Invictus farm-in deal off rails
Invictus Energy, which is searching for oil and gas in Zimbabwe’s Muzarabani area, has terminated a farm-in agreement with an unnamed partner after failing to complete a satisfactory due diligence on the investor, the company said.
A farm-in agreement is a type of contract through which an investor (a farmee) may acquire an interest in an upstream project from an existing project participant (a farmor). It is typically used in the exploration or development stage of a project, where the farmee investors or renders a service to acquire the interest. This possibly puts off rails initial plans the company had of sinking millions of dollars into drilling exploratory oil/ gas wells in Zimbabwe, for the first time in the hydro-carbons exploration history of the country.
The company had an offer for a farm-in arrangement from a potential partner in exchange for a portion of the project, but the deal was conditional upon Invictus successfully completing a due diligence on the investor.
Reprocessing and reinterpretation of data, gathered in the early 1990s by independent specialists has produced encouraging results supporting possible existence of commercially viable oil or gas deposits in Muzarabani.
The Government earlier said the exploration development of oil and gas resources in the country was a potential game changer in ongoing efforts to make the energy deficient southern African country self-sufficient.
But discovery of oil or gas in Zimbabwe means more than just energy self-sufficiency, as it will spawn opportunities for liquefied natural gas, fertiliser production, increased exports and more fiscal revenue. Notably, the Muzarabani is regarded as integral to programmes that will anchor Zimbabwe’s vision of becoming an upper middle-income economy by 2030 with per capita income seen at over US$ 3 500 per annum.
Invictus said it was unable to satisfactorily complete the required transaction due diligence on the prospective farm-in counterpart, hence the decision to terminate the non-binding agreement with the suitor. The Australia Stock Exchange ( ASX) listed company said following the termination, it was now focusing more on completing the seismic campaign, which is scheduled for completion in the third quarter of this year.
“The parties have ceased the discussions,” the company announced a few days ago, adding it was now looking for other interested potential farm-in partners.
Invictus said with near-term focus now largely on completing the seismic campaign by the end of the third quarter, it was already in the process of recruiting field staff ahead of commencing the programme.
The company earlier indicated it planned to begin drilling oil and gas test wells in October this year, likely sinking up to US$ 15 million to US$ 20 million per hole, with at least two wells having been targeted this year.
To that end, Invictus had started the shipment of hundreds of tonnes of drilling equipment in preparation for the commencement of the testwell drilling programme, which was anticipated to commence in late 2021 or early 2022.
Instead, the company has said it is now working on the construction of the camp and local recruitment campaign for 120 field crew, which is being finalised ahead of the commencement of the seismic programme.
Invictus’ asset portfolio consists of 101,171 hectares in the Cahora Bassa Basin in northern Zimbabwe. The Cahora Bassa (Muzarabani) basin is currently in the second exploration period, which runs to August 2023.
Previously explored by French oil giant Mobil Oil, in the early 1990s the project contains the largest undrilled structure in onshore Africa.
The Mzarabani Prospect (8.2Tcf + 247 million barrels of conventional gas-condensate) is part of the SG 4571 Cahora Bassa asset.
Towards the end of March 2021, the independent oil and gas explorer completed a placement to raise A$8 million (before costs).
Notably, Invictus said the funds raised would offer capital to accelerate the company’s exploration campaign throughout the remainder of 2021.
Funds raised would likely support the upcoming 2D seismic campaign in the Muzarabani SG 4571.
They could further help in well design and obtaining long lead drilling items for the Muzarabani-1 exploration well. Funds will be allocated for drilling rig tender preparation and general working capital.
In March 2021, a petroleum exploration and production development ( PEPDA) between Invictus’s subsidiary, Invictus Energy’s major shareholder Geo Associates, and the Republic of Zimbabwe was executed.
The PEDPA provides the framework to progress the project via the exploration, appraisal, development, and production phases.
It supports the obligations and rights of the involved parties, the minimum work programme obligations to maintain the licence, and ensures the security of tenure for the duration of the oil and gas project.
As an icing on the cake, the PEDPA provides for Special Economic Zone ( SEZ) status for the Muzarabani Project.