The last great oil discovery onshore could unfold in the next few weeks, and it’s been hiding right under the noses of the supermajors.
It’s all because of a treasure trove of government-held data that very few even knew existed.
And it could lead to the most exciting oil discovery since the Permian Basin, the massive basin in Texas which is estimated to hold 46.3 billion barrels..
But today, this property overlooked by the majors lies untouched halfway around the world…
And at a mammoth 8.5 million acres, this basin spans an area even greater than many of the richest discoveries in the Lone Star state.
Recently, oil majors have been flocking to Africa since it’s among the last underexplored areas on Earth…
And with low production costs in the region, that’s led to lucrative opportunities that have helped put countries like Suriname and Guyana on the proverbial map.
That’s why Bloomberg is touting, “Africa Enjoys Oil Boom as Drilling Spreads Across Continent.”
But while companies like Shell and Exxon have latched onto offshore opportunities in the one of the continent’s most stable and friendliest governments…
They completely missed the Namibian government’s treasure trove of data, including valuable high quality aeromagnetic survey data that had never been interpreted.
And when this junior explorer discovered what the government had in their data bank.
They scooped up the entire Kavango Basin, giving them exclusive petroleum licenses to a property that’s millions of acres in size.
This is truly the final frontier of oil exploration, among the last Permian-sized basins that’s never been drilled.
Here’s why you should be keeping a close eye on Reconnaissance Energy Africa, the small company behind this play.
Validation from the Biggest Names in the Oil Industry
The Kavango Basin is an enormous untapped area spanning millions of acres across Namibia and Botswana.
And at 8.75 million acres, that’s nearly the size of the massive Midland Basin in the Permian, which is owned by countless different producers today.
So for this vast area to be completely owned by one company is almost unheard of, especially for a junior with a market cap of just $200 million.
That means the upside for this opportunity is unlike most we’ve seen in a decade.
After acquiring rights to Namibia’s Aeromag data, Recon Africa had this analyzed by some of the world’s foremost experts in oil exploration.
And what they discovered was very interesting.
This data showed that the sedimentary basin could run as deep as 30,000 feet.
That would make it as deep as the Permian Basin in West Texas.
And the most exciting part is that the majority of this potential production is expected to be conventional.
So unlike the unconventional shale plays of the last few years, where producers end up spending a fortune in production to tap the last few drops of a dry super basin…
ReconAfrica is focused on finding conventional plays with the untouched fields of the massive Kavango basin.
That means no expensive hydraulic fracturing… Lower costs for water during drilling… And much, much lower cost per barrel.
Which all adds up to greater potential for profits for Recon Africa and their investors, if a major discovery is made.
Plus, while digging deeper into the data, world-class geological interpreter Bill Cathey said it showed some of the best data he’d ever seen…
And that “nowhere in the world is there a sedimentary basin this deep that has not produced commercial quantities of hydrocarbons.”
That’s incredibly promising coming from the geological interpreter to the supergiants.
So just how much oil could this untapped property hold?
Sproule, a tier-1 resource assessment company, put out an estimate in July that we could be looking at up to 18 billion barrels.
With oil prices rising and Namibia boasting one of Africa’s lowest royalty rates for oil producers…
They’ve called on Daniel Jarvie, president of Worldwide Geochemistry LLC, to analyze the data as well, giving them a clearer look at just how rich this virgin play could be.
Jarvie is one of the world’s most respected geochemists, being named “Hart Energy’s Most Influential People for the Petroleum Industry in the Next Decade” in 2010.
And he’s estimated that if all goes well in the Kavango Basin, ReconAfrica could be sitting on a basin that could generate up to 120 billion barrels of oil…
Based on only 12% of their holdings.
While numbers like this may seem hard to believe, Jarvie actually said this could be a conservative estimate.
And he’s stated, “Given the nature of the basin and the tremendous thickness, this is pretty much a no brainer...It will be productive and I’m expecting high-quality oil.”
Recently, Haywood Securities raised their short term price target for ReconAfrica from $2.50 per share to $4…
Which would be a double for investors if the target is reached on positive news in the coming weeks.
But with world-class geophysicists and geochemists making such ringing endorsements and the low production costs in the region…
That’s a major driver behind ReconAfrica’s net asset value (NAV) per share.
At the moment, they’re still trading at just over $2.
And given the confidence in what they’re seeing in the Kavango Basin so far...
ReconAfrica is rushing to move on this high impact opportunity as fast as they can.
Within Just Weeks of Breaking Exciting News
Nick Steinberger, for example, has also joined ReconAfrica’s team as their Senior Vice President, Drilling and Operations.
After spending over 30 years helping to lead an oil and gas company that was sold for an incredible $3.1 billion, he could have gone wherever he liked in the industry.
So to have someone of his caliber on the team speaks volumes about how confident many are in the future of their drilling program. The entire management team are also shareholders
That’s because he’s seeing countless similarities between the Kavango and the Permian basin, noting, “It’s the same setting, the same geological time frame, and looks like the same type of thickness.
“The top of the Permian section of Kavango is expected to be 6,000-8,000 feet in depth, which is the same as the Permian in Texas.”
Plus, ReconAfrica just got more validation from one of the world’s most respected resource consulting companies, Wood Mackenzie.
They identified one of the best comparisons to the Kavango as the Midland Basin, within the Permian in Texas.
With the overall development value of the Midland Basin being an estimated $540 billion, this could spell big news for ReconAfrica if all goes according to plan…
Now, the excitement is building as ReconAfrica’s rig has arrived onsite and drilling has already begun.
If they do make the discovery many are expecting, it could mean a huge payday because of Namibia’s oil-friendly government.
And after completing their first well spud, they’ll move on quickly on to their next two wells.
They’re expected to complete drilling at the first well within 45 days.
And from there, they could receive drilling results within weeks.
That means that unlike many other oil exploration plays, this isn’t a long “wait-and-see” situation.
They’ve set themselves up perfectly in one of the highest upside plays in the industry.
But with this story unfolding quickly, investors are keeping a close eye on ReconAfrica…
As news in the coming weeks could break possibly the start of the most exciting oil story of the last decade.
The Last Word
- They beat the majors to scoop up this 8.5 million acre holding in the Kavango Basin, making it nearly the size of the entire country of Switzerland.
- World-class geological interpreter is calling the data among the best he’s seen and that “nowhere in the world is there a sedimentary basin this deep that does not produce commercial quantities of hydrocarbons.”
- According to legendary geochemist Daniel Jarvie, “Given the nature of this basin and the tremendous thickness, this is pretty much a no-brainer… It will be productive and I’m expecting high-quality oil.”
- The highly-regarded Wood Mackenzie says one of the closest comparisons could be the Midland Basin, which is worth an estimated $540 billion. That spells massive potential for ReconAfrica, sitting at a market cap of just over $200 million
- Drilling has already begun, and major news could be released soon.
Here are a few other companies branching out to capture new opportunities in untapped environments:
Chevron (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. The supermajor ranks among the top oil producers in the two African nations. Other areas on the continent where the company holds interests include Benin, Ghana, the Republic of Congo and Togo. Chevron also holds a 36.7 percent interest in the West African Gas Pipeline Company Limited, which supplies Nigerian natural gas to customers in the region.
Though its assets are spread out across the region, it’s all strategic. With bets on both oil and natural gas, the company is looking to take advantage of both of the fossil fuels. Though prices are still depressed at the moment, as fuel demand returns to normal, Chevron could be a big winner in as prices climb back up to pre-pandemic levels.
Though Chevron still has not bounced back from the massive hit it took back in March 2020, where it dropped to a 5-year low of just $59, the oil giant has made some progress thanks to recovering oil prices. Sitting at $90 at the time of writing, Chevron is slowly recuperating some of its losses and is positioned well to benefit in the mid to long-term.
Royal Dutch Shell (NYSE:RDS.A) is world’s third-largest oil and gas company by market cap. Like Chevron, Shell has also made some big bets in Africa. In fact, it is one of the leaders in the region. The Dutch oil giant began drilling in the region over 70 years ago, and now has energy assets in over 20 countries across the continent. Though it has sold off a number of its prized plays in the region in recent years, it continues to maintain a strong presence, especially in South Africa.
South Africa is key for Shell because the government has been significantly more stable than some of the other big bets on the continent. Moreover, the country has been very open to Shell in its projects. The company’s operations in South Africa include retail and commercial fuel, lubricant, chemical and manufacturing. It’s also heavily invested in upstream exploration. It even holds the exploration rights to the Orange Basin Deep Water area, off the country’s west coast and has applications for shale gas exploration rights in the Karoo, in central South Africa.
Like the rest of the oil industry, Shell took a massive beating in March 2020. It fel from a January high of $59 to a multi-year low of just $25. Since then, however, Shell has seen its share price grow by 60%, starting 2021 particularly strong.
Total (NYSE:TOT) barely squeezes into the top 4 oil and gas companies in the world, as well. And it’s no stranger to the African oil game, either. Total betting big on the region’s potential. The company has been in the region for over 90 years, and it is showing no sign of reducing its footprint anytime soon.
That said, Total also keeps a ‘big picture’ outlook across all of its projects. The company is distinctly aware of the needs that are not being met by a significant portion of the world’s growing population, it is also hyper-aware of the growing threat of climate change. This good news for investors who often worry about how local entities are impacted when global energy giants move into their countries.
From oil and gas to renewables and beyond, Total is setting itself up nicely for the long term. And thanks to its diversification, it has outperformed other pure oil majors. It is also staying ahead of the looming climate crisis by boosting its renewable assets. And it has a stellar ESG record, as well. From diversity and societal progression and workplace safety to its commitment to reducing its own carbon footprint, the near-100 year old energy giant is checking all the right boxes for investors.
Like just about any and every other company with any exposure to oil, Total took a major hit when oil prices fell into the negatives. Despite this, however, Total, thanks to its diversification push, has been able to accomplish what some other companies have not. It has seen its share price jump by 80% since March of last year, and it’s showing no sign of slowing.
Ecopetrol (NYSE:EC) is another company to keep an eye on as oil prices slowly return to pre-pandemic levels. The Colombian producer has a bright future in one of the world’s up and coming hydrocarbon regions. South America is often overlooked in the market, but as the world’s biggest consumers scramble to broaden their import sources, the region is set to grow rapidly in the coming years.
In a recent announcement, Ecopetrol approved an investment plan to help improve the company’s growth potential. In fact, it’s even betting on its own domestic fields, allocating as much as 80% of its planned $4 billion investments in Colombia, with the remaining 20% to be split between operations in Brazil and the United States.
Though Ecopetrol is still grappling with a pushback against its fracking plans, it has a lot of potential. And if hydraulic fracturing really takes off in Colombia, it could be a boon for not only the country’s petroleum-dependent economy, but for Ecopetrol’s shareholders, as well.
Ecopetrol may still be 50% down from its 5-year high, but the 2020 oil price crash presented an opportunity for investors to see some hefty gains in the years to come. Those who played this downturn correctly will likely reap the benefits of their choices in the mid to long term. Ecopetrol is making all the right moves, and it’s at exactly the right time, with Asian demand pushing more and more buyers to the often-overlooked South American oil boom.
Suncor Energy (NYSE:SU, TSX:SU) is one of Canada’s biggest oil companies. And it’s set itself up perfectly for the rebound in the oil sands. Suncor has pioneered a number of high-tech solutions for finding, pumping, storing, and delivering its resources. Not only is it big in the oil sector, however, it is a leader in renewable energy. Recently, the company invested $300 million in a wind farm located in Alberta.
When the rebound in crude prices finally materializes, giants like Suncor are sure to do well out of it. While many of the oil majors have given up on oil sands production – those who focus on technological advancements in the area have a great long-term outlook. And that upside is further amplified by the fact that it is currently looking particularly under-valued compared to its peers.
Even more promising, some analysts are already turning a bit more bullish on the oil sands, which is great news for Suncor. “With improved cost structures and increased propensity to be capital disciplined, Canadian producers are emerging from the downturn stronger, with greater ability to generate free cash flow,” Morgan Stanley analysts Benny Wong and Adam J Gray
Tourmaline Oil Corp (TSX:TOU) is a Canadian resource producer focusing on exploration, production, development and acquisition within the Western Canadian Sedimentary Basin.
It currently holds an extensive undeveloped land position with long-term growth opportunities and a large multi-year drilling inventory. Tourmaline’s strong leadership makes the company a promising pick for investors looking to take advantage of the tremendous Canadian oil opportunities which are due for a strong rebound as oil prices inch higher.
MEG Energy Corp (TSX:MEG): is a Canada-based oil producer which operates primarily in Northern Alberta’s oil sands. The forward-thinking company uses steam-assisted gravity drainage to retrieve oil from the deep wells which it drills. The excess heat and electricity produced from this process is then sold to Alberta’s power grid.
The company’s large proven resources and their cutting-edge technology make MEG a promising company for investors looking to get in to the promising oil sands in Alberta
Pembina Pipeline Corp. (TSX:PPL): The North American pipeline industry has had a tough year, but the recent approval of the Keystone XL pipeline route and the growing need for transportation capacity should act as a boon for the sector.
Pembina Pipeline Corp. has ridden the oil price crash in an impressive manner, maintaining a good stock price and increasing its dividend. This is a stock that pays you to wait, and as the sector continues to improve it is likely investors will see good gains here.
Gibson Energy (TSX:GEI): has a long history in Canada’s oil and gas game, going back to 1953. The company has a diverse portfolio which includes transportation, storage, processing, marketing and distribution of oil, condensates, oilfield waste, refined products and natural gas. With Gibson’s huge array of assets and its multi-platform sales strategies, it’s hedged a lot of the risk for investors in an inherently high-risk, high-reward industry.
By. Jeff Black
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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, 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, 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.
Exploration for hydrocarbons is a speculative venture necessarily involving substantial risk. Recon's future success will depend on its ability to develop its current properties and on its ability to discover resources that are capable of commercial production. However, there is no assurance that Recon's future exploration and development efforts will result in the discovery or development of commercial accumulations of oil and natural gas. In addition, even if hydrocarbons are discovered, the costs of extracting and delivering the hydrocarbons to market and variations in the market price may render uneconomic any discovered deposit. Geological conditions are variable and unpredictable. Even if production is commenced from a well, the quantity of hydrocarbons produced inevitably will decline over time, and production may be adversely affected or may have to be terminated altogether if Recon encounters unforeseen geological conditions. Adverse climatic conditions at such properties may also hinder Recon's ability to carry on exploration or production activities continuously throughout any given year.
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