ReconAfrica’s Wild Ride: Promises Of ‘Billions Of Barrels’ And The Fracking Controversy

• ReconAfrica debuted on the OTC markets in February 2019 after a reverse takeover of Lund Enterprises Corporation.
• ReconAfrica initially promoted plans to use fracking in Namibia, claiming potential for “billions of barrels” of oil. However, in September 2020, the Namibian government clarified that fracking wasn’t authorised. 
• The company quickly shifted to conventional oil production and, on April 15, 2021, announced “clear evidence” of a working oil system from its first test well, doubling its stock price in just two days.
• In August 2021, after Viceroy Research released several reports, ReconAfrica disclosed test well data that showed poor oil and gas prospects.
• Following this disclosure, the company’s stock price plummeted by 29%. 
• Shortly after, shareholders filed multiple lawsuits against ReconAfrica, claiming the company was hiding poor well results and selectively sharing only positive data.
• ReconAfrica recently agreed to pay CAD $14.5 million settlements to investors to resolve the lawsuits. Affected investors can now file a claim to receive the payout.

Overview

Reconnaissance Energy RECAF went public in 2019 with ambitious claims of “billions of barrels” in Namibia’s Kavango Basin, spiking its stock by 1884%. However, in 2020, the Namibian government clarified that no fracking licences had been issued, pushing ReconAfrica to pivot toward conventional drilling methods. By August 2021, the company reported disappointing results, resulting in a 29% drop in its stock and prompting a wave of investor lawsuits. Recently, the company ultimately agreed to pay a CAD $14.5 million settlement to affected investors.

The Unravelling Of ReconAfrica’s Oil Promises

In early 2019, ReconAfrica started an ambitious project to search for oil in Namibia’s environmentally sensitive Kavango Basin, aiming to find large oil and gas reserves. The company initially planned to use hydraulic fracturing, or “fracking,” which involves injecting high-pressure fluid into rock to release oil and gas. However, since fracking had never been tried in Namibia and due to strict environmental concerns, the government had not issued any licences for this type of operation.

Despite these challenges, ReconAfrica continued to highlight its potential, claiming access to vast oil reserves with significant profit opportunities. This optimism resulted in an impressive stock surge of over 1800% from early 2020 to mid-2021. 

However, in September 2020, the Namibian government raised concerns about the company’s fracking plans by stating that “no licence for the development of unconventional resources has ever been granted in Namibia.” 

In response, ReconAfrica quickly adjusted its messaging, removing any references to fracking and shifting its focus to conventional oil exploration — though executives still left the door open for fracking in the future.

In 2021, ReconAfrica followed a carefully crafted PR strategy focused on two main themes: highlighting its “partnerships” with Namibia’s state oil company, NAMCOR, and promoting local “community benefits” like job creation. 

However, the company avoided giving clear answers about its true intentions with fracking. For example, during a community meeting, when asked if they would rule out fracking, spokesperson Ms. Preece sidestepped the question, even saying she “won’t be around” by then. 

On April 15, 2021, the company announced its first test well findings in collaboration with Namibia’s Ministry of Mines and Energy, claiming “clear evidence of a working petroleum system” with over 200 meters of oil and gas indicators. 

The market reacted positively, driving ReconAfrica’s stock up by 143.7% over three trading sessions.

Broken Promises And Shattered Trust

The truth began to emerge in June 2021 when Viceroy Research published its findings. Their analysis featured a direct quote from Namibia’s Petroleum Commissioner, Maggy Shino, which raised concerns about ReconAfrica’s claims:

“There is no way we will licence RECO or any other company to carry out fracking or unconventional hydrocarbon exploration in Namibia.” 

Viceroy Research’s report exposed critical gaps in ReconAfrica’s April disclosures, pointing out omitted technical details like mud logs, drill depths, and intercept depths — standard information in drilling updates. 

Viceroy’s analysis also questioned ReconAfrica’s geological claims, suggesting that the rocks in Zones 2 and 3 were older than the company stated. It found that Zone 1 was filled with water and not suitable for oil production, while Zone 2 was too dense to produce oil commercially. 

Additionally, data from a smaller firm contradicted ReconAfrica’s claim about Schlumberger doing the logging. Viceroy concluded that the well had no areas suitable for oil or gas production.

After these disclosures, ReconAfrica’s stock price plummeted from a high of $11.23 per share to just $4.65 by September 2021 — a staggering 58% loss.

The scandal caught the attention of U.S. regulators, who expressed concerns about potential environmental harm and policy conflicts. To make matters worse, executives sold off substantial shares before the negative news surfaced.

After the turmoil surrounding ReconAfrica, investors filed multiple lawsuits against ReconAfrica, alleging that the company misled them with overly optimistic projections about its operations in Namibia, resulting in significant financial losses. 

There were also growing worries about ReconAfrica’s environmental impact and its treatment of local communities, especially regarding its failure to consult affected residents, which violates Namibian law.

Resolving The Case

To resolve the lawsuits, ReconAfrica has reached a CAD $14.5M settlement, including $9.05M for U.S. investors and CAD $5.075M for those on the TSX Venture Exchange and Frankfurt Stock Exchange. If you invested in ReconAfrica, you may be eligible to file for a portion of the settlement to recover your losses.

After all these events, in June 2024, ReconAfrica drilled its first Naingopo exploration well, targeting around 163 million barrels of unrisked oil resources. The company is pursuing joint ventures to boost its exploration efforts and has received positive community feedback, employing over 1,350 local workers and establishing 36 water wells that benefit over 10,000 people. With class-action lawsuits now settled, ReconAfrica’s stock is rebounding, marked by a recent CAD $17.25 million public share offering showing renewed investor interest.