Talking with Brian Reinsborough, President & CEO of ReconAfrica, about its 8.5 million acre basin, with multiple 200-300 million barrel oil prospects

“Part 1 of the Reconnaissance Energy Africa (RECO.V RECAF) story saw the stock rise from 26 cents in April 2020 to a high of $13.84 in June 2021. The company was attacked by shorts and class actions and the share price came back to around $1. It's now time for Part 2 and I spoke towards the end of last week with Brian Reinsborough, the new President and CEO, about where ReconAfrica goes from here. This is the transcript:

JF: Good morning, Brian. It looks like you've now got rid of the class action lawsuits and it's all clear to move forward from here.

BR: Yes, that’s right. We were able to get that behind us and disclose it, so another big milestone that was one of my key priorities when I came on board.

JF: Good. Perhaps you could give a brief overview of the upcoming operations.

BR: Yeah, our team is working very hard. We're preparing our locations for our Damara fold belt operations. Our first well is prepared to be drilled in June of this year. Our first well is called Prospect L in the Damara fold belt. It's an oil and gas prospect. It's quite large. We like it a lot. Right now, we're doing road preparations into the site and constructing the drilling pad. We're also doing preparations on two follow-up locations, Prospects P and M. Again, we're doing road preparations and doing analysis follow-up. So we're in full operations mode right now with anticipation of drilling and commencing the second order.

JF: Okay, and how much funding do you think is needed?

BR: Yeah, these wells typically cost around $10-$11 million a piece for the Damara fold belt, but that's pretty loaded with a lot of evaluation material. So we think we're actually going to be under that AFE when it's all said and done. So, you know, around that per well.

JF: And how do you see that money being raised? Farm out or an equity raise?

BR: The process right now, we've been doing a joint venture process for the last few months. It's coming to an end in April. We've been pretty pleased with the process there, so we'll hopefully see an outcome of that process in April. We're also engaged with some banks to look at the equity markets and see if there's a process there that we may look at. We don't want to be caught on our heels if the JV process doesn't yield a value that we like or a value that we need to fill the capital structure. So we're making sure we're prepared on both sides.

JF: And where would you see the timing of that vis-à-vis the start date of the wells?

BR: Yeah, well, the JV process should come to closure in the April time frame. And the equity raise is probably a little bit before that is what we see.

JF: Right.

BR: If we do one, yeah.

JF: So an equity raise, if it happened, would be later this month or next?

BR: Yeah, in that time frame, yeah. JV sort of in April.

JF: Okay. And spud would be anticipated for June, July?

BR: In June. Yeah. Operationally, we're preparing for June. That's what the team sort of is going through all the permitting processing and operational preparations for cutting roads and everything. So that's the sequence of events right now.

JF: Okay. Now, there's been a lot of success offshore Namibia. Do you think onshore will do the same?

BR: Well, we think so. We have an entire basin locked up. I'm sure it's a different geological age than the Orange Basin. But when these basins work, they work very well. You got to keep in mind the Orange Basin sat idle for almost 26 years before Total came and opened it up with a wildcat exploration well three or four years ago. So we think the Kavango Basin, which is sort of what we're in actually, is not that much different. We're older rocks, but we have a lot of hydrocarbon shows and we know the petroleum system is working here. We have a fold belt that's very well imaged, great structure. So we think the time is right to test this.

JF: Okay. Now, the results last time were considered disappointing.

BR: Yeah. Well, yes and no. The purpose of the previous wells were really to define and see if the petroleum system was working. That was really the goal of those wells. They drilled two of the wells actually blind, which means they drilled them without seismic data. They drilled them on gravity data. And the first well, in fact, got a bunch of oil shows in the well. They took 49 sidewall cores and every sidewall core had oil in it. So the intent, they actually were successful. And of course, we are the recipients of those wells. They collected a ton of data. We're able to take that and incorporate it into a really, really thorough petroleum systems work. And I think we understand the assets much better today than we did just a few years ago.

JF: Okay. And has there been any calculation of an estimated chance of success?

BR: Yeah. We do our own assessment when we look at the inventory. We calculate the chance of hitting the Damara Fold Belt as sort of one in four, one in five. And these are large structures, large four-way dip closures, which tend to hit at a higher success rate. So that's what we assess for these type of structures, which is fairly good.

JF: So you're looking at 20-25%, yeah?

BR: Yeah, yeah.

JF: And two wells initially?

BR: Yeah, yes. Yeah.

JF: Okay. And what would you say the upcoming news flow is going to be like?

BR: News flow? Yeah. Well, we drill these wells. They're tight wells. We will disclose the results after completions of the wells. So that's typically a protocol.

JF: Right.

BR: Now, in the next little while, we're going to be releasing the new NSAI [Netherland Sewell & Associates Inc] reserve report, probably mid-next week. That'll be the next catalyst for news flow. And after that, if we do an equity raise, of course, there'll be a disclosure there. And then in April, if we have news on the JV, there'll be some disclosures there. And then spudding our wells, of course, will be the next catalyst, which will be coming up in June. So that'll be the disclosure of catalysts in the next couple of months for investors.

JF: And from spud to actually releasing results, what would the timescale be for that?

BR: Yeah, these wells, they're scheduled to take about three months. We think they'll be a little quicker than that, actually. I think we'll be able to drill in about two months. That's sort of our timeline.

JF: So results in August, latest September?

BR: Yeah. If we drill sort of mid-late June, the August-September timeframe is when we would expect it.

JF: Okay. Now, I know a lot of promotion is done by shareholders, not the company, but do you think the shares will be aggressively promoted again this time around?

BR: I hope. I mean, our disclosure policy's tightened up significantly since I've come on board. You know, we're going to keep these results tight such that that does not happen again. I don't like that, personally. So I plan to keep the results tight until it's appropriate to disclose it. That's my personal philosophy. So I want to keep this as tight as possible.

JF: Okay. So what are the potential numbers here, Brian?

BR: Yeah. Well, the Damara Fold Belt is massive. You know, just one individual prospect is giving an idea. You know, the size of these are, you know, multiple, you know, sort of 200 to 300 million barrel potential oil prospects per target. The NPV of just one target, net to the company, can be upwards of half a billion dollars net to the company. So they are very significant.

JF: They're impressive numbers.

BR: Certainly are. Yeah. And we'll be able to disclose those numbers a little bit more clearly. I'm being a little bit vague on those numbers right now because the NSAI report is not out there. Next week when it's public, I'll be able to talk more explicitly about those numbers.

JF: Okay. It all sounds very interesting, Brian.

BR: Yeah, it is. Absolutely. So look forward to being able to talk more openly about this when we're at the right time.

As Brian says, they have a whole basin locked up, with licences covering 8.5 million acres in northeast Namibia and northwest Botswana. The project is huge and Brian is credible, having discovered over 2.4 billion barrels of oil equivalent over the course of his career. The NSAI report is due later this week and there will probably be news of a financing later this month, with a possible JV announcement next month and a spud announcement in June. Well results will be announced in August/September and there undoubtedly will be significant trading opportunities along the way. Drilling success, of course, would be transformational.”