## TOWER RESOURCES PLC 

## C HAI R MAN’ S ST A TE M E N T 

## Dear Shareholders 

The next twelve months are going to be the most exciting in the Company’s history, building up to the definitive test of the Namibia project potential with the drilling of the first well scheduled for early in 20 1 2. As announced on 8 July 20 1 0, an independent Competent Person Report (CPR) on the Namibia venture, based on 2-D seismic data, confirmed the world class scale and quality of the Licence and concluded that the Delta structure, currently being prepared for drilling, has a 26% chance of finding 2.4 billion barrels of oil equivalent (“boe”) gross recoverable resources from the most clearly defined reservoir horizon. The report also confirmed significant prospective resources in less well defined horizons in the Delta structure and in the Alpha and Gamma structures. In combination, the latter two leads would hold about 5 billion boe of un-risked gross recoverable resources. Such potential represents truly exciting exploration targets. The interpretation of 3 -D seismic data has further confirmed that potential, and an updated CPR is expected to be completed in mid-June 20 11 . 

While Namibia will provide the greatest excitement, a third well is also planned in Uganda which could create significant additional shareholder value. This well appears to have a better chance of success than the first two, based on interpretation of the cumulative evidence to date. A high resolution aero gravity gradiometry (“GGI”) survey was completed during July 20 1 0, with final interpretation finalised in December. The interpreted data clearly indicates an area where basin depth plunges to about 2,500 metres and this is expected to be favourable for the generation of hydrocarbons. It also highlighted a clearly defined structural high not too far from the newly defined kitchen. This interpretation has provided the basis for a focused seismic programme, which is about to begin. 

Meaningful progress with prospective farm-in partners for the Uganda Licence was delayed whilst discussions about completion of the Heritage/Tullow transaction and the subsequent sale of assets by Tullow to Total and CNOOC remained unresolved. To avoid serious delay to the commitment programme and to meet the budgeted cost of the seismic programme which is due to begin shortly, the Company raised approximately £4.28 million by way of a share placing in February 20 11 . The tax negotiation has now been sufficiently well resolved to allow development of the substantial reserves discovered in the Albertine Graben to date to continue, and a farm in partner is now being actively sought for the EA5 commitment well. 

## Financial Highlights and Going C oncern 

The Group’s loss for the year ended 31 st December 20 1 0 was $ 1 , 311 ,45 3 , an increase of $265,674 over the corresponding period for 2009. Capital expenditure on exploration studies, drilling operations, licence management costs and licence fees amounted to $7,966,96 1  after receiving $ 1 ,85 1 , 1 80 from farm-in partners. Cash balances at 31 December 20 1 0 totalled $ 1 ,2 13 ,428. 

All operational expenditure for the Namibian project during the year was met by the Licence operator, Arcadia Petroleum and Tower’s financial carry will continue until completion of the first well and, if this is successful, a second well. The Group continues to operate in Uganda and is liable to meet the ongoing operating costs of its local operating subsidiary until funding for forward operational commitments is secured. The remaining commitment is a well which needs to be started before 27 March 20 1 2. The current strategy remains to reach agreement with third parties to fully fund this well, which the current programme calls to be drilled before the end of 20 11 . The Company is part way through a farm-out process coordinated by ENVOI, a consultancy specialising in identifying funding partners for exploration programmes. Global Petroleum Plc retains, but has not yet exercised, an option under agreed terms to become a 25% licencee and to participate in future operations. If it elects to participate in the current seismic and the commitment well it will be liable for its share of costs incurred since completing Avivi- 1 . 

In February 20 11 , and in advance of securing external funding for Uganda operations, the Company raised cash of $6,882,745 net of costs via a share placement. This funding will enable it to meet the projected cost of the seismic project and working capital requirements for the next 1 2 months. The Board is confident that the Uganda commitment well can be funded within the remaining duration of the Licence term. 

## O perations S ummary to end 2010 

## Namibia 

The seismic vessel, “Geowave Master”, arrived on location on Monday 28 June 20 1 0 to begin the 3 -D seismic acquisition programme and completed the survey on 6 September 20 1 0. The data quality is excellent and processing was completed early in 20 11 . 

