BW Energy, based in Oslo, has agreed with Reconnaissance Energy Africa Ltd. (ReconAfrica) to purchase around 16.8 million common shares and 16.8 million warrants for a total of $16 million as part of ReconAfrica’s announced equity raise.
By participating in the equity raise, BW Energy will also receive a 20% non-operating interest in the onshore Petroleum Exploration License 73 (PEL 73), where ReconAfrica will provide BW Energy with a carry of $6.4 million based on the intended initial work program.
BW Energy has also committed to certain contingent payments to ReconAfrica based on specific field development milestones.
PEL 73 is located in northeast Namibia, covering an area of approximately 25,341 sq km. Two exploration wells are planned to be drilled in the Damara Fold Belt Basin in the second half of 2024.
The wells are targeting a combined un-risked resource potential of 489 million barrels of oil based on the most recent prospective resource report by Netherland, Sewell & Associates Inc. (NSAI). After the two initial exploration wells, the partnership plans a three-dimensional 3D seismic survey of the Kavango Rift Basin in the second half of 2025, which may result in two additional exploration wells.
“The transaction will enable BW Energy to expand its footprint in a strategically important energy region and further our position as a leader in Namibia’s development towards energy independence,” said Carl Krogh Arnet, the CEO of BW Energy. “The data and insights gained through ReconAfrica’s exploration campaign will further our understanding of the geology and petroleum system in Namibia and help de-risk planned exploration and development of our Kudu license.”
The common shares are priced at CAD 1.30 per share. The warrants have a validity of 24 months and are priced at CAD 1.70 per warrant. If specific milestones are met, BW Energy has agreed to further contingent payments to ReconAfrica of up to $125 million, as specified below:
$22.5 million upon the final investment decision of a commercial development
$22.5 million, 365 days after the first oil
$5 million, 60 days after the first sale of commercial hydrocarbon production
$25 million upon BW Energy achieving a total cumulative free cash flow (“FCF”) of $300 million.
$25 million upon BW Energy achieving a total cumulative FCF of $600 million.
$25 million upon BW Energy achieving a total cumulative FCF of $900 million.
The parties need to enter into a definitive agreement and fulfill customary conditions and precedents for the transaction to be completed.
