BW Energy Signs an Agreement to Acquire shares in Reconnaissance Energy Africa

BW Energy has entered into a Letter Agreement (LA) with Reconnaissance Energy Africa Ltd (ReconAfrica) to acquire around 16.8 million common shares and 16.8 million warrants in ReconAfrica’s recent equity raise, amounting to a total consideration of USD 16 million. As part of this transaction, BW Energy will gain a 20% non-operating interest in the onshore Petroleum Exploration License 73 (PEL 73). This agreement also includes a provision where ReconAfrica will extend a carry of USD 6.4 million to BW Energy, aligned with the planned initial work program for the license.

In addition to the primary investment, BW Energy has committed to making contingent payments to ReconAfrica, which will be tied to the achievement of specific field development milestones. This strategic move not only strengthens BW Energy’s position in the exploration sector but also aligns with its broader goals of expanding its portfolio and engaging in high-potential projects.

PEL 73, located in northeast Namibia and spanning approximately 25,341 sq km, is set for two exploration wells in the Damara Fold Belt Basin in the latter half of 2024. These wells aim to tap into a combined un-risked resource potential of 489 million barrels of oil, as estimated by Netherland, Sewell & Associates Inc. (NSAI). Following the initial wells, the partnership plans a 3D seismic survey of the Kavango Rift Basin in late 2025, potentially leading to the drilling of two additional exploration wells.

Common shares are priced at CAD 1.30 each, while warrants are available for CAD 1.70 each with a validity of 24 months. BW Energy has committed to contingent payments of up to USD 125 million to ReconAfrica, contingent upon meeting specific milestones. This includes USD 22.5 million payable upon the final investment decision for a commercial development.

Carl Krogh Arnet, CEO of BW Energy, stated that the transaction will strategically expand BW Energy’s presence in a key energy region and strengthen its role in Namibia's journey towards energy independence. He highlighted that the data and insights from ReconAfrica’s exploration campaign will enhance their understanding of Namibia's geology and petroleum system, thereby reducing risks associated with the exploration and development of their Kudu license.

BW Energy establishes itself as a differentiated player within the Exploration & Production (E&P) landscape. Their strategy centers on exploiting proven offshore oil and gas reserves, mitigating risk through a phased development approach. This method optimizes resource allocation and streamlines project timelines. Furthermore, BW Energy capitalizes on existing production facilities, a stark contrast to traditional, high-investment, large-scale offshore developments. This not only reduces upfront capital expenditures but also accelerates the critical "first oil" milestone, leading to a faster influx of cash flow. This unique approach positions BW Energy as a compelling proposition for investors seeking growth opportunities within the proven offshore oil and gas segment of the E&P space.