Recon Africa: The Truth About The World's Most Exciting Oil Play

A daring junior oil and gas explorer has set out to put the African country of Namibia—which has never produced a single barrel of oil - on the world’s energy map in a wildcat drill campaign that has taken many by surprise.

The Namibian government was sitting on a treasure chest of data on the giant Kavango Basin, and it seems like no one knew.

When Reconnaissance Energy Africa (TSX.V:RECO,OTCMKTS:RECAF)initially saw the data while searching around Africa—what could be the untapped final frontier of energy—it called on world-class geologist Bill Cathey for a second opinion as to what they might be looking at here.

Cathey—whose clients have included supermajors such as ExxonMobil,ConocoPhilllips and Chevron—performed the entire magnetic survey interpretation of the Kavango Basin for ReconAfrica and was very clear about it: “Nowhere in the world is there a sedimentary basin this deep that does not produce hydrocarbons.”

RECO acquired the exploration rights to the entire 6.3-million-acre Kavango basin in Namibia. Then it extended that holding to over 8 million acres by obtaining rights to Botswana's portion of the basin.

Though Cathey is a renowned geologist, that’s no guarantee of success. This is, after all, a huge undertaking for a junior explorer, which we think makes it a very high-risk/high-reward play.

Cathey’s statement garnered a bit of attention for Recon Africa, and for Namibia. But then, another world-class geochemist jumped on board and upped the stakes.

Dan Jarvie, one of the industry’s most famous geochemist ‘wildcatters’ and a major figure behind the Texas Barnett play, estimated what he thinks the potential oil generated in Kavango could be at Billions of barrels—conservatively.

“You can forget about super-majors like Exxon, Chevron when it comes to onshore exploration outside of the United States… they aren’t the ones who make these onshore discoveries work. Instead, you should be looking for locations where independents are out in force looking for the next big thing,” Jarvie told Oilprice.com.

“There is a very strong independent junior explorer here sitting on a sedimentary basin that rivals South Texas in a massively under-explored region,” he said.  

That gained the company more attention, still. But it wasn’t until ReconAfrica started drilling that this stock started to gain greater attention, for better or worse.

In January, ReconAfrica launched a 3-well drilling campaign that they hoped would prove there was an active petroleum system here.

Many of us weren’t expecting any results until the end of the campaign. Instead, the company surprised us with results indicating a working petroleum system after only the first test drill.

Then, less than two months later, and only at the beginning of its second drill, which it spudded on May 5^th, RECO announced further indication of a working petroleum system in the shallow section of its second well.

Interest around this stock has grown significantly as results from the full drill (reaching 12,500 feet) of the second well are expected in the first week of July.

In the meantime, there looks to be a war looming over RECO, with one report saying short-sellers having amassed huge positions that they must now cover, prompting a barrage of misinformation and fake news campaigns targeting the company. ( Here is a must read report on short and distort campaigns on Seeking Alpha and the lengths short sellers will go to).

Time is running out, and fact-checking has never been more important for investors.

Investors need to understand the exploration processes, the pitfalls that face a junior explorer in a huge basin, and the environmental, social, and governance issues that we believe represent the only way forward right now - because no one wants another situation like Nigeria.

Just as important, investors need to understand how short sellers operate these days so they can navigate the sea of misinformation.

The Geology of Kavango & Indications of an Active Petroleum System

The history of the geological data for the Kavango Basin starts with the Government of Namibia, which commissioned aeromagnetic survey data that was then purchased by ReconAfrica who further had it analyzed by Bill Cathey’s Houston-based Earthfield Technology.

We believe there are a number of facts here that can help readers navigate the barrage of misinformation floating around out there about the geology itself and the nature of the drilling campaign:

1. The 3-well drill campaign is about establishing the existence of a working petroleum system.

This is where readers can easily be misled because oil and gas exploration is complicated. To fully understand the exploration process, you have to understand that there are different processes based on whether there are already wells on a specific play or not. If there are wells already in existence, then the task is to acquire seismic data to identify potential reservoirs. If there are no wells yet, as in the case of Kavango, (a virgin basin) the task is to drill stratigraphic test wells first to determine if there is an active petroleum system. That is what ReconAfrica is doing with its 3-well campaign. The acquisition of seismic data only makes sense once an active petroleum system has been identified, as otherwise where do you start on 8 million acres?

2. RECO has twice, so far, provided drilling results that indicate an active petroleum system in Kavango.

The first stratigraphic test well (6-2) results were released on April 15^th. The sample log provided over 200 meters of light oil and natural gas indicators over three discrete intervals in a stacked sequence of reservoir and source rock. Oil was then extracted from these samples and the results supported an active petroleum system with multiple source intervals.

The second stratigraphic test well (6-1) is designed to be drilled to a depth of 3,800 meters (12,500 feet). In its first, shallow section, the well encountered 343 meters of oil and gas indicators, further confirming an active petroleum system in Kavango. The Company says the well will likely reach its full depth in the first week of July. There was a short break for maintenance that has now been completed and drilling is reported to be underway as we speak.

In a recent statement, Dr. James Granath, PhD Structural Geology and Director of ReconAfrica, noted: Dr James Granath, PhD (Structural Geology), Director of ReconAfrica: “The 6-2 and 6-1 wells are stratigraphic tests, science wells if you like, but the data from the wells including hydrocarbon shows have hinted at something very interesting, and they emphatically scream the imperative to follow through on a comprehensive exploration program. These wells suggest there is commercial potential in the basin. It took 30 wells in offshore Norway to get to this point, we've been lucky enough to do it in the first two.”

And well analysis is coming from among the best in the industry: Including Schlumberger, along with Core Labs, Geomark Research, and Netherland Sewell. It doesn’t get any more reputable or independent than this.

3. The next step is seismic acquisition

Now that evidence of an active petroleum system has been determined, the next step is to understand any commercial potential of RECO’s project, and the next step is the acquisition of seismic data. Recon Africa and its partner, NAMCOR (the Namibian government’s oil company), will conduct an initial 450-kilometer low-impact 2D seismic acquisition program for which they have hired Polaris Seismic International for a cost of under $4.5M. The seismic operations are scheduled to begin in mid-July and are subject to final permitting.

4. More wells and seismic planned

RECO and NAMCOR also plan to seek approval from the Ministry for the drilling of more wells beyond the initial 3-well campaign and for additional seismic, which they are targeting for the second half of this year, pending permitting and licensing.

Where The Namibian Government Stands

Does Recon Africa (TSX.V:RECO,OTCMKTS:RECAF) have the Namibian government’s support for its Kavango Basin project? Yes, and that has been demonstrated multiple times since the company’s acquisition of aeromagnetic survey data from the government.

It also has the support of the governor of East Kavango, Bonifasius Wakudumo.

"We are pleased with ReconAfrica's approach to working closely and in constant consultation with our office, the traditional leadership, local authority, and the community. This is only the beginning stages and we have already started to experience the positive economic and social impact of the project in our regions." Kavango East Governor, Bonifasius Wakudumo said.

In response to short-selling reports spreading what the Namibian government has said is “disinformation”, the government on June 25^th announced it was creating a cohesive public relations strategy that would involve all stakeholders to counter misinformation regarding the exploration project. 

A government communique notes: “Cabinet took note of the progress made by Recon Africa under [a] petroleum license. Cabinet directed the ministry of mines to develop an efficient and effective public relations strategy with a communication plan for stakeholder engagement on the project, including constituency councilors, traditional leaders, and local communities in the Kavango East, West, and Zambezi regions.”

The Petroleum Agreement, as examined by our correspondents, appears to be solid. Once exploration is concluded, ReconAfrica will potentially return up to 75% of the licensed basin area to the government of Namibia. That return would encompass any territory that is not included in a commercial discovery zone.

The current exploration license is extendable with Ministry approval to the end of January 2023. After that, a second extension period is allowed to two more years of exploration, and beyond that, one-year extensions are part of the agreement to 2026. If there is a commercial discovery, the petroleum agreement is said to entitle Recon Africa and its local partner to a 25-year production license that is renewable for an additional 10 years in Namibia (and 20 years in Botswana).

It’s all pretty straightforward in our view. 

Recon Africa’s Cash Position

One of the first questions any investor should ask about this company is whether it has the cash to carry out the exploration as planned. It is a huge basin, as has been said, for a very small explorer. It is a basin that would typically be explored by a supermajor. There are very few junior oil and gas companies of this size that would be able to pull this off, and we think RECO is one of them.

ReconAfrica recently completed a CDN $41 million equity raise and has disclosed that it has CDN $63,000,000 (~$51.2 million) in cash reserves for the 3-well drill campaign (of which it’s almost done with drill No. 2, plus the upcoming 450-km of seismic, which will cost around $4.5 million).

And it has zero debt. That means no debt covenants to crush them and no interest payments.

ESG Initiatives: Spreading the Wealth

Let’s start with water.

Many residents of Kavango East do not have clean drinking water .

An estimated 40% of the 250,000 people of the Kavango region live in generational poverty. An oil discovery could mean jobs and improved access to basic human rights, such as clean water and medical services.

They do not have the resources to drill water wells, even though they are sitting on top of a freshwater aquifer. Instead, they walk long distances every day to carry huge volumes of water back home.

Recon Africa is drilling those wells as part of its responsibility to give back to the local communities that are allowing the company to explore for oil in the basin alongside NAMCOR, the government-owned oil company.

In the meantime, ReconAfrica has committed $10 million to ESG and has been using some of its resources to drill water wells for local inhabitants. Water is scarce in Northeast Namibia, and among other things, to date, the company has drilled four solar-powered community water wells, with plans to drill and donate eight more water wells for the local community, for which permits have already been awarded. 

It's been cause for celebration in Kavango.

The Company has formally received all water well regulatory approvals for drilling operations from the Ministry of Agriculture, Water, and Land Reform.

Furthermore, ReconAfrica has committed over $1 million to Namibia’s COVID-19 Vaccine Rollout Campaign, in addition to its contributions last year to healthcare support in the Kavango region. 

Kavango’s Environment

ReconAfrica is not operating in an environmental vacuum here. These aren’t the days of Shell in Nigeria when it was about nothing more than exploiting a country for its natural resources because no one was paying attention.

Today, thankfully, everyone is paying attention, and ReconAfrica has far too much at stake—particularly given the reputations of the world-famous geologists and geochemists backing it—to ignore the essential aspects of the environment, social responsibility, and good governance.

As a Canadian company, ReconAfrica employs best practices and technologies and has assured the public time and again, as has the Namibian government itself, that they are operating in line with legal obligations.

Its permitting, licensing, and operations have also not taken place in a legal vacuum. Everything is under constant review by multiple agencies, including the Ministry of Mines & Energy of Namibia, the Ministry of Agriculture, Water & Land Reform, the Ministry of Environment, Forestry & Tourism, the Ministry of Home Affairs, Immigration, Safety & Security, and others at the local and regional levels. 

And it’s not fracking. While earlier estimates of potential oil in Kavango done by Sproule had noted the “unconventional” potential, estimates by Dan Jarvie for billions boe of “conventional” oil, which is exactly what ReconAfrica is pursuing. ReconAfrica reports it does not have any fracking permits, nor has it applied for any. It’s the conventional potential that they’re focusing on.

The Company reports they are also not threatening the region’s Okavango River, which is more than 50 kilometers north of ReconAfrica’s operations, nor the ecologically vital Okavango Delta, which is 260 kilometers west of Reco’s operations.

ReconAfrica is using seismic equipment owned and operated by Polaris Seismic International out of Alberta, Canada. This is the lightest impact seismic equipment the world has to offer. More specifically, according to Bill Mooney CEO, it is a 9-foot-wide Mercedes Benz tractor that drives soundwaves into the ground, sent to wireless geophones, at a low or idle RPM.

Finally, with regard to drilling fluids, ReconAfrica reports it is only on each location for a few months and then the land is reclaimed and returned to normal. They say they use the most advanced drilling fluid in the industry, which is a polymer water-based fluid; in other words, plant oil. It’s benign, 100% biodegradable and 100% organic. Not only that, but Steinke says it is actually used to enrich soil in the United States.

Local residents are already going through a pilot project where they cultivate a large area for vegetable gardening, fertilizing it with ReconAfrica’s organic drilling fluid.

Excess fluids and cuttings are managed in a reserve pit adjacent to the drilling rig. The rocks being drilled through for the three exploratory wells are environmentally benign (unlike in mining operations), and this is true for most conventional oil and gas wells in general. Any fluids encountered while drilling stay in the formation due to the equivalent circulating density of the drilling fluid system. The cuttings from the well are also being captured and bagged, with half of the cuttings set aside for the Namibian government for future study.

An organic gel/clay barrier at the pit base prevents seepage into groundwater and soils. This approach is better than polyurethane pit linings, which are easy to install but challenging to remove during reclamation, which can lead to shredding and leaks.

Furthermore, local community leaders have come out in defense of the truth, recognizing that external forces and fake news have hijacked their own ability to speak.

Predatory Tactics Threatening Namibia for Short Seller Gains

Short sellers first attempted to boost their short position chances on RECO by alleging environmental negligence.

When that misinformation campaign failed to have the desired impact, we believe the campaign was tweaked to focus on the oil prospects—an area that is easier to mislead investors who are not familiar with the exploration and production phases and who (much like the authors of the short reports themselves) have no education in geology.

The problem we see for short sellers now is that ReconAfrica (TSX.V: RECO, OTCMKTS:RECAF) either got lucky on its first two wells in finding an active petroleum system, or it knew what it was targeting in the first place and luck had nothing to do with it. Either way, it’s good news for Namibia and bad news for short sellers whose misinformation campaigns have fallen short of the desired impact. Under increasing pressure from investors now to reverse these losses, the fake news campaigns have taken on a new form of aggression in the past two weeks.

We think that is largely because time is running out.

In our view, the world-class status of Dan Jarvie and Bill Cathey has rendered the geology-related slander ineffective for the most part, and the Namibian government itself has rendered the environmental libel null and void.

Now, short-sellers are faced with the looming completion of the second well by ReconAfrica, probably within a week, and the start of 450 kilometers of seismic.

The July/August timeline is what is worth watching very closely:

• Seismic: The permit is expected any day, with first activity expected in the beginning of July, including the Vertical Seismic Profile of both wells drilled to date.

• 6-1 Well: completion of drilling (first well took four months, this one, 10 weeks)

• 6-2 Well: compilation of all technical evaluations from third parties (Core Labs, Schulmberger, GeoMark Research, Netherland Sewell)

• Completion of ROE acquisition: Court approval expected in the third or fourth week of July

• Site preparation for the third well with drilling expected to start in September

If the completion of drill No. 2 and the return of lab results top even the first and second showings of an active petroleum system and oil encounters, the short sellers could be crushed in our pick for the oil play of the decade. We believe it will likely be a seismic defeat—quite literally--for those employing dirty tactics to destroy a company that has some of the biggest names in the industry behind it.

Other companies looking to capitalize on the oil recovery:

PetroChina Co. (NYSE:PTR) is the second-largest fuel company in the world and operates 30 countries across our planet, including China where it was founded back in 1999. PetroChina specializes mainly on oil exploration but has also extended into other sectors such as equipment manufacturing for petroleum engineering purposes; financial services like investing funds, merger and acquisition analysis or commodity trading; new energy development to identify opportunities related to emerging technologies that can help mitigate climate change through sustainable resource utilization.

Like many other oil companies, PetroChina had a difficult time grappling with the COVID-19 pandemic. In Response, PetroChina created an anti-COVID-19 steering team to work, among other things, on “reducing expenditure as well as cutting costs and enhancing profitability, controlling the capital expenditures and costs, optimizing debt settlement structure.”

“The decline in international crude oil prices has adversely affected the Group's sales revenue and profits, the Group actively takes measures to deal with the risks of crude oil price fluctuations, and strives to maintain stable and healthy development of production and operations,” PetroChina said.

PetroChina has recently unveiled plans to spend 239 billion yuan ($37 billion) in annual capital spending--the highest for any gas and oil company globally--in an effort to increase domestic production over the next five years and also to improve China's energy security.

Like its peers, Exxon (NYSE:XOM) was hit with incredible losses sparked by the global COVID-19 pandemic and the resulting demand destruction. Earlier this year, the company even did something that it was holding off on doing long after all the rest of the Big Oil club did it: it revised down its oil reserves.

The move shocked markets as Exxon slashed reserves down by almost a third in the most radical revision in its modern history. The supermajor reported reserves totaling 15.3 billion barrels as of the end of 2020 in a regulatory filing. This compared with 22.44 billion barrels a year earlier.

Netherlands-based, Royal Dutch Shell Plc. (NYSE:RDS.A) operates as an integrated oil, gas and chemicals company. Shell remains one of Big Oil's least optimistic companies when it comes to the long-term oil and gas outlook.Shell says we might already be past peak oil demand and is bracing itself for a worst-case scenario: Demand to never fully recover.

"I think a crisis like this has the potential to capitalize society into a different way of thinking, much as the Paris Agreement has had,"  company CEO Ben van Beurden has told investors. 

Shell has also revealed that it expects ~75% of its proved oil and gas reserves to be exhausted by 2030 and nearly all by 2050.

Africa, in particular South Africa is key for Shell because the government has been significantly more stable than some of the other big bets on the continent. Moreover, the country has been very open to Shell in its projects. The company’s operations in South Africa include retail and commercial fuel, lubricant, chemical, and manufacturing. It’s also heavily invested in upstream exploration. It even holds the exploration rights to the Orange Basin Deep Water area, off the country’s west coast, and has applications for shale gas exploration rights in the Karoo, in central South Africa.  

BP Plc. (NYSE:BP) engages in the energy business worldwide, including oil and gas production and refinery, trade in natural gas; offers biofuels and operates onshore/ offshore wind power, and solar power generating facilities. Also known as British Petroleum, BP is a multinational energy company that has been around for over 100 years. BP was formed in 1909 by the merger of two rival companies- Anglo-Persian Oil Company and Royal Dutch Shell. With operations in more than 80 countries and regions, BP is one of the world's largest oil and natural gas producers. 

We are still a long way from Beyond Petroleum. But chief executive Bernard Looney believes that we are only 30 years from a net-zero BP. He has promised that in September the company will lay out a more detailed plan that shows the path to that destination. But he has shown already that there is more to his commitment to net-zero than there was to Beyond Petroleum 20 years ago.

“Renewables and natural gas together account for the great majority of the growth in primary energy. In our evolving transition scenario, 85% of new energy is lower carbon,” Spencer Dale, BP group chief economist, said, commenting on the outlook to 2040.

BP has lately become less aggressive with its oil production and exploration, but still remains more active than the likes of Shell. Recently, the company revealed that it had discovered oil at the Puma West prospect in the deepwater U.S. Gulf of Mexico, with preliminary data pointing to good potential for a commercial volume of hydrocarbons.

Kinder Morgan (NYSE:KMI), a major North American pipeline operator , has been particularly upbeat in recent months. In fact, in early December, it issued optimistic updates, planning higher dividends and expecting more profits in 2021, after the challenges the oil industry has faced last year due to the COVID-19 pandemic and the wider market crash. Kinder Morgan also expects to raise its dividend for 2021 by 3 percent compared to this year.

Kinder Morgan Inc's chief executive officer Steve Kean noted, "With budgeted excess coverage of that dividend, we expect also to be able to engage in share repurchases on an opportunistic basis.”

Kinder Morgan is a must-watch in the industry. With dividends on the rise, oil prices increasing, and bullish sentiment returning to the oil industry, there could be some significant upside left for this pipeline operator, especially as oil begins flowing at pre-pandemic levels.

Chevron (NYSE:CVX) is a leader in the industry and the second-largest oil company on the  New York Stock Exchange. . It was founded in 1879 in California by John D. Rockefeller and partners as the Standard Oil Company of Ohio, which became part of the Standard Oil trust when it was dissolved on January 1, 1911. One year later, Chevron Corporation (then Texaco) bought out its former partner for $10 million ($2 billion today). The new corporation then changed its name to reflect this shift from being primarily an oil refining business to one also involved in natural gas exploration and production.

Chevron is also betting big on Africa, particularly Nigeria and Angola. The supermajor ranks among the top oil producers in the two African nations. Other areas on the continent where the company holds interests include Benin, Ghana, the Republic of Congo and Togo. Chevron also holds a 36.7 percent interest in the West African Gas Pipeline Company Limited, which supplies Nigerian natural gas to customers in the region. With bets on both oil and natural gas, the company is looking to take advantage of both fossil fuels. Though prices are still depressed at the moment, as fuel demand returns to normal, Chevron could be a big winner as prices climb back up to pre-pandemic levels.

Total (NYSE:TOT) barely squeezes into the top 4 oil and gas companies in the world. And for good reason. The company is one of the most diversified and forward thinking oil majors in the business.  And it’s no stranger to the African oil game, either. Total betting big on the region’s potential. The company has been in the region for over 90 years, and it is showing no sign of reducing its footprint anytime soon.

Recently, Total said that it would accelerate its dividend growth “in the coming years” as it looks to return more cash to shareholders. The group will increase its “dividend by 5 to 6 percent per year instead of the 3 percent per year as previously announced,” Total said.

It's also one of the most conscious companies in the business. Total checks every box in the ESG checklist. It is promoting diversity and safety, making massive changes in its operations to ensure that its business is environmentally sound, and has even committed to going carbon neutral by 2050 or sooner. It’s no surprise that shareholders are loving its forward-thinking approach.

Asia isn’t going to be left behind in the oil race. In fact, as demand for energy continues to explode in a post-pandemic China, CNOOC Limited (NYSE:CEO, TSX:CNU) will likely be one of the biggest benefactors. It’s the country’s most significant producer of offshore crude oil and natural gas and may well be one of the most controversial oil stocks for investors on the market. A label that has nothing to do with its operations, however.

CNOOC recently started production from the first deepwater gas field it operates fully, Reuters has reported, adding that the field is expected to yield some 4.39 billion cubic meters of natural gas, representing 2 percent of China’s total output.

The Chenhai-1 well was drilled at the Lingshui 17-2 field in the South China Sea and, according to CNOOC, could push its total natural gas production capacity to more than 13 billion cubic meters annually.

Enbridge (TSX:ENB) is in a unique position as oil and gas stages its 2021 comeback. As one of the more potentially undervalued companies in the sector, it could be set to win big this year. But that’s only if it can overcome some of the challenges in its path. Most specifically, its Line 3 project which has faced scrutiny from environmentalists.

While this challenge may prove difficult for Enbridge to overcome, the health of the Canadian oil industry is improving, and with it, the outlook for Canadian producers such as Enbridge. The company has already started the year off strong, and if it can continue its momentum, it will likely be able to see a sustained rally in its share price over the course of the year.

Canadian Natural Resources (TSX:CNQ) has been able to do what many of its Canadian counterparts haven’t been able to, keep its dividend intact after swinging to a loss for the first half of the COVID pandemic, while Canada's producers are scaling back production by around 1 million bpd amid low oil prices and demand. Though Canadian Natural Resources kept its dividend, it withdrew its production guidance for 2020, however. It also said it would curtail some production at high-cost conventional projects in North America and oil sands operations and carry out planned turnaround activities at oil sands projects in the second half of 2020.

Though there is a lot of negative press surrounding Canada’s oil sands, the industry is starting to clean up its act a bit. And Canadian Natural Resources is leading the charge. And if analysts are right about Canada’s comeback, Canadian Natural Resources could be in for a big year.

TC Energy Corporation (TSX:TRP) is a Calgary-based energy giant. The company owns and operates energy infrastructure throughout North America. TC Energy is one of the continent’s largest providers of gas storage and owns and has interests in approximately 11,800 megawatts of power generation. It’s also one of the continent’s most important pipeline operators. With TC Energy’s massive influence throughout North America, it is no wonder that the company is among one of Canada’s strongest and well-known companies.

Like a number of its peers, one of TC Energy’s biggest challenges in recent years was grappling with the particularly difficult approval process for its Keystone Pipeline. But that’s all history now, and with the bounce back in oil and gas demand, TC Energy could stand to benefit. While TC Energy’s stock price has yet to recover from pre-pandemic levels, it is one of the few industry giants which has managed to keep high dividends rolling in. With quarterly payouts exceeding 6%, TC has remained appealing for investors in the industry.

Suncor Energy (TSX:SU) is another giant in Canada’s industry. It has set itself apart from some of its peers through a number of high-tech solutions for finding, pumping, storing, and delivering its resources. Not only is it big in the oil sector, but it is also a leader in renewable energy. Recently, the company invested $300 million in a wind farm located in Alberta, showing that it is committed to reducing its carbon footprint.

Now that oil prices are finally recovering, giants like Suncor looking to capitalize. While many of the oil majors have given up on oil sands production – those who focus on technological advancements in the area have a great long-term outlook. And that upside is further amplified by the fact that it is currently looking particularly under-valued compared to its peers, especially as lithium, which is present in Canada’s oil sands, becomes an even more desirable commodity.

By. James Stafford

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

Forward-Looking Statements. Statements contained in this document that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of Recon. All estimates and statements with respect to Recon’s operations, its plans and projections, size of potential oil reserves, comparisons to other oil producing fields, oil prices, recoverable oil, production targets, production and other operating costs and likelihood of oil recoverability are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, including drilling and other exploration activities, timing of reports, development, exploitation and production, geological risks, marketing and transportation, availability of adequate funding, volatility of commodity prices, imprecision of reserve and resource estimates, environmental risks, competition from other producers, government regulation, dates of commencement of production and changes in the regulatory and taxation environment. Actual results may vary materially from the information provided in this document, and there is no representation that the actual results realized in the future will be the same in whole or in part as those presented herein. Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that Recon and its technical analysts have made. We undertake no obligation, except as otherwise required by law, to update these forward-looking statements except as required by law.

Exploration for hydrocarbons is a highly speculative venture necessarily involving substantial risk. Recon's future success will depend on its ability to develop its current properties and on its ability to discover resources that are capable of commercial production. However, there is no assurance that Recon's future exploration and development efforts will result in the discovery or development of commercial accumulations of oil and natural gas. In addition, even if hydrocarbons are discovered, the costs of extracting and delivering the hydrocarbons to market and variations in the market price may render uneconomic any discovered deposit. Geological conditions are variable and unpredictable. Even if production is commenced from a well, the quantity of hydrocarbons produced inevitably will decline over time, and production may be adversely affected or may have to be terminated altogether if Recon encounters unforeseen geological conditions. Adverse climatic conditions at such properties may also hinder Recon's ability to carry on exploration or production activities continuously throughout any given year.

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