BY TATIRA ZWINOIRA
AUSTRALIAN energy firm, Invictus Energy Limited (IEL) says the estimated drilling cost for its Cabora Bassa project in Muzarabani ranges between US$5,2 million and US$16,4 million.
IEL has been struggling to take the Cabora Bassa project off the ground since late 2018. The oil and gas project encompasses the Muzarabani Prospect in Zimbabwe believed to have multi-trillion cubic feet worth of liquids rich in conventional gas-condensate.
According to IEL’s quarterly statement ended June 2020, the firm had total available funding for future operating activities of nearly AUD1,5 million (US$1 064 941,20).
And over the past 12 months ended June 2020, IEL incurred a loss of AUD1,51 million (US$1,07 million) from net cash used in operating activities.
“During the quarter, the company received an independent drilling cost estimate for a range of well designs (vertical and directional) with the total depth ranging from 2 000m down to 4 000m,” said IEL in a statement.
“The drilling cost estimates range from US$5,2 million (2 000m vertical well -low side estimate) to US$16,4 million (4 000m directional well-high side estimate) are consistent with the company’s internal estimates.”
Added IEL: “The best estimate for a 3 200m directionally drilled well to test the 8,2 Tcf + 249 million bbl Mzarabani Prospect is US$11,7m (excluding mobilisation) which confirms the ability to test a world-class, material target at relatively low cost”.
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According to financial literacy website Investopedia, for land drilling, equipment represents one of the two major expenses for an oil producer, the other being the cost of establishing infrastructure access — roads, water, and electricity.
The website further states that the cost of oil rigs and drilling equipment invariably represents a considerable capital expenditure for an oil producer.
“The massively greater investment required in drilling equipment is one reason why oil producers are willing to undertake the time and expense of doing extensive seismological surveys to determine proven and probable reserves available for recovery before drilling,” Investopedia said.
However, currently IEL is struggling to raise capital which led to the firm entering into a share subscription agreement with local niche investment boutique and private equity firm, Mangwana Capital worth AUD0,44 million (US$287 825,48).
Further, the company continues to negotiate a production sharing agreement with the government through the appointed technical committee and legal representatives.
“The technical committee is chaired by the permanent secretary for Finance and Economic Development with the permanent secretaries for Mines and Mining Development and Energy and Power Development as members together with officials from the Reserve Bank of Zimbabwe, Zimbabwe Investment and Development Agency, Office of the President and Cabinet, Office of the Attorney-General and Local Government and Public Works,” IEL said.
IEL has made a 25% cut to its board and management annual fees and remuneration in light of the slowing global market and uncertainty over the coronavirus pandemic.
