Market snubs ReconAfrica after well results

Last Wednesday’s news that Reconnaissance Energy Africa’s (ReconAfrica) Makandina 8-2 Well in the Kavango Basin delivered no economic accumulations of hydrocarbons ignited a plunge of 46% in its share price in a single day.

ReconAfrica closed Friday at $1.55 per share on the Venture Exchange of the Toronto Stock Exchange (TSXV). According to the investment website Seeking Alpha, ReconAfrica’s share price is down 71% year-to-date and 68% year-on-year.

Its 52-week peak of $5.97 per share was recorded on 12 January this year. Shortly after that, on 20 January, ReconAfrica released an operational update, saying the processing of the first 450 km of 2D seismic data acquired in the Kavango Basin had been completed with \"excellent results\".

ReconAfrica’s 52-week low point of $1.41 per share was recorded on 9 November when it issued a statement on the Makandina 8-2 Well, saying: \"Although geologically a successful well, economic accumulations of hydrocarbons were not encountered, very likely due to the absence of a trap or a four-way dip closure.\"

MARKET DISMAY

Various international oil and gas market websites voiced their disappointment with the announcement.

Upstream.com headlined its report: \"Debut onshore wildcat flops as operator targets second probe\".

\"Reconnaissance Energy Africa’s debut wildcat onshore Namibia has failed to find viable quantities of oil or gas, jarring its plan to find a partner to help fund future drilling operations,\" Upstream said.

EnergyVoice.com said \"ReconAfrica shares plunge as well disappoints\", adding: \"As news broke of the failure, ReconAfrica’s stock fell.\"

Energy-pedia News also said \"ReconAfrica\'s Makandina 8-2 well disappoints\".

‘A SIN’

Adding insult to injury, the BBC on Thursday published an article on ReconAfrica’s oil and gas aspirations, with the headline \"COP27: The Namibia-Botswana oil project being called a sin\".

The article was widely published in other international media outlets during the week when the world’s attention was on the United Nations’ global climate summit (COP27) in Sharm El Sheikh, Egypt.

Among others, the BBC reporter interviewed the recently retired former Anglican Bishop of Namibia, Luke Pato. Pato spent the last months of his time in Namibia campaigning against ReconAfrica’s project with a group of other religious leaders.

The BBC quoted Pato: \"Jesus said, \'I have come so that they may have life and have it abundantly.\' He would never be on the side of anything that has the potential to destroy life, to destroy the environment in which people live. I have no doubt that Jesus would find a way of pulling the carpet under the feet of those who are still wanting to engage in the exploration of fossil fuels.

\"I would like drilling to stop, this company to pick up its machines and go.\"

Pato told the BBC he was worried about the effect that the drilling in Namibia may have on underground water reservoirs that connect to the Okavango River.

ReconAfrica responded by saying its exploration poses no pollution risk.

The BBC quoted Mwanyengwa Shapwanale, head of communications for ReconAfrica\'s Namibian subsidiary, saying the company was working with Namibia\'s government \"to make sure that not only are we in line with what is expected from us to protect the environment, especially the water, but also to make sure that we go the extra mile\".

NOT DISCOURAGED

The results of the Makandina 8-2 Well haven’t deterred ReconAfrica.

Also in Wednesday’s statement, the company said it was building the access road and drilling pad for the next programmed well, the 5-1, with the objective of spudding it by mid-December.

In addition, data from both the Phase 1 and Phase 2 seismic acquisition programmes acquired in 2021 and the first half of 2022 respectively, have been processed and an integrated interpretation is being finalised, ReconAfrica said.

\"Thus far, interpretation of the final processed seismic data from the Phase 2 acquisition programme has produced a series of additional leads and potential drilling targets. These additional leads will considerably expand and diversify our lead portfolio,\" ReconAfrica said.

The company further said ReconAfrica recently obtained an approved amendment to its environmental compliance certificate from the ministry of environment, forestry and tourism to acquire up to an additional 1 500 km of 2D seismic data.

\"Mobilisation of the seismic crew is underway and the data acquisition should commence at the beginning of November and likely continue into at least April 2023,\" ReconAfrica said.