Aug 17, 2021 (Financial News Media via COMTEX) -- FN Media Group Presents Oilprice.com Market Commentary
London - August 17, 2021 – With evidence of an active petroleum system now confirmed after two test wells in Namibia's 6.3-million-acre Kavango Basin, the game is afoot with 2D seismic and a 6-well exploration drilling campaign that hopes to put this final frontier nation definitively on the commercial oil map. Mentioned in today's commentary includes: Chevron Corporation /zigman2/quotes/205871374/composite CVX +1.31% , Royal Dutch Shell plc , BP p.l.c. /zigman2/quotes/207305210/composite BP +0.90% , TotalEnergies SE /zigman2/quotes/201824152/composite TTE +0.36% , Baker Hughes Company /zigman2/quotes/205323712/composite BKR -5.66% .
Recon Africa ( RECO , RECAF ), the junior explorer behind the new play, and its JV partner NAMCOR, Namibia's state oil company, think they might have drilled into a reservoir in their first test well, and they are very excited about what comes next. So, let's drill down here to better understand exactly where we stand with exploration in the Kavango Basin, and why many of us are so excited about it.
Namibia Is Set To Boom
The purpose of the first two stratigraphic wells was to determine evidence of whether Recon Africa is sitting on an active petroleum system. These wells were not drilled with the intention of completion for production, which comes at a later stage if all goes well, though the first well has been left in a state that will enable re-entry for flow testing.
ReconAfrica's first test well (6-2) now has a complete set of data . Complete data from the second test well (6-1) is being assembled for submission to and must be accepted by the Government of Namibia before the company can release it in the public realm. We expect that shortly.
What we know so far from the first test well is that data shows three main intervals with a variety of oil shows and associated gas shows. Drilled to a total depth of 2,294 meters, this well had over 250 meters of hydrocarbon shows.
Mud-Logging Results Are Positive
Mud-logging is said to be one of the most critical elements of exploration--and we believe it's crucial for investors in terms of determining the potential value of a company's exploration results.
It used to be that mud-logging was a less comprehensive affair involving the recording of depth and the describing of the lithology of formations encountered in drilling. Those results would then determine whether the formations contained hydrocarbons.
But, as Schlumberger notes , mud-logging has expanded significantly in recent times. Today, it involves an impressive collection of high-tech sensors, including gas chromatographs, weight-on-bit and mud-pit level indicators. Advanced tech mud-logging now combines a basket of surface indicators that give us an incredibly concise record of subsurface geology and hydrocarbons.
Conducted by U.S.-based Horizon Well Logging Inc, mud-logging for the 6-2 well returned 52 intervals with shows. All of that was documented by U.S.-based Horizon Well Logging Inc, and the description is available on the ReconAfrica website.
Samples are described every 3 meters, and any samples that have evidence of oil are described, and then the oil itself is extracted and rigorously evaluated for quality. Likewise, gas is sampled directly from the flowline and sent to a chromatograph, which measures the amount of gas and some basic properties.
Horizon CEO Doug Milham noted: "Horizon is proud to be part of the team at ReconAfrica and the potential resource that has been discovered with their first two wells. The presence and quality of oil and gas shows encountered while drilling the 6-2 and 6-1 wells was remarkable, with many positive indicators of hydrocarbons encountered throughout both wells. Our sample logging data and analysis has identified significant intervals of oil and natural gas in each of the two wells drilled, with varying characteristics from multiple zones. This is an exciting oil and gas exploration project with world-class potential."
What this mud-logging data shows most clearly is evidence of the presence of a conventional petroleum system with many light oil shows. That, in turn, means the company has significant support for a comprehensive 2D seismic program that will more definitively evaluate the Kavango Basin.
3 Zones of Thickness Could Potentially Be Reservoirs
First of all, this is a conventional petroleum system. We know this now because the comprehensive data shows signs that--as in a conventional system--the petroleum is migrating along faults, fractures, or porous rock from a source into a reservoir or trap. In Recon Africa's 6-2 well, the three intervals, we don't know yet if they hit an actual reservoir in its first well.
More Results On The Horizon
Core labs are expected to give us critical data about the rocks specifically, which in turn should feed into the analysis of the wireline logs. These are said to be taking about 4-5 weeks longer than anticipated due to COVID restrictions that made it more time-consuming to ship from Namibia to Core Labs in Houston, Texas.
The company reports that 2D seismic has already started and remains on schedule, and Recon Africa is already receiving information to interpret. Test lines have been finished as of the first week of August, and Recon Africa reports it is now shooting its first line in production mode.
So, in addition to the wider 450km seismic acquisition across the Kavango Basin, Recon Africa is also shooting vertical seismic profiles in the 6-2 and 6-1 wells in an effort to tie them to the wider seismic line. We think this is significant because it should allow the company to accurately correlate the zones they've already found through the first two test wells.
Target completion of seismic data acquisition is said to be by the end of September.
As of the time of writing, Recon Africa ( RECO , RECAF ) reports it has CAD$60 million in cash to cover the seismic program, additional wells from now until June 2022, and its ESG commitments to Namibia and the people of the Kavango Basin. As soon as the seismic acquisition is complete, which again is expected by the end of next month, Recon Africa says it will start drilling more wells. The company intends to drill one to two wells by the end of this year, and an additional two to four wells in the first half of next year.
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