IVZ completes well pad for 1.2 Tcf gas + 73M barrel condensate - drilling this quarter

Our Investment Invictus Energy (ASX: IVZ) just finished building the wellpad for its next big drilling event in Zimbabwe.

IVZ is now roughly a month away (in November) from drilling its 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)

IVZ has already signed a “Well services” contract with $116BN capped SLB - the world’s largest oilfield services contractor. (source)

And today confirmed that the wellpad construction was complete and ready for the rig…

(source)

IVZ also confirmed that the rig was now on the move to the well site AND that “Musuma-1 remains on track to spud in November”.

So IVZ will be drilling at some point inside the next ~30-45 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$6M to US$10M. (source)

IVZ had A$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 IVZ’s share price can start trading free of any “cap raise weight”.

Especially with everything happening in oil markets right now.

We think oil prices could run hard over the next few months

~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 call by the Aramco CEO was before all of the Houthi attacks on Saudi Aramco infrastructure.

So everything has actually gotten worse since then.

Now three routes out of the Middle East are at risk - Hormuz, Bab al-Mandab and Saudi Arabia’s East-West pipeline:

(source)

For the first time in decades, the world is almost completely cut off from Middle East oil.

Despite all of this, oil prices haven’t really behaved like the “largest oil supply shock in history”.

(yet)

Right now feels very similar to what happened the last time the world experienced a sustained supply shock out of the Middle East back in the 1970’s.

Oil prices rallied hard, came off a bit and then rallied hard again:

(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.

Maybe oil prices have just finished consolidating that first leg up, and we have the second wave much higher next?

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)

So far we have seen:

• 507 million barrels drawn out of global inventories since February (source)
• 400 million barrels released from government emergency stockpiles in the IEA's coordinated action back in March (source)
• And 95 million barrels drawn in August alone - importantly with China leading the drawdowns... (source)

(source)

If all of this Middle East supply stays offline for another few months, we think the oil price could really start to take off…

...like it did the last time the Middle East went offline - keep in mind we are nowhere near those inflation adjusted peaks yet - to go past those Oil would need to go through US$220 per barrel:

(source)

Past performance is not an indicator of future performance. Commodity prices are volatile and can fall as well as rise.

No matter what happens, at oil prices above US$70–80 a barrel we think any success case for IVZ could be well received by the market.

We covered this a month ago here: IVZ: Saudi’s Aramco CEO is calling it the “largest oil supply shock in history” - oil price running - IVZ drilling in November.

What’s next for 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