Oil & Gas Explorer Finds Encouraging Namibia Flow Results

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1. Ownership and Share Structure Information

The information listed above was updated on the date this article was published and was compiled from information from the company and various other data providers.

Preliminary production testing results from the three lowest zones in the Elandshoek formation on the Kavango West 1X discovery well in Namibia have been released by Reconnaissance Energy Africa Ltd. (RECO:TSXV; RECAF:OTCQX; 0XD:FSE) and partners BW Energy (20% working interest) and the National Petroleum Corporation of Namibia (NAMCOR, 10% carried WI), according to a July 16 release.

After starting on June 8, the company said it has finished testing the three deepest intervals in the Elandshoek formation. During testing of the uppermost interval, natural gas reached the surface during three separate flow tests. ReconAfrica collected production samples for laboratory evaluation while flaring the remaining hydrocarbons at the surface.

The company, also known as ReconAfrica, expects compositional analysis results in the coming weeks after laboratories in the United States examine the samples, the release said.

Crews have now moved the testing equipment higher in the well to begin evaluating the three identified intervals within the shallower Huttenberg formation. Those three zones span 182 meters of reservoir, including 76 net meters of hydrocarbon-bearing pay identified through well log analysis. Management estimates each zone could require roughly 10 days of testing and expects to provide the next production testing update around late August.

"We are very excited to have produced hydrocarbons to surface on the Kavango West production test, which are the first hydrocarbons ever produced to surface onshore Namibia," President and Chief Executive Officer Brian Reinsborough said. "Knowing that the Elandshoek formation had naturally fractured carbonate rocks, we are pleased to learn that those fractures support production. Our operations team is working on a possible open hole horizontal or deviated sidetrack from this wellbore to intersect a larger reservoir interval and the natural fracture network across the structure."

He continued, "Based on global analogue reservoirs, we believe a significant uplift in productivity rates could be realized by this operation. Our operational team is now focused on production testing the significant net hydrocarbon column in the Huttenberg formation."

Horizontal Wells Could Deliver Higher Production

ReconAfrica said it completed the well by casing and cementing the entire 1,657-meter Otavi section, including both the Huttenberg and Elandshoek formations, with production casing. That design allows ReconAfrica to individually evaluate the six targeted intervals identified through well log interpretation.

Although the production casing was required for this phase of testing, the company noted that it can limit access to the reservoir's natural fracture system, the company said. After confirming natural hydrocarbon flow from the tested interval and completing testing on the remaining perforated zones, management plans to consider drilling a horizontal or deviated sidetrack through the upper Elandshoek formation. Such a well would target a larger portion of the reservoir and intersect more of the natural fracture network across the Kavango structure to improve production rates.

Based on comparable naturally fractured carbonate reservoirs elsewhere in the world, management believes horizontal or deviated wells can deliver substantially higher production than vertical wells. The company also believes the Huttenberg formation contains significant matrix porosity, which should support production using the current well configuration.

ReconAfrica said it perforated, acid-treated and production-tested three separate intervals covering a combined 163 meters within the Elandshoek formation. The uppermost of those zones flowed hydrocarbons to the surface, allowing the company to collect production samples while flaring the remaining volumes.

The company tested the 47-meter uppermost Elandshoek interval and flared production during three separate flow periods. The well remained open for flow for about 24 hours in total, producing intermittent volumes of natural gas and liquids. Equipment limitations prevented the company from obtaining accurate flow-rate measurements. However, tubing pressure increased after each test and reached 2,300 pounds per square inch through the five-inch production casing before the second flow test, indicating the reservoir is capable of delivering hydrocarbons.

ReconAfrica collected IsoTubes containing hydrocarbon samples from the surface and will send them to laboratories in the United States for compositional analysis. The company flared all remaining hydrocarbons produced during testing. Laboratory analysis of the samples will determine the composition of the produced fluids, including whether they contain natural gas and associated natural gas liquids from the reservoir or represent the recovery of load fluids.

Key Technical Risk Reduced, Analyst Says

In an updated note on the company on July 16, Research Capital Corp. Analyst Bill Newman called the preliminary production testing results "encouraging."

Although equipment limitations prevented the company from obtaining reliable flow-rate measurements, the testing confirmed that hydrocarbons can flow naturally from the reservoir, representing an important technical milestone for the company's frontier exploration project, he said.

The company evaluated the Elandshoek intervals through perforated production casing that had been cemented in place, Newman wrote. While this completion method enabled ReconAfrica to isolate and assess individual reservoir sections, it is not considered the optimal approach for a naturally fractured carbonate reservoir because the casing and cement can limit access to the natural fracture system. During testing, tubing pressure increased to 2,300 psi, which management believes provides further evidence of the reservoir's ability to deliver hydrocarbons.

Following these initial testing results, management is considering re-entering the Kavango West 1X well to drill an open-hole horizontal or deviated sidetrack through the upper Elandshoek formation, he noted. Such a well would encounter a significantly larger portion of the natural fracture network and, based on comparable carbonate reservoirs elsewhere in the world, could achieve meaningfully higher production rates than the existing vertical well.

"We view these results as encouraging," Newman said. "While commercial flow rates have not yet been established, the successful production of hydrocarbons to surface meaningfully reduces one of the key technical risks associated with the discovery."

The company's focus will now shift to the Huttenberg formation, where it plans to production test three intervals spanning 182 meters of reservoir, including 76 net meters of hydrocarbon-bearing pay identified through well log analysis. Management expects each interval to require approximately 10 days of testing and anticipates providing its next operational update in late August.

"We maintain our SPECULATIVE BUY recommendation and our CA$4.40 target price, equivalent to our risked valuation of the Kavango West discovery plus the risked valuation of the Loba Oil Field in Gabon," Newman concluded.

Expert: Co. 'Due for Success'

Ron Struthers of Struthers Resource Stock Report said ReconAfrica's production testing program at the Kavango West discovery well could set the stage for a significant development. Writing for Streetwise Reports on June 9, Struthers described the testing campaign as having the potential to produce "potentially enormous news on the horizon."

Struthers noted that offshore operators in Namibia have already achieved commercial discoveries from single hydrocarbon-bearing intervals that were narrower than those being evaluated by ReconAfrica. As a result, he believes the company's multiple testing targets provide a favorable opportunity for success. He wrote, "As I commented in a previous update, oil companies operating offshore Namibia have witnessed commercial discoveries from just one pay zone and with more narrow intervals."

In a July 16 update in his Struthers Report newsletter, Ron Struthers noted that ReconAfrica had finished production testing the three deepest intervals within the Elandshoek formation, with the uppermost zone delivering natural gas to surface during three separate flow tests.

"This is positive news, but it sounds to me that flows are not good enough to be commercial and is why they are talking about a horizontal side-track," Struthers wrote. "These horizontals are done all the time in oil and gas production and is a normal technique in shale production. The stock is down on the news and I expect it might test the CA$0.75 area. I see this as positive news but the markets these days only seem to be able to see a day ahead if that and trade off the latest headline."

The Catalyst: War Sending Oil Prices Higher

Oil prices climbed sharply as escalating military conflict in the Middle East heightened concerns over global energy supplies, according to a report by Cris Tolomia for Quartz on July 17. Brent crude futures advanced to US$86.03 a barrel, while U.S. West Texas Intermediate crude futures traded at US$80.99 a barrel. According to Reuters, Brent remained on track for a third consecutive weekly gain, and both benchmark contracts had risen nearly 12% during the week.

CNBC reported that Kuwait's Ministry of Electricity, Water and Renewable Energy confirmed a strike ignited a fire at one of the country's power plants, knocking a significant share of its electricity-generating capacity offline, Tolomia noted.

The U.S. Central Command said it carried out a sixth straight night of strikes against Iran, targeting dozens of military assets that included coastal surveillance installations, air defense positions, logistics infrastructure and maritime capabilities. CENTCOM added that more than 50,000 U.S. military personnel are currently deployed across the Middle East.

Iran responded by launching missiles and drones at U.S. military facilities in neighboring countries, including an attack targeting an air base in Jordan, the article said. Reuters reported that Qatar's defense ministry said its forces intercepted an Iranian missile attack early Friday, although a child suffered injuries from shrapnel produced during the interception.

According to CNBC, the renewed fighting has significantly disrupted traffic through the Strait of Hormuz, a strategic waterway that carries about one-fifth of the world's oil supply. The latest escalation followed the collapse of a ceasefire that had been reached the previous month.

Oil prices had already reached their highest level in four weeks after CENTCOM announced a naval blockade of Iranian ports, further increasing concerns over the security of energy shipments through the Strait of Hormuz, the Quartz report said.

International Energy Agency Executive Director Fatih Birol said during a Council on Foreign Relations event in Washington on Thursday that the situation remains troubling. "We should be worried, and I am worried, if the situation does not improve in the next few weeks," Birol said, according to Tolomia.

However, U.S. natural gas futures declined about 2% on Thursday, closing at their lowest level in two months as production increased, liquefied natural gas export volumes eased and storage levels remained well supplied following a weekly inventory build that largely matched expectations, according to Scott Disavino writing for Reuters on July 16.

The front-month August natural gas contract on the New York Mercantile Exchange dropped 6.6 cents, or 2.3%, to settle at US$2.888 per million British thermal units (mmBtu). The contract posted its weakest close since May 12.

The U.S. Energy Information Administration reported that utilities injected 41 billion cubic feet (bcf) of natural gas into storage during the week ended July 10, the report said.

The storage increase closely matched the 43-bcf injection forecast by analysts surveyed by Reuters, Disavino wrote. The latest build compared with a 47-bcf increase during the corresponding week last year and a five-year average injection of 45 bcf for the same reporting period between 2021 and 2025. 

Looking further ahead, calendar 2027 natural gas futures slipped to US$3.33 per mmBtu, marking their lowest level since February 2022.

LSEG reported that average natural gas production across the U.S. Lower 48 states increased to 110.3 billion cubic feet per day (bcfd) so far in July, up from 110.0 bcfd in June, according to the Reuters article. Even so, output remained below the monthly record of 110.6 bcfd set in December 2025.

Weather forecasters expect above-average temperatures to persist through July 31, a trend that should keep electricity demand elevated as power producers consume significant amounts of natural gas to meet air-conditioning demand, Disavino said. Gas-fired generating stations account for roughly 40 per cent of U.S. electricity production.

Ownership and Share Structure¹

About 1% of the company is owned by insiders and management, including Reinsborough, with 0.29%. About 7% is held by BW Energy Ltd. The rest is in institutional and retail.

Other top shareholders include Senior Vice President of Drilling and Completions Nicholas Steinsberger with 0.17%, Director Joseph Davis with 0.06%, Senior Vice President of Exploration Christopher Sembritzky with 0.06%, and Director W. Derek Aylesworth with 0.05%.

ReconAfrica's market cap is CA$308.04 million with 385.05 million shares outstanding. It trades in a 52-week range of CA$0.42 and CA$1.35.

Common Investor Questions

Did ReconAfrica find oil or natural gas in Namibia? The testing produced natural gas and liquids to surface, but the exact composition isn't confirmed yet. Laboratory analysis of the recovered samples in the United States will determine whether the fluids are natural gas with associated natural gas liquids from the reservoir, or recovered load fluids. Results are expected in the coming weeks.

Who are ReconAfrica's partners in the Kavango project? ReconAfrica operates the well alongside BW Energy, which holds a 20% working interest, and the National Petroleum Corporation of Namibia (NAMCOR), which holds a 10% carried working interest.

Why are the Kavango West 1X results considered significant? They mark the first hydrocarbons ever produced to surface onshore Namibia, and they confirm that hydrocarbons can flow naturally from the reservoir's fractured carbonate rock. Research Capital analyst Bill Newman said this "meaningfully reduces one of the key technical risks" of the frontier exploration project, even though commercial flow rates have not yet been established.

What is the Huttenberg formation and why does it matter? The Huttenberg is the shallower formation ReconAfrica is testing next, and it holds the larger identified pay column. Its three zones span 182 metres of reservoir, including 76 net metres of hydrocarbon pay identified from well logs. Management believes the Huttenberg has substantial matrix porosity that could produce with the current wellbore, unlike the fracture-dependent Elandshoek.