RESOURCES
How Invico’s Energy Assets Are Valued
Invico Capital Corporation’s energy investments are valued using a disciplined, reserve-based framework grounded in independent engineering analysis and forward commodity price assumptions.
At the core of this approach is the 3 Consultants’ Average (“3Con”) price deck, which anchors long-term pricing expectations and drives the valuation of underlying reserves.
Because these assets are valued on expected future cash flows, sustained changes in commodity pricing can have a meaningful impact on both NAV and portfolio-level cash generation.
During periods of extreme market volatility, Invico uses an intra-marking process that ensures valuations remain responsive between formal quarterly updates.
Invico’s Valuation Methodology
Invico applies an Adjusted Net Asset Value methodology to its oil and gas investments, determining fair value by aligning asset-level economics with prevailing market conditions.
At the core of this approach is an independent reserve evaluation, prepared by a third-party engineering firm in accordance with:
- National Instrument 51-101 (NI 51-101)
- The Canadian Oil and Gas Evaluation Handbook (COGEH)
These reserve evaluations convert physical subsurface reserves into a present-day dollar value through a discounted cash flow (DCF) analysis, which incorporates future production volumes, commodity price forecasts, and more.
This ensures that valuation is anchored in the expected cash-generating capacity of the assets, rather than short-term market sentiment.
What Is the 3 Consultants’ Average?
A key input into Invico’s reserve valuations is the 3Con price deck, which is a standard pricing benchmark used in Canadian oil and gas reserve valuations and reflects the average long-term commodity price and foreign exchange forecasts from three independent engineering firms – GLJ, Sproule, and McDaniel – and is updated quarterly.
By relying on the 3Con, Invico’s valuations are based on independent, consensus-driven forward pricing assumptions, ensuring consistency across reporting periods.
How Invico’s Reserve Valuations Are Calculated
Reserve evaluations translate physical reserves into present-day value through a structured methodology.
Expected lifetime production.
Core pricing assumptions.
Field-level expenses and royalties deducted from gross revenues.
Net revenues discounted to present value.
The result is a present value estimate of future net revenues, commonly expressed as PV10 (Present Value at 10%) or NPV (Net Present Value).
The Influence of WTI Spot Pricing
While reserve valuations are based on forward price forecasts rather than spot prices, sustained movements in WTI crude oil remain highly relevant in their influence of the near-term portion of the forecast curve.
The transmission mechanism is as follows:
- Sustained increased WTI spot prices
- Futures curve shifts upwards
- Consultants revise the 3Con price deck higher
- Projected revenues, cash flows, and asset values increase
Short-term volatility typically has a limited impact on valuation, while durable price movements across a quarterly cycle are what ultimately drive changes in NAV (Net Asset Value).
However, even where spot price movements do not immediately affect valuation inputs, they remain economically meaningful at the asset level.
Operating Torque & Cash Flow Impact
Invico’s energy assets carry relatively fixed operating costs. As a result, incremental revenue from higher commodity prices flows disproportionately to the bottom line, a dynamic known as operating torque. The quantitative impact on operating margins is that for every 5% increase in oil prices, margins rise by approximately 9%.
Illustrated below, internal sensitivity analysis shows the impact of higher oil prices on margins:
| Oil Price1 | NOI Per BOE | Torque (increase to margin over $60 base case)2 |
|---|---|---|
$
50.00 |
$
7.95 | 0.7X |
$
60.00 |
$
11.18 | 1.0X |
$
65.00 |
$
12.79 | 1.1X |
$
70.00 |
$
14.41 | 1.3X |
$
75.00 |
$
16.02 | 1.4X |
$
80.00 |
$
17.64 | 1.6X |
$
90.00 |
$
20.86 | 1.9X |
$
100.00 |
$
24.09 | 2.2X |
1. A US$1 change in the average 2026 oil price is estimated to result in approximately US$360,000 of incremental operating income over the year end 2025 3C on forecast, based on a constant Henry Hub gas price assumption of US$3.50/mmbtu.
2. This sensitivity analysis is illustrative and directional in nature. Actual financial outcomes may vary significantly due to fluctuations in commodity prices, operating performance, and cost structure. HH gas price is assumed to be $3.50/mmbtu for this analysis. Actual results may differ.
Source: Invico Capital Corporation. Internal cash flow forecast and sensitivity analysis based on varying oil price assumptions, as at December 31, 2025. Prepared April 2026 for illustrative purposes only.
Portfolio-Level Implications of Price Forecasts
Changes in forward commodity price assumptions can have several implications at the portfolio level:
Reserve reports produce higher PV10/NPV values, which directly increase the Fund’s NAV.
Lenders base credit facilities on reserve values; higher values can support greater access to capital.
Private energy investments are valued using the latest price decks; upward revisions can increase carrying values.
Acquirers value energy assets based on expected cash flows from reserves; higher forecast prices can support stronger exit pricing.
What are Intra-Marks?
Quarterly 3Con updates provide a standardized framework, but commodity markets can move materially between reporting periods. During periods of heightened volatility, Invico applies an intra-marking process using the following methodology:
- Adjusts only the first two years of the forward curve
- Applies an approximate 10% conservative discount
- Cross-checks against independent consultant guidance
Why Intra-Marking Matters
Intra-marking ensures that NAV accurately reflects current market conditions when spot prices, forward curve movements, and volatility shift meaningfully between quarterly 3Con updates. These factors can materially impact near-term cash flows and, in turn, energy asset values, even when long-term 3Con forecasts remain relatively stable.
Without adjustment during periods of significant market movement, NAV may lag underlying economic reality, potentially leading to reporting delays and investor confusion. By conservatively bridging to the next formal 3Con update, Invico can provide timely and transparent performance reporting while maintaining valuation discipline.
In Summary
Invico’s approach to valuing energy assets is grounded in:
- Independent reserve evaluations aligned with NI 51-101 and COGEH
- Consensus-based forward pricing through the 3Con framework
- Disciplined intra-period valuation adjustments
This framework reflects a balance of rigour, transparency, and responsiveness, ensuring that valuations remain aligned with both underlying asset performance and evolving commodity market conditions.
If you’re interested in learning more about Invico’s oil and gas investment opportunities, please contact us using the form below.
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