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Reconnaissance Energy Africa Ltd
Symbol RECO
Shares Issued 65,940,145
Close 2020-02-03 C$ 0.81
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Reconnaissance to acquire drill rig for $1.8M (U.S.)

2020-02-04 01:39 ET - News Release

Mr. J. Jay Park reports


Reconnaissance Energy Africa Ltd. has entered into a binding asset purchase agreement with Henderson Rigs (Houston) for the acquisition of a Crown 750 drilling rig.

The initial cost of the rig is $1.8-million (U.S.), of which the company has provided Henderson Rigs with a non-refundable deposit of $450,000 (U.S.) with the balance of $1.35-million (U.S.) payable on or before Feb. 10, 2020. Shortly thereafter, Henderson Rigs will outfit the Crown 750 with a best-in-class top-drive system (for faster drilling rates) and ancillary equipment to acclimate the rig for drilling in the Kalahari Desert. These incremental improvement costs will be approximately $1.2-million (U.S.). Therefore, all-in costs when the rig is ready to transport will be approximately $3-million (U.S.).

The Crown 750 was United States manufactured and has never been used. The rig is 1,000 horsepower equipped with two CAT 540 horsepower diesel engines, combined with a 440,000-pound hook load. Consequently, the rig is rated to drill 12,000 vertical feet. Further details and specifications of the Crown 750 are posted on the company's website.

As a result of comprehensive discussions with international drilling contractors, management concluded the acquisition of a company-owned rig is approximately 45 per cent of the cost of hiring an international drilling contractor for its Namibian project. Further, by acquiring a rig located in Houston, there are significant time and cost benefits as the rig will be shipped directly by sea from the port of Houston to the port of Walvis Bay, Namibia. Once in Walvis Bay, the rig will be transported over land by way of the paved highway directly to the company's Kavango basin licence area in northeast Namibia. It is anticipated the rig will be on the first drilling location in the Kavango basin by the second half of June.

"Of all the rigs we inspected, the Crown 750 has always been our No. 1 choice," stated Frank Seidel, president of Seidel Technologies. "With ReconAfrica's emphasis on quality equipment and experienced people, I'm confident we can meet the company's drilling objectives in the Kavango basin, on time and within budget."

The primary objective of Reconnaissance's initial three-well program is to penetrate key source rocks within the Karoo supergroup, providing evidence of an active petroleum system throughout the Kavango sedimentary basin. Secondary objectives are to assess oil- and gas-prone conventional targets.

"We were able to acquire this high-quality rig at a significant discount of the cost to build, as it is truly a buyer's market," stated Jay Park, chief executive officer of Reconnaissance. "This rig is very well suited to execute the company's initial program of drilling, logging and coring three deep wells in the Kavango sedimentary basin this year."

As to the prospectiveness of the Kavango basin, Bill Cathey, chief executive officer and chief geoscientist of Houston-based Earthfield Technologies and a member of the company's technical advisory team, affirmed, "In my experience, I haven't seen a basin this deep anywhere in the world that hasn't produced commercial quantities of hydrocarbons."

Reconnaissance is a junior oil and gas company engaged in the development of the newly discovered Kavango sedimentary basin, in northeast Namibia, where the company holds a 90-per-cent working interest in petroleum licences comprising approximately 6.3 million contiguous acres.

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