IVZ drilling final targets - 17 more days until we find out?

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 6,061,999 IVZ shares and 2,833,212 IVZ options and the Company’s staff own 161,667 IVZ shares and 51,679 IVZ options at the time of publishing this article. The Company has been engaged by IVZ to share our commentary on the progress of our Investment in IVZ over time.

Day 31...

IVZ has just announced they have drilled to 2,750m... out of a planned 3,750m.

...IVZ are now drilling into their primary targets.

We have elevated gas shows.

(~70x background levels).

AND heavier hydrocarbons in mudgas readings.

(Which is getting better as IVZ drills deeper).

...and no serious drilling issues.

Everything is looking good so far...

Now there is just 1,000m of drilling to go.

We think it will take ~11 days to drill this final 1,000m,

(Based on our very basic “average daily drill rate” of 88m/day so far).

And after IVZ drills that final 1,000m...

IVZ will run a test and attempt to successfully bring a hydrocarbon fluid sample to surface...

Bringing a fluid sample to surface is the last thing IVZ needs to do to officially declare a hydrocarbon discovery.

This will take another 3 to 6 days to complete (according to IVZ announcements).

And then we pray...

That IVZ successfully brings a fluid sample to surface and declares an official hydrocarbon DISCOVERY.

By our basic calculations (assuming no drilling or wireline delays), is that in ~17 days we could find out if IVZ has made a discovery.

Roughly around the day of the Melbourne Cup on November 7th...

BUT...

We may even get that long awaited “discovery” announcement earlier than that...

Today IVZ said in its announcement the aim of its post drilling completion test (that will take 3 to 6 days) is to:

“confirm the presence of moveable hydrocarbons in multiple zones”

What this means is that IF IVZ manages to get a fluid sample to surface from any of these “multiple zones” they must announce it to the market immediately.

(Under ASX continuous disclosure rules.)

So if (and that’s IF) IVZ gets lucky and manages to get a fluid sample to surface early in the testing process, we might even get an announcement sooner than in 17 days.

This would be our best case scenario.

It assumes that IVZ is successful in getting a fluid sample to surface AND there are no material drilling delays.

So that’s our bet.

That’s what we are hoping for.

Will it happen? - no idea

This is oil and gas frontier oil & exploration, its very high risk.

Things go wrong and share prices can go down.

There hasn’t been much of a pre result run yet, so we are holding a lot more shares than we had originally planned into this result.

Just like we did in Mukuyu-1.

...but we don’t Invest more than we are comfortable to lose.

So, we are hoping for a spectacular result off low market expectations,

But are also prepared to take a loss.

It’s going to be an adrenaline and cortisol filled couple of weeks with our IVZ lotto ticket in hand.

17 days to go...?

Here is where we are at according to IVZ managing Director Scott Macmillan:

Where is IVZ now in its drill campaign?

Drilling started on the 20th of September, since then IVZ has drilled ~2,750m in ~31 days.

At that rate IVZ should be drilling ~88m per day and reach Total Depth (TD) within the next ~11 days.

So far this current well ( Mukuyu-2) has been far smoother sailing versus Mukuyu-1 last year.

Last time around, IVZ started experiencing technical issues when the well reached ~2,000m in depth where hole conditions and equipment availability made it difficult to sample the well properly.

Most of the technical issues for IVZ came from “challenging conditions in the Pebbly Arkose”, which Mukuyu-2 has already drilled through now.

So far IVZ has managed to drill through that area of the well without any of the issues experienced in Mukuyu-1.

Here is what the next few announcements from IVZ should look like:

1. The well reaches TD - IVZ so far has drilled ~2,750m in ~31 days. At that rate IVZ should reach total depth within the next ~11 days (assuming no technical issues).
2. Wireline logging program commences & gets completed - According to IVZ wireline logging should take 3-6 days to complete (assuming no technical issues). This should start straight after the well reaches TD.
3. Final results (fingers crossed we get a “discovery” announcement here) - assuming the well reaches TD within the next 11 days and the wireline logging program takes another 3-6 days to complete. We should be getting final results from the drill by ~early to mid November.

Barring any technical issues (like a broken drill core or broken wireline logging tools) we should see the final results announcement earlier to mid November.

Ultimately, the announcement that will move the IVZ share price the most will be (3)...

IF IVZ manages to get a sample to surface then it will be FORCED to announce it straight away because the news is material - this would likely mean IVZ goes into a trading halt.

So the earliest "surprise" announcement we can expect will have to come after the wireline logging program starts.

All the other bits of newsflow between now and the final results are expected announcements which shouldnt technically be material to IVZ’s share price.

The market is the market though and leading up to that final results announcements we expect to see fluctuations in IVZ’s share price as investors speculate on an outcome from the drill program.

We also noted in today’s announcement IVZ confirmed it wants to bring a sample from multiple zones...

All IVZ needs is for one of those zones to produce an oil/gas sample to surface for a discovery to be declared.

Ultimately we are hoping IVZ can get an oil/gas sample to surface, declare a discovery and achieve our Big Bet which is as follows:

Our IVZ Big Bet:

“To see IVZ make a basin opening oil/gas discovery in Zimbabwe and re-rate by over 700%, similar to the move Africa Oil experienced after making its basin opening discovery in Kenya”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our IVZ Investment Memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true

What’s next for IVZ?

Mukuyu-2 drill results 🔄

Drilling started on the 20th of September and company guidance is the well will be completed within 50-60 days.

We are ~31 days into the program.

By the company timeline estimates we should be complete between the 9th and 19th of November.

2D seismic results 🔄

IVZ recently completed its 2D seismic program across the eastern part of its project.

The results from the seismic program are expected in November.

Prospective resource upgrade 🔄

After the 2D seismic program’s results come in and IVZ has completed drilling Mukuyu-2, we expect to see IVZ put out an updated prospective resource estimate for its project.

What are the risks?

In the short term, the key risk for IVZ is still exploration risk.

Mukuyu-2 may not deliver the desired results and in that scenario, we would expect the company’s share price to drop significantly.

So far the drill program has run relatively smoothly but there is also a risk that IVZ runs into technical issues during the drill program.

Technical risk is also relevant at this stage of the drilling.

Any technical problems could delay the final results beyond the 50-60 days guidance the company put out.

Click here to see all of the risks we list in our IVZ Investment Memo.

Our IVZ Investment Memo

In our IVZ Investment Memo, you can find the following:

• Our IVZ Big Bet
• Why we are Invested in IVZ
• Key objectives we want to see IVZ achieve
• The key risks to our Investment thesis
• Our Investment plan