My thoughts on the announcement and the soph/insto call this morning (the call was at 2am for me so I may have not caught everything 100%):
Resource Upgrade:
- About what I thought could be possible for the entire acreage, not just 1 well. It is a truly amazing target.
- Scott mentioned during the call that their internal estimates were higher than the ERCE estimate (which is normal in the industry... the third party always takes the more conservative stance on the various uncertainties/sensitivities to derive volume). I wouldn't be surprised if IVZs internal estimates are closer to 25 Tcf and 1 Bbbl... again, just for the 1st well target.
- Regarding the Chance of Success % published. ERCE as the third party will always take the most conservative view and even their view is actually on the higher end for wildcat explo in a new basin (I've seen a lot of explo wells drilled even offshore ($100M+ for the drill) with a 5-10% CoS). I think IVZs estimates seem fair, they would have to be cautious not to put a % too high. The Westwood consultancy study would suggest the CoS of both ERCE and IVZ is on the conservative side.
- We still have all the upside of the second well with stacked targets as well as other targets that for now will be undrilled but will make up the wider exploration portfolio. I think there's potential here in the wider acreage for 30++ Tcf and 1.5B++ bbl.
- Note that IVZ do not plan to drill the deepest target (Lower Angwa) as there are some drilling constraints that will prevent it given the well is to be drilled deviated so they will struggle with torque etc. at depth. It will be an upside though and if the drilling goes smoother than planned/modelled then they will in fact keep drilling and go through the deepest target too. This means though that in the base case, the Mukuyu well will target 17.4 Tcf and 725 MMbbl (since the Lower Angwa that most likely won't be drilled is 2.6 Tcf and 120 MMbbl).
- It's quite amazing that any one of these individual layers/targets could likely justify a development by themselves.
OTC/DTC:
- Apparently there was an issue with the paperwork the first time around so it did not progress and they've had to do the paperwork again. If I remember correctly, Scott said that they submitted the new/corrected documents 3 or 4 weeks ago... so we should have news any day now.
Farm-out:
- Still on the cards and sounds like it will be the option that IVZ take rather than self fund the lot. It appears very much now that they have selected their preferred partner and there must be a non-binding contract/MoU signed but with some conditions precedent before it is executed/binding. One CP being the PSA signature and one being the Gazettal. Scott is in Harare now to progress both topics. I expect they are both resolved in the next couple of weeks, with the farm-out formalised straight after.
Drilling Schedule:
- There were delays of 3 weeks and then 2 weeks for the rig but the equipment is all starting to arrive now.
- The civil works / wellpad is about ready to go.
- I did mention on a post here when "late July" was announced that means August
- No issue drilling through wet season if needed.
Valuation / Market Cap:
- IVZ was already materially undervalued in comparison to Recon. Now it is just ridiculous.
