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London – June 28, 2021 -What could be shaping up to potentially be the last great onshore oil discovery in the world has just announced encouraging results in the first section of its second well in Namibia’s giant Kavango Basin, and modern history suggests that first well successes are rarely reversed. Mentioned in today’s commentary includes: ConocoPhillips Company (NYSE:COP), Petrobras (NYSE:PBR), Chevron (NYSE:CVX), Royal Dutch Shell (NYSE:RDS.A), Reconnaissance Energy Africa (TSXV: RECO) (OTCQX: RECAF).
What looks to have been a brilliantly timed acquisition based on a treasure trove of government-held data few knew existed is now hoping to help reshape poverty-stricken Namibia’s future. And at a mammoth 8.5 million acres, this basin spans an area comparable to the largest projects in the Lone Star state. And Recon Africa holds petroleum exploration licenses for the entire basin.
Low production costs in frontier oil plays have led to some exciting opportunities that have helped put countries like Suriname and Guyana on the proverbial map. And Africa may be the final frontier, with an oil boom emerging as drilling spreads across the continent, according to one report. But while companies like Shell and Exxon have latched onto offshore opportunities in one of the continent’s most stable and friendliest governments…
But they may have completely missed the Namibian government’s treasure trove of data, including a potentially valuable high-quality aeromagnetic survey data that had never been interpreted. And when this junior discovered what the government had so skillfully acquired…They scooped up exploration rights for the entire Kavango Basin, giving them exclusive petroleum licenses to an area that’s millions of acres in size.
This may truly be the final frontier of onshore oil exploration, among the last Permian-sized basins that have never been drilled. And its opportunities just like these that have produced impressive gains in recent years for other explorers that made a discovery.
Africa Oil scored 379% gains after reporting a discovery of oil in Kenya. Valeura Energy Corp’s shares skyrocketed for 1,000% gains after reporting a discovery in Turkey.
Now in Namibia, ReconAfrica is already up 377% in less than a year, having found indicators of the existence of a working petroleum system in its first well (6-2) in April and then encountering oil and gas again in the shallow section of its second drill (6-1), which is still ongoing.
First Well Successes Rarely Reverse
On April 15th, Recon Africa Africa (TSX-V : RECO) (OTCQX: RECAF) in a joint press release with the Ministry of Mines and Energy of Namibia announced the results of its first of three drills (6-2), showing clear evidence of an active petroleum system for this nearly 9-million-acre basin. The samples provide over 200 meters of light oil and natural gas indicators/shows over three discrete intervals in a stacked sequence of reservoir and source rock.
The results were unexpected by the company as this was just the first of three stratigraphic planned wells, but there would be another surprise just weeks later as RECO got started on its second well … On June 3rd, the first section of its second well (6-1) provided further evidence of a working petroleum system.
Recon Africa have since put out a further update letting investors know that a further 685 feet of hydrocarbon shows comprising a variety of light oil and natural gas have been discovered so far in the second section of well 2.
Not only does Recon Africa Africa (TSX-V : RECO) (OTCQX: RECAF) hold petroleum licenses to the entire Kavango Basin, but one expert after another has stepped up to indicate the potential of this opportunity.
Haywood Securities initiated coverage on RECO in November and has adjusted its price target three times since. They also participated in RECO’s C$25-million bought deal financing. See latest news release…the financing closed at $41+mm
A discovery success, says Haywood, would present manifold opportunities for strategic joint ventures for further de-risking–without additional shareholder dilution. This play “has all the ingredients to establish the existence of a working hydrocarbon system (in a relatively short cycle time) and subsequently evaluate and exploit the potential of the Kavango Basin”, Haywood wrote in its most recent report.
Even without the recent positive first and second drill results showing indicators of a petroleum system, Haywood sees material upside as Kavango is further de-risked and have recently moved their short term price target up to $16.00 CAD. In a further boost of confidence, Wood Mackenzie compared RECO’s Kavango basin to the Midland Basin in Texas which has a development value of $540 billion.
More News Could Be Just Days or Weeks Away
RECO’s second announcement that it encountered indicators of oil and gas in the second drill (6-1) was only in the shallower section… There’s more to come.
Drill no. 2 is expected to be completed by the end of this month …And the preliminary analysis of all results from the wells 6-1 and 6-2 are anticipated at the end of July.
From the first well (6-2) over 150 sidewall cores have been taken to Core Labs in Houston and 37 sidewall cores are on their way there as well from the shallower section of the 6-1 well. Then we’ve got drill three and possibly four which is expected this year, too.
And that’s just in the near term. Further out, the news flow could get even more exciting because this is a huge basin. If a commercial discovery is established in the future, we may be looking at a juicy potential JV deal that could be the biggest reward for investors.
ReconAfrica isn’t operating in a vacuum here. They seem fully aware of what this could mean to the people of Namibia. For starters, RECO’s founder Craig Steinke says the carbonates they found so far “look like carbonate rocks seen in northern Africa where basically conventional completion methods will make them productive. No fracking.”
And for Namibia, a huge, conventional oil play could be “transformational”, particularly for the 250,000 people in the Kavango region, 40% of whom live in generational poverty.
“This will provide the local citizens with good-paying jobs, upwardly mobile jobs, that will help pull them out of poverty, provide access to fresh water and basic medical services,” Steinke says. RECO reports it is already employing 200 people in the area.
As soon as RECO’s (RECO, RECAF) rig hit the ground in Kavango, the company reported it set up shop with the local authorities to drill water wells. They’ve announced drilling of four water wells so far and are permitting sixteen more.
Big Oil Is Set To Capitalize On Rising Crude Prices
ConocoPhillips Company (NYSE:COP) as the largest pure upstream company, has performed relatively well in this depressed market, generating ample free cash flow and returning a good chunk of it to shareholders. Unlike many of its peers who continued to expand aggressively during the shale boom, COP has taken several steps to lower costs and fortify its balance sheet.
Thanks to a global recovery in demand, Conoco has seen an increasingly bullish look on the industry, and it was one of the few companies which did not partake in the mass-layoffs seen in the industry last year. In addition, Conoco has also seen a fairly decent about of insiders buying into its stock, which is a good sign.
Petrobras (NYSE:PBR) is focused on developing its pre-salt operations. And it’s easy to see why. Those upstream projects being approved for development must have a breakeven price of $35 per Brent or less. Brazil’s national oil company has budgeted capital spending for exploration and production activities of $46.5 billion from 2021 to 2025. Petrobras has got desirable crude oil, a massive footprint in its domestic industry, and a growing amount of interest from investors.
Chevron (NYSE:CVX) is a leader in the industry, and the second-largest oil company on the New York Stock Exchange. Chevron is also betting big on Africa, particularly Nigeria and Angola. The supermajor ranks among the top oil producers in the two African nations. Other areas on the continent where the company holds interests include Benin, Ghana, the Republic of Congo and Togo. Chevron also holds a 36.7 percent interest in the West African Gas Pipeline Company Limited, which supplies Nigerian natural gas to customers in the region. With bets on both oil and natural gas, the company is looking to take advantage of both fossil fuels. Though prices are still depressed at the moment, as fuel demand returns to normal, Chevron could be a big winner as prices climb back up to pre-pandemic levels.
Royal Dutch Shell (NYSE:RDS.A) is the third largest NYSE-listed company, coming in just under Chevron. And similar to Chevron, Shell has also made some big bets in Africa. In fact, it is one of the leaders in the region. The Dutch oil giant began drilling in the region over 70 years ago and now has energy assets in over 20 countries across the continent. Though it has sold off a number of its prized plays in the region in recent years, it continues to maintain a strong presence, especially in South Africa.
Africa, in particular South Africa is key for Shell because the government has been significantly more stable than some of the other big bets on the continent. Moreover, the country has been very open to Shell in its projects. The company’s operations in South Africa include retail and commercial fuel, lubricant, chemical, and manufacturing. It’s also heavily invested in upstream exploration. It even holds the exploration rights to the Orange Basin Deep Water area, off the country’s west coast, and has applications for shale gas exploration rights in the Karoo, in central South Africa.
By. Alex Leigh
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Forward-Looking Statements. Statements contained in this document that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of Recon. All estimates and statements with respect to Recon’s operations, its plans and projections, size of potential oil reserves, comparisons to other oil producing fields, oil prices, recoverable oil, production targets, production and other operating costs and likelihood of oil recoverability are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, including drilling and other exploration activities, timing of reports, development, exploitation and production, geological risks, marketing and transportation, availability of adequate funding, volatility of commodity prices, imprecision of reserve and resource estimates, environmental risks, competition from other producers, government regulation, dates of commencement of production and changes in the regulatory and taxation environment. Actual results may vary materially from the information provided in this document, and there is no representation that the actual results realized in the future will be the same in whole or in part as those presented herein. Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that Recon and its technical analysts have made. We undertake no obligation, except as otherwise required by law, to update these forward-looking statements except as required by law.
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