Yesterday, Rukun Energi Cemerlang (RATU) became the talk of the stock market on its first trading day, and for good reason, it was oversubscribed by 300 times!
This company started operations in 2006 and is almost entirely owned by PT Rukun Raharja Tbk. (RAJA), an energy company that has been around since 1993.
RATU’s portfolio has caught the attention of many, featuring two "gold mines": Jabung Block and Cepu Block, both known for producing high quality oil and gas.
Located in Jambi, Sumatra, Jabung Block spans 1,642.8 km² and was producing an average of 52 BOEPD by mid 2024.
Production has been steady since operations began in 1997, thanks to reservoirs like Air Benakat, Gumai, Baturaja, and Talang Akar.
The production cost at Jabung is relatively low, at just USD 11-13/barrel, while its oil sells at a premium of USD 2-5/barrel above the Indonesian Crude Price.
In 2023, the block generated USD 47 mn in revenue, with a net profit of USD 18 mn after tax. This means ROE from Jabung Block alone was a whopping 99.6%!
Jabung also boasts 2P reserves (proven + probable) of 292 MMBOE. With its Production Sharing Contract extended until 2043, this block has a long future of steady production ahead.
Cepu Block, located on the border of East Java and Central Java, covers 919.19 km². It is one of Indonesia’s largest oil fields, with 2P reserves of 405 mn MMBO.
Its main production comes from Banyu Urip Field and Kedung Keris Field, delivering an output of 44 KBPD as of mid 2024.
Cepu Block’s standout advantage is its super-low production cost, just USD 3-4/barrel, while its oil sells at a USD 5 premium above brent prices.
In 2023, the block contributed a net profit of USD 15 mn to RATU’s subsidiary, PT Petrogas Jatim Utama Cendana (PJUC).
Even though reserves at Banyu Urip are gradually depleting, the field’s production has lasted longer than initially expected.
Kedung Keris, which started production in 2019, continues to strengthen Cepu Block’s output.
In 2023, RATU purchased an 8% stake in Jabung Block from PT GPI Jabung Indonesia for USD 26.5 mn. This investment has proven strategic, directly boosting the company’s revenue.
Additionally, RATU owns a 2.24% stake in Cepu Block through PJUC, in partnership with a regional government owned enterprise in East Java.
In the oil and gas industry, efficiency is everything. RATU has excelled, achieving a net margin of 52% and ROIC of 58% in 2023, double the industry average.
Thanks to low lifting costs and premium selling prices, RATU remained highly profitable even during the 2020 oil price crash.
Both Jabung and Cepu Blocks consistently deliver high gross margins: 50% for Jabung and 70% for Cepu
As a result, RATU generates an average annual net profit of USD 24 mn, with projected annual revenue reaching USD 55 mn over the next five years.
However, the oil and gas business is not without risks. Volatile global oil prices can directly impact revenue, making efficiency and hedging essential.
Changes in government regulations, such as taxes or PSC terms, could also affect profitability.
Additionally, operational risks exist, including the possibility of failing to discover new reserves or encountering technical issues at production sites.
Its strategy focuses on expanding its portfolio through the acquisition of new blocks while optimizing production at existing ones.
Jabung and Cepu Blocks will remain key pillars of the business, with projected free cash flows of USD 24 mn per year until the PSC contracts expire.
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