Medco sees this year's net up 37%
Medco sees this year's net up 37%
Edhi Pranasidhi and Fin Esther Harini, Dow Jones/Jakarta
PT Medco Energi, Indonesia's largest upstream oil and gas
exploration company, expects its net profit for this year to rise
37 percent, fueled by record-high crude oil prices, its chief
executive said recently.
Medco's net profit this year will rise to around US$96
million, with the company already posting net profit of $47.5
billion in the first six months of the year, Hilmi Panigoro told
Dow Jones Newswires.
Medco's upbeat profit projection reflects the positive impact
of record-high global oil prices, with Nymex benchmark crude
prices at US$63.17 a barrel at 06:56 GMT.
"For every $1 increase in oil prices, we can earn $2 million
in net profit," he said.
Hilmi expects crude oil prices to hover around the $60 a
barrel level for the rest of the year as total global crude oil
demand stands at 86 million barrels a day, outpacing daily supply
of 84 million barrels.
He noted that soaring demand in China and India and the
ongoing maintenance shutdown of two huge U.S.-based oil
refineries will help keep oil prices buoyant, but declined to
provide a specific forecast for global crude oil prices beyond
this year.
The world's oil reserve replacement ratio is now only 50
percent, meaning that for every one barrel of oil sold this year,
producers have made only half a barrel in new oil discoveries
"Given those factors, it isn't surprising if oil prices remain
high for the rest of the year," Hilmi said.
However, Medco's reserve replacement ratio is well above the
global average at 150 percent and he believes that the firm is
well-placed to take advantage of the current high oil prices.
Medco currently produces 90,000 barrels of crude oil a day, or
around 30 million barrel a year, he said. It now has 45 million
barrels in new oil discoveries.
The company is also actively seeking new sources of oil and
gas in Indonesia to ensure Medco's continuing profitability.
Hilmi said those efforts include a plan to bid for a 50
percent stake in an oil and gas block in Aceh owned by U.S.
petroleum giant ExxonMobil Corp.
ExxonMobil owns a 50 percent non-operating stake in Mobil
Block A Ltd. in Lhokseumawe, in northern Nanggroe Aceh
Darussalam. U.S.-based ConocoPhillips owns the remaining 50
percent of the firm and operates the block. ExxonMobil Oil
Indonesia said last week that the firm was "soliciting offers"
from companies for the Block A stake, without elaborating.
Medco also plans to spend $220 million in 2005 and another
$600 million in 2006 and 2007 to maintain business operations at
peak efficiency, Hilmi said. The company will use its own
internal cash to finance the investment.
Medco's investment will go some way in helping Indonesia
reverse its decline in oil output. Southeast Asia's sole member
of the Organization of Petroleum Exporting Countries (OPEC) will
this year be a net oil importer, placing great strain on the
government's already tight budget.
Analysts expect the nation's oil production to fall to an
average of 476 million barrels a year between 2006 and 2010, from
around 502 million barrels a year between 2001 and 2005.