JP/13/MEDCO
Medco to get $190m in compensation for Jeruk
Leony Aurora The Jakarta Post/Jakarta
Indonesian energy giant PT Medco Energi Internasional will cash in on its calculated gamble in drilling wells in the Jeruk oil field by claiming US$190 million in compensation from the field's original partners, Cue Energy and Singapore Petroleum Company (SPC).
The publicly listed company's CEO Hilmi Panigoro said on Monday he received a confirmation last Friday that Cue Energy and SPC intended to reclaim their rights on Jeruk, a big oil field located in East Java.
Consequently, "They have to pay for all of the costs we have incurred on Jeruk, which is about $30 million, within 30 days after the letter," he said.
The two firms would also have to pay penalties worth between three times and 10 times for seismic observation and the drilling of the first and second wells, he added.
"The total penalty is about $190 million," said Hilmi. The funds -- almost triple the net profit of $70.1 million that Medco accumulated last year -- would be paid after Jeruk started pumping oil, which is estimated top be in 2008.
However, should the field produce between 50,000 and 60,000 barrels of oil per day, then the penalty would be paid off within one year, added Hilmi.
Australia's third largest oil and gas producer, Santos Ltd., previously partnered up with Cue Energy and SPC to explore and manage Jeruk, with 45 percent, 15 percent, and 40 percent of the concessional rights, respectively.
Two years ago, when the two junior partners refused to take the risk of exploring the field, Santos and Medco signed an agreement to have a 50-50 share in the drilling of wells.
They struck gold when they found the equivalent of between 350 million and 500 million barrels of oil in the field, far more than the previous certification of 170 million barrels.
Medco had previously said it was considering maintaining some shares in the field.
"Our contract did not allow that. However, we are very happy with the compensation," said Hilmi.
Medco, the largest Indonesian-controlled private oil company has been aggressively expanding its business, most recently by acquiring 100 percent of Australian-based energy firm Novus Petroleum Ltd. for A$350 million last year.
With surging oil prices and significant additional oil and gas reserves from its new subsidiary, Medco's net profit in 2004 jumped almost 30 percent to $70.1 million from $54.1 million in the previous year.
Revenues increased 19.2 percent to $535.1 million last year from $449 million in 2003, with the crude oil price averaging higher at $36.78 per barrel from $29.33 per barrel in the respective periods.
I-Box
London IPO set for July, road shows June
The time table for Medco's initial public offering (IPO) in London Stock Exchange is being finalized, with the event scheduled for mid-July, CEO Hilmi Panigoro said.
"We will make non-deal road shows to Hong Kong and Singapore in May," Hilmi said.
After that, in June, the company would conduct official road shows to Asian cities as well as London and several cities in the U.S., namely Los Angeles, New York, San Francisco, Philadelphia, and Boston, he added.
In a bid to go further in the international market, Medco is planning to sell some 1.5 billion shares, or 40 percent of its stake, and list its shares on the London bourse.
Medco's share ended unchanged at Rp 2,575 on Monday.