ReconAfrica has found a joint venture partner – BW Energy – with a hefty US$16 million investment.
BW Energy, which has a 95% interest in the Kudu field, is paying US$16 million for an ownership of 6.7% in ReconAfrica.
The company is also acquiring a 20% working interest in PEL73 in exchange for future payments of up to US$125 million upon successful exploration outcomes, of which US$45 million comes at declaration of final investment decision of a commercial discovery, US$5 million on first production, and three tranches of US$25 million after certain cash flow milestones are reached.
ReconAfrica is engaged in the opening of the newly discovered Kavango Sedimentary Basin in the Kalahari Desert of northeastern Namibia and northwestern Botswana, where the company holds petroleum licences comprising ~8 million contiguous acres.
ReconAfrica has been looking for a partner for months.
The joint venture structure preserves a 70% working interest in PEL 73 for ReconAfrica, 10% carried interest for Namcor and 20% working interest for BW Energy.
BW Energy will participate in ReconAfrica’s two Damara Fold Belt exploration wells and a 3D seismic program.
The company also has an option to join two Rift Basin exploration wells for over two years.
In return, BW Energy will earn a US$45 million bonus at the declaration of commerciality (final investment decision), providing additional capital carry through to the first production.
The company will also receive US$80 million in production bonuses based on certain cash flow milestones.
After achieving positive free cash flow, BW Energy will earn a further US$141 million.
ReconAfrica has also agreed with Research Capital Corporation to be the lead underwriter and sole book-runner.
ReconAfrica CEO Brian Reinsborough welcomed BW Energy as a partner in Namibia.
“Our farm-out joint venture process was thorough, which attracted significant interest from high-quality companies of all sizes.
“BW Energy’s offer met our guidelines to ensure strategic alignment for a multi-well exploration drilling program while retaining significant upside exposure on success.
“We continue to execute our strategic priorities set out last year with the company on track to drill a portfolio of opportunities in the Damara Fold Belt and the Kavango Rift Basin,” Reiborough said.
He added that the first well, Naingopo, is currently drilling and is supported by BW Energy, whose high-quality technical team will add significant value to executing ReconAfrica’s forward exploration plans.
BW Energy CEO Carl Arnet said the transaction will enable them to expand their footprint in a strategically important energy region and further their position as a leader in Namibia’s development towards energy independence.
Arnet said the data and insights gained through ReconAfrica’s exploration campaign will further BW Energy’s understanding of Namibia’s geology and petroleum system and help de-risk planned exploration and development of our Kudu licence.
