Image Source: My computer If you want to access and read any of these I have shared them all here. The spudding of the Lokichar basin wells are shown in red. Again, you can see a number of familiar things were announced pre-drill, including seismic & gravity surveys and more land acquired. IVZ has also delivered this common set of pre-drill announcements. Also note there were delays to spudding AOI’s first well (shown in yellow) - this is common in basin opening drills on the initial rig mobilisation to a far away location where every single part of the rig needs to be transported and assembled. I can think of many times where I have traveled somewhere and forgotten something important like my phone charger or a key pair of shorts. Once AOI released the first few results as it passed through and tested the targets in the well over a few months, the share price rose significantly (shown in blue): Here are the links to those announcements - 2012 03 26 [sp .35] - Oil discovery 20m oil column at 1040m drilling to continue
- 2012 05 07 [sp .82] - More oil discovered at 1500m, oil column in excess of 100m
- 2012 05 25 [sp .94] - Another 140m of oil from 1800m to 1940m
Another thing to note from reading this set of positive announcements is that even successful drills experience issues, in AOI’s case deteriorating hole conditions requiring a side track to deepen the well. This is totally normal in exploration drilling, same as delays to spudding a well. AOI also hit the basin bounding fault earlier than expected (i.e. before reaching their planned target depth), meaning that the drill location they chose based on the data they had didn’t allow them to drill deep enough to test one of the lower target zones. Again, a pretty normal thing to happen and delivered valuable learnings for the next drill plan. After the AOI share price surged and another successful well was announced, AOI did a 3M placement at .75, significantly higher than pre-drill average price and enough to fund the drilling of many more of its prospects… and yes, as usual the share price then hovered around the placement price of ~ over the next 6 months - still a nice ~4x from the pre drill average. After the significant discovery and cap raise AOI had enough cash and potential to keep the rigs in-country and drilled out many targets in the basin, making lots of discoveries in the string of pearls given that each pearl is a geologically similar structure. Ideally, we want to see IVZ make successful discoveries on both Mukuyu-1 and Baobab-1 and then raise a decent chunk of cash to drill the next 5 to 10 holes… or bring in a deep-pocketed farm-in partner to do the heavy financial and operational lifting. A few years later AOI farmed down half of its 50% ownership in the Lokichar Basin to Maersk for a deal worth nearly billion in back cost repayments AND future carry. In 2014 AOI share price took a hit after the oil price crashed so keep in mind that unexpected and uncontrollable macro factors can always impact a great investment. AOI went on to use its farm down cash to acquire producing oil & gas assets to create cashflow while they wait for their discoveries to be developed by its farm-in partners. AOI are now producing 27,000 barrels of oil per day and paying regular dividends - AOI are definitely the exception to the rule for the majority of oil & gas exploration companies that never make a discovery. Like with AOI and other explorers that strike significant oil & gas, if IVZ manages to hit it out of the park with the first two wells it opens up many opportunities for funding and partnership to drill out the rest of the basin. …but of course on the flipside a couple of bad results will likely mean that IVZ will need a change in plan (and likely a pretty painful recapitalisation raise). So based on what I observed 10 years ago with AOI, what I’ll be watching out for with IVZ is any early results announced, perhaps gas shows but preferably gas columns from testing the first few target zones, hopefully prior to reaching target depth. However, every oil & gas explorer approaches things differently, and IVZ may wait till they hit target depth before it releases any news - we just don’t know. Also noting that technical issues may likely occur and cause delays while they are being solved, but don’t necessarily mean the drilling will be unsuccessful - AOI’s first drill spud was delayed. It was also planned to take 60 to 90 days and ended up taking almost double that time while they encountered and solved drilling problems… but was still a success. One positive difference to note is that IVZ went for the option of retaining their full ownership by NOT doing a farm out and self funding the first two drills. AOI had already farmed out a 50% share on the key blocks BEFORE its first drill (and post-discovery it farmed out another 25% for almost billion in back costs repayments and free carry on its remaining 25%). So IF IVZ manages to deliver a significant gas discovery, it will have a way bigger chunk of the project to work with compared to if it had farmed out before (on the flipside it will bear all the costs of a failure). On a side note, my personal favourite part of the AOI discovery was what happened on the day that the discovery announcement was made - everyone I know is sick of hearing this story but here it is anyway (and it sort of relates to IVZ at the end). Back when I was invested in AOI and the drilling had just started, I got it into my head it would be a good idea to travel to an overseas oil & gas conference where AOI’s management was presenting to try and meet them (to this day meeting management remains a key part of our investment process). The conference was coincidentally being held in Nairobi, Kenya, where AOI had just started its first drill into the Lokichar basin, hoping to make Kenya’s first ever oil discovery. Conference tickets were about ,200 so as a long shot I asked the conference organisers for a free media pass and sent them the link to this blog which at the time had maybe a couple of thousand readers max. I was very surprised when they said yes and sent me a free conference ticket. So I took a week of leave from my job, bought the cheapest plane ticket I could find and was off to Kenya to try and meet the AOI management and other interesting oil & gas explorers. There were about 350 people in attendance, including African oil & gas explorer CEO’s, financiers, government ministers from Kenya and neighboring countries, and representatives from the big energy companies. It’s half way through the first day of the conference, everyone is sitting down listening to the presentations, when suddenly… AOI releases an announcement on the TSX.V that they had made Kenya’s first ever oil discovery in the Lokichar basin. Being an overexposed AOI investor, at an oil & gas conference, in Kenya, at the moment AOI announced Kenya’s first ever oil discovery that spiked the share price was certainly an experience. | 
(20min delay)