As the energy market continues to experience volatility today, various oil stocks are in focus. One that is gaining tremendous attention is Indonesia Energy (NYSEMKT:INDO). Currently, INDO stock is up more than 15% on heavy volume.
This move comes amid a macroeconomic environment that is extremely bullish for energy producers. As a key developer of oil and gas projects in Indonesia, INDO stock has become one trading vehicle investors seem intent on in this environment. The company’s relatively small market capitalization of less than $300 million might have something to do with this.
But of course, it’s impossible to ignore the fact that surging crude prices are driving most energy stocks higher. This is the tide that is lifting all boats, with many of the smaller or more leveraged producers seeing outsized volatility. For traders looking for runners, INDO stock has been a perfect option.
As it happens, there is a company-specific driver behind today’s rise in INDO stock. Let’s dive into why investors are watching Indonesia Energy today.
What’s Driving INDO Stock Higher Today?
Today, Indonesia Energy announced that it commenced drilling of two crucial wells in at Kruh Block. These wells provide the potential for $2.6 million in revenue over the first year, should drilling proceed successfully, and oil remain around the $95 level. Overall, each well is expected to cost $1.5 million to produce.
Thus, the payback period for these wells, at these oil prices, is around one year. For investors in the energy sector, this is an enticing proposition. Of course, how high oil prices remain is uncertain. However, the fact that this expansion of drilling is taking place is bullish for investors looking for an energy producer that’s actively drilling wells and increasing production.
The timing of this capital spending certainly makes sense given where oil prices are trading. Many companies have wells that may not have been profitable to drill at lower oil prices that have suddenly become profitable. Indonesia Energy appears to be one such development company investors are keen on right now for this reason.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.