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Indonesia Energy Corporation Limited (INDO)
:INDO
US Market

Indonesia Energy (INDO) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Indonesia Energy disclosed 72 risk factors in its most recent earnings report. Indonesia Energy reported the most risks in the “Finance & Corporate” category.

Risk Overview Q4, 2022

Risk Distribution
72Risks
35% Finance & Corporate
22% Production
19% Legal & Regulatory
18% Macro & Political
4% Tech & Innovation
1% Ability to Sell
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Indonesia Energy Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2022

Main Risk Category
Finance & Corporate
With 25 Risks
Finance & Corporate
With 25 Risks
Number of Disclosed Risks
72
+1
From last report
S&P 500 Average: 32
72
+1
From last report
S&P 500 Average: 32
Recent Changes
1Risks added
0Risks removed
5Risks changed
Since Dec 2022
1Risks added
0Risks removed
5Risks changed
Since Dec 2022
Number of Risk Changed
5
+5
From last report
S&P 500 Average: 4
5
+5
From last report
S&P 500 Average: 4
See the risk highlights of Indonesia Energy in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 72

Finance & Corporate
Total Risks: 25/72 (35%)Above Sector Average
Share Price & Shareholder Rights10 | 13.9%
Share Price & Shareholder Rights - Risk 1
If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our ordinary shares or if our operating results do not meet their expectations, the price of our ordinary shares could decline.
The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. Securities and industry analysts currently publish limited research on us. If there is limited or no securities or industry analyst coverage of our company, the market price and trading volume of our ordinary shares would likely be negatively impacted. Moreover, if any of the analysts who may cover us downgrade our ordinary shares, provide more favorable relative recommendations about our competitors or if our operating results or prospects do not meet their expectations, the market price of our ordinary shares could decline. If any of the analysts who may cover us were to cease coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.
Share Price & Shareholder Rights - Risk 2
We may issue preferred shares with greater rights than our ordinary shares.
Our amended articles of association authorize our board of directors to issue one or more series of preferred shares and set the terms of the preferred shares without seeking any further approval from our shareholders. Any preferred shares that are issued may rank ahead of our ordinary shares, in terms of dividends, liquidation rights and voting rights.
Share Price & Shareholder Rights - Risk 3
Shares eligible for future, including as a result of our financing with L1 Capital, sale may depress our stock price.
As of April 26, 2023, we had 10,142,694 ordinary shares outstanding, 5,434,402 of which were held by our officers, directors and affiliates. In addition, 200,000 ordinary shares are subject to outstanding options granted under certain stock option agreements entered into with our management team. All of the ordinary shares held by affiliates (notably Maderic, which is controlled by our Chairman) are restricted or control securities under Rule 144 promulgated under the Securities Act. Our affiliates may, subject to compliance with applicable law, choose to sell ordinary shares held by them. Sales of these ordinary shares under Rule 144 or another exemption under the Securities Act or pursuant to a registration statement could have a material adverse effect on the price of the ordinary shares and could impair our ability to raise additional capital through the sale of equity securities. Moreover, under our convertible note financing with L1 Capital, L1 Capital has the right to convert principal under such note at $6.00 per share. During the year ended December 31, 2022, $9,900,000 of the total $10,000,000 principal amount of the convertible notes has been converted into ordinary shares, which was substantially lower than the prevailing market price of our ordinary shares. Further, monthly installment payments of the L1 Capital note was deferred, but should we elect to make such payments in the form of ordinary shares, such shares will be priced at (and the number of shares to be issued will be determined based upon) the lesser (i) $6.00 per share or (ii) 90% of the average of the two lowest closing bid prices of the ordinary shares for the ten (10) consecutive trading days ending on the trading day immediately prior to the payment date, with a floor price of $1.20 per share (which floor price may be waived by us, but not L1 Capital, under certain circumstances). Any payments of the L1 Capital note in ordinary shares could therefore require us to issue L1 Capital ordinary shares, which could be sold into the market, which could have an adverse effect on the price of the ordinary shares and could impair our ability to raise additional capital through the sale of equity securities. L1 Capital also holds the ordinary share purchase warrants, which are currently exercisable at $6.00 per share. During the year ended December 31, 2022, 325,000 of the total 767,240 warrants was exercised. Upon exercise of such warrants, sales of the underlying ordinary shares could also have a material adverse effect on the price of the ordinary shares.
Share Price & Shareholder Rights - Risk 4
An entity controlled by our Chairman owns a substantial majority of our ordinary shares and voting power.
Maderic Holding Limited, an entity controlled by our Chairman Wirawan Jusuf (or Maderic), owns and exercises voting and investment control of approximately 51.49% of our ordinary shares as of the date of this report. As a result of this concentration of share ownership, investors may be prevented from affecting matters involving our company, including: - Fluctuations in oil and other commodity prices;         - Volatility in the energy industry, both in Indonesia and internationally;         - Variations in our operating results;         - Risks relating to our business and industry, including those discussed above; Furthermore, this concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our shareholders. This significant concentration of share ownership may also adversely affect the trading price for our ordinary shares because investors may perceive disadvantages in owning shares in a company that is controlled by a company insider. This concentration of ownership could also create conflicts of interests for Dr. Jusuf that may not be resolved in a manner that all shareholders agree with.
Share Price & Shareholder Rights - Risk 5
We may not be able to maintain the listing of our ordinary shares on the NYSE American, which could adversely affect our liquidity and the trading volume and market price of our ordinary shares, and decrease the value of your investment.
Our ordinary shares are currently traded on the NYSE American. In order to maintain our NYSE American listing, we must maintain certain share price, financial and share distribution targets, including maintaining a minimum amount of shareholders' equity and a minimum number of public shareholders. In addition to these objective standards, the NYSE American may delist the securities of any issuer (i) if, in its opinion, the issuer's financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if an issuer fails to comply with the NYSE American's listing requirements; (v) if an issuer's securities sell at what the NYSE American considers a "low selling price" and the issuer fails to correct this via a reverse split of shares after notification by the NYSE American; or (vi) if any other event occurs or any condition exists which makes continued listing on the NYSE American, in its opinion, inadvisable. If the NYSE American delists either our ordinary shares, investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced liquidity, decreased analyst coverage of our securities, and an inability for us to obtain additional financing to fund our operations.
Share Price & Shareholder Rights - Risk 6
Our ordinary share price has been and may in the future be volatile and, as a result, you could lose a significant portion or all of your investment.
The market price of our ordinary shares on the NYSE American has fluctuated, and may in the future fluctuate (in each case to a significant extent), as a result of several factors, including the following: - Fluctuations in oil and other commodity prices (including but not limited to as a result of external events such as the COVID-19 pandemic and Russia's invasion of Ukraine in February 2022);         - Volatility in the energy industry, both in Indonesia and internationally;         - Variations in our operating results;         - Risks relating to our business and industry, including those discussed above;         - Strategic actions by us or our competitors;         - Reputational damage from accidents or other adverse events related to our company or its operations;         - Investor perception of us, the energy sector in which we operate, the investment opportunity associated with the ordinary shares and our future performance;         - Addition or departure of our executive officers or directors;         - Changes in financial estimates or publication of research reports by analysts regarding our ordinary shares, other comparable companies or our industry generally;         - Trading volume of our ordinary shares;         - Future sales of our ordinary shares by us or our shareholders;         - Domestic and international economic, legal and regulatory factors unrelated to our performance; or         - The release or expiration of lock-up or other transfer restrictions on our outstanding ordinary shares. Furthermore, the stock markets often experience significant price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions or interest rate changes may cause the market price of ordinary shares to decline.
Share Price & Shareholder Rights - Risk 7
The market for our ordinary shares has been volatile, and an active, liquid and orderly trading market for our ordinary shares may not be maintained in the United States, which could limit your ability to sell our ordinary shares.
The market for our ordinary shares has been volatile, with times of significant trading volume and times of minimal trading volume. Although our ordinary shares are listed on the NYSE American, an active, liquid and orderly U.S. public market for our ordinary shares may not be achieved or sustained, and the market for our ordinary shares may remain unpredictable. If an active, liquid and orderly market is not sustained, you may experience difficulty selling your ordinary shares. Moreover, the price of our publicly-listed shares has been subject to significant price fluctuations, which creates the risk of loss of your investment in our ordinary shares.
Share Price & Shareholder Rights - Risk 8
Provisions of our charter documents or Cayman Islands law could delay or prevent an acquisition of our company, even if the acquisition may be beneficial to our shareholders, could make it more difficult for you to change management, and could have an adverse effect on the market price of our ordinary shares.
Provisions in our amended and restated memorandum and articles of association may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our shareholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. Such provisions may reduce the price that investors may be willing to pay for our ordinary shares in the future, which could reduce the market price of our ordinary shares. These provisions include: - A requirement that extraordinary general meetings of shareholders be called only by the directors or, in limited circumstances, by the directors upon shareholder requisition;         - An advance notice requirement for shareholder proposals and nominations to be brought before an annual general meeting;         - The authority of our board of directors to issue preferred shares with such terms as our board of directors may determine; and         - A requirement of approval of not less than 66 2/3% of the votes cast by shareholders entitled to vote thereon in order to amend any provisions of our amended and restated memorandum and articles of association.
Share Price & Shareholder Rights - Risk 9
You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited, as a result of our company being incorporated under the laws of the Cayman Islands.
We are a Cayman Islands exempted company with limited liability and substantially all of our assets will be located outside the United States. In addition, most of our directors and officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or our directors or executive officers, or enforce judgments obtained in the United States courts against us or our directors or officers. Further, mail addressed to us and received at our registered office will be forwarded unopened to the forwarding address supplied by our directors. Our directors will only receive, open or deal directly with mail which is addressed to them personally (as opposed to mail which is only addressed to us). We, our directors, officers, advisors or service providers (including the organization which provides registered office services in the Cayman Islands) will not bear any responsibility for any delay, howsoever caused, in mail reaching this forwarding address. Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Law (Revised) (as the same may be supplemented or amended from time to time) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not technically binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and certain states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law. As a result, there may be significantly less protection for investors than is available to investors in companies organized in the United States, particularly Delaware. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in a Federal court of the United States. The Cayman Islands courts are also unlikely: - To recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of United States securities laws; and         - To impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of United States securities laws that are penal in nature. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. The Grand Court of the Cayman Islands may stay proceedings if concurrent proceedings are being brought elsewhere. Like many jurisdictions in the United States, Cayman Islands law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies and any such company may be the surviving entity for the purposes of mergers or the consolidated company for the purposes of consolidations. For these purposes, (a) "merger" means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a "consolidation" means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must, in most instances, then be authorized by a special resolution of the shareholders of each constituent company and such other authorization, if any, as may be specified in such constituent company's articles of association. A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders. For this purpose a subsidiary is a company of which at least 90% of the votes cast at its general meeting are held by the parent company. The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands. The plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures. In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not be approved, the court can be expected to approve the arrangement if it determines that: - The statutory provisions as to the required majority vote have been met;         - The shareholders have been fairly represented at the meeting in question, the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class and that the meeting was properly constituted;         - The arrangement is such that it may reasonably be approved by an intelligent and honest man of that share class acting in respect of his interest; and         - The arrangement is not one which would be more properly sanctioned under some other provision of the Companies Act. If the arrangement and reconstruction is approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares. In addition, there are further statutory provisions to the effect that, when a take-over offer is made and approved by holders of 90.0% in value of the shares affected (within four months after the making of the offer), the offeror may, within two months following the expiry of such period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands, but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of shareholders. As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of our board of directors or controlling shareholders than they would as public shareholders of a U.S. company.
Share Price & Shareholder Rights - Risk 10
Changed
Other future issuances and sales of additional ordinary shares could cause dilution of ownership interests and adversely affect our share price.
Beyond our note financing with L1 Capital, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders or result in downward pressure on the price of our ordinary shares.
Accounting & Financial Operations6 | 8.3%
Accounting & Financial Operations - Risk 1
Changed
We have identified a material weakness in our internal control over financial reporting for the year ended December 31, 2022. If we fail to remediate this weakness or otherwise develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud.
We have identified a "material weakness" in our internal control over financial reporting for the year ended December 31, 2022. As defined in the standards established by the Public Company Accounting Oversight Board of the United States ("PCAOB"), a "material weakness" is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the audits of our consolidated financial statements for the years ended December 31, 2022 and 2021, a material weakness that have been identified in our internal control over financial reporting as of such dates related to our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. We have implemented and are continuing to implement a number of measures to address the material weakness identified. As a result of the material weakness, our management has concluded that as of December 31, 2022, our disclosure controls and procedures were ineffective in ensuring that the information required to be disclosed by us in this annual report is recorded, processed, summarized and reported to them for assessment, and that the required disclosure is made within the time period specified in the rules and forms of the SEC. We cannot assure you that we will be able to continue to implement an effective system of internal control, or that we will not identify additional material weaknesses or significant deficiencies in the future. We are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires that we include a report from management on the effectiveness of our internal control over financial reporting in this report. In addition, once we cease to be an "emerging growth company" as such term is defined under the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ordinary shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods, which would further damage our reputation and likely adversely impact our share price.
Accounting & Financial Operations - Risk 2
We are a holding company, with all of our operations conducted through our operating subsidiaries in Indonesia. Should our operations generate positive cash flows in the future, and should we desire to cause our operating subsidiaries to make dividends or distributions to our parent company in the future, limitations on the ability of our subsidiaries to do so, or any tax implications of doing so, could limit our ability to pay our parent company expenses or pay dividends to holders of our ordinary shares.
We are a holding company and conduct substantially all of our business through our operating subsidiaries, which are limited liability companies established in Indonesia. Should our operations generate positive cash flows in the future, and should we desire to cause our operating subsidiaries to make dividends or distributions to our parent company in the future, we might be limited in our ability to do so for regulatory or tax reasons. If applicable laws, rules and regulations in Indonesia or Hong Kong (where our holding subsidiary WJ Energy is domiciled) in the future limit or preclude our Indonesian subsidiaries from making dividends to us, our ability to fund our holding company obligations or pay dividends on our ordinary shares could be materially and adversely affected. In addition, we may also enter into debt arrangements in the future which limit our ability to receive dividends or distributions from our operating subsidiaries or pay dividends to the holders of our ordinary shares. Indonesian, Hong Kong or Cayman Island tax laws, rules and regulations may also limit our future ability to receive dividends or distributions from our operating subsidiaries or pay dividends to the holders of our ordinary shares.
Accounting & Financial Operations - Risk 3
Because the likelihood of paying cash dividends on our ordinary shares is remote at this time, investors must look solely to appreciation of our ordinary shares in the market to realize a gain on their investments.
We do not know when or if we will pay dividends to our shareholders, and the likelihood that we will be paying dividends on our ordinary is remote at this time. We currently intend to retain future earnings, if any, to finance the expansion of our business. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations, capital requirements and investment opportunities. Accordingly, investors must look solely to appreciation of our ordinary shares in the market to realize a gain on their investment. This appreciation may not occur.
Accounting & Financial Operations - Risk 4
Our estimates regarding our market are based on our research but may prove incorrect.
This report contains certain data and information that we obtained from private publications. Statistical data in these publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of our ordinary shares. In addition, the rapidly changing nature of the oil and gas industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these or other forward-looking statements. See "Cautionary Note Regarding Forward-Looking Statements."
Accounting & Financial Operations - Risk 5
Estimates of proved reserves and future net revenue are inherently imprecise.
The process of estimating oil reserves in accordance with the requirements of the United States Securities and Exchange Commission ("SEC") is complex and involves decisions and assumptions in evaluating the available geological, geophysical, engineering and economic data. Accordingly, these estimates are imprecise. Actual future production, oil and gas prices, revenues, taxes, capital expenditures, operating expenses and quantities of recoverable oil reserves most likely will vary from those estimated. Any significant variance could materially affect the estimated quantities and present value of our reserves. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and gas prices and other factors, many of which are beyond our control.
Accounting & Financial Operations - Risk 6
Our estimated oil reserves are based on assumptions that may prove inaccurate.
Oil engineering is a subjective process of estimating accumulations of oil and gas that cannot be measured in an exact way, and estimates of other engineers may differ materially from those set out herein. Numerous assumptions and uncertainties are inherent in estimating quantities of proved oil, including projecting future rates of production, timing and amounts of development expenditures and prices of oil and gas, many of which are beyond our control. Results of drilling, testing and production after the date of the estimate may require revisions to be made. Accordingly, reserves estimates are often materially different from the quantities of oil and gas that are ultimately recovered, and if such recovered quantities are substantially lower that the initial reserves estimates, this could have a material adverse impact on our business, financial condition and results of operations.
Debt & Financing7 | 9.7%
Debt & Financing - Risk 1
Our business requires significant capital investment and maintenance expenses, which we may be unable to finance on satisfactory terms or at all.
The oil and natural gas industry is capital intensive and we expect to make substantial capital expenditures in our business and operations for the exploration and production of oil reserves. The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things, commodity prices, actual drilling results, the availability of drilling rigs and other equipment and services, and regulatory, technological and competitive developments. In response to increases in commodity prices, we may increase our actual capital expenditures. We will likely need to raise additional financing to support our business, and we intend to finance our future capital expenditures through cash generated by our operations and potential future financing arrangements. However, our financing needs may require us to alter or increase our capitalization substantially through the issuance of debt or equity securities or the sale of assets. We also face the risk that financing arrangements (including bank loans or public or private offerings of debt or equity securities) may not be available to us when needed on favorable terms or at all, which could adversely impact our ability to operate our company. If our capital requirements vary materially from our current plans, we would likely require further investment (which may be unavailable to the extent to do not generate positive cash flows) or equity financing (which may be unavailable on desirable terms, or at all). In addition, we will likely incur significant financial indebtedness in the future, which may involve restrictions on other financing and operating activities. These changes could cause our cost of doing business to increase, limit our ability to pursue acquisition opportunities, reduce cash flow used for drilling and place us at a competitive disadvantage. A significant reduction in cash flows from operations or the availability of credit could materially adversely affect our ability to achieve our planned growth and operating results.
Debt & Financing - Risk 2
Downgrades of credit ratings of the Government or Indonesian companies could adversely affect our business.
As of the date of this report, Indonesia's sovereign foreign currency long-term debt was rated "Baa2 (Stable)" by Moody's, "BBB (Stable)" by Standard & Poor's and "BBB (Stable)" by Fitch Ratings. Indonesia's short-term foreign currency debt is rated "A-2" by Standard & Poor's and "F2" by Fitch Ratings. We can give no assurance that Moody's, Standard & Poor's or Fitch Ratings will not change or downgrade the credit ratings of Indonesia. Any such downgrade could have an adverse impact on liquidity in the Indonesian financial markets, the ability of the Government and Indonesian companies, including us, to raise additional financing, and the interest rates and other commercial terms at which such additional financing is available. Interest rates on our floating rate Rupiah-denominated debt would also likely increase. Such events could have material adverse effects on our business, financial condition, results of operations, prospects and/or the market price of our securities.
Debt & Financing - Risk 3
We require significant capital to realize our business plan.
Our ongoing work program is expensive, and we will require significant additional capital in order to fully realize our business plan. This is particularly true because we raised less funding than we had anticipated in our December 2019 initial public offering. We cannot assure you that our actual cash requirements will not exceed our estimates. Even if we were to discover be successful in our exploration operations, we will require additional financing to bring our interests into commercial operation and pay for operating expenses until we achieve a positive cash flow. Additional capital also may be required in the event we incur any significant unanticipated expenses. Under the current capital and credit market conditions, we may not be able to obtain additional equity or debt financing on acceptable terms. Even if financing is available, it may not be available on terms that are favorable to us or in sufficient amounts to satisfy our requirements. If we are unable to obtain additional financing, we may be unable to implement our business plan and our growth strategies, respond to changing business or economic conditions and withstand adverse operating results. If we are unable to raise further financing when required, our planned production and exploration activities may have to be scaled down or even ceased, and our ability to generate revenues in the future would be negatively affected. Additional financing could cause your relative interest in our assets and potential earnings to be significantly diluted. Even if we have success, we may not be able to generate sufficient revenues to offset the cost of our operational plans and administrative expenses.
Debt & Financing - Risk 4
The rights afforded to L1 Capital under our convertible note and warrant financing with them could discourage investment in our company from third parties.
Under our January 2022 (as amended in March 2022) financing agreements with L1 Capital, L1 Capital has been afforded certain rights which could discourage third parties from investing in our company based on the perceived preferred position and rights of L1 Capital. These rights include: - Our indebtedness to L1 Capital is required to be outstanding until repaid the senior debt obligation of our company ($100,000 of such indebtedness remains outstanding);         - While our indebtedness to L1 Capital is outstanding, if we issue any debt, including any subordinated debt or convertible debt, then L1 Capital will have the option to cause us to immediately utilize 30% of the aggregate proceeds of such issuance to repay the note to L1 Capital. In addition, if we issue any equity interests for cash as part of a financing transaction (other than in connection with an "at the market" funding program), then L1 Capital will have the option to cause us to direct 30% of such proceeds from such issuance to repay the L1 Capital note;         - While our indebtedness to L1 Capital is outstanding, we shall not (without the prior written consent of L1 Capital): (i) enter into any financing transactions that qualify as "variable rate transactions" until thirty (30) days after such time as the L1 Capital note has been repaid in full and/or has been fully converted into ordinary shares or (ii) utilize any "at the market" offering program in respect of our ordinary shares in the thirty (30) day period following any date that we have made payments under the L1 Capital note in the form of ordinary shares; and         - While our indebtedness to L1 Capital is outstanding, we shall not (without the prior written consent of L1 Capital): (i) authorize the amendment of any outstanding note, option, warrant, or other derivative security convertible, exercisable or exchangeable for ordinary shares to reduce the conversion, exercise or exchange price of any such security or (ii) grant a replacement note, option, warrant or other derivative security convertible, exercisable or exchangeable for ordinary shares for the purpose of reducing the conversion, exercise or exchange price of any such security being replaced; and         - If we enter into a definitive agreement with respect to a change of control of our company, L1 Capital shall have the right to require our company to prepay the L1 Capital note with a five percent (5%) payment premium. The existence of these rights of L1 Capital, or the exercise of such rights, may deter potential investors from providing us needed financing, or may deter investment banks from working with us, which would have a material adverse effect on our ability to finance our company.
Debt & Financing - Risk 5
Changed
Our 2022 financing with L1 Capital Global Opportunities Master Fund, Ltd. ("L1 Capital") could cause dilution and pressure on the public price of our ordinary shares as the outstanding warrants can be exercised at discounted price to market.
Any exercise by L1 Capital of the warrants that were issued to them in connection with our January 2022 financing will cause dilution to shareholders since it is likely that those warrants will only be exercise at a discount to the prevailing market price. Moreover, the ordinary shares underlying the L1 Capital warrants have been registered for resale pursuant to a Registration Statement on Form F-1 filed with the SEC on March 9, 2022, as amended (the "L1 Registration Statement"), effective June 1, 2022. After the L1 Registration Statement was declared effective, L1 Capital commenced sales of such shares in the public market. Any future such sales could cause pressure on the public price of our ordinary shares and could force such price downwards, perhaps significantly. During the year ended December 31, 2022, $9,900,000 of the total $10,000,000 principal amount of the convertible notes were converted into ordinary shares at $6.00 per share at L1 Capital's election and 325,000 of the total 767,240 warrants were exercised.
Debt & Financing - Risk 6
We may not be able to fund the capital expenditures that will be required for us to increase reserves and production.
We must make capital expenditures to develop our existing reserves and to discover new reserves. Historically, we have financed our capital expenditures primarily through related and non-related party financings as well as funds raised from our initial public offering in December 2019 and our financing with L1 Capital in 2022. We expect to continue to utilize these or similar resources (as well as funds from potential equity and debt financings and any future net positive cash flow) in the future. However, we cannot assure you that we will have sufficient capital resources in the future to finance all of our planned capital expenditures. During 2021 and 2022, we have had to modify our drilling and other operational plans due in part to limitations on our capital resources. Moreover, volatility in oil and gas prices, the timing of our drilling programs and drilling results will affect our cash flow from operations. Lower prices and/or lower production could also decrease revenues and cash flow, thus reducing the amount of financial resources available to meet our capital requirements, including reducing the amount available to pursue our drilling opportunities. If our cash flow from operations does not increase as a result of capital expenditures, a greater percentage of our cash flow from operations will be required for debt service and operating expenses and our capital expenditures would, by necessity, be decreased.
Debt & Financing - Risk 7
We face credit risk from the Government and the ability of Pertamina to pay our company for the operating costs and profit sharing split in a timely manner.
Our current cash inflow is dependent on a "cost recovery" and profit-sharing arrangement with Pertamina, an Indonesian state-owned oil and natural gas corporation based in Jakarta, meaning that all operating costs (expenditures made and obligations incurred in the exploration, development, extraction, production, transportation, marketing, abandonment and site restoration) are advanced by our company and later repaid by Pertamina plus a share of the profit from operations. Any delay of payment by Pertamina may adversely affect our operations and delay the schedule of capital investments which could have otherwise have an adverse effect on our business, prospects, financial condition and results of operations.
Corporate Activity and Growth2 | 2.8%
Corporate Activity and Growth - Risk 1
Strategic determinations, including the allocation of capital and other resources to strategic opportunities, are challenging, and our failure to appropriately allocate capital and resources among our strategic opportunities may adversely affect our financial condition and reduce our growth rate.
Our future growth prospects are dependent upon our ability to identify optimal strategies for our business. In developing our business plan, we have and will continue to consider allocating capital and other resources to various aspects of our businesses including well-development (primarily drilling), reserve acquisitions, exploratory activity, corporate items and other alternatives. We also have and will continue to consider our likely sources of capital. Our ability to fund our current business plan is dependent on our available capital. As we raised less funds than we had anticipated in our December 2019 initial public offering, we have been faced with challenges relative to the allocation of those funds, which has required us to modify our business plan and which could create challenges for our ability to fully fund our plans. In addition, notwithstanding the determinations made in the development of our business plan, business opportunities not previously identified periodically come to our attention, including possible acquisitions and dispositions. If we fail to identify optimal business strategies or fail to optimize our capital investment and capital raising opportunities and the use of our other resources in furtherance of our business strategies, our financial condition and growth rate may be adversely affected. Moreover, economic or other circumstances may change from those contemplated by our business plan, and our failure to recognize or respond to those changes may limit our ability to achieve our objectives.
Corporate Activity and Growth - Risk 2
Our lack of asset and geographic diversification increases the risk of an investment in us, and our financial condition and results of operations may deteriorate if we fail to diversify.
Our business focus is on oil and gas exploration in limited areas in Indonesia and exploitation of any significant reserves that are found within our license areas. As a result, we lack diversification, in terms of both the nature and geographic scope of our business. We will likely be impacted more acutely by factors affecting our industry or the regions in which we operate than we would if our business were more diversified. If we are unable to diversify our operations, our financial condition and results of operations could deteriorate.
Production
Total Risks: 16/72 (22%)Above Sector Average
Manufacturing8 | 11.1%
Manufacturing - Risk 1
Our drilling operations may be curtailed, delayed or cancelled as a result of a variety of factors that are beyond our control.
Our drilling operations are subject to a number of risks, including: - Unexpected drilling conditions;         - Facility or equipment failure or accidents;         - Adverse weather conditions;         - Unusual or unexpected geological formations;         - Fires, blowouts and explosions;         - Geopolitical conflicts including the recent military in Ukraine and sanctions on certain oil and gas exporting countries;         - Unforeseen delays in the Government permit processing or the timing for the tendering of necessary third party services;         - Uncontrollable pressures or flows of oil or gas or well fluids; and         - Public health risks and pandemic outbreaks, such as COVID-19 and its variants. With respect to the COVID-19 in particular, although the Government of Indonesia has officially ended the restrictions on December 30, 2022, it may be too early at this stage to conclude that COVID-19 is no longer a threat. The full effects of COVID-19 around the world are presently unknown and unpredictable and could have a material adverse effect on (i) the demand for our oil and gas in Indonesia, (ii) our ability to staff our drilling operations and (iii) our supply chain. Any of these events could adversely affect our ability to conduct operations or cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution or other environmental contamination, loss of wells, regulatory penalties, suspension of operations, and attorney's fees and other expenses incurred in the prosecution or defense of litigation.
Manufacturing - Risk 2
We may be unable to expand operations by securing rights to additional producing our exploration blocks.
One of our key business strategies is to expand our asset portfolio, which may include producing our exploration blocks. We have currently identified one such potential block – the Rangkas Area – and our goal will be to secure rights to conduct activities in Rangkas and other areas in Indonesia, However, due to the competitive tender process and uncertainties around Government contracting, among other factors, we may be unable to secure rights to conduct exploration or production activities in any additional areas. In particular, we face competition from other oil and gas companies in the acquisition of new oil blocks through the Indonesian government's tender process. Our competitors for these tenders include Pertamina (who can tender for blocks on its own), and other well-established large international oil and gas companies. Such companies have substantially greater capital resources and are able to offer more attractive terms when bidding for concessions. If we are unable to secure rights to additional blocks, we would be left without additional opportunities for revenue and profit and remain subject to the risks associated with our current lack of asset diversification, all of which would harm our results of operations.
Manufacturing - Risk 3
We may not find any commercially productive oil and gas reservoirs in connection with our exploration activities.
Our business prospects are currently dependent on extracting assets from our Kruh Block and on finding sufficient reserves in our Citarum Block. Drilling involves numerous risks, including the risk that the new wells we drill will be unproductive or that we will not recover all or any portion of our capital investment. Drilling for oil and gas may be unprofitable. Wells that are productive but do not produce sufficient net revenues after drilling, operating and other costs are unprofitable. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and successful drilling and completion operations. In addition, our properties may be susceptible to drainage from production by other operations on adjacent properties. If the volume of oil and gas we produce decreases, our cash flow from operations may decrease.
Manufacturing - Risk 4
The marketability of our production depends largely upon the availability, proximity and capacity of oil and gas gathering systems, pipelines, storage and processing facilities.
The marketability of our production depends in part upon processing and storage. Transportation space on such gathering systems and pipelines is occasionally limited and at times unavailable due to repairs or improvements being made to such facilities or due to such space being utilized by other companies with priority transportation agreements. Our access to transportation options can also be affected by Indonesian law, regulation of oil and gas production and transportation, general economic conditions and changes in supply and demand. These factors and the availability of markets are beyond our control. If our access to these transportation and storage options dramatically changes, the financial impact on us could be substantial and adversely affect our ability to produce and market our oil and gas.
Manufacturing - Risk 5
Unless we replace our oil reserves, our reserves and production will decline over time. Our business is dependent on our continued successful identification of productive fields and prospects and the identified locations in which we drill in the future may not yield oil or natural gas in commercial quantities.
Production from oil properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics. Accordingly, our current proved reserves will decline as these reserves are produced. Our future oil reserves and production, and therefore our cash flows and income, are highly dependent on our success in efficiently developing our current reserves and economically finding or acquiring additional recoverable reserves. While we have had success in identifying and developing commercially exploitable deposits and drilling locations in the past, we may be unable to replicate that success in the future. We may not identify any more commercially exploitable deposits or successfully drill, complete or produce more oil reserves, and the wells which we have drilled and currently plan to drill within our blocks or concession areas may not discover or produce any further oil or gas or may not discover or produce additional commercially viable quantities of oil or gas to enable us to continue to operate profitably. If we are unable to replace our current and future production, the value of our reserves will decrease, and our business, financial condition and results of operations will be materially adversely affected.
Manufacturing - Risk 6
Our expectations for future drilling activities will be realized over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of such activities.
We have identified drilling locations and prospects for future drilling opportunities, including development and exploratory drilling activities, at both Kruh Block and Citarum Block. These drilling locations and prospects represent a significant part of our future drilling plans. Our ability to drill and develop these locations depends on a number of factors, including the availability of capital, regulatory approvals, negotiation of agreements with third parties, commodity prices, costs, access to and availability of equipment, services, resources and personnel and drilling results. There can be no assurance that we will drill these locations or that we will be able to produce oil from these locations or any other potential drilling locations. Changes in the laws or regulations on which we rely in planning and executing its drilling programs could adversely impact our ability to successfully complete those programs.
Manufacturing - Risk 7
Drilling oil and natural gas wells is a high-risk activity.
Our growth is materially dependent upon the success of our drilling program. Drilling for natural gas and oil involves numerous risks, including the risk that no commercially productive natural gas or oil reservoirs will be encountered. The cost of drilling, completing and operating wells is substantial and uncertain, and drilling operations may be curtailed, delayed or cancelled as a result of a variety of factors beyond our control, including: - Unexpected drilling conditions, pressure or irregularities in formations;         - Equipment failures or accidents;- Adverse weather conditions;         - Volatility (significant increase and decreases) in natural gas and oil prices;         - Surface access restrictions;         - Loss of title or other title related issues;         - Compliance with, or changes in, governmental requirements and regulation; and         - Costs of shortages or delays in the availability of drilling rigs or crews and the delivery of equipment and materials. We experienced difficulties in drilling in 2021 at our K-25 well when the well collapsed during the rainy season, and at K-28 in 2022 when significant amount of gas was encountered during drilling which required additional effort to protect the well and operations. Our future drilling activities may not be successful and, if unsuccessful, such failure will have an adverse effect on our future results of operations and financial condition. Our overall drilling success rate or our drilling success rate for activity within a particular geographic area may decline. We may be unable to lease or drill identified or budgeted prospects within our expected time frame, or at all. We may be unable to lease or drill a particular prospect because, in some cases, we identify a prospect or drilling location before seeking an option or lease rights in the prospect or location. Similarly, our drilling schedule has varied and may in the future vary from the schedule set forth in our capital budget. The final determination with respect to the drilling of any scheduled or budgeted wells will be dependent on a number of factors, including: - The results of exploration efforts and the acquisition, review and analysis of the seismic data;         - The availability of sufficient capital resources to us and the other participants for the drilling of the prospects;         - The approval of the prospects by other participants after additional data has been compiled;         - Economic and industry conditions at the time of drilling, including prevailing and anticipated prices for natural gas and oil and the availability of drilling rigs and crews;         - Our financial resources and results; and         - The availability of leases and permits on reasonable terms for the prospects and any delays in obtaining such permits. These projects may not be successfully developed and the wells, if drilled, may not encounter reservoirs of commercially productive natural gas or oil.
Manufacturing - Risk 8
We have previously had to modify and in the future we may not adhere to our proposed drilling schedule.
While we have internally approved plans for development of Kruh Block and have publicly stated our intentions with respect to new drilling activity for Kruh Block, we have had to modify our drilling schedule in the past, and may be required to do so again in the future. Our final determination of whether and when to drill any scheduled or budgeted wells (whether in Kruh Block or otherwise) from time to time will be dependent on a number of factors, including: - Prevailing and anticipated prices for oil and gas;         - The availability and costs of drilling and service equipment and crews;         - Economic and industry conditions at the time of drilling;         - The availability of sufficient capital resources;         - The results of our exploration efforts;         - The acquisition, review and interpretation of seismic data;         - Our ability to obtain permits for and to access drilling locations; and         - Continuous drilling obligations. Although we have identified or budgeted for numerous drilling locations, we may not be able to drill those locations within our expected time frame or at all. In addition, our drilling schedule may vary from our expectations because of future uncertainties. Moreover, conditions (such as weather, Government permitting, our capital resources, and similar matters) have in the past required us, and may in the future require us, to modify or delay our drilling programs. Some of the factors that impact the timing of our drilling plans are beyond our control. Any delay in implementing our drilling programs could damage our reputation and share price, and could also have a material adverse effect on our results of operations (including our cash flows).
Employment / Personnel1 | 1.4%
Employment / Personnel - Risk 1
Labor laws and regulations in Indonesia and labor unrest may materially adversely affect our results of operations.
Laws and regulations which facilitate the forming of labor unions, combined with weak economic conditions, have resulted and may result in labor unrest and activism in Indonesia. In 2000, the Government issued Law No. 21 of 2000 regarding Labor Unions (or the Labor Union Law). The Labor Union Law permits employees to form unions without intervention from an employer, the government, a political party or any other party. On March 25, 2003, President Megawati enacted Law No. 13 of 2003 regarding Employment (or the Labor Law) which, among other things, increased the amount of severance, pension, medical coverage, service and compensation payments payable to employees upon termination of employment. The Labor Law requires further implementation of regulations that may substantively affect labor relations in Indonesia. The Labor Law requires companies with 50 or more employees establish bipartite forums with participation from employers and employees. The Labor Law also requires a labor union to have participation of more than half of the employees of a company in order for a collective labor agreement to be negotiated and creates procedures that are more permissive to the staging of strikes. Following the enactment, several labor unions urged the Indonesian Constitutional Court to declare certain provisions of the Labor Law unconstitutional and order the Government to revoke those provisions. The Indonesian Constitutional Court declared the Labor Law valid except for certain provisions, including relating to the right of an employer to terminate its employee who committed a serious mistake and criminal sanctions against an employee who instigates or participates in an illegal labor strike. The Labor Law was amended by GR2/2022 and the amendments include, amongst others, the reduction in the statutory severance payments payable to the employees in the event of employment termination. Labor unrest and activism in Indonesia could disrupt our operations, our suppliers or contractors and could affect the financial condition of Indonesian companies in general.
Supply Chain2 | 2.8%
Supply Chain - Risk 1
We rely on independent experts and technical or operational service providers over whom we may have limited control.
We use independent contractors to provide us with certain technical assistance and services. We rely upon the owners and operators of rigs and drilling equipment, and upon providers of field services, to drill and develop our prospects to production. We also rely upon the services of other third parties to explore and/or analyze our prospects to determine a method in which the prospects may be developed in a cost-effective manner. Our limited control over the activities and business practices of these service providers, any inability on our part to maintain satisfactory commercial relationships with them or their failure to provide quality services could materially adversely affect our business, results of operations and financial condition.
Supply Chain - Risk 2
Changed
Our production sharing contract, or PSC, for Citarum Block requires or may require us to relinquish portions of the subject contract area in certain circumstances, which would potentially leave us with less area to explore.
Pursuant to our PSC with SKK Migas for Citarum Block, there are circumstances under which we are required or may be required to relinquish portions of the contract area back to the Government, with such portions being subject to be agreed to between us and the Government. Such circumstances include our inability to complete the work programs agreed to in our PSC for Citarum. If we relinquish or are required to relinquish portions of Citarum, we could be left with fewer areas to explore and a resulting diminishment of potential resources we could capitalize on. See "Business-Our Assets-Citarum Block" for further information. We may be required to agree to similar provisions in future contracts with the Government.
Costs5 | 6.9%
Costs - Risk 1
The lack of availability or high cost of drilling rigs, equipment, supplies, personnel and oil field services could adversely affect our ability to execute our exploitation and development plans on a timely basis and within our budget.
Our industry is cyclical and, from time to time, there has been a shortage of drilling rigs, equipment, supplies, oil field services or qualified personnel. During these periods, the costs and delivery times of rigs, equipment and supplies are substantially greater. In addition, the demand for, and wage rates of, qualified drilling rig crews rise as the number of active rigs in service increases. During times and in areas of increased activity, the demand for oilfield services will also likely rise, and the costs of these services will likely increase, while the quality of these services may suffer. If the lack of availability or high cost of drilling rigs, equipment, supplies, oil field services or qualified personnel were particularly severe in any of our areas of operation, we could be materially and adversely affected. Delays could also have an adverse effect on our results of operations, including the timing of the initiation of production from new wells.
Costs - Risk 2
We do not insure against all potential operating risks. We might incur substantial losses from, and be subject to substantial liability claims for, uninsured or underinsured risks related to our oil and gas operations.
We do not insure against all risks. Our oil and gas exploitation and production activities are subject to hazards and risks associated with drilling for, producing and transporting oil and gas, and any of these risks can cause substantial losses resulting from: - Environmental hazards, such as uncontrollable flows of oil, gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater, shoreline contamination, underground migration and surface spills or mishandling of chemical additives;         - Abnormally pressured formations;- Mechanical difficulties, such as stuck oil field drilling and service tools and casing collapse;         - Leaks of gas, oil, condensate, and other hydrocarbons or losses of these hydrocarbons as a result of accidents during drilling and completion operations, or in the gathering and transportation of hydrocarbons, malfunctions of pipelines, measurement equipment or processing or other facilities in our operations or at delivery points to third parties;         - Fires and explosions;         - Personal injuries and death;         - Regulatory investigations and penalties; and         - Natural disasters and pandemics. We have general insurance covering typical industry risks with an insured limit per event of US$35,000,000 with an insured limit per block of US$100,000,000. However, we do not know the extent of the losses caused by any occurrence and there is a risk that our insurance may be inadequate to cover all applicable losses, to the extent losses are covered at all. Losses and liabilities arising from uninsured and underinsured events or in amounts in excess of existing insurance coverage could have a material adverse effect on our business, financial condition or results of operations.
Costs - Risk 3
We may suffer delays or incremental costs due to difficulties in the negotiations with landowners and local communities where our reserves are located.
Access to the sites where we operate require agreements (including, for example, assessments, rights of way and access authorizations) with the landowners and local communities. If we are unable to negotiate agreements with landowners, we may have to go to court to obtain access to the sites of our operations, which may delay the progress of our operations at such sites. There can be no assurance that disputes with landowners and local communities will not delay our operations or that any agreements we reach with such landowners and local communities in the future will not require us to incur additional costs, thereby materially adversely affecting our business, financial condition and results of operations. Local communities may also protest or take actions that restrict or cause their elected government to restrict our access to the sites of our operations, which may have a material adverse effect on our operations at such sites.
Costs - Risk 4
Lower oil and/or gas prices may also reduce the amount of oil and/or gas that we can produce economically.
Sustained substantial declines in oil and/or gas prices may render a significant portion of our exploration, development and exploitation projects unviable from an economic perspective, which may result in us having to make significant downward adjustments to our estimated proved reserves. As a result, a prolonged or substantial decline in oil and/or gas prices, such as what we have experienced since mid-2014, which was exacerbated during the COVID-19 pandemic since 2020 caused, and would likely in the future cause, a material and adverse effect on our future business, financial condition, results of operations, liquidity and ability to finance capital expenditures. Additionally, if we experience significant sustained decreases in oil and gas prices such that the expected future cash flows from our oil and gas properties falls below the net book value of our properties, we may be required to write down the value of our oil and gas properties. Any such asset impairments could materially and adversely affect our results of operations and, in turn, the trading price of our ordinary shares.
Costs - Risk 5
Oil and gas price volatility has and may continue to adversely affect our results of operations and financial condition.
Our revenues, cash flow, profitability and future rate of growth are substantially dependent upon prevailing prices for oil and gas, over which we have no control. If oil prices are higher, we can generate more cash from our drilling operations, and if oil prices are lower, our ability to generate cash is reduced. In addition, our ability to borrow funds and to obtain additional capital on attractive terms is also substantially dependent on oil and gas prices. Historically and recently, world-wide oil and gas prices and markets have been very volatile and are likely to continue to be volatile in the future. Prices for oil and gas are subject to wide fluctuations in response to relatively minor changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors that are beyond our control. These factors include international political conditions (including wars, conflicts, trade and other disputes, cyberattacks and similar occurrences), the domestic and foreign supply of oil and gas, the level of consumer demand and factors effecting such demand, weather conditions, domestic and foreign governmental regulations, the price and availability of alternative fuels and overall economic conditions. In addition, various factors, including the effect of domestic and foreign regulation of production and transportation, general economic conditions, changes in supply due to drilling by other producers and changes in demand may adversely affect our ability to market our oil and gas production. Any significant decline in the price of oil or gas would adversely affect our revenues, operating income, cash flows and borrowing capacity and may require a reduction in the carrying value of our oil and gas properties and our planned level of capital expenditures. This risk was demonstrated in 2021 and 2022 with very significant swings in the price of oil as a result of rising interest rates and inflation, the ongoing Russia-Ukraine conflict, high demand for oil in China and India, the actions taken by oil-related intergovernmental organizations such as OPEC to effect the supply and price of oil, and the recovery of the global economy after the COVID-19 pandemic. We may continue to be subject to oil and gas price-related risks while these or similar conditions persist and the global economy remains uncertain.
Legal & Regulatory
Total Risks: 14/72 (19%)Above Sector Average
Regulation8 | 11.1%
Regulation - Risk 1
The effect and impact of the recently enacted Omnibus Law on job creation in Indonesia are not immediately known and subject to ongoing review.
On November 2, 2020, the Government of Indonesia issued the Omnibus Law No. 11 of 2020 on Job Creation (or the Omnibus Law), which aims to attract investment, create new jobs, and stimulate the economy by, among other things, simplifying the licensing process and harmonizing various laws and regulations, and making policy decisions faster for the central government to respond to global or other changes or challenges. The Omnibus Law amended more than 75 laws (including aspects of the Oil and Gas Law) and up to March 2022, the central government has issued at least 51 implementing regulations making the Omnibus Law one of the most sweeping regulatory reforms in Indonesian history. The Omnibus Law introduces a number of new concepts, including a new risk-based assessment (i.e. low, medium and high risks) in issuing licenses for businesses, removes foreign ownership restrictions in various industries, simplifies environmental assessment requirements and licensing procedures, and provides a more flexible manpower regulations. On November 25, 2021, the Constitutional Court declared the Omnibus Law to be conditionally unconstitutional, and it was subsequently revised and replaced with the issuance of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation, also known as the new Omnibus Law. Given the extensive breadth of changes introduced by the Omnibus Law, the full impact of various regulation and policy changes on our business and operation in Indonesia are presently unknown and subject to our ongoing review. Therefore, we are subject to the risk that compliance with the Omnibus Law may be challenging and may distract our management, and may also require us to alter operations, which in turn could impact our results of operations. On November 25, 2021, the Constitutional Court through Decision Number 91/PUU-XIII of 2020 declared the Omnibus Law to be "conditionally unconstitutional" and would need rectification. The Omnibus Law shall remain valid until the rectification is made within a period of two years. In response to such decision, on December 30, 2022, the Government of Indonesia enacted GR 2/2022. The previous Omnibus Law is deemed revoked and declared invalid. However, GR2/2022 retains most of the changes and concepts adopted in the Omnibus Law, such as the risk-based licensing process, and all regulations that have been amended by Omnibus Law shall remain valid as long as they are not in contravention of GR 2/2022. Furthermore, any implementing regulations enacted to implement the Omnibus Law also remain valid, as long as it does not contravene GR 2/2022.
Regulation - Risk 2
We may be unable to obtain or maintain special permits to conduct drilling and seismic activities in forest areas in Indonesia.
Some of our proposed drilling locations are situated within forestry areas. In order to conduct drilling and seismic activities in the forest area within Indonesia, we will need to obtain "Approval for the Utilization of Forest Area (Persetujuan Penggunaan Kawasan Hutan or PPKH) or as previously known as "Borrow-to-use permit of forest area (Izin Pinjam Pakai Kawasan Hutan, or IPPKH)" from the Indonesian Ministry of Forestry. PPKH is granted for companies to use the forest area other than forestry activities. The Indonesian government has provided for such requirements in several laws and regulations since 1990 concerning conservation of natural resources, natural primary forest and the ecosystem. The application for a PPKH must satisfy both administrative and the technical requirements. The maximum validity period for a PPKH for an exploration or production activity is no more than the validity period of the relevant license for the exploration and the production activities. However, in respect of a follow through exploration during a production period, the PPKH may be granted for a maximum period of two years and it is extendable. The application process of PPKH of forest area is complex because applicants had to comply with different requirements at different offices in the Ministry of Forestry, and between government agencies and local administrations, frequently with no certainty of processing time and cost. With the announcement of an "online single submission" (or OSS) processing system in 2018 by the Ministry of Forestry, the application for a PPKH is processed through the OSS. While the OSS is supposed to shorten the period required for the application, there are numerous documents and other permits (including the local governor's recommendation and environmental permits) as well as a work program and maps which are required before a PPKH application can be submitted. Any delay in the issuance to us of the PPKH, or our inability to obtain such permit for any reason, would cause delays in our ability to conduct drilling and seismic activities in the subject area, which in turn could adversely impact our business plans and results of operations.
Regulation - Risk 3
The interpretation and application of the Oil and Gas Law of 2001 and the anticipated enactment of a new oil and gas law is uncertain and may adversely affect our business, financial condition and results of operations.
In Indonesia, the complexity of the laws and regulations relating to oil and gas activities is compounded by uncertainties in the legal and regulatory framework. Indonesia's Oil and Gas Law of 2001 went into effect on November 23, 2001 (or the Oil and Gas Law), which was amended on December 30, 2022 by Government Regulation In Lieu of Law No. 2 of 2022 on Job Creation (known as GR 2/2022). The Oil and Gas Law sets forth a statutory body of general principles governing oil and gas activities, which are further developed and implemented in a series of Government regulations, presidential decrees and ministerial decrees. The provisions of the Oil and Gas Law are generally broad, and few sources of interpretative guidance are available. In addition, not all of the implementing regulations to the Oil and Gas Law have been issued and some have only recently been enacted. It is uncertain how these regulations will affect us and our operations without clear instances of their application, while the uncertainty surrounding the Oil and Gas Law and its implementing regulations has increased the risks, and may result in increases in the costs, of conducting oil and gas activities in Indonesia. The Government may also adopt new laws and/or policies regarding oil and gas exploration, development and production that differ from the policies currently in place and that adversely impact the cost of doing business in Indonesia. If and to the extent any changes to the current legal and regulatory framework are detrimental to our business and our position, our business, development plans, financial condition and results of operations could be adversely affected.
Regulation - Risk 4
Increased regulation by the Government and governmental agencies may increase the cost of regulatory compliance and have an adverse impact on our business, financial condition and results of operations.
Our business operations in Indonesia are subject to an expanding system of laws, rules and regulations issued by numerous government bodies. The evolving roles of SKK Migas and The Ministry of Energy and Mineral Resources of Indonesia (or MEMR), together with political changes in Indonesia, has allowed other governmental agencies such as the Ministry of Trade, the Ministry of Forestry, the Ministry for Environment and Bank Indonesia to increase their roles in regulating the oil and gas industry in Indonesia. In addition, the Indonesian tax authorities have recently initiated additional tax audits and implemented measures to increase tax revenues from the oil and gas industry. The continued expansion of the roles of governmental agencies may result in the adoption of new legislation, regulations and practices with which we would be required to comply. Such legislation, regulations and practices may be more stringent and may cause the amount and timing of future legal and regulatory compliance expenditures to vary substantially from their current levels. They could also require changes to our operations and development plans, which could adversely impact our results of operations.
Regulation - Risk 5
The interpretation and application of laws and regulations in Indonesia involves uncertainty.
The courts in Indonesia may offer less certainty as to the judicial outcome or a more drawn out judicial process than is the case in more established legal systems. Businesses can become involved in lengthy judicial proceedings over simple issues when rulings are not clearly defined. Moreover, such problems can be compounded by the poor quality of legal drafting and excessive delays in the legal process for resolving issues or disputes. These characteristics of the legal system in Indonesia could expose us to several kinds of risks, including the possibility that effective legal redress may be more difficult to obtain; a higher degree of discretion on the part of the Government; the lack of judicial or administrative guidance on interpreting the relevant laws or regulations; inconsistencies and conflicts between and within various laws, regulations, decrees, orders and resolutions; or the relative inexperience or lack of predictability of the judiciary and courts in such matters. The enforcement of laws in Indonesia may depend on and be subject to the interpretation of the relevant local authority. Such authority may adopt an interpretation of an aspect of local law which differs from the advice given to us by local lawyers or even previous advice given by the local authority itself. Matters of local autonomy are extremely controversial in Indonesia, adding further uncertainty to the interpretation and application of the relevant legal and regulatory requirements. Furthermore, there is limited or no relevant case law providing guidance on how courts would interpret such laws and the application of such laws to its concessions, join operations, licenses, license applications or other arrangements. Even where such case law exists, it lacks the binding precedential value found in the U.S. legal system. For example, on November 13, 2012, the Constitutional Court of the Republic of Indonesia (Mahkamah Konstitusi Republic Indonesia, or MK) issued Decision 36/PUU-X/2012 (or MK Decision 36/2012). In it, the MK declared several articles in the Oil and Gas Law of 2001 invalid and dissolved Badan Pelaksana Minyak dan Gas Bumi (or BP Migas) for failing to directly manage oil and gas resources as required by its interpretation of Article 33 of the Constitution of the Republic of Indonesia. In response to MK Decision 36/2012, the Government created SKK Migas and authorized it to take over the functions of BP Migas pursuant to Presidential Regulation No. 9 of 2013 on the Implementation of Management of Natural oil and Gas Upstream Business Activities. However, while these arrangements have not been challenged to date, there is a risk that future challenge to the current arrangements, and changes in Indonesian law generally, could require us to modify our operation and development plans, and could adversely impact our results of operations.
Regulation - Risk 6
We are subject to complex laws common to the oil and natural gas industry, particularly in Indonesia, which can have a material adverse effect on our business, financial condition and results of operations.
The oil and natural gas industry is subject to extensive regulation and intervention by governments throughout the world, including extensive Indonesian regulations, in such matters as the award of exploration and production interests, the imposition of specific exploration and drilling obligations, allocation of and restrictions on production, price controls, required divestments of assets and foreign currency controls, and the development and nationalization, expropriation or cancellation of contract rights. We have been required in the past, and may be required in the future, to make significant expenditures to comply with governmental laws and regulations, including with respect to the following matters: - Licenses, permits and other authorizations for drilling operations;         - Reports concerning operations;- Compliance with environmental, health and safety laws and regulations;         - Compliance with the requirements to divest parts of our interest to domestic parties;         - Compliance with requirements to sell certain portion of our production to domestic market;         - Adjustment to the split between the contractor and the Government in respect of the production;         - Compliance with local content requirements;         - Drafting and implementing emergency planning;         - Plugging and abandonment costs; and         - Taxation. Under these laws and regulations, we could be liable for, among other things, personal injury, property damage, environmental damage and other types of damage. Failure to comply with these laws and regulations may also result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that could substantially increase our costs. Any such liabilities, obligations, penalties, suspensions, terminations or regulatory changes could have a material adverse effect on our business, financial condition or results of operations. In addition, the terms and conditions of the agreements under which our oil and gas interests are held generally reflect negotiations with governmental authorities and can vary significantly. These agreements take the form of special contracts, concessions, licenses, associations or other types of agreements. Any suspensions, terminations or regulatory changes in respect of these special contracts, concessions, licenses, associations or other types of agreements could have a material adverse effect on our business, financial condition or results of operations.
Regulation - Risk 7
As an "emerging growth company" under the JOBS Act, we are allowed to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our ordinary shares.
For so long as we remain an "emerging growth company" as defined in the JOBS Act, we intend to take advantage of certain exemptions from various requirements that are applicable to public companies that are not "emerging growth companies" including: - Not being required to comply with the auditor attestation requirements for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002;         - Not being required to comply with any requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and our financial statements;         - Reduced disclosure obligations regarding executive compensation; and         - Not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these exemptions until we are no longer an "emerging growth company." We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
Regulation - Risk 8
As a foreign private issuer, we are subject to different U.S. securities laws and NYSE American governance standards than domestic U.S. issuers. This may afford less protection to holders of our ordinary shares, and you may not receive corporate and company information and disclosure that you are accustomed to receiving or in a manner in which you are accustomed to receiving it.
As a "foreign private issuer" for U.S. securities laws purposes, the rules governing the information that we will be required to disclose differ materially from those governing U.S. corporations pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The periodic disclosure required of foreign private issuers is more limited than that required of domestic U.S. issuers and there may therefore be less publicly available information about us than is regularly published by or about U.S. public companies. For example, we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence and our quarterly (should we provide them) or current reports may contain less or different information than required under U.S. filings. In addition, as a foreign private issuer, we are exempt from the proxy rules under Section 14 of the Exchange Act, and proxy statements that we distribute are not subject to review by the SEC. Our exemption from Section 16 rules under the Exchange Act regarding sales of ordinary shares by our insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act. As a result, you may not have all the data that you are accustomed to having when making investment decisions. Also, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder with respect to their purchases and sales of our ordinary shares. Moreover, as a foreign private issuer, we are exempt from complying with certain corporate governance requirements of the NYSE American applicable to a U.S. issuer, including the requirement that a majority of our board of directors consist of independent directors. For example, we follow Cayman Islands law with respect to the requirements for meetings of our shareholders, which are different from the requirements of the NYSE American. Additionally, in January 2022 in connection with our financing with L1 Capital, we formally adopted home country practice and thereby opted out of the NYSE American rule that would otherwise require shareholder approval should we issue more than 19.99% of our then outstanding ordinary shares in a financing that is not a "public offering" at less than the then current market value. As the corporate governance standards applicable to us are different than those applicable to domestic U.S. issuers, you may not have the same protections afforded under U.S. law and the NYSE American rules as shareholders of companies that do not have such exemptions.
Litigation & Legal Liabilities1 | 1.4%
Litigation & Legal Liabilities - Risk 1
Failure to comply with the U.S. Foreign Corrupt Practices Act of 1977 (or FCPA) could result in fines, criminal penalties, and an adverse effect on our business.
We operate in Indonesia, which is a jurisdiction known to be challenged by corruption. As such, we are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take action determined to be in violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our management.
Taxation & Government Incentives2 | 2.8%
Taxation & Government Incentives - Risk 1
We may become subject to taxation in the Cayman Islands which would negatively affect our results of operations.
We have received an undertaking from the Financial Secretary of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Act (Revised) of the Cayman Islands, until the date falling 20 years after November 2, 2018, being the date of such undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of the shares, debentures or other obligations of our company or (ii) by way of the withholding in whole or in part of a payment of any "relevant payment" as defined in section 6(3) of the Tax Concessions Act (Revised). If we otherwise were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be materially and adversely affected. See "Taxation-Cayman Islands Taxation."
Taxation & Government Incentives - Risk 2
We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.
A foreign corporation will be treated as a "passive foreign investment company" (or PFIC) for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income". For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale of other disposition of their shares in the PFIC. Based upon our current and anticipated method of operations, we do not believe that we should be a PFIC with respect to our 2022 taxable year, and we do not expect to become a PFIC in any future taxable year. However, no assurance can be given that the U.S. Internal Revenue Service (or IRS) or a court of law will accept this position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if the nature and extent of our operations change. If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders would face adverse U.S. federal income tax consequences and certain information reporting requirements. Under the PFIC rules, unless those shareholders make an election available under the United States Internal Revenue Code of 1986 as amended (or the Code) (which election could itself have adverse consequences for such shareholders), such shareholders would be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of their shares of our ordinary shares, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of the shares of our ordinary shares.
Environmental / Social3 | 4.2%
Environmental / Social - Risk 1
The future development of national security laws and regulations in Hong Kong could impact our Hong Kong holding subsidiary.
WJ Energy is our wholly-owned holding company subsidiary which is incorporated in Hong Kong. On June 30, 2020, the Hong Kong Special Administrative Region of the People's Republic of China implemented a new national security law. The implementation of the national security law and its development may trigger sanctions or other forms of penalties by foreign governments, which may cause economic and other hardship for Hong Kong, including companies such as WJ Energy. As of the date of this annual report, we are not aware of any restrictions under this law that would preclude the transfer of corporate funds of our company through WJ Energy, nor have there been any sanctions or any forms of penalties imposed by foreign governments related to the Hong Kong national security law that would impact WJ Energy. However, it is difficult to predict the impact in the future, if any, that the national security law or similar measures will have on WJ Energy, including, without limitation, the ability of WJ Energy to pay dividends or make distributions to our company, as such impact will depend on future developments, which are highly uncertain and cannot be predicted. Any restrictions or limitations on funds passing through WJ Energy could have a material adverse effect on our ability to finance our operations in accordance with our past and current practices.
Environmental / Social - Risk 2
We and our operations are subject to numerous environmental, health and safety laws and regulations which may result in material liabilities and costs.
We and our operations are subject to various international, domestic and foreign local environmental, health and safety laws and regulations governing, among other things, the emission and discharge of pollutants into the ground, air or water; the generation, storage, handling, use, transportation and disposal of regulated materials; and human health and safety. Our operations are also subject to certain environmental risks that are inherent in the oil and gas industry and which may arise unexpectedly and result in material adverse effects on our business, financial condition and results of operations. Breach of environmental laws, as well as impacts on natural resources and unauthorized use of such resources, could result in environmental administrative investigations and/or lead to the termination of our concessions and contracts. Other potential consequences include fines and/or criminal environmental actions. We are required to obtain environmental permits from governmental authorities for our operations, including drilling permits for our wells. We may not be at all times in complete compliance with these permits and the environmental and health and safety laws and regulations to which we are subject. If we violate or fail to comply with such requirements, we could be fined or otherwise sanctioned by regulators, including through the revocation of our permits or the suspension or termination of our operations. If we fail to obtain, maintain or renew permits in a timely manner or at all (such as due to opposition from partners, community or environmental interest groups, governmental delays or any other reasons) or if we face additional requirements due to changes in applicable laws and regulations, our operations could be adversely affected, impeded, or terminated, which could have a material adverse effect on our business, financial condition or results of operations. For example, Law No. 32 of 2009 on Protection and Management of Environment (or the Environmental Law) as amended by GR 2/2022 and its implementing regulation, Government Regulation No. 22 of 2021 on Environmental Protection and Management (or GR 22/2021), require an entity conducting oil and gas business operations have its environmental impact assessment report (Analisis Mengenai Dampak Lingkungan, or AMDAL), as well as an environmental management effort plan (Upaya Pengelolaan Lingkungan Hidup, or UKL) or an environmental monitoring effort plan (Upaya Pemantauan Lingkungan Hidup or UPL), approved. Under the Environmental Law, should we fail to meet the obligations contained in the relevant AMDAL or UKL or UPL, it can lead to the nullification of our business license. We, as the owner, shareholder or the operator of certain of our past, current and future discoveries and prospects, could be held liable for some or all environmental, health and safety costs and liabilities arising out of our actions and omissions as well as those of our block partners, third-party contractors, predecessors or other operators. To the extent we do not address these costs and liabilities or if we do not otherwise satisfy our obligations, our operations could be suspended, terminated or otherwise adversely affected. We have also contracted with and intend to continue to hire third parties to perform services related to our operations. There is a risk that we may contract with third parties with unsatisfactory environmental, health and safety records or that our contractors may be unwilling or unable to cover any losses associated with their acts and omissions. Accordingly, we could be held liable for all costs and liabilities arising out of the acts or omissions of our contractors, which could have a material adverse effect on our results of operations and financial condition. Releases of regulated substances may occur and can be significant. Under certain environmental laws and regulations applicable to us in Indonesia, we could be held responsible for all of the costs relating to any contamination at our past and current facilities and at any third party waste disposal sites used by us or on our behalf. Pollution resulting from waste disposal, emissions and other operational practices might require us to remediate contamination, or retrofit facilities, at substantial cost. We also could be held liable for any and all consequences arising out of human exposure to such substances or for other damage resulting from the release of hazardous substances to the environment, property or to natural resources, or affecting endangered species or sensitive environmental areas. Environmental laws and regulations also require that wells be plugged and sites be abandoned and reclaimed to the satisfaction of the relevant regulatory authorities. We are currently required to, and in the future may need to, plug and abandon sites in certain blocks in which we operate, which could result in substantial costs. As in other areas, the interpretation and application of environmental laws in Indonesia involves a degree of uncertainty. Such changes in the interpretation and application of existing laws and regulations, or the enactment of new, more stringent requirements, may have and result in an adverse impact on our business, development plans, financial condition and results of operations.
Environmental / Social - Risk 3
Climate change and climate change legislation and regulatory initiatives could result in increased operating costs and decreased demand for the oil and natural gas that we produce.
Climate change, the costs that may be associated with its effects, and the regulation of greenhouse gas (or GHG) emissions have the potential to affect our business in many ways, including increasing the costs to provide our products and services, reducing the demand for and consumption of our products and services (due to change in both costs and weather patterns), and the economic health of the regions in which we operate, all of which can create financial risks. In addition, legislative and regulatory responses related to GHG emissions and climate change may increase our operating costs. Moreover, experts believe climate change poses potential physical risks, including an increase in sea level and changes in weather conditions, such as an increase in changes in precipitation and extreme weather events. In addition, warmer winters as a result of global warming could also decrease demand for natural gas. To the extent that such unfavorable weather conditions are exacerbated by global climate change, GHG emissions or otherwise, our operations may be adversely affected to a greater degree than we have previously experienced, including increased delays and costs. However, the uncertain nature of changes in extreme weather events (such as increased frequency, duration, and severity) and the long period of time over which any changes would take place make any estimations of future financial risk to our operations caused by these potential physical risks of climate change unreliable. Moreover, the regulation of GHGs and the physical impacts of climate change in the areas in which we, our customers and the end-users of our products operate could adversely impact our operations and the demand for our products.
Macro & Political
Total Risks: 13/72 (18%)Above Sector Average
Economy & Political Environment8 | 11.1%
Economy & Political Environment - Risk 1
Added
The war in Ukraine could materially and adversely affect our business and results of operations.
The 2022 invasion of Ukraine by Russia and resulting war has materially affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia's military interventions in Ukraine have led to, and may continue to lead to, additional sanctions being levied by the United States, European Union and other countries against Russia. Russia's military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the global markets, our customers or suppliers' businesses and potentially our business. As we are an oil and gas exploration and production company, our performance is affected by global economic conditions as well as geopolitical issues and other conditions. Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast financial results. As a result of the recent movement of Russian military units into provinces in Ukraine, the United States, the European Union, the United Kingdom and other jurisdictions have imposed sanctions on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies and defense companies, and have imposed restrictions on exports of various items to Russian and certain regions of Ukraine (including the self-proclaimed Donetsk People's Republic and Luhansk People's Republic and Crimea). Moreover, on February 22, 2022, the Office of Foreign Assets Control of the United States issued sanctions aimed at limiting Russia's ability to raise funds through sovereign debt. These geopolitical issues have resulted in increasing global tensions and create uncertainty for global commerce. Any or all of these factors could negatively affect our business, financial condition and result of operations. In addition, new requirements or restrictions could come into effect which might increase the scrutiny on our business or result in one or more of our business activities being deemed to have violated sanctions. Our business and reputation could be adversely affected if the authorities of United States, the European Union, the United Nations, or other jurisdictions were to determine that any of our activities constitutes a violation of the sanctions they impose or provides a basis for a sanction designation of us. However, as of the date of this report, we do not have any business, operation or assets in Russian or Ukraine, nor do they have any direct or indirect business or contracts with any Russian or Ukraine entity as a supplier or customer. Consequently, we do not expect that Russia's invasion of Ukraine will have any material impact on our business operations, including but not limited to our product pricing, supply, consumer demand, and the supply chain. Additionally, we believe the cybersecurity risks in the supply chain are not material to our business, and there is no new or heightened risk of potential cyberattacks on the Company by state actors or others since Russia's invasion of Ukraine. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military actions or resulting sanctions may magnify the impact of other risks described in this section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations and prospects.
Economy & Political Environment - Risk 2
We may be affected by uncertainty in the balance of power between local governments and the central government in Indonesia.
Indonesian Law No.25 of 1999 regarding Fiscal Decentralization and Law No.22 of 1999 regarding Regional Autonomy were passed by the Indonesian parliament in 1999 and further implemented by Government Regulation No.38 of 2007. Law No.22 of 1999 has been revoked by and replaced by the provisions on regional autonomy of Law No.32 of 2004 as amended by Law No.8 of 2005 and Law No.12 of 2008. Law No.32 of 2004 and its amendments were revoked and replaced by Law No.23 of 2014 regarding Regional Autonomy as amended lastly by GR 2/2022. Law No.25 of 1999 has been revoked and replaced by Law No.33 of 2004 regarding the Fiscal Balance between the Central and the Regional Governments, which has been revoked and replaced by Law No. 1 of 2022 regarding Fiscal Relation between Central and Regional Governments. Currently, there is uncertainty in respect of the balance between the local and the central governments and the procedures for renewing licenses and approvals and monitoring compliance with environmental regulations. In addition, some local authorities have sought to levy additional taxes or obtain other contributions. There can be no assurance that a balance between local governments and the central government will be effectively established or that our business, financial condition, results of operations and prospects will not be adversely affected by dual compliance obligations and further uncertainty as to legal authority to levy taxes or promulgate other regulations affecting our business.
Economy & Political Environment - Risk 3
Unfavorable credit and market conditions could negatively impact the Indonesian economy and may negatively affect our ability to access capital, our business generally and results of operations.
Global financial crises and related turmoil in the global financial system may have a negative impact on our business, financial condition and results of operations. In particular, if disruptions in international credit markets, exacerbated by the sovereign debt crises or global pandemics, adversely impact the Indonesian economy (where our oil and gas products are sold by the Government), our business may suffer and may adversely affect our ability to access the credit or capital markets at a time when we would need financing, which could have an impact on our flexibility to react to changing economic and business conditions. Any of the foregoing factors or a combination of these factors, or similar factors not known to us presently, could have an adverse effect on our liquidity, results of operations and financial condition.
Economy & Political Environment - Risk 4
As the domestic Indonesian market constitutes the major source of our revenue, the downturn in the rate of economic growth in Indonesia or other countries due to the unprecedented and challenging global market and economic conditions, whether due to the COVID-19 pandemic or any other such downturn for any other reason, will be detrimental to our results of operations.
The performance and growth of our business are necessarily dependent on the health of the overall Indonesian economy. Any downturn in the rate of economic growth in Indonesia, whether due to political instability or regional conflicts, global health crisis, economic slowdown elsewhere in the world or otherwise, may have a material adverse effect on demand for the commodities we produce. The Indonesian economy is also largely driven by the performance of the agriculture sector, which depends on the impact of the monsoon season, which is difficult to predict. In the past, economic slowdowns have harmed manufacturing industries, including companies engaged in the oil and gas extraction. During 2020, Indonesian gross domestic product declined for the first time in several years with a decline of 2.1% according to the International Monetary Fund, and any future slowdown in the Indonesian economy could have a material adverse effect on the demand for the commodities we produce and, as a result, on our business, financial condition and results of operations. In addition, the Indonesian securities market and the Indonesian economy are influenced by economic and market conditions in other countries. Although economic conditions are different in each country, investors' reactions to developments in one country can have adverse effect on the securities of companies in other countries, including Indonesia. A loss of investor confidence in the financial systems of other emerging markets may cause volatility in Indonesian financial markets and, indirectly, in the Indonesian economy in general. Any worldwide financial instability could also have a negative impact on the Indonesian economy, including the movement of exchange rates and interest rates in Indonesia. Any slowdown in the Indonesian economy, or future volatility in global commodity prices, could adversely affect the growth of our business in Indonesia. The Indonesian economy and financial markets are also significantly influenced by worldwide economic, financial and market conditions. Any financial turmoil, especially in the United States, United Kingdom, Europe or China, may have a negative impact on the Indonesian economy. Although economic conditions differ in each country, investors' reactions to any significant developments in one country can have adverse effects on the financial and market conditions in other countries. A loss in investor confidence in the financial systems, particularly in other emerging markets, may cause increased volatility in Indonesian financial markets.
Economy & Political Environment - Risk 5
Deterioration of political, economic and security conditions in Indonesia may adversely affect our operations and financial results.
Any major hostilities involving Indonesia, a substantial decline in the prevailing regional security situation or the interruption or curtailment of trade between Indonesia and its present trading partners could have a material adverse effect on our operations and, as a result, our financial results. Prolonged and/or widespread regional conflict in the South East Asia could have the following results, among others: - Capital market reassessment of risk and subsequent redeployment of capital to more stable areas making it more difficult for us to obtain financing for potential development projects;         - Security concerns in Indonesia, making it more difficult for our personnel or supplies to enter or exit the country;         - Security concerns leading to evacuation of our personnel;         - Damage to or destruction of our wells, production facilities, receiving terminals or other operating assets;- Inability of our service and equipment providers to deliver items necessary for us to conduct our operations in Indonesia, resulting in delays; and         - The lack of availability of drilling rig and experienced crew, oilfield equipment or services if third party providers decide to exit the region. Loss of property and/or interruption of our business plans resulting from hostile acts could have a significant negative impact on our earnings and cash flow. In addition, we may not have enough insurance to cover any loss of property or other claims resulting from these risks.
Economy & Political Environment - Risk 6
Current political and social events in Indonesia may adversely affect our business.
Since 1998, Indonesia has experienced a process of democratic change, resulting in political and social events that have highlighted the unpredictable nature of Indonesia's changing political landscape. In 1999, Indonesia conducted its first free elections for representatives in parliament. In 2004, 2009 and 2014, elections were held in Indonesia to elect the President, Vice-President and representatives in parliament. Indonesia also has many political parties, without any one party holding a clear majority. Due to these factors, Indonesia has, from time to time, experienced political instability, as well as general social and civil unrest. For example, since 2000, thousands of Indonesians have participated in demonstrations in Jakarta and other Indonesian cities both for and against former presidents Abdurrahman Wahid, Megawati Soekarnoputri and Susilo Bambang Yudhoyono and current President Joko Widodo as well as in response to specific issues, including fuel subsidy reductions, privatization of state assets, anti-corruption measures, decentralization and provincial autonomy, and the American-led military campaigns in Afghanistan and Iraq. Although these demonstrations were generally peaceful, some turned violent. In addition, effective January 1, 2015, a fixed diesel subsidy of Rp1,000 per liter was implemented and the gasoline subsidy was ended. Although the implementation did not result in any significant violence or political instability, the announcement and implementation also coincided with a period where crude oil prices had dropped very significantly from 2014. With the purpose to provide stability of the retail sale price of the gasoline and diesel, the Energy and Mineral Resources Ministry issued on February 28th Ministerial Decree No. 62/2020 that erases a price floor for unsubsidized gasoline and diesel set by a previous decree, providing flexibility to reduce prices as low as possible. The new decree still maintains a price ceiling for such fuels pegged to prices in Singapore. The Government reviews and adjusts the price for fuel on monthly basis and implements the adjusted fuel price in the following month. There can be no assurance that future increases in crude oil and fuel prices will not result in political and social instability. Furthermore, separatist movements and clashes between religious and ethnic groups have also resulted in social and civil unrest in parts of Indonesia, such as Aceh in the past and in Papua currently, where there have been clashes between supporters of those separatist movements and the Indonesian military, including continued activity in Papua, by separatist rebels that has led to violent incidents. There have also been inter-ethnic conflicts, for example in Kalimantan, as well as inter-religious conflict such as in Maluku and Poso. Also, labor issues have also come to the fore in Indonesia. In 2003, the Government enacted a new labor law that gave employees greater protections. Occasional efforts to reduce these protections have prompted an upsurge in public protests as workers responded to policies that they deemed unfavorable. As a result, there can be no assurance that social, political and civil disturbances will not occur in the future and on a wider scale, or that any such disturbances will not, directly or indirectly, materially and adversely affect our business, financial condition, results of operations and prospects.
Economy & Political Environment - Risk 7
Fluctuations in the value of the Indonesian Rupiah may materially and adversely affect us.
Although our functional currency is the U.S. Dollar, depreciation and volatility of the Indonesian Rupiah could potentially affect our business. A sharp depreciation of Indonesian Rupiah may potentially create difficulties in purchasing imported goods and services which are critical for our operation. As shown during the Asian monetary crisis in 1998, imported goods became scarce as suppliers often chose to keep their stocks in anticipation of further deterioration of the Indonesian Rupiah. In addition, while the Indonesian Rupiah has generally been freely convertible and transferable, from time to time, Bank Indonesia has intervened in the currency exchange markets in furtherance of its policies, either by selling Indonesian Rupiah or by using its foreign currency reserves to purchase Indonesian Rupiah. We can give no assurance that the current floating exchange rate policy of Bank Indonesia will not be modified or that the Government will take additional action to stabilize, maintain or increase the Indonesian Rupiah's value, or that any of these actions, if taken, will be successful. Modification of the current floating exchange rate policy could result in significantly higher domestic interest rates, liquidity shortages, capital or exchange controls, or the withholding of additional financial assistance by multinational lenders. This could result in a reduction of economic activity, an economic recession or loan defaults, and as a result, we may also face difficulties in funding our capital expenditures and in implementing our business strategy. Any of the foregoing consequences could have a material adverse effect on our business, financial condition, results of operations and prospects.
Economy & Political Environment - Risk 8
Negative changes in global, regional or Indonesian economic activity could adversely affect our business.
Changes in the Indonesian, regional and global economies can affect our performance. Two significant events in the past that impacted Indonesia's economy were the Asian economic crisis of 1997 and the global economic crisis which started in 2008. The 1997 crisis was characterized in Indonesia by, among others, currency depreciation, a significant decline in real gross domestic product, high interest rates, social unrest and extraordinary political developments. While the global economic crisis that arose from the subprime mortgage crisis in the United States did not affect Indonesia's economy as severely as in 1997, it still put Indonesia's economy under pressure. The global financial markets have also experienced volatility as a result of expectations relating to monetary and interest rate policies of the United States, concerns over the debt crisis in the Eurozone, and concerns over China's economic health. Uncertainty over the outcome of the Eurozone governments' financial support programs and worries about sovereign finances generally are ongoing. If the crisis becomes protracted, we can provide no assurance that it will not have a material and adverse effect on Indonesia's economic growth and consequently on our business. An additional significant event that as of the date of this annual report is still unfolding and uncertain is the novel coronavirus outbreak which began in early 2020 and the related disease, COVID-19, which was declared as a pandemic by the World Health Organization on March 11, 2020. Indonesian government officials called for social distancing and isolation and considered to enforce a lockdown in affected areas in an attempt to minimize the spread of the virus. After two years, on December 30, 2022, the Government of Indonesia officially ended the restrictions but it is too early to conclude that COVID-19 is no longer a threat. The extent of the impact of COVID-19 on our future financial results will be dependent on future developments such as the length and severity of the COVID-19, future government actions in response to the COVID-19 and the overall impact of the COVID-19 on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. Adverse economic conditions in Indonesia could result in less business activity, less disposable income available for consumers to spend and reduced consumer purchasing power, which may reduce demand for communication services, including our services, which in turn would have an adverse effect on our business, financial condition, results of operations and prospects. There is no assurance that there will not be a recurrence of economic instability in future, or that, should it occur, it will not have an impact on the performance of our business.
Natural and Human Disruptions4 | 5.6%
Natural and Human Disruptions - Risk 1
Terrorist activities in Indonesia could destabilize Indonesia, which would adversely affect our business, financial condition and results of operations, and the market price of our securities.
There have been a number of terrorist incidents in Indonesia, including the May 2005 bombing in Central Sulawesi, the Bali bombings in October 2002 and October 2005 and the bombings at the JW Marriot and Ritz Carlton hotels in Jakarta in July 2009, which resulted in deaths and injuries. On January 14, 2016, several coordinated bombings and gun shootings occurred in Jalan Thamrin, a main thoroughfare in Jakarta, resulting in a number of deaths and injuries. There is a risk that terrorist incidents may recur and, if serious or widespread, might have a material adverse effect on investment and confidence in, and the performance of, the Indonesian economy and may also have a material adverse effect on our business, financial condition, results of operations and prospects and the market price of our securities.
Natural and Human Disruptions - Risk 2
Seasonal weather conditions and other factors could adversely affect our ability to conduct drilling activities.
Our operations could be adversely affected by weather conditions. Severe weather conditions limit and may temporarily halt our ability to operate during such conditions. We experienced weather related challenges with the collapse of our K-25 well in 2021, which set back our production in 2021. These constraints and the resulting shortages or high costs could delay or temporarily halt our oil and gas operations and materially increase our operating and capital costs, which could have a material adverse effect on our business, financial condition and results of operations.
Natural and Human Disruptions - Risk 3
Indonesia is vulnerable to natural disasters and events beyond our control, which could adversely affect our business and operating results.
Many parts of Indonesia, including areas where we operate, are prone to natural disasters such as floods, lightning strikes, cyclonic or tropical storms, earthquakes, volcanic eruptions, droughts, power outages and other events beyond our control. The Indonesian archipelago is one of the most volcanically active regions in the world as it is located in the convergence zone of three major lithospheric plates. It is subject to significant seismic activity that can lead to destructive earthquakes, tsunamis or tidal waves. Flash floods and more widespread flooding also occur regularly during the rainy season from November to April. Cities, especially Jakarta, are frequently subject to severe localized flooding which can result in major disruption and, occasionally, fatalities. Landslides regularly occur in rural areas during the wet season. From time to time, natural disasters have killed, affected or displaced large numbers of people and damaged our equipment. We cannot assure you that future natural disasters, such as the spread of the novel coronavirus, will not have a significant impact on us, or Indonesia or its economy. A significant earthquake, other geological disturbance or weather-related natural disaster in any of Indonesia's more populated cities and financial centers could severely disrupt the Indonesian economy and undermine investor confidence, thereby materially and adversely affecting our business, financial condition, results of operations and prospects.
Natural and Human Disruptions - Risk 4
Changed
The existence of COVID-19 or similar health crises and any resulting volatility in the energy markets may materially and adversely affect our business, financial condition, operating results, cash flow, liquidity and prospects.
The outbreak of COVID-19 and its development into a pandemic in March 2020 have resulted in significant disruption globally, and variants of COVID-19 have continued to impact major parts of the world into 2022. Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 and its variants have restricted travel, business operations, and the overall level of individual movement and in-person interaction across the globe, including the United States and Indonesia. The COVID-19 pandemic has caused us to modify our business practices, including by restricting employee travel, requiring employees to work remotely and cancelling physical participation in meetings, events and conferences, and we may take further actions as may be required by government authorities in future. The COVID-19 pandemic has caused significant disruptions in the capital markets since its outbreak in 2020, which to some extent adversely affected the energy industry. Any future such disruption could negatively impact our ability to raise capital. In the past, we have financed our operations by the issuance of equity securities. However, we cannot predict whether macro-economic disruptions stemming from COVID-19 will continue to fluctuate when the economy will fully return to pre-COVID-19 levels, if at all. These macro-economic disruptions may adversely impact our ability to raise additional capital to finance our operations in the future, which could materially and adversely affect our business, financial condition and prospects, and could ultimately cause our business to fail. The extent to which COVID-19 ultimately impacts our business, results of operations and financial condition will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the duration and spread of COVID-19 or variants of COVID-19, its severity, the actions to contain COVID-19 or treat its impact (such as vaccinations), and how quickly and to what extent normal economic and operating conditions can resume. Even after COVID-19 has subsided, we may continue to experience materially adverse impacts on our business as a result of its global economic impact, including any recession that has occurred or may occur in the future, and lasting effects on the volatility in the price of oil and natural gas.
Capital Markets1 | 1.4%
Capital Markets - Risk 1
Market conditions for oil and gas, and particularly volatility of prices for oil and gas, could adversely affect our revenue, cash flows, profitability and growth.
Our revenue, cash flows, profitability and future rate of growth depend substantially upon prevailing prices for oil and gas. Prices also affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. Lower prices may also make it uneconomical for us to increase or even continue current production levels of oil and gas. Prices for oil and gas are subject to large fluctuations in response to relatively minor changes in the supply and demand for oil and gas, market uncertainty and a variety of other factors beyond our control, including: - Changes in foreign and domestic supply and demand for oil and gas;         - Political stability and economic conditions in oil producing countries, particularly in the Middle East and also in Russia (particularly given the February 2022 invasion of Ukraine by Russia);         - Weather conditions;         - Price and level of foreign imports;         - Terrorist activity in Indonesia or elsewhere;         - Availability of pipeline and other secondary capacity;         - General economic conditions;         - Global risks of more coronavirus or other viral outbreaks, or other global or local public health uncertainties;         - Domestic and foreign governmental regulation; and         - The price and availability of alternative fuel sources.
Tech & Innovation
Total Risks: 3/72 (4%)Above Sector Average
Cyber Security1 | 1.4%
Cyber Security - Risk 1
Cyber-attacks targeting systems and infrastructure used by the oil and gas industry may adversely impact our operations.
Our business has become increasingly dependent on digital technologies to conduct certain exploration, development and production activities. We depend on digital technology to estimate quantities of oil reserves, process and record financial and operating data, analyze seismic and drilling information, and communicate with our employees and third-party partners. Unauthorized access to our seismic data, reserves information or other proprietary information could lead to data corruption, communication interruption, or other operational disruptions in our exploration or production operations. In addition, computer technology controls nearly all of the oil and gas distribution systems in Indonesia, which are necessary to transport our production to market. A cyber-attack directed at oil and gas distribution systems could damage critical distribution and storage assets or the environment, delay or prevent delivery of production to markets and make it difficult or impossible to accurately account for production and settle transactions. While we have not experienced significant cyber-attacks, we may suffer such attacks in the future. Further, as cyber-attacks continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber-attacks.
Technology2 | 2.8%
Technology - Risk 1
We may not be able to keep pace with technological developments in our industry.
The oil and gas industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies. As others use or develop new technologies, we may be placed at a competitive disadvantage, and competitive pressures may force us to implement those new technologies at substantial cost. In addition, other oil and gas companies may have greater financial, technical and personnel resources that allow them to enjoy technological advantages and may in the future allow them to implement new technologies before we can. We may not be able to respond to these competitive pressures and implement new technologies on a timely basis or at an acceptable cost. If one or more of the technologies we use now or in the future were to become obsolete or if we are unable to use the most advanced commercially available technology, our business, financial condition and results of operations could be materially adversely affected.
Technology - Risk 2
Our use of seismic data is subject to interpretation and may not accurately identify the presence of oil and natural gas.
Even when properly used and interpreted, seismic data and visualization techniques are tools only used to assist geoscientists in identifying subsurface structures as well as eventual hydrocarbon indicators, and do not enable the interpreter to know whether hydrocarbons are, in fact, present in those structures. In addition, the use of seismic and other advanced technologies requires greater pre-drilling expenditures than traditional drilling strategies, and we could incur losses as a result of these expenditures. Because of these uncertainties associated with our use of seismic data, some of our drilling activities may not be successful or economically viable, and our overall drilling success rate or our drilling success rate for activities in a particular area could decline, which could have a material adverse effect on us. While we have announced our strategic plan to defer additional new drilling at Kruh Block in order to collect new seismic data acquisition, processing and interpretation during 2023 to provide better quality data, and in turn reduce the uncertainty to some degree in interpretation of reserves estimate and prospective drilling locations, we will continue to be faced with the a risk that this new data will be unreliable or may lead to drilling operations which do not result in oil or gas discoveries.
Ability to Sell
Total Risks: 1/72 (1%)Above Sector Average
Sales & Marketing1 | 1.4%
Sales & Marketing - Risk 1
There is inherent credit risk in any gas sales arrangements with the Government to which we may become a party in the future.
Natural gas supply contracts in Indonesia are negotiated on a field-by-field basis among SKK Migas, an oil, energy, and government company organized and authorized by the Government to manage natural oil and gas upstream business activities, gas buyers and sellers. The common clause in gas supply contracts is a "take-or-pay arrangement" in which the buyer is required to either pay the price corresponding to certain pre-agreed quantities of natural gas and offtake such quantities or pay their corresponding price regardless of whether it purchases them. Under certain circumstances, such as industrial or economic crisis in Indonesia or globally, the buyer may be unwilling or unable to make these payments, which could trigger a renegotiation of contracts and become the subject of legal disputes between parties. When and if we establish natural gas production and enter into related contracts with the Government, this contract term could have a material adverse effect on our business, financial condition and result of operation by reducing our net profit or increasing our total liabilities in the future, or both.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
    The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
      They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
        It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
          How do companies disclose their risk factors?
          Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
            Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
              Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
                According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
                  How can I use TipRanks risk factors in my stock research?
                  Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
                    You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
                      Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
                        A simplified analysis of risk factors is unique to TipRanks.
                          What are all the risk factor categories?
                          TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
                          1. Financial & Corporate
                          • Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
                          • Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
                          • Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
                          • Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
                          2. Legal & Regulatory
                          • Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
                          • Regulation – risks related to compliance, GDPR, and new legislation.
                          • Environmental / Social – risks related to environmental regulation and to data privacy.
                          • Taxation & Government Incentives – risks related to taxation and changes in government incentives.
                          3. Production
                          • Costs – risks related to costs of production including commodity prices, future contracts, inventory.
                          • Supply Chain – risks related to the company’s suppliers.
                          • Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
                          • Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
                          4. Technology & Innovation
                          • Innovation / R&D – risks related to innovation and new product development.
                          • Technology – risks related to the company’s reliance on technology.
                          • Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
                          • Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
                          5. Ability to Sell
                          • Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
                          • Competition – risks related to the company’s competition including substitutes.
                          • Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
                          • Brand & Reputation – risks related to the company’s brand and reputation.
                          6. Macro & Political
                          • Economy & Political Environment – risks related to changes in economic and political conditions.
                          • Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
                          • International Operations – risks related to the global nature of the company.
                          • Capital Markets – risks related to exchange rates and trade, cryptocurrency.
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