Performance of Oil and Gas Producers Declines in Second Half

The performance of publicly-listed oil and gas producers will go down in the second half of the year due to the decline in global oil prices. According to the IFT Research Department, PT Benakat Petroleum Energy Tbk (BIPI) will be the most affected as oil sales has a large contribution to its revenues.

Since the start of the second semester, the price of West Texas Intermediate (WTI) dropped 13 percent. This will affect oil and gas producers that depend on global oil price fluctuation.

Of the three oil and gas producers, PT Benakat Petroleum Energy, PT Energi Mega Persada Tbk (ENRG) and PT Medco Energi International Tbk (MEDC), Benakat is the most vulnerable to falling oil prices. Oil sales contributed 87.95 percent to total company revenue in the first semester. In contrast, the lowest contribution from oil sales is for Medco Energy at 51.46 percent of total revenues.

Due to the drop in global oil price in the second semester, coupled with the stagnant lifting production volume, Benakat's revenues is projected to decrease 11.43 percent, Energi Mega's drops 10.19 percent and Medco's falls 6.69 percent.

Reza Priyambada, Managing Research Head of PT Indosurya Asset Management, said that the decline in global oil price will affect the company’s income in the sector.

He said that during the unstable global economic recovery, oil price will be depressed due to weak demand. “If the global economy continues in this current pace, it will be difficult for oil prices to move up from US$ 83-US$ 85 per barrel,” Reza said.

Firlie Ganinduto, Director of Benakat Petroleum Energy, said the company has not revised its target selling price although global oil price went down to US$ 83 per barrel. To anticipate the lower selling price, the company is increasing production to 2,700 barrels per day from 2,200 barrel per day in the first semester. The company will also implement efficiency measures by revitalizing equipment so that the cost of goods sold will not increase.

Benakat Petroleum recorded a 15 percent growth in revenues year-on-year (YOY) to Rp 158.85 billion (US$ 18.58 million) from Rp 137.46 billion. The company obtained of Rp 139.7 billion from crude oil sales or 87.95 percent of the total revenues.

Lukman Mahfoedz, President Director of Medco Energi, said that the company will maintain its production level, reduce operational shutdown and optimize production costs to balance the decline in oil price.He said that the company’s performance will not fall if oil price is set at US$ 80-US$ 90 per barrel. Medco’s average oil selling price reached US$ 113.2 per barrel in the first semester.

Medco Energi’s oil and gas prodution grew 1.9 percent from 55.5 to 56.5 million barrels of oil equivalent per day (mboepd) in the first six months of this year. Meanwhile, the average selling price of oil reached US$ 113.2 per barrel, up 40.7 percent from the same period last year at US$ 80.5 per barrel. The selling price of gas grew 5.6 percent to US$ 3.8 per million British thermal unit (mmbtu).

Herwin Hidayat, Head of Investor Relations of Energi Mega Persada, said that the company targets to increase oil and gas production by 25 percent to 16 mmboepd throughout this year. The selling price of oil is projected to be more conservative at US$ 80 per barrel. Therefore, he said that the fall of global oil price in the second semester is not a cause for worry.

In the first half of 2011, Energi Mega’s oil production increased 8.6 percnet (YOY) from 6,500 barrels per day (bph) to 7,059 bph. Meanwhile, gas production was from 41 million standard cubic feet per day (mmscfd) to 47.9 mmscfd.

The selling price of oil grew 41.31 percent from US$ 79.4 per barrel to US$ 112.2 per barrel. The selling price of gas increased from US$ 2.5 per mmbtu to US$ 3.6 per mmbtu.