Indonesia Energy Corporation Limited, an oil and gas exploration and production company focused on Indonesia, announced that the company has commenced drilling operations at the first of its two back-to-back producing wells (this first well is named the K-27 well) at its 63,000-acre Kruh Block.
Drilling at K-27 commenced on Thursday, April 7, 2022. K-27 has a target total depth of 3,400 feet, and it is expected to take approximately 45 days to complete all drilling operations.
The commencement of drilling represents a milestone in IEC’s previously announced plan to drill two new wells at Kruh Block. As an update to the drilling plan timing for 2002, IEC plans to commence drilling of the second new well (called K-28) immediately following the completion of the K-27 well. A third new well new well at Kruh Block is anticipated to commence drilling in the June-July 2022 timeframe, and likely a fourth new well sometime before the end of 2022. These wells are the continuation of IEC’s previously announced drilling campaign to complete a total of 18 new production wells in Kruh Block by the end of 2024.
If drilling is successful, each of K-27 and K-28 is expected to average production of over 100 barrels of oil per day over the first year of production, and each well will cost approximately $1.5 million to drill and complete. Based on the terms of IEC’s contract with the Indonesian government and an oil price of $90.00/barrel (which is 10% below yesterday’s closing price for Brent), each well is expected to generate $2.4 million in net revenue in its first twelve months, which would be enough to recover the cost of drilling the wells in the first year of production.
The Kruh Block is located on Sumatra Island where IEC is already producing oil from 5 existing wells.
Mr. Frank Ingriselli, IEC’s President, commented “We are excited to have delivered on our commitment to commence drilling these two back-to-back wells and to aggressively take advantage of the current high prices for oil and move our company towards a potential cash flow positive position this year, setting the stage for further drilling and growth for our company in 2022 and beyond. We believe Kruh Block is a world class asset that should significantly grow our cash flow as we drill additional wells and seek to maximize returns on our investments and grow shareholder value. Additionally, our company is moving forward to aggressively set the stage to develop our potential billion-barrel equivalent natural gas Citarum Block, where the previous operator drilled a few gas discoveries."