Invictus shares surge as government paves the way for Cabora Project
In a commercially important development, Invictus Energy Limited (ASX:IVZ), has negotiated a Petroleum Exploration Development and Production Agreement (PEDPA) following approval from the Zimbabwean government.
The PEPDA between Invictus’s 80% owned subsidiary, Geo Associates and the Republic of Zimbabwe was executed with the agreement being signed on behalf of the Government of the Republic of Zimbabwe by the Minister for Mines and Mining Development, Hon. Winston Chitando at a signing ceremony at State House in Harare on Friday 26 March 2021.
The agreement provides the framework for progression of the Cabora Bassa Project through the exploration, appraisal, development and production phases, the obligations and rights of each party, the minimum work program obligations to maintain the licence in good standing, and the security of tenure for the project duration.
The PEDPA provides the licence holder with the right to enter into a 25-year production licence following the exploration periods, and on this note the company is currently in the second exploration period.
Such is the significance of this development that Invictus’s shares were up more than 25% on Monday morning, building on recent strong gains that have seen its share price increase more than three-fold in three months.
By way of background, the Cabora Bassa Project encompasses the Mzarabani Prospect, a multi-TCF and liquids-rich conventional gas condensate target, which is potentially the largest, undrilled seismically defined structure onshore Africa.
The prospect is defined by a robust dataset acquired by Mobil in the early 1990s that includes seismic, gravity, aeromagnetic and geochemical data.
Agreement encompasses fiscal incentives
The PEDPA also provides for Special Economic Zone (SEZ) status for the Cabora Bassa Project which will facilitate a host of fiscal and non-fiscal incentives over the life of the project, including legal and financial stability, offshore banking, zero capital gains tax, tax holiday periods and 15% corporate rate thereafter.
His Excellency, President E.D. Mnangagwa who was the guest of honour at the signing ceremony underlined the importance of the project for his country in terms of industry prosperity, as well as the provision of electricity generation in saying, “The signing of the (PEDPA) agreement represents major strides in our efforts to tap into our oil and gas deposits, which is a new territory in the country’s mining sector.
"Other potential benefits of an oil and gas discovery included electricity generation, production of liquid petroleum, liquefied petroleum gas (LPG), fertiliser production and petrochemicals."
He noted that the signing of the PEDPA with Geo-Associates was testimony to the Government’s commitment to open up the economy to investment as well as engaging and re-engaging the global community to do business in Zimbabwe.
Vice President Constantino Chiwenga highlighted the internal benefits in positioning Zimbabwe to achieve broader goals as a result of having a reliable power supply in saying, "The exploration and development of oil and gas resources is a game-changer in making the Zimbabwe energy sector self-sufficient which is key in realising our national vision."
Macmillan points to potential for accelerated development
Invictus sees numerous positives stemming from this milestone event, and managing Director Scott Macmillan was quick to join the dots between having a collaborative and constructive relationship with the government and the group’s ability to rapidly develop the project.
This is a significant milestone for the project which provides the security of tenure and the confidence for the significant future investment ahead.
The PEDPA and the provision for the creation of a Special Economic Zone for the project lay out the pathway for accelerated development of the project on exploration success.
While Invictus is trading at levels not seen since 2014, further upside wouldn’t surprise given multiple catalysts are on the horizon, and as outlined below it has some catching up to do in terms of trading in line with other companies that arguably don’t have the same investment appeal.