Palm Beach, FL – March 24, 2020 – Oil and gas production has a long history in Indonesia, with Indonesia being an international pioneer in many areas, however, the industry has not seen significant new developments for a number of years, with many existing contractors having lost interest in further exploration in Indonesia due to regulatory instability and an uncertain investment climate, and few new players were entering the market according to a report in a PricewaterhouseCoopers (PWC), Indonesia, investment Guide… but a new report from Orbis Research projects a rosy future for the Indonesian oil and gas market growth. The report stated: “Recovering prices, strong demand from the transportation industry and modern developments of oil and gas exploration and production activities are some of the factors driving Indonesia oil and gas market growth. Increasing exports and imports of oil and gas on the account of surged demand across the world are fueling the market growth. Global oil demand is estimated at 104 MMbbl/d in 2025 and natural gas continues to expand its share across major markets. Oil and gas companies will need to expand their production to meet emerging demand in the foreseeable future.” Active energy companies in the markets this week include Indonesia Energy Corporation Limited (NYSE: INDO), TOTAL S.A. (NYSE: TOT), Noble Energy, Inc. (NASDAQ: NBL), Royal Dutch Shell plc (NYSE: RDS.A) (NYSE: RDS.B), Diamondback Energy, Inc. (NASDAQ: FANG).
The oil and gas industry is undergoing rapid transformations across the world. The innovation of new technologies has allowed unconventional drilling that enhances oil and gas production. New business models and services are rapidly evolving and assisting to reduce the cost of operations in upstream oil and gas, which in turn promoting the market growth. Sustained growth in the consumption of natural gas, petroleum, and petrochemical products is one of the major growth drivers for oil and gas companies in Indonesia. Companies operating in the industry can benefit from this opportunity through investing and participating in the oil and gas trade. The major Indonesia companies are undertaking various oil and gas pipeline projects and contracts to expand their production capacities and sustain their position in the oil and gas industry.
Indonesia Energy Corporation Limited (NYSE American: INDO) BREAKING NEWS: Indonesia Energy Obtains Key Permit to Initiate its 2020 Drilling Campaign – Indonesia Energy Corporation (IEC), an oil and gas exploration and production company focused on Indonesia, today announced that the company’s Technical Program and Drilling Budget has been approved by Pertamina, Indonesia’s state-owned oil and natural gas corporation, which also granted IEC the permit to commence the bidding process to secure drilling contractors for its 2020 production drilling campaign at IEC’s 63,000 acre Kruh Block.
In addition to seeking bids for drilling contractors, IEC has started the procurement and services engagement processes necessary to quickly commence its planned drilling operations for six new wells when its operatorship at Kruh Block renews in May 2020. This activity includes the procurement of drilling rig and other required services as well as all drilling goods. The procurement processes is expected to be be completed in the second quarter of 2020 so that drilling can commence in close proximity to the renewal of the Kruh operatorship.
In a recent press release, IEC noted that notwithstanding the recent drop in oil prices and global outbreak of the novel coronavirus, the company remains on track to move forward with its 2020 plans to drill and complete six new production wells on its 63,000 acre Kruh Block, located on the island of Sumatra, which is expected to significantly increase production and cash flow in 2020. As previously announced, it is expected that these 6 new wells will only cost approximately $1.5 million each and will bring IEC’s average production cost to only US$21.34 per barrel (or possibly lower). This compares to the many companies in the United States that have announced the suspension of their drilling operations on their uneconomic assets.
Regarding IEC’s 2020 exploration and appraisal plans for its 1,000,000 acre Citarum Block, the company announced that it has completed the technical evaluation for 2D Seismic survey planning and the Environmental Baseline Assessment and has also attained the government approval of a permit to commence the 2D seismic survey acquisition program. The new seismic data will allow IEC to make better predictions of the reservoir extent and select the best drilling location for delineating the gas discoveries.
Mr. Frank Ingriselli, IEC’s President commented “As we announced just a few days ago, we remain on track with our production well drilling program at Kruh for 2020, and now we have taken further steps to start such operations. With the commencement of the well bidding process, we expect to have a drilling contractor secured in the near term and, with the permits issued by the government, we should be on-track to significantly increase production and cash flow this year. We are blessed with an asset that has such a low cost of production that notwithstanding the drop in world crude oil prices and the coronavirus outbreak, we believe we are still positioned to deliver on our development plans and drive shareholder value. The same is true for our 1,000,000-acre Citarum Block on the Java near Jakarta where natural gas prices are at a 400% premium to the prices in the United States.”
Other recent developments in the energy industry include:
TOTAL S.A. (NYSE: TOT) the company Chairman & CEO addressed the Group’s employees on March 19 to mobilize them in the face of the challenges ahead. He recalled the resilience that the Group’s teams demonstrated during the 2015-16 oil crisis as well as the two pillars of the Group’s strategy which are the organic pre-dividend breakeven of less than $25/b and the low gearing to face this high volatility.
In a context of oil prices on the order of $30 per barrel, he announced an action plan to be implemented immediately based on the following three axes: 1) Organic Capex cuts of more than $3 billion, ie. more than 20%, reducing 2020 net investments to less than $15 billion. These savings are mainly in the form of short-cycle flexible Capex, which can be arbitrated contractually over a very short time period; 2) $800 million of savings in 2020 on operating costs compared to 2019, instead of the $300 million previously announced; and 3) Suspension of the buyback program – the company announced a $2 billion buyback for 2020 in a 60 $/b environment; it bought back $550 million in the first two months.
Noble Energy, Inc. (NASDAQ: NBL) recently provided an operational update in response to the current global macroeconomic and commodity outlook: David L. Stover, Noble Energy’s Chairman and CEO, commented, “In light of the recent commodity price downturn, we are sharply reducing capital expenditures. Deferring activity until commodity prices recover protects our investment returns, maintains free cash flow and strengthens the balance sheet. While this is a challenging environment, Noble Energy is well positioned to achieve attractive long-term returns for our shareholders. The impact of bringing a mega-project like Leviathan on production is evident today, as it provides greater certainty of cash flows, supports strong financial liquidity and improves our annual production decline profile.”
The Company had $4.4 billion in financial liquidity at the end of February 2020. In addition, Noble Energy has no significant debt maturities before late 2024.
Royal Dutch Shell plc (NYSE: RDS.A) (NYSE: RDS.B) News: As the virus spreads across the world – seriously impacting people’s health, our way of life and global markets – Shell is putting the safety and health of our people and customers first, along with the safe operations of all our businesses. At the same time, we are taking decisive action to reinforce the financial strength and resilience of our business so that we are well-positioned for the eventual economic recovery.
“As well as protecting our staff and customers in this difficult time, we are also taking immediate steps to ensure the financial strength and resilience of our business,” said Ben van Beurden, Chief Executive Officer of Royal Dutch Shell. “The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past.”
Diamondback Energy, Inc. (NASDAQ: FANG) recently provided an update to the operational press release it issued on March 9, 2020, as well as an update to the Company’s 2020 and 2021 oil hedge positions. Following last week’s release, Diamondback has reduced activity further, including a minimum one-month break for all completion crews operating for the Company. After that break, the Company expects to judiciously reactivate crews and run between three and five completion crews, down from nine crews, for the rest of 2020 dependent upon future commodity price, with the primary goal of protecting the Company’s balance sheet and cash flow. Diamondback plans to reduce its operated drilling rig count to ten by early in the third quarter as contracts roll off over the next few months, and plans to run between six and ten rigs thereafter dependent upon future commodity price, representing more than a 50% reduction in rigs from earlier this year.
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