ivz.jpg

Invictus Energy Limited

ASX:IVZ

Last Price:

$0.200

Our Investment Summary

Date of
Initial Coverage

18-Sep-20

Initial
Entry Price

$0.038

Returns from
Initial Entry

426%



Investment Memo: Invictus Energy (ASX:IVZ) - LIVE

Opened: 16-Feb-2022

Shares Held at Open: 6,706,980


What does IVZ do?

IVZ is a gas exploration company drilling one of the largest un-tested gas prospects in Zimbabwe.

What is the macro theme?

Natural Gas demand in Africa to replace existing coal and oil energy generation. As governments around the world look to phase out ageing coal-generation, gas will play a critical role in providing a green and more cost-effective alternative to base-load energy generation.

Why did we invest in IVZ?

First mover on an Elephant Scale Target

Our primary reason for investing in IVZ was for it to go and replicate our previous success with Africa Oil back in 2012. IVZ's Oil & Gas project in Zimbabwe has a prospective resource (100% Gross Basis) of 9.25 TcF Gas + 294m barrels of Conventional Gas-Condensate. Drilling program expected to cost US$12m which is cheap considering the size of the target being tested.

Strategic Location bordering South-Africa

Zimbabwe over-looked in the past due to geopolitical issues & rampant inflation. With political climate improving & it's location bordering the Energy hungry South-Africa the project has immediate access to energy markets & direct to industrial users who are looking to transition energy consumption at there projects to a more green source.

We like big oil & gas exploration drilling events

We have been investing in early stage oil & gas exploration for many years, and three of our most successful investments have been in "swing for the fence" high impact drilling, especially if it is a "basin opening" drill. These are high risk but high potential reward. Big, basin opening, exploration wells (like IVZs) take a long time to prepare, but the share price usually runs up in the lead up to commencement of the drilling.

What do we expect IVZ to deliver in 2022?

Objective #1: Detailed interpretation of seismic survey recently conducted.

We are hoping to see the results from the seismic survey form a major part of the planning process for the upcoming maiden drilling program.

Milestones

Shoot seismic programs

Analyse/reprocess data

Refine drill targets and finalise well locations

Objective #2: Drilling rig contracted and permitting completed

We are hoping to see all of the permitting process completed & drill-rigs contracted before the company needs to raise to finance drilling.

Milestones

Drilling permits

Drill rig contracting

Drill rig mobilisation

Objective #3: Financing for drilling

Potential farm-out to secure drilling financing

Milestones

Capital raise 1

Capital raise 2

Farm out “memorandum of understanding” (MOU)

Binding farm out agreement

Objective #4: This is the most important: We want to see the first drill.

Milestones

Drilling commencement

Drilling results

What could go wrong?

Exploration Risk

IVZ will be doing a maiden drilling program at its gas project, there is a chance the drilling finds no gas which could mean the project is stranded.

Economic Production Risk

If gas is found it doesn't guarantee that it can be economically produced, there is a risk that the water content of the gas flows is too high making it uneconomic to extract. Flow-rates will need to prove that any gas found can be economically produced.

Geopolitical Risk

The project is located in Zimbabwe which has a history of political & economic instability, there is a risk that geopolitical issues make it difficult to advance the gas project. 1st half of the Production Sharing Agreement Finalised but 2nd half not completed, there is a risk that the government tries to take a large part of the proceeds from the project if it is successful.

Commodity Price Risk

Ultimately demand for Gas and its price will dictate the economic viability of the project.

What is our investment plan?

As with all early stage oil and gas investments we invest early, well before the main drilling event and will aim to be free carried and have taken profit before the drill result comes in. We look to hold at least 40% of our initial position into the first result, this is a ~3 year strategy.


Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 6,706,980 IVZ shares and 140,989 IVZ options at the time of writing this article. S3 Consortium Pty Ltd has been engaged by IVZ to share our commentary on the progress of our investment in IVZ over time.


Investment Milestones for IVZ

Initial Investment: 3.8c
Top Slice
Free Carry
Increased Investment: 11c
Free Carry
Increase Investment 10c
Free Carry
🔃 Take Profit
Price increases 300% from initial entry
Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years


Our Past Commentary on Invictus Energy

Date Title
06-Oct-2022 $ IVZ basin opening drill at 593m out of planned 3,500m - over half way to first target at 850m
25-Sep-2022 $ IVZ to drill any day now - What a past successful exploration campaign looks like
20-Aug-2022 $ 0.305 Following a company's progress and why context matters
18-Aug-2022 $ It’s pre-drill time
09-Jul-2022 $ 0.205 Markets showing life after June tax loss selling
05-Jul-2022 $ IVZ’s resource is now 2.7x bigger - Drilling in August
11-Jun-2022 $ 0.190 Why the market is tanking and what are we doing?
08-Jun-2022 $ IVZ’s Drill Rig Now on its Way - Elephant Scale Gas Target to be Pierced in July
21-May-2022 $ 0.000 Commodities super cycles
14-May-2022 $ 0.220 Small caps in a shocking market
30-Apr-2022 $ 0.210 US market swings drove a wild week on the ASX.
28-Apr-2022 $ The IVZ Bidding War Has Officially Begun - Drilling in July
23-Apr-2022 $ 0.195 What exactly is a share price catalyst?
11-Apr-2022 $ 0.210 Why we invest in IPOs and our investment approach
07-Apr-2022 $ IVZ Identifies New Prospective Targets Ahead of First Well
04-Apr-2022 $ 0.185 Investing in Early Stage, High Risk Companies in 2022
28-Mar-2022 $ IVZ Gets a 7x Increase in Acreage, Focused on the Margins. Sovereign Wealth Fund on Board. Drilling Getting Closer
12-Mar-2022 $ 0.160 Nickel, the War and Under Investment in Exploration
05-Mar-2022 $ 0.140 Mainstream Media Catching on to the Commodities Supercycle
21-Feb-2022 $ 0.150 Why we invest in Oil & Gas and Precious Metals
16-Feb-2022 $ Years in the making: IVZ first drill now months away
12-Feb-2022 $ 0.155 Energy Transition Metals, Raw Materials, McKinsey, Supply and Demand Economics
31-Jan-2022 $ 0.120 Inflation, US Fed Reserve, Bond Yield, Cash Buffer Portoflio
22-Jan-2022 $ 0.115 Our Investment Approach, Energy Cold War, Ukraine, Supply Chain Crisis
14-Jan-2022 $ 0.120 How do Fund Managers Invest in Small Cap Stocks?
08-Jan-2022 $ 0.125 Early-year trading indicates market is set for an up-and-down year
18-Dec-2021 $ 0.115 Investing 101: Taking Stock of your Stocks and Diversification
11-Dec-2021 $ 0.125 ASX rests pre-Chrsitmas as the market trades on very low volumes
09-Dec-2021 $ IVZ Commits to Farm in Deal with British Tycoons - But Maintains Open Relationship
04-Dec-2021 $ 0.150 Omicron, Inflation and Investment Memos
06-Nov-2021 $ 0.145 COP26, Battery Metals, Green Energy
09-Oct-2021 $ 0.165 Investing 101: Key lessons for small cap investors
04-Sep-2021 $ 0.155 Annual Reports, Uranium and a Welcome to New Subscribers
10-Jul-2021 $ 0.155 Breaking News: Stellantis signs offtake MoU with VUL
26-Jun-2021 $ 0.160 June tax loss selling is behind us, KNI IPO expected in August
05-Jun-2021 $ 0.175 What did our investmensts do this week? BPM, VN8, IVZ, and more...
27-Apr-2021 $ 0.185 Our Portfolio Performance from January 1st to March 31st 2021
16-Apr-2021 $ 0.185 IVZ Price Runs on Positive Result in Same Petroleum System?
26-Mar-2021 $ 0.180 We just invested - Extra Exposure to Elephant Energy Explorer
11-Mar-2021 $ 0.089 Up 2,150% - Will IVZ Repeat this Run?
12-Feb-2021 $ 0.078 What are the best returns in our portfolio?
07-Jan-2021 $ 0.053 Our Stock Picks for 2021
18-Sep-2020 $ 0.051 Introducing Our Top Energy Pick of 2020: Eying Elephant Scale Potential



Investor Presentation

Expanded acreage with a prospective resource upgrade on the way?

ASX:IVZ Sep 19, 2022 Announcement

Investment Memo: IVZ IM-2022
Investment Thesis 1: We like big oil & gas exploration drilling events


This morning our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) confirmed the official “Gazettal” of its expanded acreage which now covers the entire conventional oil and gas play in the Cabora Bassa Basin, Zimbabwe.

Importantly, it covers the basin margin “string of pearls” play.

Long time readers will remember one of our first ever oil and gas picks, Africa Oil, which drilled its own “string of pearls” play in the Lokichar Basin in Kenya in 2012, after which its share price gained ~1,200%.

IVZ, ten years later, is about to drill its first ever well. Similar to Africa Oil’s drilling program, it could potentially be a “basin opening”, meaning it could mark the first discovery in a previously undrilled basin.

IVZ now controls exploration rights over a total of ~360,000 acres ahead of its maiden drilling program at the Mukuyu-1 prospect, targeting 20 trillion cubic feet of gas and 845 million barrels of gas condensate.

We also note that in today’s announcement, IVZ commented on a prospective resource estimate being prepared which would include the basin margin targets.

We think the market is missing the potential resource upgrade potential here and expect to see the company’s share price re-rate further once this announcement is out.

The prospective resource upgrade will cover the prospects in the image below.

We think there is a good chance IVZ will upgrade its resource significantly, especially considering the number of leads it has across these targets.


Updated investor presentation

ASX:IVZ Sep 02, 2022 Announcement

Investment Memo: IVZ IM-2022


This morning our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) released a new investor presentation.

The slide deck comes after the recent granting of two exploration permits that cover the entire Cabora Bassa Basin in Zimbabwe, which gives IVZ (in its own words) - “basin master position.”

Effectively meaning in the event a basin opening discovery is made, IVZ will be in control of all of the other prospects in the basin.

IVZ is now only a few weeks away from drilling the first of its two wells this year (Mukuyu-1), targeting a gross unrisked prospective resource of 20 trillion cubic feet of gas and 845 million barrels of condensate.

We found the following slide particularly useful for a quick recap of what IVZ has done this year and to see what’s coming next.

To check out the updated investor presentation click on the image below:


First look at IVZ’s ‘String of Pearls’

ASX:IVZ Sep 02, 2022 Announcement

Investment Memo: IVZ IM-2022
Investment Thesis 1: First mover on an Elephant Scale Target
Investment Thesis 2: We like big oil & gas exploration drilling events


This morning our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) gave us a first look at its basin margin ‘String of Pearls’ play.

Using the 2D seismic data that IVZ acquired in 2021, the company has managed to map out several high priority prospects all along the basin margin.

The key highlight from today’s announcement was that all of these new prospects come in addition to the single Mukuyu prospect where IVZ’s gross unrisked 20 trillion cubic feet + 845 million barrels of gas condensate prospective resource sits.

IVZ confirmed today that an updated prospective resource is being prepared to include the potential in these prospects. We think the market is underappreciating just how important this could be.

We expect to see this be the next major share price catalyst (outside of the Mukuyu-1 drilling program).

Below is an image of these prospects:

Another highlight from today’s announcement was the comparison made to the East Africa Rift “String of Pearls” play that resulted in material discoveries in the Lokichar Basin in Kenya.

This was the same basin where one of our first ever oil and gas picks Africa Oil made its discovery and re-rated by over 1,200%.

There is no guarantee IVZ will experience the same success Africa Oil did but after today’s announcement, we like that IVZ has multiple shots to open up an entirely new basin in East Africa, first at Mukuyu-1 and then again across the “String of Pearls” prospects.


Final preparations underway for maiden drilling program

ASX:IVZ Sep 01, 2022 Announcement

Investment Memo: IVZ IM-2022
Objective 1: This is the most important: We want to see the first drill.


Our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) has provided a small progress update on the mobilisation of its drill rig at the Mukuyu-1 prospect.

We first Invested in IVZ back in September 2020, naming it our 2020 Energy Pick Of The Year, and are now approaching the major drilling event that we have been patiently waiting for.

IVZ is about to drill its elephant scale prospect in Zimbabwe with the potential to open up an entirely new oil and gas basin in the country.

Drilling is expected to commence in the coming weeks with IVZ saying “final preparations are underway”.

The well will target a giant prospective resource totalling 20 trillion cubic feet (Tcf) and 845 million barrels of gas condensate. A gross mean unrisked prospective resource of ~4.3 billion barrels of oil equivalent over seven different stacked targets.


Prospective resource for the 'Basin Margin' prospect?

ASX:IVZ Sep 01, 2022 Announcement

Investment Memo: IVZ IM-2022
Investment Thesis 1: Strategic Location bordering South-Africa
Investment Thesis 2: We like big oil & gas exploration drilling events


Our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) has commented on the official granting of exploration rights over the basin margin “string of pearls” play at its gas project in Zimbabwe.

One thing that has piqued our interest is IVZ working to put together a separate prospective resource update for its basin margin prospect.

At present, IVZ has a prospective resource of 20 trillion cubic feet + 845 million barrels of gas condensate, inside seven stacked targets at the Mukuyu prospect alone.

It has a gross unrisked prospective resource of 4.3 billion barrels of oil equivalent - all at a single prospect.

With a prospective resource being prepared for the basin margin, there is now a chance IVZ significantly increases its prospective resource beyond the already massive figure.

We expect this to be a short term share price catalyst as the size of the prize pre-drilling increases significantly.


Exploration rights granted - Basin margin well confirmed

ASX:IVZ Sep 01, 2022 Announcement

Investment Memo: IVZ IM-2022
Objective 1: This is the most important: We want to see the first drill.


Yesterday our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) confirmed that it now holds the exploration rights to the 1848 and 1849 permits which cover the basin margin “string of pearls” play.

With the formal granting of the exploration rights to IVZ, the company says it will drill the basin margin play (Baobab-1 well) right after the Mukuyu-1 well is completed.

IVZ confirmed that civil works have commenced at the Baobab-1 well site (basin margin play) to ensure that the drill rig could be moved over from the Mukuyu prospect.

IVZ expects this to take four weeks to complete, so after almost 2.5 years of patiently waiting, we might get to see IVZ drill two of its prospects in the coming months.

The basin margin play is particularly interesting because it shares similar characteristics to the types of basin opening discoveries made across the East African Rift “string of pearls” plays.

Long time readers will remember one of our first ever oil and gas picks, Africa Oil, which drilled its own “string of pearls” play in the Lokichar basin in Kenya in ~2012, after which its share price gained ~1,200%.


$25M raised, Mukuyu-1 now fully funded

ASX:IVZ Sep 01, 2022 Announcement

Investment Memo: IVZ IM-2022
Objective 1: Financing for drilling


Our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) came out of a trading halt yesterday having raised enough cash to finance the drilling of its Mukuyu-1 well.

IVZ raised $25M via a share placement at 23c per share.

The placement also came with one-for-one unlisted options exercisable at 40c per share with a five year expiry.

IVZ also confirmed that the placement was “highly oversubscribed, with multiple new and existing institutional investors across North America, the UK, Asia and Australia entering the share register ahead of the Company’s drilling campaign”.

This means investors who missed out on an allocation will need to buy on market if they want greater exposure to IVZ’s drilling program. The share price opened above the 23c placement price, ending the day at 26.5c per share.

A total of 108,695,652 new shares and unlisted options will be issued and IVZ expects the shares to be issued on the 7th of September 2022.

The share price has since pulled back to ~25c, and we expect to see it hover around the placement price after the shares come to market as some investors may sell their shares but hold onto their options into the drilling program.

IVZ detailed what the funds would be used for:


The latest video from the Mukuyu-1 well site

ASX:IVZ Aug 10, 2022

Investment Memo: IVZ IM-2022
Objective 1: This is the most important: We want to see the first drill.


We recently noticed the following video from our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) with an update on the mobilisation of the Exalo 202 drill rig ahead of its maiden drilling program expected in August.

Below is a link to that video.

IVZ is gearing up to drill its elephant scale prospect in Zimbabwe with the potential to open up an entirely new oil and gas basin in the country.

After recently having its environmental impact assessment renewal approved, IVZ is cleared to drill the Mukuyu-1 well from a permitting perspective. Drilling is expected to commence this month, and a new discovery here could be a game changer for IVZ, Zimbabwe and the Southern Africa energy markets.

The first well will target a giant prospective resource totalling 20 trillion cubic feet (Tcf) and 845 million barrels of gas condensate — a gross mean unrisked prospective resource of ~4.3 billion barrels of oil equivalent over seven different stacked targets.


Invictus Awarded Three Carbon Offset Projects in Zimbabwe

ASX:IVZ Aug 03, 2022 Announcement

Investment Memo: IVZ IM-2022


This morning Our 2020 Energy Pick Of The Year, Invictus Energy (ASX: IVZ) just made a move towards potentially being the first “cradle to grave” carbon neutral oil and gas project.

In this case, “cradle to grave” means that carbon neutrality is secured from exploration through to production and the end of the project's useful life.

Today, IVZ took that first step by being awarded three different carbon offset projects over a ~30 year term over 301,565 hectares of indigenous forests.

The three projects are the Ngamo, Gwayi & Sikumi projects which are classified under the Reducing Emissions from Deforestation and forest Degradation (REDD+) framework.

REDD+ is basically a framework created by the United Nations that aims to reduce carbon emissions from deforestation and forest degradation.

IVZ is 50:50 partnered with the Forestry Commission of Zimbabwe and plans to develop deforestation programs so as to protect the indigenous forests. Under the REDD+ framework, this constitutes emissions reduction programs which then generate carbon credits that can be sold on the open market.

IVZ is now going through the verification process to get the carbon credits recognised up to the point where they are tradable, with the company expecting this to take ~12 months to complete.

With carbon credits forecast to be worth US$80 to $150/tonne in 2035, IVZ has managed to put together a strategy to reduce carbon emissions and work towards developing one of the first ever carbon neutral oil and gas projects as well as make money from the carbon credits generated.

Next:

We are waiting to see IVZ update the market with respect to a farm in agreement and, most importantly, mobilise its drill rig ready ahead of next month’s spudding.


Farm-in progress during the June quarter

ASX:IVZ Jul 26, 2022 Announcement

Investment Memo: IVZ IM-2022
Objective 1: Financing for drilling


Our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) just put out its June quarterly report.

The report included a brief update on progress being made on the farm-in front.

IVZ said it had “received three farm-in offers for the Cabora Bassa Project, with ongoing due diligence and internal approvals being undertaken by additional parties which may result in further bids being received”.

IVZ also confirmed that “The results of these current, and potential future, farm-in bids are subject to certain conditions precedent and further updates will be provided in due course.”

Farm-in agreements in the oil and gas sector are unique whereby they are a simple exchange of cash for a % ownership in the projects.

This means that IVZ can leave the signing of this type agreement right down to the last minute before drilling begins.

With drilling expected to commence in August, IVZ should have a few more weeks to get this deal over the line.

The positive is that there are multiple offers already on the table, so it’s more a case of ironing out the details and satisfying whatever conditions are being placed on the offers.

These type agreements need to strike the perfect balance between financial commitment from a partner and the expertise they bring to the project, so we are not surprised the process is taking a while to finalise.

We hope that whoever IVZ decides to bring on as a partner makes a significant financial contribution to the project and also has oil and gas development experience.


Environmental management plans approved, drilling in August

ASX:IVZ Jul 26, 2022 Announcement

Investment Memo: IVZ IM-2022
Objective 1: This is the most important: We want to see the first drill.


This morning our 2020 Energy Pick Of The Year, Invictus Energy (ASX: IVZ), announced the renewal of its Environmental Impact Assessments through to July 2023.

With the renewals approved, IVZ confirmed that it has concluded “the permitting requirements” which allow the company to conduct in-field seismic and exploration drilling.

IVZ is now a few weeks out from drilling its Mukuyu prospect in Zimbabwe - the largest undrilled oil and gas prospect onshore Africa.

The first well will target a giant prospective resource totalling 20 trillion cubic feet (Tcf) and 845 million barrels of gas condensate — a gross mean unrisked prospective resource of ~4.3 billion barrels of oil equivalent.

Next:

We are waiting to see IVZ update the market with respect to a farm in agreement and, most importantly, mobilise its drill rig ready ahead of next month’s spudding.


Drill rig now arriving on site, drilling expected in August.

ASX:IVZ Jul 25, 2022

Investment Memo: IVZ IM-2022
Objective 1: This is the most important: We want to see the first drill.


Over the weekend, we saw a video from our 2020 Energy Pick Of The Year, Invictus Energy (ASX: IVZ), confirming that its Exalo 202 drill rig is arriving on site ahead of its maiden drilling program expected in August.

Below is a link to that post where you can see the video of the rig equipment arriving on site.

IVZ is gearing up to drill its elephant scale prospect in Zimbabwe with the potential to open up an entirely new oil and gas basin in the country.

As IVZ’s LinkedIn post mentioned, a new discovery could be a game changer for IVZ, Zimbabwe and the broader southern African energy markets.

The first well will target a giant prospective resource totalling 20 trillion cubic feet (Tcf) and 845 million barrels of gas condensate — a gross mean unrisked prospective resource of ~4.3 billion barrels of oil equivalent.

With the rig now arriving at the well site, IVZ expects drilling to commence in August.


OTC listing update - Depository trust company status approved

ASX:IVZ Jul 25, 2022 Announcement

Investment Memo: IVZ IM-2022


This morning our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) confirmed that it has received approvals for depository trust company status (DTC) in the OTC markets in the USA.

The DTC approvals will allow real time electronic clearing and settlement, streamlining the trading process for IVZ shares in the USA.

The key advantages of today’s news is as follows:

  1. Trades and settlements are in USD.
  2. Trading in the North American time zone
  3. IVCTF is the same class of shares traded on the ASX.

All of this should mean the process of buying and selling IVZ shares in the US is simplified to the point where it becomes more accessible to investors in North America.

Generally, OTC listings and subsequent DTC status improve liquidity and bring more eyeballs to a company.

We suspect a good portion of US investors are very much aware of the gas supply crisis playing out right now and with IVZ getting ready to drill its elephant scale prospect in Zimbabwe, we think today’s news could see some more trade volumes come through from US investors.

The company last traded for US$0.14/per share which translates to a ~20.5c at the current USD/AUD exchange rate.

The company is trading under the ticker “IVCTF” and trading activity can be viewed via the following link: www.otcmarkets.com/stock/IVCTF/overview.


African gas in high demand, EU looks to replace Russian supply

ASX:IVZ Jul 11, 2022

Investment Memo: IVZ IM-2022


The following article from Bloomberg highlights the European rush to African gas supplies to replace Russian supply.

Read the full article here.

Below are our key takeaways:

  • The EU wants to import as much African gas as it can.
  • Nigeria has 3% of the world's proven gas reserves, yet has tapped almost none of it. Like most African countries, what has been extracted is mostly sent to Europe, which now wants to import even more to make up for supplies lost to Moscow’s invasion of Ukraine.
  • Italy recently signed a deal to buy gas from Angola and the Democratic Republic of the Congo, while Germany has been looking to secure supplies from Senegal.
  • Many African leaders support boosting gas exports to help their cash-strapped governments, but they also want access to financing that would allow them to harness the fuel’s potential to create domestic natural gas markets.
  • A recent spate of major discoveries has led to big private projects with supermajors including Exxon Mobil, BP and Shell spending tens of billions in Mozambique, Tanzania, Senegal and Mauritania to extract more gas for export.
  • The supermajors plan to grow existing LNG facilities in Nigeria and Angola to help Africa produce 470 billion cubic metres of gas per year by the late 2030s, equal to about 75% of Russian output this year, according to consultants Rystad Energy.

The article clearly lays out the structural demand for African gas from developed EU nations like Germany, Italy and Spain.

The demand comes as gas prices reach astronomical highs all across the EU and the need to transition away from a reliance on Russian gas becomes a lot clearer.

We have exposure to this macro thematic through our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) which is gearing up to drill its elephant scale prospect in Zimbabwe with the potential to open up an entirely new oil and gas basin in Zimbabwe.

Just last week, IVZ upgraded its prospective resource to a giant 20 trillion cubic feet (Tcf) and 845 million barrels of gas condensate.

The prospective resource now stands at a total of 4.3 billion barrels of oil equivalent on a gross mean unrisked basis.

With drilling expected to commence in August, we think IVZ has timed its drilling program to perfection — any new discovery is likely to garner a lot of international interest, especially from the EU.


EU Parliament to consider gas a "Green" energy source

Jul 07, 2022

Macro: Natural Gas


Overnight, EU lawmakers voted in favour of labelling gas and nuclear power as “green” as part of the continent’s plan to transition away from fossil fuels.

We’ve long been of the view that gas is the natural transitional fuel that can bridge the gap between fossil fuels and cleaner energy sources.

Burning gas to produce power has a far lower carbon footprint compared to coal and oil, with the added benefit of having all of the infrastructure in place to produce and consume it.

We think that the world is ready to embrace it as part of the energy mix for the next decade and potentially beyond that. As a result, we hold several Investments in companies looking to supply gas to energy hungry parts of the world.

The following Reuters article provides an overview of the proposed EU legislation:

Read the full article here.

Our key takeaways:

  • On Wednesday the European parliament backed EU rules labelling investments in gas and nuclear power plants as climate-friendly.
  • The vote in favour of the proposal means the EU can now look to pass the proposal into law. The only risk facing the proposal is if 20 of the EU’s 27 member states oppose the move.
  • The new rules will add gas and nuclear power plants to the EU "taxonomy" rulebook from 2023, enabling investors to label and market investments in them as green.
  • EU Financial Services Chief Mairead McGuinness said "The Complementary Delegated Act is a pragmatic proposal to ensure that private investments in gas and nuclear, needed for our energy transition, meet strict criteria".
  • Slovakian Prime Minister Eduard Heger said the vote result was good for energy security and emissions-cutting targets

To see the Investment Memos for these companies click on the links below:

Elixir Energy (ASX: EXR)

  • Exploration stage, coal bed methane gas, Mongolia

Invictus Energy (ASX: IVZ)

  • Exploration stage, gas, Zimbabwe

Top End Energy (ASX: TEE)

  • Exploration stage, gas, Northern Territory


Gas shortage the catalyst for a global recession

Jul 06, 2022

Macro: Natural Gas


The following Bloomberg article shines a spotlight on the ripple effects high gas prices have on the global economy.

Read the full article here.

Our key takeaways:

  • Natural gas is the hottest commodity in the world right now. It’s a key driver of global inflation. Prices are up some 700% in Europe since the start of last year raising fears of a continent wide energy induced recession.

  • Russia is cutting back on pipeline deliveries to Europe, the scramble to fill that gap is turning into a worldwide shortage.

  • Germany says gas shortfalls could trigger a Lehman Brothers-like collapse, as Europe’s economic powerhouse faces the unprecedented prospect of businesses and consumers running out of power.

  • The German government is in talks to bail out utilities which are losing some €30 million a day because it has to cover the missing Russian gas at soaring spot-market prices.

  • Deutsche Bank cited growing risks of an “imminent German recession on the back of energy rationing,” and pointed to soaring power prices in Italy and France too. Morgan Stanley also predict that the whole of Europe will be in a downturn by year-end.

The Bloomberg article focuses on the repercussions gas shortages are having on the EU and the German economy in particular.

The German economy is one of the key pillars of the EU region, with a strong manufacturing industry making it an exporting powerhouse. The country is therefore heavily reliant on reliable energy supplies to keep this part of its economy functioning.

The fear that the Bloomberg article highlights is how a shortage in gas supplies or heightened prices could force shutdowns and lead to a recession.

We think this applies not only to the German economy and the EU but to the rest of the world also. With gas likely to become a more important part of the energy mix as the world transitions away from coal and oil we think investment into new supply will need to accelerate.

As a result we hold the following companies as Investment exposures to natural gas. To see the Investment Memos for these companies click on the links below:

Elixir Energy (ASX: EXR)

  • Exploration stage, coal bed methane gas, Mongolia

Invictus Energy (ASX: IVZ)

  • Exploration stage, gas, Zimbabwe

Top End Energy (ASX: TEE)

  • Exploration stage, gas, Northern Territory


Well services contract signed, drilling targeted for July.

ASX:IVZ May 26, 2022 Announcement


Investment Memo: IVZ 2022

Objective #4: Drilling of the Mukuyu-1 well


Invictus Energy (ASX: IVZ) has signed a well services contract with Baker Hughes - one of the world’s leading oilfield service providers, operating in more than 120 countries.

The contract covers most of the services required during drilling programs, from project management to more technical things like wellhead supply and installation.

IVZ also reaffirmed its anticipated spud date of July, with the drill rig expected to start mobilising on site in early June.

That means we should start to see images of the rig on site very soon.

The first well will be drilled on the Mukuyu prospect — the largest undrilled prospect in onshore Africa with an estimated prospective resource of 8.2 TcF and 247 million barrels of conventional gas condensate on a gross basis.


Drilling now scheduled for July-August of this year

ASX:IVZ May 24, 2022 Announcement


Investment Memo: IVZ 2022

Objective #4: Drilling of the Mukuyu-1 well


Yesterday our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) confirmed that its drilling program is now expected to be done either in July or August of this year.

Initially the company had put out guidance for a July drilling program but in yesterday’s announcement updated the market with a July-August date.

We suspect this has something to do with the company recently announcing an increase in the size of its project and all of the admin work that went into getting that deal finalised.

With farm-in discussions still ongoing we don't mind seeing minor delays but with some really strong macro tailwinds behind gas exploration globally, we want to see IVZ get that maiden drilling program done as quickly as possible this year.


Farm-in discussions progressing well

ASX:IVZ May 24, 2022 Announcement


Investment Memo: IVZ 2022

Objective #3: Financing for drilling


Yesterday our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) put out an update on the progress being made with farm-in partners for its Mukuyu-1 well which is now scheduled to be drilled in July-August of this year.

IVZ announced that it was now progressing multiple bids from potential farm-in partners and that it “Anticipates having a significant portion of the drilling program funded by a farm-in partner(s)”.

Clearly the company is getting a lot more interest in its project now with the gas macro picture completely different to when the Cluff Energy Africa MOU was signed in late 2021.

With the project area increased by ~700% and the Zimbabwe Sovereign Wealth Fund now onboard with the project, we are hoping IVZ can secure a far more favourable farm-in agreement leading up to the drilling program in July-August.


$12M capital raise @ 20c per share completed

ASX:IVZ May 24, 2022 Announcement


Investment Memo: IVZ 2022

Objective #3: Financing for drilling


Yesterday our 2020 Energy Pick Of The Year Invictus Energy (ASX: IVZ) announced that it had just completed a placement raising $12M at 20c per share.

One notable participant in the raise was IVZ chairman Joe Mutiwiza who is a member of the Presidential Advisory Council (PAC), a body appointed by Zimbabwe’s President to assist the President in formulating key economic policies and strategies in the country.

We see this as a vote of confidence from someone with deep in-country experience and only months out from IVZ’s maiden drilling program.

It looks like the placement was completed over the weekend with investors who participated in the capital raise also receiving one free option for every two shares purchased.

This will mean that the following will be issued:

  • 60,026,165 IVZ shares at 20c per share.
  • 30,013,083 options exercisable at 35c per share, expiring 11th July 2023.

The shares from the capital raise are expected to be issued on the 30th of May with the options expected to be issued on the 7th of July.

The IVZ share price is currently trading at ~25c per share which will mean the investors who participated in the capital raise will be up ~20% on the shares they receive if the share price stays at these levels on the 30th of May.

When these type placements are done we generally see some churn in the company’s shares as some of those investors look to sell their shares and hold onto their options. In the short term we would expect the share price of IVZ to come back down to ~20c per share, barring any unexpected share price catalysts.


African gas to replace Russian gas supplies to Europe?

ASX:IVZ May 18, 2022


Investment Memo: IVZ 2022

Macro Theme: Natural Gas


The following news piece by the BBC asks the question “Can Africa replace Russian gas supplies to Europe?”.

Read the full article here.

Key takeaways from the BBC article is as follows:

  • Russia has the largest natural gas reserves in the world and is the largest exporter, accounting for around 40% of Europe's imports.
  • The EU wants to cut supplies by two-thirds by the end of the year and become independent of all its fossil fuels by 2030.
  • Africa’s biggest exporters (Algeria, Egypt and Nigeria) amount to less than half of what Russia supplies to Europe.
  • The good news is that there is great potential in Africa and the continent is well positioned with vast natural gas resources that could be developed to replace Russian supplies.
  • The EU has already started looking south with the Italian Prime Minister Mario Draghi only last month signing a gas supply deal with Algeria to increase gas imports by ~40%.
  • Energy economist Carole Nakhle says that in the medium and long term we “will see greater investment to increase the capacity to bring more gas out of the ground and bring them to Europe".

We have been invested in Invictus Energy (ASX: IVZ) which we made our 2020 Energy Pick Of The Year because of its elephant scale prospect, which has the potential to open up an entirely new oil and gas basin in Zimbabwe, should the drilling program in July make a successful discovery.

IVZ is currently fielding farm-in offers from several interested parties as it prepares for the two well drilling program in July, where the first well will be targeting a 8.2 trillion cubic feet (Tcf) + 247 million barrels of conventional gas condensate (gross un risked basis) prospective resource at Mukuyu-1.


Seismic data showing potentially hydrocarbon bearing zones

ASX:IVZ May 13, 2022 Announcement


Yesterday our 2020 Energy Pick of the year Invictus Energy (ASX: IVZ) put out an update on the analysis work going on for all the seismic data the company has put together leading upto the big drilling event in July of this year.

In the announcement IVZ also confirmed that it still on track to drill the Mukuyu-1 well in July of this year which will be targeting an independently estimated prospective resource of 8.2 trillion cubic feet (Tcf) + 247 million barrels of conventional gas condensate (gross unrisked basis).

Most of yesterday’s announcement was however focused on IVZ’s latest analysis around all of the 2D seismic that is available over its project area. The key takeaway being that IVZ believes the sections immediately below the shallow “Horizon 200” target at the Mukuyu target could be comprised of multiple stacked hydrocarbon bearing zones, ranging in thickness from 40 to 80m.

The significance of this is that the all of the data now correlates with the amplitude anomaly at the Horizon 200 target with all of the data suggesting a potential Direct Hydrocarbon Indicator (DHI).

IVZ shot ~840km of 2D seismic data and then went and reprocessed ~US$30M in legacy datasets left over by Mobil who ran some basin wide seismic surveys in the 1990s.

IVZ has now combined all of this data and looks to have refined the Mukuyu target to the extent that the company has a relatively decent idea of what it is targeting and where it expects to intercept gas bearing reservoirs.

Another key takeaway from all of this is that IVZ have managed to put together another key target that will be the focus of the upcoming Mukuyu-1 well - the 200 Horizon (shown in the image below). Importantly this sits outside of the current prospective resource and is extremely shallow at a depth of only ~850m.

The image below from yesterday’s announcement really helped us visualise what all of this seismic data is telling us, with a clear breakdown of the different stacked targets.

We suspect that with all of the new findings after processing all of this seismic data that IVZ could potentially look to update its prospective resource, especially given the newly identified “Horizon 200” target is currently excluded in the prospective resource figure.

With drilling expected to commence in ~2 months it may not be enough time, but we would like to see just how big of a target this well is actually shaping up to be.

We have been invested in IVZ since September 2020 and are looking forward to this year's big drilling event.

To see all of the key reasons why we invested in IVZ, what we expect to see the company achieve this year and the key risks to our investment thesis, check out our 2022 IVZ Investment Memo here.

We also note that IVZ’s Managing Director Scott Macmillan is holding a technical briefing to discuss these results at 12:00 AEDT today, which you can register for using this link - https://us02web.zoom.us/webinar/register/WN_h2tv-jIwT2uIrIi54UrUuQ


Wellpad construction ongoing, drilling to start in July

ASX:IVZ May 10, 2022


This morning we came across this drone footage from our 2020 Energy Pick of the Year, Invictus Energy’s (ASX:IVZ) LinkedIn page, which shows the progress being made with wellpad construction works at the Mukuyu-1 drilling location.

With wellpad construction progressing, IVZ confirmed on the post that the drilling program was scheduled for July.

We first invested in IVZ in September 2020 as the company prepared to drill out one of the largest seismically defined, undrilled oil and gas structures in onshore Africa.

IVZ’s Mukuyu prospect has an independently estimated prospective resource of 8.2 trillion cubic feet (Tcf) + 247 million barrels of conventional gas-condensate.

For some context on the size of the target, the Bass Strait which has been supplying the bulk of domestic Australian gas needs had ~10 trillion cubic feet of gas reserves at its peak.

Since we first invested, IVZ has run a detailed 2D seismic program, reprocessing US$30M in seismic datasets leftover by Mobil who were the previous owners of the project in the 1990’s. All of this means that IVZ has significantly refined its drill targeting and is now ready to finally drill its elephant scale prospect.

With wellpad construction underway and drilling approximately two months away, we detailed what else we are waiting on from IVZ in our last note which you can view here: What’s next for IVZ (note dated 28 April 2022)

To see all of the reasons why we continue to hold IVZ in our portfolio check out our 2022 IVZ Investment Memo where you can also find the key objectives we want to see IVZ achieve in 2022 and all of the key risks to our investment thesis. Click here for the Memo.


Italy looking to Angola for gas. EU interested in African gas

ASX:IVZ Apr 21, 2022


This morning we saw the following Bloomberg article which highlighted Italy’s recent deal to boost natural gas imports from Angola as the country tries to move away from a dependence on Russian energy imports.

At the moment Italy receives ~40% of its gas supplies from Russia and the Italian prime minister and ex-president of the European Central Bank, Mario Draghi said “We are delivering on our commitment to diversify energy sources”.

As part of the agreement, Italy will increase its gas purchases from Angola and will also look to be involved in the joint development of energy projects. The Bloomberg article also states that the PM would then look to travel to the Republic of Congo and later to Mozambique looking for similar deals.

We were already well aware of Europe's interest in looking south to replace its energy dependence on Russia, the move by the Italian government now provides for some macro tailwinds for other African energy projects.

We have exposure to this thematic through our 2020 Energy Pick of the Year, Invictus Energy (ASX:IVZ) which is less than 2 months away from drilling the largest seismically defined, undrilled oil and gas structure in onshore Africa.

IVZ's Oil & Gas project is located in Zimbabwe and has a prospective resource (100% Gross Basis) of 9.25 trillion cubic feet (TcF) Gas + 294m barrels of Conventional Gas-Condensate and is of a big enough size that in the event a successful discovery is made, we think the Europeans could start to show some interest.

We made our first investment in IVZ back in September 2020 primarily because of its elephant scale prospective resource. Since then we have been patiently waiting for the upcoming drilling program which is now scheduled to take place in June.

To see all of the reasons why we invested in IVZ, what we want to see the company achieve in 2022 and the key risks to our investment thesis, check out our 2022 IVZ Investment Memo by clicking on the image below.


Farm-in process restarted, new offers being considered

ASX:IVZ Mar 31, 2022 Announcement


In our most recent note on IVZ, in which we covered IVZ’s 7x increase in acreage from 100,000 to 709,300ha at its Zimbabwe gas project, we flagged that its farm-in option with Cluff Energy Africa might be put up for renegotiation.

Today, IVZ confirmed that Cluff Energy Africa’s option to commit to a farm-in over the project had been extended to 30 April and that it expects an updated binding farm-in offer by then.

IVZ also said that it is already in discussions with “multiple parties for additional farm-in offers”. This is a good sign as it will create competition amongst those interested parties.

With the seismic data reviews also likely to be nearing completion and the Sovereign Wealth Fund of Zimbabwe now backing the project we suspect that companies that alot of parties that may have been waiting on some of the political/permitting risks to be addressed are now interested in the project.

Today’s announcement now sets 30 April as the deadline for the farm-in process to be finalised leading up to the two well drilling program scheduled for June.

What’s next: We want to see the seismic data processing and analysis finalised, well locations confirmed, and some binding farm-in offers in the lead up to the maiden drilling program in June.

To see the key reasons we continue to hold IVZ in our portfolio and what we want to see the company achieve this year, check out our 2022 Investment Memo here.


Trading halt pending an update regarding its permitting

ASX:IVZ Mar 24, 2022


This morning we saw our 2020 Energy Pick of the Year Invictus Energy (ASX:IVZ) go into a trading halt pending an update with respect to the outstanding permitting of its project.

It’s difficult to say for sure what the announcement will be regarding but given the trading halt quotes that IVZ “will be providing an update in relation to finalising an agreement relating to the Company’s SG 4571 Permit with the Government of the Republic of Zimbabwe” we hope it is related to the production sharing agreement that IVZ said was nearing completion.

In our last note we said that we expected IVZ to make progress converting its Petroleum Exploration Development and Production Agreement (PEDPA) (which was signed in March 2021) into a 25 year production sharing agreement.

This would effectively be the final stage of permitting before IVZ has certainty around tenure, as well as having fiscal and legal frameworks in place, should IVZ make a large scale discovery during its maiden drilling program in ~June.

Below is an image from IVZ’s 2021 Investor Presentation, showing where a Production Sharing Agreement sits in the permitting process.

We will be watching for the announcement, which should be out on or before Monday. If the Production Sharing Agreement is finalised, then the pathway to the potentially basin opening drilling program will be much clearer.

This year’s drilling program is the main reason we are invested in IVZ.

For more on why we continue to hold IVZ in our portfolio and what we want to see the company achieve in 2022, check out our 2022 Investment Memo here.


Rig contract executed, drilling to commence in June

ASX:IVZ Mar 10, 2022


Ahead of its drilling program that’s anticipated to commence in June, IVZ today confirmed that the final drill rig contracts had been signed for its Muzarabani-1 well in Zimbabwe, as well as an option to drill a second exploration well.

As for the option for a second well, IVZ is currently waiting on the formal granting of the extended licence area before committing.

IVZ have agreed on is the Exalo #202 rig, which can drill down to a depth of ~5,000m and is expected to begin mobilisation at IVZ’s project in May.

A key takeaway from today's announcement for us is that IVZ has managed to secure a rig that is powerful enough to drill down to ~5,000m depths.

In the most recent investor webinar, managing director Scott Macmillan mentioned that the seismic data to date showed that a drill rig could test five different structures of interest by drilling to a depth of ~4,500m.

IVZ is still finalising its interpretation of the seismic data it acquired in 2021 as well as the US$30M legacy dataset left over by Mobil as it works to firm up where it will be drilling in June.

We set this as objective #1 in our 2022 Investment Memo which you can check out here.


Final Processed Seismic Data Received

ASX:IVZ Feb 28, 2022


Today IVZ announced that the datasets from its 2021 2D seismic survey and the re-processing of the US$30M legacy dataset left over by Mobil had largely been received from the 2D seismic consultants.

Next, IVZ will continue with its internal interpretation of the datasets before ranking the anomalies picked up from most interesting to least, so as to finalise the locations for its drilling program now expected to be spud in June 2022.

In our 2022 investment memo we put the “detailed interpretation of seismic data” and final identification of the drilling locations as objective #1. Once this is out of the way, IVZ can shift its focus to the maiden drilling program.