The days of offshore oil discovery are gone. One of the last times anyone was even remotely interested in one was 2017, when Repsol discovered 1.2 million barrels on Alaska’s North Slope.
However, a huge E&P company discovering a new resource doesn’t move the needle for investors. However, the multi-billion-boe potential of Namibia’s Kavango Basin could be an entirely different story.
This could be the last major onshore discovery that the world sees, and it has a multi-billion boe potential.
The best part for us? The entire Kavango Basin has been licensed to Reconnaissance Energy Africa, a small-cap exploration company. (TSX.V: RECO, OTCMKTS:RECAF) with an experienced team consisting of geologists who work with Halliburton and Schlumberger.
They just completed a 450-kilometre-long seismic acquisition to confirm the details of a highly-anticipated multiwell drilling program that will begin in Q1 next year.
Insiders buying shares even though short sellers are threatening the share price is a sign of a reason. They wouldn’t buy more if they weren’t excited by the Company’s future prospects and their 450-sq km of seismic.
The initial processing results of the seismic acquisition has produced high quality data revealing a variety of structural and stratigraphic features providing for a target rich environment for the upcoming drilling program scheduled for early Q1, 2022. #Seismic https://t.co/h31lwkw1eO
— ReconAfrica (@Recon_Africa) November 6, 2021
The most exciting part of the story may still be to come. Recon Africa will be able to use the seismic results to guide them where to drill. Netherland Sewell and Recon Africa are expected to give us a resource estimation, which is what has been waiting for.
It’s well worth the wait, we think. Here are three reasons:
#1 The Namibian government fully supports
There has been a fair amount of misinformation about Recon Africa’s (TSX.V: RECO, OTCMKTS:RECAF) relationship with state and local governments and community stakeholders, but in our view it is exactly that–misinformation, spread by short sellers to manipulate the share price.
Also, misinformation ignores that Recon Africa is a partner in Kavango exploration with the state-run National Petroleum of Namibia. (NAMCOR) has a 10% share.
Maggy Shino, Namibia’s Petroleum Commissioner, spoke to a Parliamentary Standing Committee in October. She clarified Recon Africa’s status, noting that RECAF has an Exclusive Prospecting License and that more than 40 consultative meetings have taken place with local communities, key stakeholders, and all relevant ministries to get to this point.
She noted that Recon Africa had already employed more than 250 Namibians, and spent N$14 million on services. Meanwhile, the government has seen a nearly N$8 billion increase in revenues as a result of its activities in Kavango.
On October 29 th, Namibia’s Traditional Authorities of East and West Kavango also made clear their position. They expressed confidence in the ongoing exploration program that has already found evidence of conventional oil and gas systems in the Kavango Sedimentary Basin and could result in significant socio-economic wealth.
“Everyone is satisfied with the way ReconAfrica conducts the exploration. This is what we want. The liberation struggle has ended, and it is time for economic freedom. “We want exploration to know what’s under the ground,” Hompa Eugene Siwombe (Chairperson of the Kavango Traditional Authority Committee),.
Recon Africa’s ESG commitments are proving to be a benefit to Kavango residents, Siwombe says. This has included drilling 22 solar-powered, potable water wells. 14 of these have been completed so far and handed over to communities, making “the lives better for our people in the Kavango areas”.
We see this as the main point: A conventional oil-play the size of Kavango is useless if it does not benefit Kavango and Namibians in general.
Recon Africa was aware of this and adopted it as part of its strategy. Recon African has committed NAD$112million ( CAD $9.46million) to its ESG initiatives for Namibia. This includes drilling water wells in Namibia and funding a COVID-19 vaccine program.
Traditional Authority King Hambukushu Erwin Munika Mbambo reiterated the statements of the chairman, suggesting that any outside opposition towards Recon Africa’s Oil Project is unwarranted. This is not what Namibians want.
The King stated, “We are supporting because we, the Traditional Leaders, see the real situation and not people trying to decide what should happen.”
Plays like these can lead to short-sellers, who scramble to cover their losses in time. This could include paid articles about “fracking” and other irrelevant lawsuits, where the lead plaintiff only has 150 shares…
This is a traditional play that doesn’t involve fracking. Recon Africa also reports that it has established a carbon neutral strategy. They are currently studying greenhouse gas containment strategies and reforestation, not just in their immediate area.
#2 The waiting is a good thing.
These large-scale oil exploration projects are not easily explored or delineated overnight. These are the patience plays that, if they prove successful, could lead to million-dollar fortunes.
Some investors are chiming in on RECAF Reddit to say that they are here for the long-term and view this as their retirement plan. They claim they aren’t scared by short-selling tactics and that the recent drop in share prices is a buying opportunity.
Craig Steinke, founder of Recon Africa (TSX.V: RECO, OTCMKTS:RECAF)  increased his shares by $50,000. We believe this is due to his confidence in the upcoming seismic results (early Dec) as well as the planned drilling program based upon the seismic acquisition.
We think he is signalling to investors that now, at the edge of what some belief may be the last major offshore oil exploration in the world, is not the right time to bow to short sellers’ demands to sell.
#3 The next step could be seismic
Anyone who has been following this company for a while knows that Recon Africa drilled two stratigraphic text wells earlier in the year and established the existence a functioning petroleum system. The seismic survey is now complete and the multi-well drill program is next.
October 21 Recon Africa announced that it had completed its acquisition of 450 kms of 2D seismic data on time and within budget. Shiraz Dhanani (lead geophysicist) was responsible for the massive project. He has previously conducted seismic operations all over the globe for companies like ExxonMobil or BP.
Absolute Imaging, Calgary, Alberta, and Down Under Geophysical, Houston, Texas are processing the seismic data. Both companies adhere to industry best practices and the results are expected by early December.
Investors are eagerly awaiting seismic results. But the real event will be the multi-well drilling campaign.
Recon Africa will begin the drill campaign in Q1 2022, “targeting seismically-defined traps and conventional reservoirs already found in the stratigraphic Wells”.
The market is very impatient and hopes that RECAF will drill before the year ends. However, it will not be until the first quarter of next year. This is because sound exploration is in Recon Africa’s best interests. It is better for investors to combine all data than to do a quick interpretation and drill one well right away. This approach is more comprehensive and will benefit investors over the long term. It may even lead to a JV deal. In this complex exploration game, more data is better.
Investors will need patience as they must deal with a short-selling campaign until the new data is available to the public. We believe it is worth the wait.
These days, discoveries are rare and hard to come by. We have tapped all of the oil resources. In any oil price environment, a major discovery onshore would be a good thing. Especially if it is a conventional play and doesn’t involve fracking. Even better if oil prices rise, and they might last.
A small-cap company with a strong financial position could have the best chance to offer investors an unforgettable adventure.
Exxon Mobil (NYSE:XOM) is the world’s largest oil and gas company. John D. Rockefeller Sr. founded it in 1870 with the goal of producing kerosene for lamps. It would later become an integrated oil company and one of the most influential corporations, shaping global events starting with WWII. ExxonMobil Corporation owns over 80 subsidiaries.
ExxonMobil, one of few Western energy companies that invest in Guyana’s growing oil industry, is the only Western company to do so. ExxonMobil announced that it would be focusing its capital expenditure on Guyana offshore by 2020, as global oil companies were struggling to make ends meet in a world where prices are below $50 per barrel. Exxon is reaping the benefits of this decision.
Operations are turning out to be very profitable, despite the fact that the Stabroek Block has seen significant drilling success and plenty of exploration potential. It hasn’t stopped. Exxon is also working to develop the Payara oilfield, which is located in the Stabroek Block to the northeast of Liza one and has a depth of approximately 2,000m. The Payara oilfield is expected to break even at $32 per barrel. This is a testament to the operation’s considerable profitability in an environment in which Brent is selling for more than $85 per barrel.
Exxon finds Guyana to be a highly profitable country because of its combination of low breakeven oil prices in the Stabroek Block, and a favourable production sharing agreement. This agreement includes a low royalty rate and means to recover development costs.
Chevron Corp. (NYSE:CVX) is an American multinational energy company with headquarters in San Ramon (California). It has been in operation for over 110 years. It was established by Benjamin Silliman Jr. and Charles Noyes in 1879 as the Standard Oil Company of Ohio. This monopoly controlled 90% of all oil production within the United States. It changed its name from Standard Oil Co. (Ohio) to Standard Oil Co. in 1911. Later, it merged with other companies to create Chevron Corporation. This company expanded beyond the USA into several other countries, including Canada, Angola, Angola, Nigeria, and Algeria.
Michael Wirth, Chevron CEO and Chairman expressed optimism recently about the trajectory of oil prices. He said that he saw “a fair amount support” following recent spikes above $80 per barrel.
Wirth pointed out that oil prices had made strong gains during a weak October season, which usually sees a drop in demand. He stated that prices have risen at a time when they are usually weakening, which suggests there is some support in the market.
Wirth noted for the long-term outlook that it is more difficult to find new oil supplies and has increased the pressure on companies to pay dividends or buybacks to shareholders. This is in addition to the fact that they are not spending the cash on new exploration.
ConocoPhillips (NYSE:COP)Â was founded in 1917 by two oil industry pioneers. It has grown to become one of the most important energy companies in the world. They offer a wide range of products to meet the needs of society for power generation, food and transportation.
ConocoPhillips works with the government and industry to ensure responsible resource development while minimizing the environmental impact. ConocoPhillips is committed to making sure that its employees feel valued and supported as they work together towards success.
Bank of America upgraded ConocoPhillips shares from Neutral to Buy from Neutral a few months ago. They set a $67 price target and called the company a “cash machine” with the potential to generate accelerated returns.
Leggate ConocoPhillips shares are back at more attractive levels, “but with a new macro outlook than when Brent oil peaked at $70.” BofA’s analyst thinks COP is extremely exposed to longer-term recovery. BofA isn’t the only Wall Street punter gushing over ConocoPhillips.
Cheniere Energy (NYSE:LNG) an energy company, specializes in Liquefied Natural Gas (LNG), and Liquefied Natural Gas (LNG). The company owns a number of US plants, pipelines and storage facilities. It also has a global presence in Australia and Canada. The demand for LNG is expected to grow in the coming years due to its safety as an alternative to oil-based fuel sources like gasoline and diesel, Cheniere Energy.
Natural gas and LNG are the most environmentally friendly hydrocarbons, emitting half the amount of greenhouse gases as coal and producing less than one-tenth of the pollutants. This is in line with the global shift to cleaner energy sources. Accordingly, LNG demand will grow by 3.4% per year through 2035. There will be approximately 100 million metric tonnes of additional capacity needed to meet both the growing demand and declining demand from existing projects. The increase in natural gas consumption for power generation capacity will be 300 GW more by 2040. This is equivalent to 300 million tons of LNG. Most of this demand comes from Asia, particularly China and India. This is great news for Cheniere Energy.
This makes natural gas/LNG the only fossil fuel likely to experience any growth in the next 20 years. Goldman predicts that Cheniere will experience strong growth in U.S. LNG export capacity and spot pricing for the remaining volume. This would allow Cheniere to achieve a free-cash-flow growth rate of approximately 50% from 2021 levels. Woodmac believes that LNG could see even greater growth. It is possible to adopt carbon capture and storage technology (CCS) at a fraction of the cost.
‘Crescent Point Energy Corp. (NYSE:CPG;TSX:CPG). is an Alberta-based oil and gas company. CPG is the symbol used to trade the shares of the Company on the Toronto Stock Exchange. Crescent Point owns interests in more than one million acres of natural gas and petroleum rights in Saskatchewan, Manitoba and North Dakota.
Crescent Point Energy is a company that explores, develops and produces light and moderate crude oil and natural resources in Western Canada, the United States, and other countries. The provinces of Saskatchewan and Alberta are home to the company’s natural gas properties and other assets.
Crescent Point shares were once worth more than $45 per share, and they even paid a generous dividend compared to the current price of $5.15 per share.
The 2014 oil price crash left the company with low cash flows and high levels of debt. This led to severe dividend cuts, and the shares have never recovered fully. Crescent Point shares trade at 80% below their 2014 levels despite the 120% gain.
Crescent Point has been able to generate healthy cash flows and make strategic acquisitions thanks to the continuing oil price rally. However, the stock could crash again if it is volatile.
Cenovus Energy is one of Canada’s top oil and gas producers. After the merger of Petro-Canada, Pacific Petroleums, Cenovus Energy was created in 2001. Cenovus Energy is a Canadian company that develops, produces and markets natural gas liquids and crude oil in Canada, the United States, and the Asia Pacific region. The company operates in three segments: Oil Sands, Conventional and Refining and Marketing.
Cenovus Energy shares rose to a 52 week high after J.P. Morgan elevated the shares to Overweight (from Neutral) with a C$14.50 target price (45% potential upside), and citing progress in last year’s Husky Energy takeover (OTCPK.HUSKF). Cenovus shares are still undervalued. WTI is now at $80/bbl, for the first time since 2004. The company is in a great place to generate enough cash flow to purchase back its ConocoPhillips stake.
Imperial Oil Limited, a subsidiary of Exxon Mobil Corporation (NYSE:IMO; TSX IMO), is a Canadian company that produces and refines petroleum products including gasoline. It operates in Canada, the United States, and other countries. Imperial Oil, an integrated oil company, produces and sells oil in Canada. The company’s Upstream segment had 138,000,000 barrels of proven undeveloped oil reserves as of December 31, 2020.
Imperial Oil, a Canadian oil company, announced its plans to continue the production of renewable diesel at its Strathcona refinery. When it’s completed in 2024 the facility will produce approximately 20K bbl/day renewable diesel. This, according to the company, could help reduce the emissions of the Canadian transport sector by 3M metric tonnes/year. According to the company, renewable diesel will be made from blue hydrogen. This is a combination of natural gas reforming and carbon capture and storage.
