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Medco Warns Revenue May Fall 50%
Jakarta Globe | March 12, 2010

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The country’s biggest private oil producer, PT Medco Energi International, said on Wednesday that its 2009 revenue may drop 50 percent compared with a year earlier due to the economic downturn.

“Last year we made several adjustments to our operations due to the global financial crisis,” said Hilmi Panigoro, chief commissioner of Medco. “I think revenue this year will be flat until the Donggi-Senoro project starts.”

Medco has yet to release full-year results, but its revenue last year through September had fallen 54 percent to $482.24 million, from $1.05 billion in the year-earlier period. Profit plummeted 94 percent to $15.1 million in the period.

“In 2008, we recorded a one-time gain [on soaring oil prices] and from the sale of [PT Apexindo Pratama Duta],” he said, referring to the sale of the oil and gas driller to transport firm PT Mitra Internasional Resources for Rp 5.2 trillion ($566.8 million).

The Donggi-Senoro gas project has been stalled because the government has yet to approve construction or confirm the price at which the gas will be sold, despite signing a sales agreement with consortium PT Donggi Senoro LNG in January 2009.

The company is majority owned by Japan’s Mitsubishi, with minority stakes held by Medco and state oil and gas firm PT Pertamina, the lead developer of the project.

Pertamina and Medco want to sell all the gas outside the country to ensure that they can recoup their investment in the $1.7 billion project, which has relied heavily on foreign investors. But the government wants some of the output to be allocated to meet domestic demand, which would result in lower prices than on the international market. The dispute over domestic obligations is also slowing negotiations.

Hilmi also said Medco expected to pump 32,000 barrels of oil per day this year, up from 31,000 bpd last year. The company is targeting gas production to rise to 145,000 standard cubic feet from 137,000 scfd in 2009.

The company said it was planning to increase capital expenditure 72 percent to $612 million for its production arm, PT Medco E&P, to support the increased output this year.

The spending will also include $243.6 million for several oil and gas joint ventures, Budi Basuki, Medco’s president director, said in December.

The remaining expenditure will be allocated for seismic surveys at $31.1 million, drilling exploration wells at $101 million, development of facilities at $115 million and drilling development wells at $122.1 million.

Medco is planning to seek outside funding for capital expenditure, including dollar-denominated bonds.