Wednesday, July 17, 2024

Canadian driller using Okavango exploration to boost share price – Namibian MPs

Once before, some have expressed fear that a Canadian drilling company called Reconnaissance Energy Africa (ReconAfrica) that is officially exploring for oil and gas in the Okavango Basin is actually in search of something else – a higher share price on the Toronto Stock Exchange and Frankfurt Stock Exchange. A standing committee of the Namibian parliament says that at least so far, Recon Africa is using its exploration activity to pump the value of its share price on the stock market.

ReconAfrica areas of interest are in Namibia and Botswana and resultantly, has formed two subsidiaries: Recon Namibia (REN) and Recon Botswana. Through Namibia Petroleum Corporation (NAMCOR), the state-owned oil company, the Namibian government has a 10 percent shareholding in REN and “about” 98 percent shareholding in over 40 licences issued by the Ministry of Mines and Energy.

Following international outcry over mineral exploration in an area connected to a highly sensitive ecosystem (which includes the Okavango Delta), the Namibian parliament tasked the Standing Committee on Natural Resources to investigate this matter. One part of the Committee’s report all but confirms the theory that ReconAfrica merely wants to bolster its performance on the stock market.

“The Committee was concerned that REN, based on the rise of its shares at the stock exchange, is raising money using Namibian resources while NAMCOR’s 10 percent is not worth anything,” reads the report in reference to a practice that is known as “stock-pumping.”

The resources in question (oil and gas deposits) straddle the border and by extension, ReconAfrica would also be using Botswana’s resources to boost its share price. The company has been continually issuing positive press statements and some investors bought its shares on the basis of such positive statements. The alleged stock-pumping is also mentioned in a damaging report by Viceroy Research LLC, a United States-based investigative financial research group registered in Delaware.

After Viceroy published its findings, some investors filed a class-action lawsuit against ReconAfrica through Pomerantz LLP, an international law firm with offices in New York, Chicago, Los Angeles, Paris and Tel Aviv. Based on Viceroy’s research, Pomerantz makes the case that “[ReconAfrica is] committed to drip-feeding overly positive press releases in the hope of boosting their share price.” For its part, ReconAfrica has stated that it intends to “vigorously defend” the lawsuit.

In August 2021, an investigation by the National GeographicThe Globe and Mail, and The Namibian found that ReconAfrica’s share price rose 1,600 percent “in the past 12 months due to a concerted campaign of paid stock promotion and opaque press releases aimed at unsophisticated investors.” National Geographic reports that the company’s announcement about a huge oil find in the Okavango Basin “corresponded with sharp increases in the company’s stock price—from 19 cents a share in September 2019 to a high of nearly $10 in late June 2021.”

Taking an aggressive stance, the investigation team reported that ReconAfrica “checks every box in the SEC’s guidelines as to what constitutes an oil and gas scam, and in addition to these red flags we believe there is a near-zero chance of commercial success. The two wells drilled so far have been unsuccessful – we believe drilled solely to fulfil lease requirements.” The Securities and Exchange Commission (SEC) is an independent US agency whose primary purpose is to enforce the law against market manipulation.

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