Renaissance Oil Corp. has lined up an entry into Botswana in a bid to diversify its focus away from Mexico.
The junior Toronto-listed company has signed an agreement with Reconnaissance Energy Africa (ReconAfrica). The deal provides an option for a 50% working interest in a licence that covers 2.45 million acres (9,910 square km) in the Kavango Basin.
ReconAfrica announced its entry into the Botswana licence on June 11, taking a 100% stake. The company’s move expands its interests in the basin from the Namibian side of the border.
ReconAfrica entered the Botswana licence by reaching a farm-out agreement with a company that is wholly owned by Renaissance’s CEO Craig Steinke.
Steinke’s company will pay ReconAfrica C$100,000 and if it exercises an option for a 50% stake in the licence it will pay C$1 million. ReconAfrica has committed to spending at least $432,000 in the first four years of exploration.
Should the deal complete, Steinke will increase his stake in Renaissance to 11.7%, from 3.3%.
“The option will provide Renaissance with an important and potentially high impact oil and gas play, through the opening of the Kavango Basin, a previously unrecognised, deep sedimentary basin in northwestern Botswana and northeastern Namibia,” said Renaissance’s director Ian Telfer.
“This low cost three year option provides excellent value for Renaissance shareholders.”
The company also noted the appeal of Botswana, which is stable and offers attractive terms. Renaissance said Mexican government policies have made the company seek alternatives.
The licence on the Botswana area runs for four years, with renewal options of up to 10 years. The licence holders can sign up for a 25-year production licence, if they make a discovery.
The deal can be terminated by either side if it has not been completed by August 17.
Testing of ReconAfrica’s Kavango thesis has been repeatedly pushed back. This week the company it expected to ship the rig from Houston in September. The first well, of three, should be spudded in late October.
The company blamed delays on travel restrictions imposed as a result of coronavirus. It had planned to begin its drilling programme by the end of June.