Reconnaissance Africa (TSXV: RECO) Stock Soars 57%. Should You Invest?

Source: PLUkaAOM_Studio, Shutterstock

Summary

  • The company has found a working conventional petroleum system in Kavango Basin.
  • RECO stock has been riding high since the past year.
  • The company also reported strong financials in Q3 2020

The stock of Reconnaissance Energy Africa Ltd. (TSXV:RECO) soared 57 per cent and it climbed up to a price of C$ 5.52 at market close on April 15. The sudden surge in the stock came after the company announced it discovered a working conventional petroleum system in Namibia’s Kavango Basin.

The company informed in its press release that one of the three well drilling programmes indicates the presence of over 200 meters of oil and natural gas at three discrete levels.

Dan Jarvie, a member of Reconnaissance Africa and a petroleum systems chemist said that the results are positive and are indicative of a working petroleum system. The Namibian Mines and Energy Minister, Tom Alweendo, termed the discovery as a significant development for onshore exploration and said that the result of the well has enabled them to unlock the country's petroleum potential.

According to a report of the Canadian Association of Petroleum Producers (CAPP), the capital investment in the oil and gas industry will rise by 14 per cent in 2021 to C$ 27.3 billion, although the spending will increase it will remain below the pre-pandemic levels.

A Look At Reconnaissance Africa's Stock And Financials


The company's stock has been riding high since the past year and on April 15 it breached its 52-week high of C$ 5.08 (January 19, 2021), up by 8.7 per cent. It is up by 2,023 per cent than its 52-week low of C$ 0.26 (April 27, 2020).

One-year performance of RECO stock (Source: Refinitiv)

Reconnaissance Africa is worth C$ 378.5 million and offers a 339.56 per cent return on equity (ROE). In a year, the stock skyrocketed by 1391.9 per cent and 148.6 per cent year-to-date (YTD).

The company maintained strong financials in Q3 2020 and its cash and cash equivalents increased by 617 per cent year-over-year (YoY) to C$ 18.2 million. During the same period, the value of total assets increased to C$ 30.8 million, up from C$ 8.3 million in 2019.

The above constitutes a preliminary view and any interest in stocks should be evaluated further from an investment point of view.

 


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