Reconnaissance Energy Africa Ltd (TSX-V:RECO, OTCQX:RECAF) (ReconAfrica) is set to unlock considerable hydrocarbon potential, analysts say, following its move into Angola announced last week.
The Canadian company signed an agreement with Angola’s national oil regulator, Angola’s National Agency for Petroleum, Gas, and Biofuels (ANPG), granting ReconAfrica 5.2 million net acres of onshore exploration rights in southeastern Angola’s Etosha-Okavango basin.
The acreage lies directly along trend with the company’s 6.3 million-acre land position in neighboring Namibia and further consolidates ReconAfrica’s early mover advantage in the highly prospective Damara Fold Belt and Rift Basin.
Analysts view the MOU as a low-cost, high-upside move.
“The newly signed MOU provides a low-cost entry into highly prospective acreage in Angola—a jurisdiction that has recently implemented regulatory reforms aimed at attracting foreign investment,” wrote Research Capital Corp in a note, reiterating its Speculative Buy rating and C$2.55 price target.
Under the MOU, ReconAfrica will lead a 24-month technical program that includes geological studies, a regional hydrocarbon seep survey, geochemical sampling, and planning for a 2D seismic program. The company will hold an 80% working interest, while Angola’s state-owned oil company Sonangol will retain the remaining 20%.
Haywood Securities also sees the Angola agreement as a logical and strategic expansion of ReconAfrica’s basin-scale exploration model. “We view the agreement as adding to the company’s activities in Namibia where the team is carrying out exploration drilling in the Damara Fold Belt and Rift plays, which might extend into onshore Angola,” analysts wrote, maintaining their Buy rating and $2.10 per share target.
The move comes as ReconAfrica prepares to spud its Prospect I exploration well in Namibia, located just 47 kilometers from the new Angolan acreage. The well is targeting a large four-way dip closure covering approximately 6,000 acres with a planned depth of 3,800 metres.
According to Haywood Securities, Prospect I carries an unrisked resource estimate of 365 million barrels of oil or 1.9 trillion cubic feet of gas—more than double the 163 million-barrel potential previously assigned to the Naingopo well.
Research Capital noted that drilling at Naingopo significantly de-risked the Damara Fold Belt by confirming the presence of reservoir-quality Otavi carbonates and surface oil shows, increasing confidence in the geological extension into Angola. “If commercial hydrocarbons are proven in Namibia, the Angolan acreage could substantially expand ReconAfrica’s access to multi-hundred-million-barrel exploration prospects,” the firm noted.
With drilling at Prospect I imminent and technical groundwork in Angola now underway, analysts continue to believe that ReconAfrica is pursuing a high-risk, high-reward strategy in one of Africa’s least explored but potentially most prolific petroleum systems.