Medco to raise gas output 10%

Medco to raise gas output 10%

Leony Aurora, The Jakarta Post, Jakarta

PT Medco Energi Internasional, the country's largest locally
controlled oil and gas company, expects gas production to rise 10
percent to 150 million standard cubic feet per day (mmscfd) in
2006, while it says oil production will likely remain flat.

The company will produce between 56,000 barrels and 60,000
barrels per day (bpd) of oil next year, compared to 57,000 bpd
this year, president director Hilmi Panigoro said on Thursday.

"Production from the Sembakung block is just enough to offset
the declining output from our other fields," said Hilmi.

Sembakung, a block in East Kalimantan recently acquired by
Medco, is expected to contribute 4,600 bpd to the company's oil
portfolio starting in the last quarter of this year.

Gas production will rise from 135.8 mmscfd currently, said
Hilmi, as the company develops its fields in South Sumatra.

Medco will spend some US$300 million in 2006 to drill 24
exploration wells, 131 development wells and to develop the
onshore Lematang block in South Sumatra. The company budgeted
$200 million in capital expenditures for 2005, but realized only
some 70 percent of that figure.

"We intended to develop Lematang this year, but as it turns
out that plan was postponed to next year," said Hilmi.

Medco reported an increase of 44 percent in net profit in the
first nine months of the year, to $68.4 million from $47.8
million last year on higher crude oil prices.

Sales in that period rose to $442.2 million from $392.6
million.

Hilmi said that Encore International, a company owned by the
Panigoro family, has appointed Credit Suisse First Boston (CSFB)
as the financial adviser for the sale of $180 million in bonds,
which will mature in three years.

Encore, which controls 54.5 percent of Medco, will sell the
U.S. dollar-denominated bonds in December, Hilmi said. The
proceeds will be used to pay off Encore's debts.

In February, the Panigoro family returned as the majority
shareholder in Medco by purchasing a 60 percent stake in New
Links Energy Resources, which had controlled 86 percent of the
company, for $340 million from Thailand's PTT Pcl and CSFB.

In July, Medco raised $300 million by divesting more than a
billion shares as global depository shares at discounted prices,
cutting the Panigoros' stake to 54.5 percent from 85.5 percent.