- Invictus Energy Limited announced the presence of hydrocarbon reservoirs, including natural gas and oil, at their secondary drilling site
- Critics have called for Invictus Energy to provide extractive data to validate their claims and substantiate their findings
- Is there gas or Invictus is recycling claims?
Harare- Invictus Energy Limited made an announcement on November 20, 2023, revealing the presence of hydrocarbon reservoirs, including natural gas and oil, at their secondary drilling site, Mukuyu 2. However, there is a prevailing sense of pessimism among observers due to a perceived gap between Invictus Energy's continuous affirmations based on exploratory data and the need for concrete extractive data since 2018. Critics on Invictus Energy's "X handle" have called for the provision of extractive data to validate tangible progress. This article aims to examine whether Invictus' data may be misleading or if the projects necessitate substantial time and investment. However, considering the timeframe and associated costs incurred by other companies during drilling endeavours, it may be somehow premature to harbour excessive optimism for Invictus, which reported expenditures of US$8 million by June 2023.
The process of oil discovery encompasses multiple crucial stages, starting from initial exploration and culminating in the confirmation of commercial viability. Among these stages, the three most significant ones are geological survey and mapping, seismic exploration, and exploration drilling. Regrettably, Invictus, as revealed in its Mukuyu 2 report and Mukuyu 1 updates, has only completed the evaluation stage, which involves assessing the characteristics and potential of the oil reservoir. This assessment includes data interpretation derived from wireline logging and the recuperation of natural gas from the Pebbly Arkose formation.
However, there are notable gaps in the comprehensive results provided by Invictus. The seismic exploration and exploratory drilling stages, which are crucial for obtaining comprehensive data, are absent. Seismic exploration, a pivotal stage that the public is eagerly demanding through Invictus' X handle, entails generating and recording seismic waves to create detailed subsurface images. It aids in identifying potential oil traps, reservoirs, and geological structures that may harbour hydrocarbons. Exploratory drilling, on the other hand, is carried out to ascertain the presence of oil and evaluate its commercial viability. This stage involves drilling test wells, analysing core samples, and examining well logs to assess rock properties, fluid content, and pressure conditions. Unfortunately, these stages are missing from both the Mukuyu 1 and Mukuyu 2 reports.
Invictus claims that their machinery malfunctioned just as they were about to embark on these final two stages at Mukuyu 1, prompting them to proceed to Mukuyu 2. However, such a narrative is challenging to accept, even when employing the most basic logical reasoning.
Invictus is an independent upstream oil and gas company that focuses on the exploration and appraisal of oil and gas resources in northern Zimbabwe. Their primary project is the Cabora Bassa Basin, where they hold an 80% interest through their exploration license SG 4571. This license grants them the rights to explore and develop hydrocarbon reserves in an expansive area spanning 360,000 hectares. The Cabora Bassa Basin, located in northern Zimbabwe, is known to have significant hydrocarbon potential.
To use the Company’s CEO, Scott Macmillan words, he stated that the ongoing evaluation activities at the Mukuyu-2 drilling site have consistently confirmed the existence of active and potentially productive hydrocarbon reserves. This affirmation is supported by two key factors. Firstly, the successful extraction of natural gas from the Pebbly Arkose formation indicates the presence of a viable gas reservoir. Additionally, the meticulous analysis of wireline logging data, which involves capturing and interpreting measurements from downhole tools in the Upper and Lower Angwa reservoirs, has provided further evidence and insights into the nature of the hydrocarbon reserves. This is just an evaluation stage.
This second drilling site, Mukuyu-2 which is under perusal was identified as an alternative location after Invictus faced machinery breakdowns in December 2022 which compelled them to halt drilling operations at their initial site, Mukuyu-1.
However, a lot is concerning regarding Invictus’ discoveries. The company's decision to proceed to Mukuyu-2 without presenting evidence of oil presence in Mukuyu-1 has raised cautions. Its failure to provide an extract fluid sample to fulfil regulatory requirements for declaring a commercial discovery adds to the scepticism surrounding their claims. These discoveries are relying more on exploratory statements rather than extractive evidence.
It would have been more beneficial for Invictus to address the challenges encountered at Mukuyu-1, and provide substantial evidence of oil reserves at that site. This would have even had a positive impact on the company's share price performance on the Australian Securities Exchange, enhancing investor confidence and credibility in their findings at Mukuyu-2.
Designing the well to prioritise the highest probability of successful retrieval and initiation of sampling operations early on would have been a prudent approach. It is questionable why the decision to proceed without obtaining tangible results and evidence from the initial drilling site was taken. Only through thorough and rigorous testing can one accurately determine the potential for a commercially viable discovery.
Such haste and continued exploratory stage announcements might be taken as a way to even manipulate things like its share prices which have been volatile for a while. The company’s reports usually coincide with negative share performance on ASE. In August (when it reaffirmed presence of oil in Mukuyu 1) when the share price had been on a downward trajectory in July hitting a lower of 13 cents then peaked up to 27 cents and 18 cents on the closing of August which was the best closing share price since the beginning of the year after the announcement. The latest on 20 November also comes when the shares have experienced a volatile month declining from October highs down the bar to a lower of 12 cents. Hence, this affirmation also arrived in the wake of a notable deterioration in the company's stock performance with a year-on-year decline of 15%. Having reached a pinnacle of 30 cents per share in November 2022, the share value subsequently dwindled to 13 cents on the 20th of November 2023.
The provided graph below depicts the movement of share prices during the month of November 2023. The colour red represents the price movement coinciding with the release of company circulars confirming the existence of oil at its drilling sites
However, unlike in the past, the market's response to recent announcement has been pessimistic. Despite the positive disclosure regarding the oil project at Mukuyu 2, the company's shares have experienced a significant and continuous decline. In the week leading up to November 20, there was a notable decrease in Invictus’s shares. They dropped from a peak of 20 cents on November 13 to a low of 14 cents on November 20.
The shares have experienced a significant decrease since the start of November. On October 30, the shares reached a peak of 22 cents with a substantial trading volume of 30 million shares (Year-to-Date performance). However, by November 20, the shares had declined to a low of 13 cents, coinciding with the day of the latest oil update. It is important to note that share prices are influenced by various factors beyond the company's specific updates. These factors may include currency movements, global inflation, and other market dynamics. Therefore, the decline in share prices cannot be solely attributed to the oil update but should be considered in the context of these broader influences.
The imperative for Invictus lies in its ability to furnish compelling substantiation for its oil discoveries prior to embarking on subsequent projects. By directing its efforts towards the acquisition and presentation of tangible evidence, encompassing comprehensive testing results and authenticated data derived from well samples, Invictus Energy can effectively dispel the scepticism that has arisen regarding the veracity of its findings.
Invictus Energy commenced drilling for its oil project in September 2022. The Mukuyu drilling site with an estimated cost of around US$16 million, represented one of the most significant global oil and gas exploration prospects of that year and even to date. The site is estimated to hold approximately 20 trillion cubic feet of natural gas and 845 million barrels of conventional gas condensate, equivalent to approximately 4.3 billion barrels of oil. These substantial reserves position the project as highly promising. Mangwana Capital is one of the local investors in the project. Invictus has been engaged in oil and gas exploration activities in the Cabora Bassa and Zambezi basins since 2018, hence, a need for extractive data.
Is it not that Invictus lacks veracity in its endeavours pertaining to oil exploration?
It would be unjust to assert that Invictus is not authentic in its oil exploration endeavours based solely on the current absence of immediate results from the Mukuyu 1 and 2 projects. However, spanning from 2018, there is a need of something proven. However, these projects (Mukuyu), which commenced production in October 2022 and May 2023 necessitate a meticulous exploration process, including the seismic exploration stage which needs more time. This is due to the vast resources required and the technological complexities involved in the exploration process Similar instances are found in various oil projects across Africa, China, and the USA. It is reasonable to estimate that it may take further approximately 1 year from now in the exploratory phase before drilling operations commence at Mukuyu.
This timeframe aligns with the seismic exploration stage observed in similar projects undertaken by distinguished companies such as ExxonMobil's Liza Field in Guyana and Chevron's Big Foot Field in the Gulf of Mexico, which took approximately 1-2 years and 6-12 months before advancing to drilling activities. TotalEnergies' Egina Field in Nigeria underwent a seismic exploration stage lasting around 9-12 months, while BP's Thunder Horse Field in the Gulf of Mexico and Shell's Mars Field also followed a similar timeline of approximately 6-9 months and 9-12 months, for their seismic exploration stages.
Bonga Field in Nigeria, operated by the Nigerian National Petroleum Corporation (NNPC), began its exploration stage in 1995 and took approximately 7 years before reaching the extractive stage in 2003. Similarly, the Daqing Oilfield in China, operated by the China National Petroleum Corporation (CNPC), underwent an extensive exploration process that spanned several years, with large-scale production commencing in the 1960s after exploration activities initiated in the 1950s.
Considering the aforementioned examples, it should be noted that it might be too early to expect extractions from Mukuyu 1 and 2 projects. Therefore, considering the average timeframe observed in the seismic exploration stages of similar projects, it may be too early to expect immediate results. This timeframe allows for the necessary data collection, detailed surveys, and interpretation of geological information to fully assess the oil reserves and make informed decisions regarding drilling and extraction activities.
In terms of expenditures, Invictus is currently trailing behind its peers, having allocated a mere US$8 million as of June 2023. This figure is significantly lower when compared to the costs incurred by other aforementioned projects from exploration to production stages. Notably, the Bonga Oil Project in Nigeria stands as the least expensive among the mentioned ventures, with an expenditure of approximately US$3.6 billion to achieve the production stage. It is important to consider such substantial costs when evaluating the progress of Invictus. However, it is crucial to bear in mind that expenses are also correlated with the depth of the oil reservoirs. In the presence of extensive oil fields and favourable geological formations, the associated costs tend to be lower. At present, it may be premature to make a conclusive judgment, and it would be prudent to allow Invictus additional time for further evaluation and development.
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