Reconnaissance Energy Africa continues to come under fire from various sources, including short sellers, but it has received public affirmation for its plans from local government in Namibia.
The Canadian company’s activities onshore Namibia have been criticised by environmental activists. Initially, worries focused on fracking, but they have grown to include the potential impact on water and elephants.
A whistleblower reported concerns on ReconAfrica to the US Securities and Exchange Commission on May 5, National Geographic reported. According to the report, the company had allegedly failed to provide important information in an attempt to increase its share price.
East Kavango Governor Bonifasius Wakudumo issued a statement of support for ReconAfrica on May 28. The article in National Geographic does “not reflect the integrity and business practices of ReconAfrica and its operations in our region, Kavango East”, he said.
Short sellers
ReconAfrica denied the allegations raised by National Geographic. It went on to say the story would “facilitate activist short sellers” who have been attempting to drive the company’s share price down.
A number of law firms have launched prospective class actions against ReconAfrica following the allegations.
Officially, there are around 3 million shares held short, around 1.5% of ReconAfrica’s total, the company’s IR manager Grayson Anderson explained. “It’s possible there’s a large naked short, but the magnitude of that is up for debate.”
A very large short position would have likely had an impact on the company’s share performance over the last year, which has not been apparent, Anderson said. “Whether the complaint was filed by a short seller or an environmental activist, we don’t know. The quality of the complaint did not show a good understanding of the subject matter,” he continued.
Short selling tracker Buyins.net has reported high volumes of short selling in the US and Canada and that a short squeeze has begun. ReconAfrica pays Buyins.net for data and advertising.
Discussions of short selling dominate bulletin boards and Reddit forums dedicated to the company. Allegations swirl – with little evidence – that Anson Funds has a short position in ReconAfrica and that it has been involved in the negative press. Energy Voice has asked Anson to comment but has not yet heard a response.
As of June 1, ReconAfrica has a market capitalisation of around $1.1 billion. It announced a warrants listing on May 31 to raise C$41.4 million ($34.4mn).
Local pressures
The Namibian recently reported that the company had previously employed Knowledge Katti as a media consultant. Katti has played a part in a number of resource companies in Namibia and he is close to Namibian President Hage Geingob.
ReconAfrica acknowledged that Katti had approached the company in October 2000 and he provided “advisory support” for a short period. The contract ended early in 2021, it said.
US Senator Patrick Leahy, of Vermont, chimed in on the National Geographic article.
Shocking revelations about possible securities violations related to oil and gas exploration in the fragile Okavango region warrant prompt and thorough scrutiny by the #SEC and African governments. https://t.co/2ny7wuFjVY
— Sen. Patrick Leahy (@SenatorLeahy) May 25, 2021
The Anglican Church of Southern Africa has criticised ReconAfrica’s work, describing it as a “sin”, in March. Leonardo diCaprio voiced his support to “save the Okavango”.
At the end of 2020, Unesco expressed some concerns about exploration in World Heritage sites.
ReconAfrica has denied claims that its work has interfered with animal migration and waterways. Furthermore, the company has plans to tackle its future carbon emissions.
“We can stay at zero emissions easier than other oil companies,” Anderson said. “We can offset carbon as we develop, we have an extremely progressive world-leading ESG programme – it’s a critical part of any business,” he continued.
ReconAfrica will work on its scope 1 and 2 emissions over the year as more clarity emerges on its discovery. Scope 3 poses more challenges in terms of calculations, he said. However, Anderson said this would also play a part in its plans.
The company’s emissions plans did not find favour with local activists.
Ina-Maria Shikongo, Fridays for Future Windhoek co-ordinator, said promises on climate regulations from the global north rang hollow.
“Nowhere is this more evident than in the Kavango, where under cover of COVID-19, oil and gas are rushing to cash-in on what they suspect is the last great fossil fuel find. Instead, what they have found is the decade’s great emblematic struggle, because what happens in Kavango, won’t stay in Kavango.”
Updated at 4:23 pm with comment from Fridays for Future Shikongo.