ivz.jpg
Invictus Energy
(ASX:IVZ)


Overview

Investment Memo: Short summary on why we invested (18th September 2020)

============================

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 behind IVZ?

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?

A) 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.

B) 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.

C) 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.

Click to see the key reasons for making our investment in IVZ

What we expect the company to deliver before their next capital raise?

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.

Objective #2: Drilling rig contracted & 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.

Objective #3: Financing for drilling

Potential farm-out to secure drilling financing.

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

What could go wrong?

A.) 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.

B.) 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.

C.) 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 try's to take a large part of the proceeds from the project if it is successful.

D.) 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.

=================== Investment Memo ends====================

We will asses the performance of this company against this initial investment memo in each update commentary we provide. This Investment Memo is current at 18th September 2020.

============================================================

IVZ Company Milestones

”Expected Company Milestones” are based on the company's publicly available execution plan and some assumptions made by our team on potential announcements that should de-risk the investment. “Our investment milestones” show our current long-term investment plan. Early stage investments are risky and there is no guarantee that the expected events will occur. The lists are not in sequential order.

Carrabosa Project Milestones

✅ Environmental Impact Assessment Approved
Non-Binding Farm-In Offer
✅ PEDPA Signed (Part 1 of the Production Sharing Agreement)
ℹ️
Contract with Farm-In Partner Terminated
🔲 New Farm-In Partner Secured
Seismic Operations Commenced
Seismic Data Collection
🔄 Seismic Data Results [End of 2021]
🔲 PPSA Signed (Part 2 of the Production Sharing Agreement)
🔲 Drill Targets Identified
🔲 Drill Rig Secured [2021]
🔲 Drilling Commenced [H1 2022]
🔲 Drilling Results
🔲 High Impact Basin Open Drilling Campaign

Invictus Company Milestones

Portfolio Initiation
Next Investors Energy Pick of the Year 2020
$8M Cap Raise @11c
⚔️
ReconAfrica Share Price Movement
⚔️
ReconAfrica “Found Working Petroleum System”
🔲 Unexpected Announcement 1
🔲 Unexpected Announcement 2
🔲 Unexpected Announcement 3
🔲 Project Funding 2
🔲 New Institutional Investor
🔲 Analyst Research Report

IVZ Investment Strategy

Initial Investment: 3.9c
Increased Investment: 11c
Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
🔲 Price increases 2000% from initial entry
12 Month Capital Gain Discount
🔲 Free Carry
🔲 Take Profit
🔲 Hold remaining Position for next 2+ years

Key

🔲 Expected Milestone
✅ Achieved Milestone
🟩 Above Average Result
🟨 Average (Expected) Result
🟧 Below Average Result
🟥 Negative Result
🌎 Macro Event
⚔️ Results from Other Company / Project
[UPA] Unexpected Positive Announcement
[NEW] New Milestone Added