The farm-down deal between Reconnaissance Energy Africa and BW Energy is expected to be completed before October 31, 2024.
ReconAfrica announced on Wednesday that it had now entered into a definitive agreement with BW Energy regarding the farm-down deal.
The parties will also wait for all necessary regulatory approvals, including, but not limited to, approvals from certain governmental authorities, including the Ministry of Mines and Energy and Namcor, and the acceptance of the TSX Venture Exchange.
BW Energy, which has a 95% interest in the Kudu field, is paying US$16 million for an ownership stake 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 the declaration of the 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.
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 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 CEO Brian Reinsborough said they have successfully started the joint venture partnership with BW Energy by completing the farm-down agreement quickly.
Reinsborough said the transaction maximizes cash upfront for ReconAfrica’s multi-well drilling program.
“It provides significant cash for development expenditures based on success while retaining a high working interest for ReconAfrica and its shareholders,” Reinsborough said.
The joint venture structure preserves a 70% working interest in PEL 73 for ReconAfrica, a 10% carried interest for Namcor and a 20% working interest for BW Energy.
