Invictus Energy: Cabora Bassa project advanced well through March 2020 quarter – report

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Invictus Energy: Cabora Bassa project advanced well through March 2020 quarter – report

3:00 CAT | 06 May 2020

Currently exploring for oil and gas on high impact energy resources in sub-Saharan Africa, Invictus Energy Limited (ASX:IVZ) has been advancing smoothly on its Cabora Bassa project endeavours as evident from the recently released Quarterly Report.

Though there have been certain project delays amidst current COVID-19 related restrictions and volatility in the capital markets and oil space, IVZ commits to be on track to reach significant milestones once the situation eases.

IVZ, with its attractive project portfolio, seems to be gaining significant industry attention for several reasons.

Firstly, addressing the chronically undersupplied energy market of South Africa, IVZ is seeking to develop potential regional markets in addition to significant local natural gas demand in Zimbabwe. Secondly, it has bagged the first mover advantage and acquired the finest acreage, best terms along with the opportunity to tap most lucrative markets. Thirdly, the Company remains on key project developments once the restrictions are lifted.

IVZ is the 80% owner and operator of the Cabora Bassa Project that contains the SG 4571 exploration licence in the Cabora Bassa Basin in northern Zimbabwe. Seismically defined, and undrilled, it is also potentially the largest structure of its kind onshore Africa.

The Project has a unique combination of low-cost entry, long dated and fairly low-cost work commitments, given the onshore location with good infrastructure, substantial scale in terms of prospectivity and running room upon success, coupled with multiple monetisation pathways.

Let us glance through notable activities that propelled IVZ’s project advancement during the last quarter.

Classified as Priority Development Project from Zimbabwe Government

In January 2020, IVZ bagged the Priority Project classification by the Office of the President and Cabinet of Zimbabwe. This signified the Government’s belief for it to be a key project within Zimbabwe that can provide a significant economic benefit to the economy and can be leveraged in Zimbabwe’s vision of becoming a Middle Income Economy by 2030.

Development on Production Sharing Agreement Front

The Government of Zimbabwe framed a Technical Committee to embark on negotiations for a Production Sharing Agreement (PSA) with Geo Associates (Private) Limited. However, IVZ had been delayed in making a presentation to the Committee owing to COVID-19 related restrictions. Meanwhile, along with its attorneys, IVZ has been corresponding with the legal representatives from the Committee and expects to resume negotiations shortly.

IVZ Hosted by Muzarabani and Mbire Chiefs

The District Administrator for Mashonaland Central Province in Centenary hosted IVZ during the quarter. The Company was received by the Chiefs representing the Muzarabani and Mbire Districts, who performed an initial ceremony for their respective areas during the quarter.

IVZ, via Geo Associates, provided an overview and update of the Project and the approaching on the ground activity, to begin post EIA approval expected shortly.

A formal combined ceremony including the hosting of IVZ and Government representatives has been deferred due to the COVID-19 lockdown.

EMA received final EIA submissions

The Environmental Management Authority (EMA) was provided with final EIA submissions from the various government, NGO and local stakeholder groups. In the Project area, a site visit was also carried out by EMA representatives.

Developments Post Quarter – Placement at Premium & New Director Onboard

On 30 April 2020, IVZ reported that it has entered into a binding share subscription agreement with the Mangwana Opportunities Fund to raise the equivalent of $0.44 million via the placement of 12,564,143 shares at a share price of $0.035 – a 91% premium to the preceding 5 day VWAP of $0.0183 and a 40% to premium to the last closing price of $0.025.

Funds raised will be used to advance the Project, including on the ground activity, preparatory works in the project area, CSR program within the Muzarabani and Mbire Districts and other in country activities.

IVZ also welcomed Joe Mutizwa, Chairman of Mangwana Capital, to be a director of its wholly owned local subsidiary.

Management View

IVZ’s focus is on the regional gas market rather than overseas exports. Moreover, gas sale agreements are usually fixed price, long life contracts over 10-20 years resulting in stable pricing and are unaffected by volatility, like the one being witnessed in the oil and LNG market currently.

Managing Director Mr Scott Macmillan acknowledges that IVZ has made significant progress during the quarter wherein the instrumental phase was the engagement from the Government to deliver the regulatory framework required to implement the PSA with the Republic of Zimbabwe.

He instigated the Company’s strong local demand is evident from the gas sale MoUs with Sable Chemicals and Tatanga Energy, along with the premium priced regional markets that are facing severe supply shortfalls in the near future.

IVZ’s Take on COVID-19

In the wake of the current situation, the Board and Management has focused on reducing costs within its control, including-

Cuts in various categories of its corporate costs in Australia from its already low overheads
Reduction in the annual fees and remuneration of the Board and Management by 25-50%, effective 1 April 2020

The funding secured from Mangwana ensures that the project spending is unaffected and IVZ’s exploration program remains on track. According to the Board, IVZ’s cost base seems to be robust, while being well funded to deliver a SG 4571 farmout.

Besides, Cash and cash equivalents at the end of the quarter amounted to $1.54 million. Meanwhile, IVZ stock traded $0.025 at the market close on 1 May 2020 and has delivered 100% return in the past one month.

Source: Kalkine Media