By Toyin Akinosho, Lagos, Nigeria
After a swirl of good press featuring salutary articles about its daring into an under explored frontier basin and encountering a working petroleum system, ReconAfrica now appears to have arrived at that point where all the spears are aimed at it.
The Canadian independent is entangled in a class action suit in New York, United States, filed by shareholders who accuse it of issuing misleading statements that convinced them to buy shares between February 2019 and September 2021 – shares that have since tanked in value. “Defendants concealed material information from the public about the data from their first two oil and gas test wells, and about their plans to frack in Namibia, while selling millions of dollars of ReconAfrica stock to unsuspecting investors,” lawyers for the aggrieved investors wrote in papers filed in court.
ReconAfrica, in 2021, drilled two stratigraphic test wells in a very large, previously unregarded sedimentary basin, called the Kavango Basin onshore northern Namibia. The 6-1 and 6-2 wells, the company reported, intersected over 300 metres and 200metres of oil and gas shows respectively. ReconAfrica did not call any of these a discovery. Indeed, it stated clearly that “the two wells were drilled to provide stratigraphic, sedimentological, reservoir and geochemical information”. Although the data in both wells was very positive, neither 6-1 nor 6-2 was tested since they were designed to be only stratigraphic wells.
Makandina 8-2, which was ReconAfrica’s third well in the basin, was the company’s first seismically defined probe in the campaign. It failed to encounter economic accumulations of hydrocarbons. The company placed the blame on the absence of a trap or a four-way dip closure.
But a lot of the complaints about ReconAfrica today is associated with claims that the explorer convinced people to buy shares, as if it went to town screaming: “Hey we have a hydrocarbon discovery here!” From a technical viewpoint, I think ReconAfrica did an amazing job defining an unknown basin using aero-gravity data.
But I also think they should not have started drilling before any seismic was recorded and interpreted. I consider it sheer carelessness on their part not to have brought in test equipment for the first well, even it was called a stratigraphic well. Had ReconAfrica tested even a small amount of oil, even as low as 500Barrels of Oil Per Day, it would have established their credibility. But with no testing, nothing solid is known, just speculation.
The stock has been extremely volatile and this has been accelerated by the short sellers.
I wasn’t surprised that the Namibia government sold its half of its equity back to ReconAfrica. No.
I know the Namibian government to be extremely risk averse. You just need to take a look at its attitude to the Kudu field development (space will not permit me to go into that here) to understand the psychology behind its bailing out of Kavango.
One cynical report about ReconAfrica’s operations, published in the Daily Maverick, a widely respected South African platform, had a sentence that leapt at me: “Announcing the results of the third well in November, ReconAfrica said it had found no commercial oil, but still insisted that the data confirmed the presence of a working petroleum system”. That’s an extremely clueless statement.
Personally, I wish ReconAfrica a lot of luck. It’s a brave adventurer who came to forage for hydrocarbon in an unexplored miogeosyncline at a time (yes, right at the height of the pandemic) when nothing was happening anywhere.
Toyin Akinosho, publisher of Africa Oil+Gas Report, is a petroleum geoscientist of over three decades’ postgraduate experience.