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London – January 26, 2022 – Still hounded by short-sellers precisely because of the possible sheer magnitude of the discovery, a pick for the world’s most exciting onshore play in recent history—and possibly the last we will see—has just updated shareholders on the prospects for its next 3-6-well drill campaign in Namibia. Mentioned in today’s commentary includes: Exxon Mobil (NYSE:XOM), Chevron Corp. (NYSE:CVX), ConocoPhillips (NYSE:COP), Cheniere Energy (NYSE:LNG), Continental Resources (NYSE:CLR).
Reconnaissance Energy Africa (ReconAfrica) (RECO, RECAF) is nearly finished with the initial interpretation of its massive 450 kilometers of 2D seismic data for Namibia’s Kavango Basin …And the company says it’s already delineated a “diverse group of high-quality prospects” for the drill campaign.
In a January 20 press release, RECO also said it had appointed two new directors to its board, Craig Steinke as Executive Chairman and Dr. Joseph Davis.
In the meantime, RECO has designed another huge 500-kilometer 2D seismic acquisition program, which has been submitted to the local authorities for approval and is slated to start by the end of February. As soon as all permitting is approved by the Namibian government investors should see the detailed drilling schedule for the first half of this year. It is believed to be the first well will be spudded in Q1.
And RECO’s ambitious ESG project elements are moving full speed ahead, with the company’s ~$1 million COVID vaccine support program for the Namibian government so far ensuring over 8,000 first-dose vaccinations, over 1,200 second-dose vaccinations and 100 boosters for hard-to-reach, remote villages and settlements in Kavango East and Kavango West. So far, a total of 52 of a planned 81 villages have seen COVID vaccination outreach.
From here on out, expect the Q1 news flow to gain significant momentum as the anticipated seismic interpretation delineates the drilling locations for an onshore oil play that has potential to put Namibia on the global conventional hydrocarbons map.
Active Petroleum System Already Identified
Excitement has continued to build, attracting short-sellers and questionable tactics, since RECO (RECO, RECAF) announced in August that together with its partner, Namibian state-run NAMCOR, that lab tests confirmed evidence of an active petroleum system, while results from a second stratigraphic test well encountered 350 meters of hydrocarbon showings. Those results had executives noting that they drilled into a very thick zone of potential production or reservoir. All on the maiden stratigraphic test drills.
The first well (6-2) encountered over 250 meters of hydrocarbon shows after drilling to a depth of 2,294 meters. The second test well returned 350 meters of hydrocarbon shows after drilling to a depth of 2,780 meters.
Doug Milham, CEO of Horizon Well Logging Inc—the company that did the sample logging data and analysis, described the results as indicative of an exploration play with “world-class potential”. Likewise, industry recognized Polaris conducted the 450-kilometer 2D seismic program for RECO, the results of which will help determine where the upcoming drill campaign that we’ve been waiting for.
The 8.5-Million-Acre Play of a Lifetime?
The size of this play is almost unimaginable. RECO (RECO, RECAF) has the rights to 6.3 million acres in Namibia’s portion of the giant Kavango Basin and another 2.2 million acres in neighboring Botswana.
It’s a play that has had the likes of Wood Mackenzie—a well-known analyst for natural resources—compare the potential to the Permian basin in Texas. And it’s a play that world-class geologist Dan Jarvie has estimated could have potential for billions of barrels of oil.
The sheer size and potential here demands patience, and early-in investors are probably in this for the long haul. When billions of barrels is at stake in what could be a once-in-a-lifetime exploration effort, it’s important to do things right, and by the book, including a lineup of ESG efforts that ensure this is beneficial for Namibia.
Steinke has called it “transformational” for Namibia, a country that “suffers from severe energy poverty. Their main goal in Vision 2030 is to industrialize their country and pull their people out of poverty. You have to remember they don’t have a significant amount of indigenous energy. For example, Namibia imports 60% of their electricity from South Africa, so how can they industrialize their country? If you have to import energy to establish industries, but at higher costs, then how do you compete? You can’t?”
So far, despite misinformation to the contrary that has been debunked by the Namibian government itself, we think ReconAfrica (RECO, RECAF) has made all the right moves to ensure the biggest conventional onshore oil exploration in decades is de-risked for everyone.
Supermajors Likely To Benefit From $100 Oil
Exxon Mobil (NYSE:XOM) is one of the largest oil and gas companies in the world. It was founded by John D. Rockefeller Sr. in 1870, with a goal to produce kerosene for lamps, which led to it becoming an integrated oil company that would go on to be one of the most powerful corporations ever built.
Recently, Exxon put up for sale natural gas assets in the Barnett Shale in Texas, Reuters has reported, citing a confirmation of the news by the company.
The assets include 2,700 wells spread across 182,000 acres, according to the report. So far, no buyer has been identified, and no agreements have been reached on the sale, a spokeswoman for the company said.
Chevron Corp. (NYSE:CVX) comes in just above Shell as the world’s second-largest oil and gas company by market cap. Chevron is also betting big on Africa, particularly Nigeria and Angola. Not only is Chevron looking for riches in Africa, but it is also deep in Iraq’s oil industry, as well.
The newly resuscitated Iraq National Oil Company (INOC) has been authorised by the government in Baghdad to directly negotiate with U.S. oil giant, Chevron, for it to develop the long-delayed Nasiriyah oil field in the southern DhiQar province, according to several domestic news sources.
The idea of developing the 4.36 billion-barrel Nasiriyah oilfield has been mooted by a rapid succession of governments in Iraq since it was discovered by INOC in 1975. The original plan to develop the field on a standalone basis was shelved in the lead-up to the Iran-Iraq war that began in 1980 and lasted until 1988. The field eventually came on-stream in 2009 and was listed on the 2009-2010 fast-track development plan, which aimed to raise its output to at least 50,000 bpd in the first phase.
ConocoPhillips (NYSE:COP) is dedicated to working with others in industry and government to provide responsible development of resources while minimizing environmental impact. ConocoPhillips also strives to make sure their employees feel valued as they work towards success together.
ConocoPhillips’ CEO Ryan Lance is bullish on the price of oil, the executive said on Monday at the Argus Americas Crude Summit in Houston.
Lance further expressed his view that the U.S. oil industry is poised for even more consolidation in an effort to bring down costs—costs which the majority of U.S. oil and gas companies see as rising as much as 10%, according to the latest Dallas Fed Survey conducted in December.
Lance said that the consolidation drive, however, doesn’t mean that small independents are going to disappear. For the United States, this is good news, because in that same Dallas Fed Survey from December, it was mostly the small independent firms that had plans to raise crude oil production.
Cheniere Energy (NYSE:LNG) is an energy company that specializes in liquefied natural gas (LNG) and Liquefied Natural Gas production. The company has a number of plants, pipelines, and storage facilities across the United States as well as a global presence in Australia, Qatar, Nigeria, Canada, and Trinidad & Tobago. With demand for LNG increasing all over the world due to its role as a safer alternative to coal and oil-based fuel sources such as gasoline or diesel fuel Cheniere Energy is poised for growth over the next few years.
With the global shift towards cleaner energy sources in full swing, LNG and natural gas bring the benefits of being the cleanest-burning hydrocarbon, producing half the greenhouse gas emissions and less than one-tenth of the air pollutants of coal. Consequently, LNG demand is expected to grow 3.4% per annum through 2035, with some 100 million metric tons of additional capacity required to meet both demand growth and decline from existing projects. Natural gas use in power generation capacity is expected to grow by an additional 300 GW by 2040, equivalent to 300 million tonnes of LNG, with the majority of that demand coming from Asia, especially China, India, and other Southeast Asia countries. And that’s great news for Cheniere Energy.
Continental Resources (NYSE:CLR), the shale driller owned by one of the richest and most prominent shale wildcatters, Harold Hamm, has reported strong Q3 numbers that, nevertheless, failed to meet Wall Street’s expectations.
Continental Resources has reported Q3 revenue of $1.34B, good for 93.5% Y/Y growth but $70M below the Wall Street consensus. Adjusted net income clocked in at $437.2 MM while GAAP EPS of $1.01 missed by $0.20.
With oil prices consolidating above $85 per barrel, the majority of shale producers are solidly profitable, and many are returning excess cash to shareholders in the form of hiked dividends. Continental Resources has followed suit by hiking its dividend 33% to $0.20, but has also gone off the beaten path–the company is finally taking a stake in North America’s biggest oil field.
Continental has announced plans to acquire 92,000 net acres in the Permian Basin from Pioneer Natural Resources Co. for $3.25 billion. The company will pay cash for the assets in the Delaware Basin, a subregion of the massive Permian
By. James Stafford
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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, timing of drilling, other exploration and results, 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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