1,249 and \$5,777 respectively (2014 – \$1,318 and \$3,518 respectively). Share options and other equity instruments such as warrants were anti-dilutive for both periods.

		Quarter ended September 30,		Nine months ended September 30,
	2015	2014	2015	2014
Weighted average number of shares outstanding	169,367,444	154,122,700	159,260,123	153,974,348
Dilutive weighted average number of shares outstanding	169,367,444	154,122,700	159,260,123	153,974,348

12. Tax assessments – Tanzanian operations

i. Gas operations

In 2014, the Company accrued an estimated tax liability for the period 2008-2012 of Tshs 478 million (equivalent to \$0.28 million at the December 31, 2014 exchange rate of 1Tsh=0.00058 US\$). The final tax assessment for this period was received in 2015 and totaled Tshs 282 million (equivalent to \$0.13 million at the September 30, 2015 exchange rate of 1Tsh=0.00047 US\$), which was settled by way of an offset against a deposit on account with the Tanzania Revenue Authority ("TRA"). The net amount was recorded within production and operating expense.

ii. Discontinued transmission and distribution operations

In 2015, the Company received a tax assessment relating to a discontinued, dissolved subsidiary of the Company totalling Tshs 2.57 billion (equivalent to \$1.2 million at the September 30, 2015 exchange rate of 1Tsh=0.00047 US\$) for the period 2009-2012. The Company accrued an estimated tax liabitiy of Tshs 1.86 billion (\$0.87 million) which has been recorded within production and operating expense.

During Q3 2015, the Company made a cash payment of Tshs 534 million (\$0.25 million) and on October 2, 2015 the TRA approved the Company's request to offset Tshs 1.014 billion (\$0.48 million) against the remaining deposit on account with the TRA, leaving an accrued payable balance at September 30, 2015 of Tshs 312 million (\$0.15 million).

KPMG LLP Telephone (403) 691-8000 205 - 5th Avenue SW Fax (403) 691-8008 Suite 3100, Bow Valley Square 2 www.kpmg.ca Calgary AB T2P 4B9

INDEPENDENT AUDITORS' REPORT ON REVIEW OF INTERIM FINANCIAL STATEMENTS

To the shareholders of Wentworth Resources Ltd.

Introduction

We have reviewed the accompanying condensed consolidated interim statement of financial position of Wentworth Resources Ltd. as at September 30, 2015, the condensed consolidated interim statements of profit or loss and other comprehensive income and cash flows for the three and ninemonth periods ended September 30, 2015 and 2014, changes in equity for the nine-month periods ended September 30, 2015 and 2014, and notes to the condensed consolidated interim financial statements ("the condensed consolidated interim financial statements"). Management is responsible for the preparation and presentation of these condensed consolidated interim financial statements in accordance with IAS 34, 'Interim Financial Reporting'. Our responsibility is to express a conclusion on these unaudited condensed consolidated interim financial statements based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying unaudited condensed consolidated interim financial statements as at September 30, 2015, are not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting'.

Chartered Professional Accountants

November 18, 2015 Calgary, Canada

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG Canada provides services to KPMG LLP.