I've been wondering if the lack of a clear timeline might indicate that Invictus will assign operatorship to the JV partner. My reasoning is as follows:
Scott has always done a good job of providing shareholders with a rough timeline of future operations. This changed markedly this year especially around the March/April time period.
The Invictus team remains small with very few employees and relies mainly on contractors. Given the upcoming ramp up in operations, I would have expected Scott to make some type of mention of growing the team and discussing what types of roles he would bring on to fill upcoming gaps. I don't recall a single instance this year of Scott talking about expanding the team at Invictus.
Many larger companies would insist on obtaining operatorship so as not to leave the future operations in the hands of a small explorer. Although partners need to agree on JV activities, the operator has full control of the day to day operations and ensuring activities are executed properly.
Given the apparent scale of the basin, it does not make sense for a small operator to lead the exploration effort. Invictus does not have the necessary manpower/resources to aggressively explore the basin.
If the JV partner is an upstream O&G company, they almost certainly have vastly more experience planning exploration, drilling, and completing wells (granted service companies in general do the actual drilling and data acquisition). Invictus has a lot of basin specific knowledge that the JV partner would utilize though.
Given the previous slip ups at Mukuyu-1 and Mukuyu-2 (tool failures, wellbore breakdown, unexpected sidetracks), the JV partner could view this as poor operational execution and poor oversight of the contractors. This could further strengthen their resolve to become the operator.
I don't really know the implications of giving up operatorship but it's my understanding that the operator is responsible for running day to day operations and negotiating the various contracts. The partners agree on a plan and rough timeline but it is up to the operator to execute those operations and timeline. Invictus would solely be relegated to an interpretation and planning role that better matches their capabilities.
In my view, there are two main types of JV partners:
A financial partner with relatively little interest in operating the block due to either lacking the necessary skills or a strategy in which they only operate in blocks they have experience with. An example is QatarEnergy who has large working interests in various blocks in the Orange Basin but does not operate any of them. For example, TotalEnergies operates the Venus block and Shell operates the Jonker block while QuatarEnergy has a working interest in both.
An O&G company with extensive exploration experience.
From the few JV deals I've looked into, it's not at all unusual for the larger company to take over operatorship from the smaller company. Below are examples:
Impact farms out Venus block to TotalEnergies and assigns them operatorship
Africa Oil farms out Kenya blocks to Tullow Oil and assigns them operatorship
Africa Oil farms out 3B/4B to TotalEnergies and assigns them operatorship
Trago farms out PEL 90 to Chevron and assigns them operatorship
The only farmout I'm aware of in which the smaller company remained the operator is ReconAfrica's recent farmout to BW energy. That farmout is a little bit weird though in that Recon was actively drilling an exploration well when the agreement was signed. It might have been difficult to transfer operator when there are extensive ongoing operations. I'm only familiar with a handful of JVs though so the smaller company remaining operator might be more common than I think.
An alternative explanation is that Invictus has decided that no future work will be announced or conducted until the PPSA and/or JV is signed.
IVZ Price at posting:
8.1¢ Sentiment: Buy Disclosure: Held
