INDO - Indonesia Energy Corp (INDO) - Virtual Roadshow Highlights
Noble and Channelchek recently hosted a virtual roadshow featuring Frank Ingriselli, President of Indonesia Energy. In the presentation, Mr. Ingriselli gave an update on recent drilling activity and plans, updated expected well investment returns in light of higher oil prices, and discussed the firm's financial position and financing options. First well result are in line with expectations. INDO completed its first well in the Kruh block on June 4 and has begun perforation and flow measurement. Mr. Ingriselli indicated that the company expects to announce flow results in the next week or two but that the well is operating in line with expectations. Management has described a type curve for the field with an initial flow of around 190 barrels of oil per day, a cost of $1.5 million for drilling and completion, and an operating cost of around $20 per barrel.Well economics are crazy at current oil prices. INDO's presentation indicated that at $63/BBL, a Kruh well will generate revenues of $3.3 million in the first year, almost twice the initial cost. Stated differently, the well is expected to repay the company for all capital and operating costs in about six months. What's more, management's numbers are already outdated with Brent oil prices now above $75/BBL. Using current numbers, we estimate that all costs would be recovered in five months.Update on the timing of drilling. The company will drill three wells in succession and will move the rig to the next location shortly. Management has already begun sighting the fourth and five well which will be drilled later this year or possibly the first quarter of next year. Also, don't forget about INDO's Citarum Block. Mr. Ingriselli indicated it will drill two wells in the Citarum Block early in 2022.This is inline with our expectations and models but the first time we have heard management confirm our expectations. Mr. Ingriselli confirmed that drilling in Citarum (closer to $6 million/well) may require additional financing or the inclusion of a partner.We rate the shares OUTPERFORM with a $8.00 price target. The shares fell in March and have stagnated near $6 per share in recent months even as oil prices have continued to climb higher. The completion of the company's first well, while expected, should only be viewed as good news. As a reminder, our price deck for our models and valuation of INDO uses an oil price of $60 in 2021 and $50 long-term, well below current spot prices. Read More >>