The Best Is Yet to return For The World’s Hottest Oil Players - Oil Demand Is Finally Bouncing Back... Oil demand is finally bouncing back despite the fact that Covid cases are rising and additional travel restrictions have been put in place. Oil prices moved higher this week after the demand outlook improved. While Covid cases are up significantly from a few weeks ago, and travel restrictions have proliferated, demand still looks strong and on the rise.
Congratulations!
By now, those of you who examine my top New Year’s stock pick, Recon Africa, will have learned that this small-cap explorer may have just moved one giant leap forward in Namibia’s Kavango Basin.
"Beyond my wildest imagination, this small-cap explorer started to drill three wells to prove up the existence of indicators of petroleum systems in Namibia. They may have proved it within the first drill. Some results are just in and this play may have just been hugely de-risked. But it's like they did far more than that. They encountered oil and gas indicators, too" Yusuf Bhandarkar - Founder CEO Mumbai Multimedia Studio - Mumbai India
If you scooped up shares in Reconnaissance Energy Africa (“Recon Africa”) (TSXV:RECO, OTC:RECAF) once I first recommended it, I’m sure you’ve been watching its remarkable rise with great interest. If you didn’t, don’t worry. It’s not too late. Drill #2 is simply on the brink of start...The Press Release went out last Thursday - 15/04/2021 and also the stock forums began lighting up as investors evaluated the results. Retail investors could also be wakening to the chance and word may soon start to spread.
Spencer Hohan, a petroleum engineer, commented on Yahoo:
“As a Petroleum Engineer of 40 years now, having spent a career with major oil companies, and smaller independents, it's hard to emphasize how rare it's for something like this to be a ‘hit’ on the primary penetration well drilled based totally on a geomagnetic survey. this is often astounding. If the second well shows anywhere near similar geophysical properties, and further confirms the basin structure, this might easily be worth quite 100 times its current price. Sorry, shorts. You'd best cover today, otherwise you are bankrupt. And it's going to be too late already.”
This was a totally speculative play I wrote about last year. But I believed during this story. I believed in it when its enterprise value was much lower and before these drill results were announced. Now, of course, there'll be plenty of true believers, but Oil price readers got there first for what could also be the massive rewards that some say only come around some times in your investing career.
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The results of the primary drill are far beyond what I anticipated:
• The well sample log provides over 200 meters of oil and fossil fuel indicators over three discrete intervals in a very stacked sequence of reservoir and source rock.
• Extraction of oil from these samples “supports an energetic petroleum system with multiple source intervals”.
Dan Jarvie, RECO’s Geochemist and member, confirmed the existence of components and processes indicating a working petroleum system, stating: “These shows are indicative of migrated, thermogenic petroleum and occur over three different intervals within the 6-2 test well. The intervals penetrated include highly porous, permeable sediments and marine source rocks as predicted, and extensive marine carbonate litho facies. Mud gas results indicate a high BTU gas with the presence of sunshine oil in numerous cutting samples. supported these initial results, the components and processes for a working petroleum system are all present.”
This could put Namibia on the world’s oil map during a very big way.
Hon. Tom Alweendo, Namibian Minister of Mines and Energy, stated: “This is great news for the people of Namibia, with the results of the well confirming an enormous potential for a really valuable energy resource for our country and so a major development for Namibia onshore exploration efforts. The positive results of this well have provided us with the critical information required to unlock the country’s petroleum prospectivity & productivity is that the beginning within the process of locating significant accumulations, we are able to now confidently confirm Namibia is endowed with a lively onshore petroleum basin.”
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This story keeps recovering and better. It’s still a risk, but now that they’ve proven indicators of a petroleum system, i feel it’s becoming far less risky.
And they did that on their first well, once I was simply optimistic they might know in 3 drills.
So, what now? Now, the enterprise value looks plenty safer.
And my excitement is difficult to contain over what they may uncover in well #2. If the primary well found these indicators, the results of the second can be … (I’m not even sure the way to express it as i'm still so excited over the results from the primary well.)
The rig--owned by RECO--is reportedly being mobilized to the second well (6-1), 16km from the primary well (6-2). With this second drill, they decide to evaluate the indications of the petroleum systems revealed within the first well in a region of maximum thickness.
This is where it might be good to revisit Dan Jarvie’s numbers that we shared with you within the previous RECO newsletter. Now that indicators for a petroleum system are found, that possible 120-billion-barrel estimate from Jarvie is also pinging some serious radar.
Jarvie’s estimate of a possible 120 billion barrels of oil equivalent was based only on 12% of Recon’s holdings. Jarvie estimated RECO’s Kavango Basin is also capable of generating over 100 billion barrels of oil. And in Haywood’s opinion, given the dimensions of the basin (we’re talking about 6.3MM acres in Namibia plus a further 2.2mm in Botswana), a discovery success may present opportunities for strategic joint ventures for further de-risking--without additional shareholder dilution.
When Haywood initiated coverage in November so adjusted their target valuation in December, they noted that “On a successful discovery, attractive fiscal terms should help to facilitate the event of the basin, thereby increasing the possibility of commercialization and shareholder value”.
At that point, Haywood recommended “accumulating a footh old prior drilling/evaluation news flow in H1/21 aimed toward proving up the presence of a working hydrocarbons system, which if confirmed, should provide abundant opportunities for further exploration and appraisal drilling”. Well Haywood have just increased their price target to $10 and if you're an investor i believe you ought to take a glance at their latest report they put out yesterday afternoon: Haywood Recon Africa Update.
Even without this week’s exciting first drill results proving indicators of a petroleum system, Haywood gave the impression to see material upside as Kavango could also be de-risked:
Haywood’s adjustment also coincided with an enormous boost of confidence from Wood Mackenzie, comparing RECO’s Kavango basin to the Midland Basin in Texas and estimating that the full development potential of Kavango may be a possible $540 billion.
I’m very excited about this. In my experience, this almost never happens. I expect to determine something like this only a pair of times in my lifetime, and I’m thrilled that I used to be ready to share it with you at this stage. Small-cap explorers may always have big upside potential. If you discover the proper one you will see excellent returns. But in my view they’re almost impossible to search out during a sea of bad managers and ill-thought-out plays. I feel RECO could also be a particularly rare exception, sitting on a deep basin that may normally be expected to own been scooped up by a super-major.
I anticipated a quick ride on this one, and progress has been even faster than I imagined. I’m visiting watch what may happen next after they finish drilling their second well. i'm very excited about this one.
Latest Press Release: https://finance.yahoo.com/news/reconafricas-first-three-wells-confirms-040100822.html
Updated Haywoods Research Report: https://reconafrica.com/wp-content/uploads/Haywood-Report-Apr-15-2021.pdf
Company Website: http://www.reconafrica.com/
Canadian ticker: https://finance.yahoo.com/quote/RECO.V/?p=RECO.V
U.S. ticker: https://finance.yahoo.com/quote/RECAF/?p=RECAF
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Forward-Looking Statements. Statements contained during this document that don't seem to be historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of Recon. All estimates and statements with relevancy 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 related to 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 within the regulatory and taxation environment. Actual results may vary materially from the knowledge provided during this document, and there's no representation that the particular results realized within the future are going to be the identical in whole or partially as those presented herein. Other factors that might cause actual results to differ from those contained within the forward-looking statements also are 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 PRN by law.
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