Reconnaissance Energy Africa Ltd. [RECO-TSXV; RECAF-OTC] has been granted a petroleum licence in northwestern Botswana for 2.45 million acres (9,921 km2) and has entered into a farmout option agreement on these lands. The Botswana lands are contiguous to the company’s 6.3-million-acre petroleum licence in northeast Namibia.
As a result of acquiring and interpreting additional tight-grid regional aeromagnetic data, Reconnaissance Africa feels it has definitively established the eastern boundary of the Kavango Basin, where a deep and high potential section of the basin extends from northeast Namibia into northwest Botswana. As a consequence, Reconnaissance Africa has acquired the licence covering the eastern part of the entire Kavango Basin.
Terms of the licence are as follows:
â€¢ 100% working interest in all petroleum rights from surface to basement;
â€¢ An initial four-year exploration period, with renewals up to an additional 10 years, in accordance with the Botswana Petroleum (Exploration and Production) Act;
â€¢ Upon declaration of commercial production, the operator holds the right to enter into a 25-year production licence with a 20-year renewal period, in accordance with the Botswana Petroleum (Exploration and Production) Act;
â€¢ Royalties associated with the production licence will be subject to negotiation, in accordance with the Botswana Petroleum (Exploration and Production) Act, and generally range from 3 to 10% of gross revenue from production;
â€¢ The company has committed to a minimum work program of US$432,000 over the first four-year exploration period;
â€¢ The corporate tax rate in Botswana is 22%.
The acquisition and analysis process of the Botswana lands and initial data set used to define the most eastern portion of the Kavango Basin in Botswana was initiated over the past several years by a private company, controlled by Craig Steinke, a related party to Reconnaissance Africa.
While Steinke was proceeding with the application process, he proposed a joint venture with Reconnaissance Africa. In consideration of Steinke allowing Reconnaissance Africa to lead the acquisition and operate the Botswana lands, the company, through its wholly owned Botswanan subsidiary, has entered into a farmout option agreement with a private company wholly owned by Steinke under the following terms:
â€¢ The farmout option will carry a three-year term, providing the farmee with the right to acquire a 50% working interest in the licence.
â€¢ Initial payment from the farmee to Reconnaissance Africa is $100,000.
â€¢ If the option is exercised within 18 months of the date the licence was awarded, the farmee will pay Reconnaissance Africa $1-million upon transfer of the licence following exercise.
â€¢ If the option is exercised between 18 months and 36 months from the date the licence was awarded to Reconnaissance Africa, the farmee will pay Reconnaissance Africa $1.5-million upon transfer of the licence following exercise.
The agreement is subject to certain approvals.
Due to travel restrictions precipitated by the COVID-19 pandemic, the company has deferred drilling operations, which were originally scheduled to commence by June 30, 2020. As Namibia was only lightly affected by the COVID-19 virus, with only 29 confirmed cases (16 recoveries and 13 active cases) as of the date of this news release, guidance from Namibia suggests international travel will commence in July or August. As a result, Reconnaissance Africa’s revised drilling schedule, subject to the lifting of travel restrictions in a timely manner, includes shipping the company’s Crown 750 drilling rig from Houston, Texas to Walvis Bay, Namibia, by the second week of September with an anticipated spud, of the first of the three initial wells in late October.
Reconnaissance Africa is a junior oil and gas company engaged in the opening of the newly discovered deep Kavango sedimentary basin, in northeastern Namibia and northwestern Botswana, where the company holds petroleum licences comprising approximately 8.75 million contiguous acres.
In early trading, shares of Reconnaissance Energy Africa gained $0.06 to $0.79, or 8.2%, on a volume of 145,400 shares traded.