Indonesia Energy Corporation Limited — FY2023 Form 20-F Summary
Business context and reporting period
Indonesia Energy Corporation Limited is a Cayman Islands holding company focused on upstream oil and gas exploration and production in Indonesia. This filing is an annual Form 20-F for the fiscal year ended December 31, 2023, rather than a quarterly filing. Revenue is generated entirely through the Kruh Block, an oil-producing asset operated through PT Green World Nusantara under an agreement with Pertamina. The Citarum Block remains an exploration-stage asset.
In August 2023, the Kruh Amended KSO extended operatorship to September 2035, increased the after-tax profit split from 15% to 35%, and increased the cost-recovery cap from 80% to 100%. The company rescheduled major seismic and drilling work while negotiating the amendment.
Financial and operating metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Oil production | 58,616 bbl | 62,467 bbl | Down 6.16% |
| Average ICP oil price | $77.61/bbl | $96.94/bbl | Down 19.94% |
| Revenue | $3.525 million | $4.097 million | Down 13.96% |
| Lease operating expenses | $2.951 million | $2.953 million | Down 0.08% |
| Depreciation, depletion and amortization | $0.702 million | $1.140 million | Down 38.39% |
| General and administrative expenses | $3.368 million | $4.603 million | Down 26.82% |
| Net loss | $2.643 million | $3.123 million | Loss narrowed |
| Net cash used in operating activities | $2.979 million | $3.208 million | Improved by $0.229 million |
| Net cash used in investing activities | $0.419 million | $5.417 million | Lower drilling expenditure |
| Cash and restricted cash | $3.997 million | $7.396 million | Down $3.398 million |
Lease operating expenses represented approximately 83.7% of revenue, implying an approximate 16.3% operating contribution before DD&A and corporate overhead. Including DD&A, total operating costs were $7.021 million and the operating loss was $3.496 million. The filing does not present a conventional adjusted EBITDA measure.
At December 31, 2023, total assets were $17.725 million, total liabilities were $3.035 million, and shareholders’ equity was $14.690 million. The company reported working capital of $5.016 million and an accumulated deficit of $39.583 million. There were no outstanding bank borrowings or convertible notes at year-end. Financial liabilities included $0.482 million of L1 Capital warrant liabilities and $1.097 million of operating lease liabilities.
Cash on the balance sheet was $2.010 million, supplemented by $1.988 million of restricted cash. Restricted cash included amounts supporting Kruh performance commitments and a Citarum bank guarantee. As of April 23, 2024, unrestricted cash was approximately $0.75 million.
Material changes versus the prior comparable period
- Revenue declined primarily because the average ICP price and production both decreased.
- Production declined as reservoir energy declined and no new well contributed production during 2023.
- G&A expense decreased due mainly to lower share-based compensation and lower professional service fees.
- DD&A decreased as the estimated proved reserve base increased following the Kruh contract extension.
- Other income declined to $0.853 million from $1.476 million, primarily because the decrease in the fair value of warrant liabilities was smaller than in 2022.
- Investing cash outflows declined sharply because no new well was developed in 2023.
- Gross proved Kruh reserves increased to 3.145 million barrels from 2.056 million barrels, while net proved reserves increased to 2.332 million barrels from 1.184 million barrels. The increase was mainly attributable to the additional production period and improved profit split under the Amended KSO, not to new 2023 discoveries.
- Proved developed producing reserves decreased to 335,191 gross barrels from 371,076 gross barrels because of production.
Guidance, outlook, commentary and unusual items
- Management expects oil prices to remain approximately $80 per barrel in 2024 and 2025; first-quarter 2024 ICP prices were $77.02, $80.16 and $82.78 per barrel for January, February and March, respectively.
- The company planned seismic acquisition, processing and interpretation at Kruh during 2024, with drilling expected to resume after the seismic program, subject to funding. The filing contains inconsistent timing references, including a plan to restart drilling in 2025 and another statement that new drilling will not begin until 2026.
- The Kruh development plan contemplates 14 additional proved undeveloped wells during 2026–2029, at estimated future well costs of $21.0 million, excluding other production-facility expenditures.
- K-28 remained subject to testing and completion, and K-25 was temporarily shut in at December 31, 2023. K-27 was producing approximately 38–45 BOPD in different disclosures in the filing.
- Citarum requires additional geological and geophysical work, 2D seismic and exploration drilling. The filing lists future Citarum commitments of approximately $39.1 million from 2025 onward, including $30.0 million for drilling.
- Total disclosed future commitments were approximately $2.981 million for 2024, $1.865 million for 2025 and $137.099 million for 2026 and beyond. These amounts include operating, seismic, drilling, production-facility and abandonment obligations and combine firm commitments with planned expenditures.
- The company disclosed substantial doubt about its ability to continue as a going concern because of recurring losses, negative operating cash flow and limited unrestricted cash. Management expects to address funding needs through operating improvements, debt or equity financing, bank loans and a $4 million debt-support commitment from Chairman and CEO Wirawan Jusuf.
- A new Form F-3 registration statement covering up to $50 million of securities and up to $4.268 million of ATM shares had not been declared effective as of the filing date.
- The company identified a material weakness in internal control over financial reporting related to insufficient personnel with appropriate U.S. GAAP and SEC reporting expertise. Management concluded that disclosure controls were ineffective at December 31, 2023.
- The independent auditor issued an unqualified opinion on the financial statements but did not provide an opinion on internal control effectiveness because the company is an emerging growth company.
Principal risks and contingencies
- Substantially all revenue and operations are concentrated in Indonesia and the Kruh Block, with a single primary customer and counterparty, Pertamina.
- Profitability and liquidity depend on oil prices, production volumes, reservoir performance, cost recovery and timely payments from Pertamina.
- Exploration and drilling are subject to geological failure, permitting delays, weather, equipment availability, well-control events, community access issues and funding constraints.
- Reserves estimates are prepared internally and have not been reviewed by independent petroleum engineers. Reserve quantities and standardized discounted cash flows are sensitive to oil prices, production assumptions, development schedules and the KSO profit-sharing formula.
- The company faces Indonesian regulatory, environmental, tax, permitting, forest-area, local-content, domestic-market-obligation and contract-relinquishment risks.
- Lower oil prices could reduce economically recoverable reserves, impair oil and gas properties and restrict access to financing.
- Remaining L1 Capital warrants totaled 442,240 at year-end, creating potential dilution. The company also had 200,000 outstanding management options with an $11 exercise price.
- Additional equity or convertible financing could materially dilute shareholders. The company does not expect to pay dividends in the foreseeable future.
- Maderic Holding Limited, controlled by the Chairman and CEO, held approximately 51.34% of outstanding shares, creating concentrated voting control.
- No significant pending litigation was reported, and the filing states that there were no material commitments and contingencies recorded on the balance sheet beyond disclosed obligations.
Most important facts for investors to verify
- Current unrestricted cash, restricted cash availability and the implementation, terms and enforceability of the $4 million Chairman support commitment.
- Effectiveness and actual use of the new Form F-3 and ATM capacity, including resulting dilution and pricing.
- Completion and quality of the 2024 Kruh seismic program, the timing of drilling resumption and the testing results for K-28.
- Whether the stated 2025 or 2026 drilling restart plan is current, and whether funding is sufficient for the planned 14 wells and disclosed commitments.
- Actual production, cost per barrel and Pertamina receivable collections after the Amended KSO.
- Independent validation of the internally prepared proved and probable reserve estimates and the sensitivity of reserves to oil prices and contract economics.
- Progress in remediating the material weakness and whether future filings contain restatements, additional control deficiencies or delayed reporting.
- Remaining warrant and option dilution, including exercise prices, expiration dates and any future securities issuance.