RE:Hiddensecretsit's cdn, only way I get Haywood report is by signing up for email alerts on reco Christopher Jones, CFA, 403-509-1953, cjones@haywood.com Cameron Price, 403-509-1902, cprice@haywood.com For Important Disclosures and Analyst Certification See Page 5 1 RESEARCH REPORT | May 5, 2021 Price Target $3.25 ReconAfrica Ltd. (RECO-V, RECAF-OTCQX, 0XD Frankfurt) SECTOR: Energy COMPANY UPDATE Spuds Second Exploration Well in Namibia OUR TAKE: ReconAfrica (RECO-V) announced overnight that it has spud the 6-1 exploration well located 16 kms north of the Companys first exploration well (6-2) in the Kavango Basin in North East Namibia. The well is part of an initial 3-well exploration program and follows positive results from the 6-2 well that confirmed an active conventional petroleum system in mid-April. The well will be drilled to 12,500 ft (3,800 m) and will take 45-60 days to drill with results expected in the summer. The target is the thickest part of the discovered petroleum system and is being drilled in one of five major sub-basins within the larger, Permian aged deep Kavango basin. While we maintain our view that it is early days in the exploration of the basin, with the combination of early exploration success and a fully funded program, we continue to like the risk/reward opportunity ReconAfrica offers to investors. The Company has entered a period of significant activity with the drilling of the 6-1 exploration well, ongoing interpretation of data from the 6-2 well, and acquisition and interpretation of 450 kms of 2D seismic, which should provide a steady stream of high-impact news flow over the coming months and could lead to significant partnering potential in 2H21. OTHER HIGHLIGHTS 6-1 Exploration Well Spudded. Similar to the 6-2 well, the 6-1 well is being drilled into one of five major sub-basins of a larger, more extensive, Permian aged deep Kavango Basin. The Company plans to take whole core, side-wall cores as well as logging both conventional and source rock zones of interest. Additionally, a Vertical Seismic Profile (VSP) will be used to help tie-in with the Companys upcoming 450 km 2D seismic program which is scheduled to commence in June. RECOMMENDED ACTION Encourage investors to add to or initiate new positions ahead of a catalyst rich 2021 Maintaining our Buy rating and Top Pick status; increasing target to $12.50/sh. Following the mid-April announcement confirming the existence of an active petroleum system in the Kavango Basin, ReconAfrica has, in our view, significantly enhanced the risk/reward profile, even after the rally in the share price. The investment proposition remains, as we see it, one of the most interesting and compelling opportunities in the energy sector and includes 1) a well- funded investment case with ~$30 MM in cash (1Q21E); 2) a potentially massive resource at play; and 3) visible high-impact near-term catalysts. A powerful combination for investors! Our new target price of $12.50/sh ($10/sh previously) is based on a higher long-term Brent oil price of US$65/bbl (up from US$55/bbl). See Figure 1 for our valuation methodology. VALUATION RECO trades at 0.7x our heavily risked NAV of $12.50/sh with an unrisked upside ~$24/sh at a modest field discovery of 500 mmbbls. See page 2 for our sensitivity to chance of commercialization and field size. STOCK PRICE $9.70 RATING BUY TARGET PRICE Previous $12.50 $10.00 SCENARIO ANALYSIS KEY STATISTICS AND METRICS HAYWOOD ESTIMATES (CAD) PROJECTED RETURN 29% RISK FACTOR Very High 52-Week High/Low $10.40/$0.35 YTD Performance 336.9% Dividend Yield N/A Shares O/S 178.7 MM (fd) Market Capitalization $1,733 MM Cash (Q1/21E) -$29 MM Enterprise Value $1,704 MM Daily Volume (3 mos.) 869,000 Currency C$ unless noted 2020A 2021E 2022E Production (boe/d) 0 0 0 % Oil nm nm nm CAPEX - E&D (MM) $16.8 $22.7 $25.0 Cash Flow (MM) nm nm nm CFPS (fd) nm nm nm D/CF nm nm nm EV/DACF nm nm nm EV/BOE/D nm nm nm Downside Scenario Current Price Price Target $0.00 $9.70 $12.50 100% 29% website. Best I can do.