ReconAfrica Sells Off Mexican Assets As It Works To Clean Up Balance Sheet
Reconnaissance Energy Africa (TSXV: RECO), who operates under the banner ReconAfrica, has significantly reduced legacy liabilities from its balance sheet following the sale of its Mexican operations.
The operations, referred to as RenCan, have been sold to Chame Energy Corp, a privately owned company that is controlled by Edgar de la Torre, who’s family has been conducted oil field services in Mexico for over four decades.
The legacy liabilities in question amounted to over $101.5 million owing it royalty payments related to the firms Chiapas properties. The figure has been owing since at least 2019, with $60.3 million related to the royalty payable balance, and $41.2 million related to estimated interest as of June 30, 2023.
The debt is owed to the Tax Administration Service of Mexico, and CNH, an agency of the Mexican Federal Government. Repayments have been made, however no formal agreement was entered into regarding these repayments.
Additional liabilities unrelated to the royalty bring the total liabilities owed by the Mexico operations to over $105.7 million. ReconAfrica as a whole meanwhile posted liabilities of $113.7 million as of June 30, meaning its balance sheet will be substantially improved on a post-transaction basis.
“We are very pleased with this transaction. It provides the Company with access to working capital while allowing us to exit Mexico and remove the legacy liabilities from our balance sheet in excess of US$100 million. This transaction streamlines our portfolio and enables the Company to focus its resources on progressing our joint venture partnership efforts and preparing to execute our multi-well, high impact exploration program in Namibia which is expected to commence in Q1 of 2024,” commented CEO Brian Reinsborough.
While the liability has been removed with the sale of the assets, so to has ReconAfrica’s revenue from oil and gas sales, with Mexico accounting for all $8.0 million in revenue recorded to date in 2023.
The purchase itself sees RenCan sold for US$7.5 million, with the funds provided to ReconAfrica via a loan that was taken out by a subsidiary of RenCan, which was then provided to ReconAfrica. As part of the arrangement, that loan will terminate upon closing, deemed to be satisfied in full. Chame will be assuming all debts of RenCan and its subsidiaries, along with all present and future liabilities.
ReconAfrica last traded at $1.00 on the TSX Venture.
Information for this briefing was found via Sedar and Reconnaissance Energy Africa Ltd. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
