IVZ: Saudi’s Aramco CEO is calling it the “largest oil supply shock in history” - oil price running - IVZ drilling in November.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 12,824,570 IVZ Shares and 4,919,957 IVZ Options and the company’s staff own 200,000 IVZ shares and 100,000 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. This information is general in nature about a speculative investment and does not constitute personal advice. It does not consider your objectives, financial situation, or needs. Any forward-looking statements are uncertain and not a guaranteed outcome.

~30% of global oil supply (out of the Middle East) is as close to being halted as possible right now...

Saudi Aramco’s CEO is calling the Strait of Hormuz closure the “largest oil supply shock in the world”.

(source)

That was before this weekend, when one of the key pipelines helping soften that Hormuz blow went offline...

(the pipeline taking oil east-west through Saudi Arabia getting around the closed strait of Hormuz)

(source)

Oil markets started trading again a few hours ago and are both gapping up.

(past performance is not an indicator of future performance)

The ASX hasn’t had any time to respond to any of the stuff happening in the Middle East OR the spike in oil prices.

So today should be a fairly strong day of trading for our oil and gas Investment Invictus Energy (ASX:IVZ).

No guarantees of course.

IVZ's next well (in November) is going to drill a giant ~1.2 Tcf gas and 73 million barrels of condensate resource (gross mean unrisked).

(one of the ~12 prospects IVZ has on its project - which has a 5.5 Billion barrel of oil equivalent prospective resource)

(source)

Last Friday IVZ signed a “Well services” contract with $116BN capped SLB - the world’s largest oilfield services contractor:

(source)

AND confirmed that wellpad construction had started for its next big well:

(source)

Importantly... IVZ confirmed that “Musuma-1 remains on track for spud in November”.

So IVZ will be drilling at some point inside the next ~45-60 days.

This will be the first well IVZ drills since making its Mukuyu discovery across two wells in 2022/2023.

(Which was actually labelled the second-largest discovery in Sub-Saharan Africa for 2023)

The first three companies in the image below are $386BN capped Shell, $2983BN capped Total and then our little old IVZ.

Source: IVZ Secures Gas Sample From Major Discovery (March 2024)

The difference with this year’s well is it will be a lot shallower (~1,500m target depth versus ~3,360m depth for the 2022-2023 wells).

AND it should be a lot less technically complex because IVZ now has a “working hydrocarbon system” and a lot of data from the Mukuyu discovery.

IVZ’s last two wells were the first ever wells put into this project.

So this time around, IVZ should have a far better grip on where/what it is drilling.

We also hope it means this round of drilling can be done for a lot cheaper than the last two wells IVZ drilled too.

IVZ’s MD Scott Macmillan said in a webinar recently the well should cost ~US$6 to US$10M. (source)

IVZ is currently capped at $105M and had $10.9M ($7.6M USD) cash in the bank at 30 June.

So IF additional cash is needed, it shouldn't be a $20-30M raise... but something a lot less dilutive - especially with IVZ capped at $100M+.

We think that once the market has clarity on how IVZ will pay for the well - that’s when the weight on the share price will be lifted...

Especially with oil prices doing what they are doing right now.

The all important variable - oil prices - also look like they want to go on a run too.

Oil prices are back above US$100 per barrel again.

Which means the Strait of Hormuz, where ~25% of global oil and ~25% of the world’s LNG pass through is still shut, and doesn’t look like opening any time soon. (source)

As mentioned earlier, Saudi Aramco’s (the world’s biggest oil company) CEO Amin Nasser is calling the Hormuz closure the “largest oil supply shock in history.”

(source)

Yet, oil prices haven’t really behaved like the “largest oil supply shock in history”.

(yet)

Shades of what happened the last time the world experienced a sustained supply shock out of the Middle East was back in 1973 during a war between Israel and other Middle Eastern countries.

Oil prices rallied hard, came off a bit and then rallied hard again - we have had the first leg up, now the pullback, IF things don’t calm down we could get a similar style second run up:

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

For now the world has been able to keep a lid on oil prices - mostly by drawing down reserves and above ground inventories.

And from countries like China pulling back on purchases (decreasing the demand for oil to match the disrupted supply). (source)

But we think the reserve draw down’s can’t keep a lid on prices for too much longer...

(source)(source)

We sort of called it in our last IVZ note, implying that if the Strait of Hormuz stayed shut, oil prices could run hard:

(source - our last IVZ note)

Now, 35 days later, oil is trading at ~US$100 per barrel... and the strait is still shut - meaning we could see oil prices continue rallying.

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

No one knows what will happen with oil prices - but as long as the oil price is trading at or above US$80-100/barrel we think the market could show a lot of interest in IVZ’s 2026 well.

What we think could happen between now and drill results

We’ve talked about this a lot in the past.

Usually (as long as oil and gas prices are strong) share prices for small cap oil & gas exploration stocks start running BEFORE a big drilling event.

Usually what happens is:

1. Investors accumulate in advance. In the weeks and months before a well spuds, online forums light up, speculators front-run the binary event.
   
2. News flow stacks. Rig contract signed. Rig mobilised. Permits granted. Final location confirmed. Each announcement is an incremental data point that primes expectations.
   
3. Imagination prices the upside. The market gets to dream about what a monster discovery could look like without the hard data to argue against it. Every "maybe" becomes a bid.
   
4. Commodity macro lines up. When oil & gas is already on the market's radar (like right now), the pre-drill run is stronger. We think we are in one of those windows.

IVZ has done it before.

In the run up to Mukuyu-1 in 2022, IVZ went from ~20c to almost 40c on anticipation alone.

We bought into a placement at 23c in September 2022.

(we are still holding a lot of those 23c shares...)

By the time the rig was on location and spud was imminent, IVZ was trading well above 30c:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Over the past couple of years with interest rates up and oil & gas prices low - this hasn't played out as much.

Understandably, the willingness to dust $20-30M on an exploration well that has no guaranteed outcome isn’t as attractive to the market as it was when interest rates were close to 0%.

BUT we think IVZ could bring back the “pre-drill run up” trend for a few reasons:

1. IVZ had about ~$10.9M cash in the bank (at Jun 30) and mentioned that its well would only cost ~US$6-10M... so there is no giant US$20-30M raise needed for this well. (source)
2. IVZ has its PPSA (Petroleum Production Sharing Agreement) signed and locked away with the Republic of Zimbabwe on its ~5.5 billion barrel equivalent (gross mean unrisked estimate) project.
3. We already know there is a working hydrocarbon system in the basin. ✅

Yes IVZ has already made two hydrocarbon discoveries in 2022 and 2023 - Zimbabwe's first ever oil and gas discovery.

Strong enough to host Sub-Saharan Africa’s second largest discovery of 2023 at an estimated ~1.3 Tcf gas / ~230M barrels of oil equivalent in resources. (source)

And this time IVZ holds the “keys” to the entire basin with that signed PPSA with the Republic of Zimbabwe. ✅

(By keys we mean Zimbabwe’s first oil and gas Petroleum Production Sharing Agreement)

Another reason we think IVZ could do well in the current environment is because it has already got years of market awareness built into the name from past drill programs.

A lot of the small cap market knows the story - IF/When the macro is hot and IVZ is drilling, most will tune into what IVZ is doing.

Let the IVZ “meme-stock” reactivation theory begin?

We have a theory that when companies build up a following big enough and become “meme stocks” - they have an army of investors engaged enough for the company’s share price to do great when things are going well and bad when things go wrong or get boring.

In summary, a meme stock:

• Lives rent free in many people's heads.
• People check for announcements regularly from the company (even though they may not admit it).
• Company starts doing something exciting again.
• Past investors come back just in case “it actually happens” this time.

AND if the company actually delivers something material - there are enough eyeballs on the stock to re-rate the stock to a level to reflect the company’s new progress.

And the cycle continues.

Luckily, IVZ has been able to cultivate this following and the share price tends to do well in the lead up to its big drill programs (probably a function of the targets being genuinely massive as well).

IVZ’s share price went from ~20c to ~40c (without a PPSA) the first time around when it went from drilling confirmed to drill rig spinning:

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

We expect our “reactivation” thesis to really get going now.

Especially with the spud date locked in for November and a clear line of sight to drilling.

(You can read about our reactivation theory in detail here: The reactivation thesis: When meme stocks awaken)

Basically the more of these type posts we see on Reddit, X, Facebook and other social media platforms, the more eyeballs on what IVZ is doing.

AND with a bit of luck, if there is success - more eyeballs = more people willing to reward whatever IVZ delivers.

(of course it works in the opposite direction too if exploration results are negative)

So, more of this over the next few months please:

(source)(source)(source)(source)(source)(source)(source)(source)(source)(source)

It’s important to note this is a thesis, and there’s no exact concrete formula or science behind market moves.

We can get things wrong.

Now it's over to IVZ to drill its well in November, and we will see what happens to its share price this time around:

(source)

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

A quick reminder on what IVZ has right now

IVZ owns 80% of a giant block in the Cabora Bassa Basin in Zimbabwe.

IVZ is exploring and developing what is one of Africa's largest and last untested frontier rift basins.

IVZ has the only Petroleum Production Sharing Agreement (PPSA) signed with the Republic of Zimbabwe.

The PPSA sets the precedent (financial and non-financial framework) for oil and gas investment in the country.

Think of it like how Woodside made an oil and gas discovery in WA in 1971 (the North Rankin gas field on the North West Shelf) and then took 8 years negotiating with the Australian and WA governments on how the development would be shared - the State Agreement was finally signed on 27 November 1979 - the rest is history.

Of course it's a bit early to be calling IVZ the “Woodside of Zimbabwe”, but the origin stories so far are looking pretty similar.

Check out our deep dive on the PPSA here: IVZ signs landmark agreement with Zimbabwe. Drilling in the coming months.

The PPSA was signed back in May:

(source)(source)(source)(source)

So effectively, IVZ is now holding the keys to anyone wanting a piece of a potential 5.5 billion barrel oil equivalent prospective resource estimate.

On a project that has a gross unrisked mean prospective resource of ~5.5 billion barrels of oil equivalent (estimate).

(plus this oil & gas doesn’t have to pass through the Strait of Hormuz to get to China. Just saying...)

(source)

Up until a few years ago, the project had never been drilled.

In September 2022, IVZ started drilling its first well, Mukuyu-1, and by December had "opened up the system" by defining a working hydrocarbon system.

In 2023, IVZ followed it up with Mukuyu-2, which delivered an official gas-condensate discovery.

From the Mukuyu drill campaigns, IVZ confirmed:

• ✅ Gas readings 135x above background levels
• ✅ Multiple potential gas-bearing reservoir units (up to 13 in the Mukuyu-1 sidetrack)
• ✅ ~900m gross interval, with 225m in potential hydrocarbon-bearing zones (upper Angwa target)
• ✅ Multiple seals identified with several hundred-metre thicknesses above the deeper primary targets
• ✅ Elevated fluorescence, indicating condensate or light oil
• ✅ Commercial helium grades up to 0.1% (helium is a valuable by-product)
• ✅ A working conventional hydrocarbon system declared 🛢️
• ✅ An official gas-condensate discovery on Mukuyu-2

IVZ’s Mukuyu discovery was declared by global research firm Wood Mackenzie to be the second-largest discovery in Sub-Saharan Africa for 2023.

The first three companies in the image below are $386BN capped Shell, $283BN capped Total and then our little old IVZ.

Source: IVZ Secures Gas Sample From Major Discovery (March 2024)

The discovery in 2022 happened while Liquefied Natural Gas & oil prices were running - then as prices fell away, so did IVZ’s share price (despite that Mukuyu-2 well delivering a discovery again).

Then IVZ went into a bit of a newsflow vacuum, and with that lack of drilling activity, IVZ’s share price fell away even more.

Now... oil and gas prices are starting to move again.

Which makes for the right macro setup for IVZ to have heading into its November well.

Over to IVZ to deliver now over the next few months.

What we want to see next from IVZ

IVZ’s next well (Musuma-1)

It's now a countdown to IVZ’s next well - the 1.2 Tcf gas + 73M barrel condensate target (unrisked, prospective resource).

IVZ has confirmed drilling will begin in November this year.

Here are the milestones we will be tracking:

• 🔄 Rig mobilisation to site
• 🔲 Confirmation of funding for the well
• 🔲 Drilling starts
• 🔲 Drilling updates
• 🔲 Drilling results

What could go wrong

The key risk in the short-term is “delay risk”.

It is possible that the drilling program slips into 2027 or that it gets missed entirely.

Especially given the Zimbabwe wet season usually kicks off around November which makes drilling more difficult.

The macro environment could change, and it may lead to a delayed drill program - in which case IVZ’s share price could suffer.

Delay risks.

IVZ has been "about to drill" multiple times. If Musuma-1 slips into 2027, the market loses patience.

Source: “What could go wrong” - IVZ Investment Memo 21 April 2026

Other risks

Like any early-stage exploration company, IVZ carries significant risk, here we aim to identify a few more risks.

With the upcoming Musuma-1 well having been estimated to cost between US$6M - US$10M, IVZ’s $10.9M AUD ($7.6M USD) June 30th cash balance will be stretched pretty thin across pre-drill activities and well execution.

If a new funding partner fails to materialise on favourable terms, the company may need to launch an equity capital raise.

Both scenarios will result in dilution for existing shareholders, the question is how much.

Although IVZ already proved a working hydrocarbon system at Mukuyu, Musuma-1 is a completely new geological target. Frontier exploration drilling inherently carries a high statistical probability of failure or encountering uncommercial quantities of gas and condensate.

Much of the current thesis relies on elevated oil prices remaining at or above US$80-US$100 per barrel. A broader macroeconomic pullback or a sharp decline in global energy prices could severely dampen market appetite for frontier exploration.

Investors should consider these risks carefully and seek professional advice tailored to their personal circumstances before investing.

Our IVZ Investment Memo

You can read our IVZ Investment Memo in the link below.

We use this memo to track the progress of all our Investments over time.

Our IVZ Investment Memo covers:

• What does IVZ do?
• The macro theme for IVZ
• Our IVZ Big Bet
• What we want to see IVZ achieve
• Why we are Invested in IVZ
• The key risks to our Investment Thesis
• Our Investment Plan