INDO - Indonesia Energy Corp (INDO) - Indo closes on a $5 million private placement to support drilling
Indonesia Energy announced the closing of the initial $5.0 million tranche of a total anticipated $7.0 million private placement. The sale of a senior convertible note with a 6.0% discount and an 18-month maturity includes a five year warrant to purchase shares at an exercise price of $6.00 per share. Proceeds to the company were $4.7 million after expenses.Indo's cash position has slipped due to expenditures and production delays. Indo's cash position, which was as high as $16 million after its initial public offering, had fallen to $6 million at the end of June (latest reported financial numbers) due to normal operating costs and the drilling of two wells in the Kruh Block. The company had hoped to use cash flow from new wells to fund additional drilling. However, drilling delays associated with COVID and a well shut-in due to monsoon flooding damage, have resulted in lower-than-expected cash flow.The offering will booster the company's cash position and support its active drilling program in 2022. The company anticipates drilling two new wells in the first two months of 2022 and two more in the third quarter. Each well costs about $1.5 million to drill. We believe the offering will allow the company to complete the first half of this year's drilling program without additional financing. Assuming the wells start contributing cash flow, we believe the proceeds combined with completion of the remaining offering tranche will be enough to fund third quarter drilling.Offering de-risks the need for additional capital. We acknowledge that there have been setbacks with the company's drilling and production program. Nevertheless, we believe the company have attractive assets (wells have a payback period of less than 12 months) and believe the risk/reward profile is favorable. The shares peaked at $8.34 in March of 2021 before falling to current levels near $3.50 even as oil prices have risen. We are maintaining our Outperform rating and price target of $8 per share. Read More >>