Invictus Energy Update: Still Waters Run Deep
The inter-drill lull comes for us all, but despite the maddening combination of success and setback (both operational and chart-wise) it seems clear the best is yet to come for Invictus Energy.
tl;dr:
I wanted originally to do a fact-based deep dive into recent news and follow it up by pointing the compass into the future to highlight what’s to come in 2024, but with the eagerly-anticipated lab results of Mukuyu-2 gas samples due back imminently, I thought I would hold off on the detail-oriented breakdown for their arrival and instead provide more of an “emotional status update” for the stock with this article.
The long and the short of it is that the current flatline of the stock is (I believe) the precise sort of contrarian moment investors should be champing at the bit to buy into, not panic as a result of. Invictus holds real value and looks poised to add to that significantly over the next 12-24 months, with a resource 1.3 TCF and counting after just 2 wells in a region starved for energy solutions.
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Invictus Energy shareholders have experienced the full power of market volatility over the past couple of years. Indeed, all the agony and ecstasy of resource investing has been on full display with this company. Euphoric chart highs and despairing lows, heartbreaking exploration challenges, and conviction-affirming discoveries and offtakes. They call natural gas the widow-maker for its volatility and you feel every bit of that with Invictus. And they haven’t even pumped the first cubic foot out of the ground yet.
Suffice it to say, but Invictus has been a stressful investment since then. Indeed, even the chart of Invictus itself looks like the ECG of a heart attack. Lots of dramatic jolts in both directions, but ultimately returning to a baseline.
The frustrating part of the lack of sustainable share price appreciation is that this is not the story of hopes crushed by reality, with dreams turned to dusters by the drill bit. Invictus actually did what every explorer dreams of. They made a substantial discovery at their Mukuyu target that looks like it will continue to grow and grow into something quite massive for as long as Invictus continues to drill it out and prove it up.
And yet the share price today is barely a third of what it was the day the discovery was announced last December, and 80%+ off all-time highs. Hardly the reward that is meant to follow assuming so much risk.
And so Invictus investors (who are already known to be a little bit, shall we say, energetic) - for those of you brave enough to wade into the elephant graveyard that is HotCopper - have been jittery and nervous, with much wailing and gnashing of teeth. Strange aftermath for what could very likely end up being a discovery of global significance not that long from now.
It wasn’t supposed to happen like this.
And I am definitely caught in the middle of it. Invictus remains my 2nd largest position and I have yet to sell a share. It’s a strange thing to take a huge risk, be proven right, and end up significantly underwater for your efforts. You can understand why there is some consternation among investors.
But I’m not worried. Honestly. Because this is no longer a speculative explore co. that will live and die on investor sentiment alone, but rather a company taking its first fledgling steps of developing a real project, with real value, with real, serious players getting involved.
Put another way, you can finally point to there being fundamental - rather than speculative - value on which to build an assessment of Invictus through. Before discovery, the potential of Invictus was as high or as low as the emotional vagaries of the market deemed it. But now, things are different. Now we know that Managing Director Scott Macmillan’s vision was right. We know that the likelihood of this project improving dramatically drill-by-drill has increased massively. And, knowing all this, we can point to the share price with a more critical eye as to what it is valuing Invictus and its rapidly-realising potential to be worth.
And therein lies the opportunity presently. That gap that exists here between price and value. Which lets us begin transition into the realm of actual investing, rather than pure degen resource speculation. Suddenly, dollar values and cash flow modeling can be pinned to real numbers. And in this world of actual, proper, investing, it may lag at times (wherein lies opportunity for canny investors), but value ultimately drives price.
Because make no mistake, this company and its project has been massively and materially derisked. It holds a resource independently assessed already at 1.3 TCF after just two drills. And those 1.3 TCF were hard-earned, built drilling blind into virgin land with all the trials and tribulations that entails. Now, Invictus is armed with a rapidly-growing body of subsurface knowledge, and a drilling game plan that is proven to work. How much more will Invictus be able to accomplish now that it has a working recipe for success?
Which, again, if you ask me, points to a real and meaningful disconnect between price and value at the present time. At the current market cap, I would argue more failure than success is built into the market’s estimation of Invictus. And that, I believe, is a fundamental misunderstanding of what Invictus looks to be accomplishing.
Are there risks? Of course there are. Above ground and below. That nagging PPSA with ZimGov still looms uncomfortably. The open financing isn’t helping anything. The rocks might yet be tight. There are infrastructure needs to be met. But the list of legitimate risks continues to narrow, while blue sky potential remains unblemished. And that’s an awfully good place to be.
On the flipside, Invictus’ 2024 looks to be filled with a strong flow of positive catalysts which I believe will serve to staircase the share price back into valuation ranges more deserving of such a discovery.
What to look forward to, in roughly chronological order:
Lab results
Closing of financing/being fully funded for 2024
PPSA signing
Mukuyu-2 flow testing
2024 exploration program announcement
Recommencement of drilling
Further discoveries across the basin
So, if you’re a current Invictus investor, steel your courage and take heart. And if you aren’t, it might be time to get greedy in the market. Because if you ask me, the best is almost assuredly yet to come. And the first steps towards realising that are already underway.
As always, thanks for reading.
-Matthew from JRI