Corporate M&A

ReconAfrica Executes LoI to Acquire Renaissance Oil

By Isha Makkar
April 19, 2021
3 minutes read
Gas Flare

London-based Reconnaissance Energy Africa Ltd. (ReconAfrica) has entered into a non-binding Letter of Intent (LoI) to acquire 100% of the issued and outstanding share capital and convertible securities of TSX-V listed Renaissance Oil Corp. in a corporate transaction valued at C$155 million.

The LoI has been unanimously approved by both companies’ boards of directors, and holds a 30-day exclusivity period to negotiate and settle a definitive agreement. Upon completion, Renaissance Oil shareholders will hold 11.36% of the fully-diluted issued and outstanding shares of ReconAfrica.

Under the terms of the LoI, Renaissance Oil shareholders will receive 0.046 share of ReconAfrica for each share of Renaissance Oil common stock held. Based on the total number of Renaissance Oil common shares outstanding (as on April 19th, 2021), Renaissance Oil shareholders will receive a total of 20,340,792 common shares of ReconAfrica valued at C$7.62 per share (based on ReconAfrica’s closing share price on April 16th, 2021, the last trading day prior to the transaction announcement), amounting to a total estimated equity offer value of approximately C$154.9 million. Adjusting for Renaissance Oil’s reported long-term debt of US$9,917 and working capital surplus of US$46,398 (as of October 31st, 2020), the total implied transaction value is approximately US$953,805 on an enterprise value basis.

Based in Vancouver, Renaissance Oil is focused on the development of a portfolio of shale assets and mature fields in Mexico, and currently holds a 25% interest in the Amatitlán Contract located within the Chicontepec Paleochannel formation in East Central Mexico, as well as 100% interests in Mundo Nuevo, Topén, and Malva blocks in the state of Chiapas. As of December 31st, 2019, the company had proved (1P) reserves of 0.47 million barrels of oil equivalent (MMboe), and a current average daily production of approximately 1,200 barrels of oil equivalent per day (boe/d).

“With ReconAfrica’s recent drilling success in the Kavango Basin, the company has determined it is in the best interest of ReconAfrica shareholders to consolidate all interests. Renaissance Oil’s right to acquire 50% working interest in 2.2 million acres in the eastern part of the Kavango basin (Botswana) is potentially very valuable to ReconAfrica as it pursues the development of conventional resources in the basin,” commented Scot Evans, CEO of ReconAfrica.

Craig Steinke, CEO of Renaissance Oil said, “Consolidating all interests in the Kavango Basin to 8,500,000 acres, which covers the entire sedimentary basin, is in an accretive transaction for both ReconAfrica and Renaissance. The combined company will solely focus on the development of the deep Kavango basin while exploring strategic alternatives for the Mexican assets.”

ReconAfrica is engaged in exploration activities in Namibia and Botswana, with a focus on activities in the frontier Kavango Basin. In August 2019, Lund Enterprises Corp. and the shareholders of 1163631 BC Ltd. entered into a reverse takeover, following which ReconAfrica was formed.

The transaction is subject to customary closing conditions, including completion of satisfactory due diligence by each of ReconAfrica and Renaissance Oil, negotiation of a definitive agreement, entering into a binding definitive agreement, entering into by the directors and officers of Renaissance Oil of support and lock-up agreements to vote in favor of the transaction, and receipt of all regulatory and shareholder approvals.

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