Questions and Answers from the Final Frontier of Onshore Oil Exploration
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Oil and Gas sector investors have watched with interest over the past two years as Recon Africa discovered and began exploring what could be the last large onshore oil discovery. Here are six questions that investors are asking about the company and this potentially incredible find.
Did Recon Africa discover oil in Namibia?
That depends on who you ask. Die-hard long investors will tell you that Recon Africa has discovered billions of barrels of oil. The company has only committed to saying it has discovered a working petroleum system, so there is no guarantee of commercial quantities of oil. A recently released resource report indicates about one billion unrisked barrels of oil and about 73 million risked barrels of oil. This report only covers a small portion of Recon Africa's license area in Namibia and is based on limited data.
Is Namibia a good place to look for oil?
While many nations, particularly in Africa, are burdened with corrupt, greedy and/or incompetent governments, Namibia has been a stable democracy since achieving independence 30 years ago. In addition, terms of Recon Africa's license agreement are reasonable by oil industry standards. Note that Namibia gets over 50% of oil production profits, so the nation is not getting a bad deal. Namibia has been eager to encourage oil exploration, as evidenced by two recent offshore oil discoveries by major oil companies. If successful, Recon Africa's discovery will be the first onshore find in Namibia. Many people in the oil and gas industry believe that Africa in general, and Namibia in particular, is a great place to explore.
If there is so much oil in Namibia, why are they only finding it now?
There are several reasons why oil exploration in Namibia as a whole, and the Kavango basin in particular, has been limited. As noted above, Namibia only gained its independence fairly recently, and only within the past 10 years or so have they turned their attention to encouraging oil exploration. Specific to the Kavango basin, the area was not considered a good target for commercial quantities of oil until recent analysis by geologists showed that the basin had the necessary geological characteristics and was much deeper than previously thought.
How much oil is there in the Kavango basin?
No one really knows how much oil there is, and how much of it can be pumped to the surface. In fact, it could be years or decades before this question has a clear answer. This lack of complete understanding is common in the oil industry since resource estimates are constantly updated as more information comes in. This information comes from seismic mapping and wells that are drilled and tested. In an area as large as the Kavango basin (Recon Africa has licenses for over eight million acres) it will take a long time to figure out how much oil it holds.
When will Recon Africa start drilling again?
Recon Africa completed two wells during 2021 but scrapped plans for a third well due to the success of the first two. In late 2021 2D seismic was completed which provided data for selecting future drilling locations. The company has stated that they expect to begin drilling again in Q2 2022 and will drill three to four wells in 2022. Based on recent comments, they will likely begin drilling within a few weeks. The company has C$75 million in cash which should be sufficient to complete the 2022 drilling program. Permit applications for multiple sites were submitted early in 2022 and it seems as though the necessary approvals have been obtained. One of the announced potential locations seems to have mine clearing activity going on and is quite obviously being cleared. Yes, you read that right. Mine and ordinance clearing is necessary in that region due to Namibia's war of independence in the 1990's.
Is Recon Africa a good investment?
Whether Recon Africa is a good investment for you depends on your risk tolerance and how likely you think they are to discover significant quantities of oil. The stock had a run up early in 2021 based on the discovery of a working petroleum system, but has been down significantly since that time. Some investors believe that short selling has had a big effect on the share price. It is possible that the huge increase during early 2021 made the stock overvalued as its market cap exceeded $1 billion. Some investors are also wondering if they should invest now while it is still a speculative stock, or wait until commercial oil is discovered and buy in at a higher price but with less risk.
How can I learn more about Recon Africa?
OTC Wiki contributors provide a wealth of information about RECAF Stock on the Recon Africa wiki page.