Medco Energi continues acquiring amid slowdown
Strike while the iron is hot. That is what publicly listed energy firm Medco Energi Internasional did recently by managing several acquisitions amid a slowdown in the industry.
The company announced Thursday that it had officially acquired ConocoPhillips Indonesia (CIIL) and ConocoPhillips Singapore Operations (CSOP), subsidiaries of US oil and gas giant ConocoPhillips (COP), without disclosing any details about the prices paid.
CIIL is the operator of the South Natuna Sea Block B PSC with 40 percent participation rights and the operator of the West Natuna Transportation System, while CSOP operates an onshore receiving facility in Singapore.
“Through this acquisition, not only will Medco Energi obtain world-class integrated offshore oil and gas operations, but it will also strengthen its position as an independent energy and natural resources company in Indonesia,” Medco Energi president director Hilmi Panigoro said in a statement.
In addition to CIIL’s involvement, South Natuna Sea Block B is also operated by US oil producer Chevron and Japanese oil and gas explorer Inpex, which have controlling shares of 25 percent and 35 percent, respectively.
As of December 2015, South Natuna Sea Block B had three producing oilfields and 16 natural gas fields in various phases of development. Its average daily production in 2014 comprised 5,000 barrels of crude and 117 million cubic feet of gas.
Medco Energi Internasional CEO Roberto Lorato said in September that the acquisition of the block would add to the company’s substantial gas and liquids reserves and increase its daily production by more than 35 percent.
In 2015, it produced a total of 60.4 billion cubic feet of gas, an increase of 2.65 percent on an annual basis. At the same time, it produced a total of 8.8 million barrels of oil, down around 2 percent year-on-year.
Reza Priyambada, a stock market analyst with the Indonesian Association of Securities Analysts (AAEI), said Medco Energi had been harnessing the current global economic situation, in which low global oil prices have reduced the value of oil and gas assets worldwide and provided investors with discounted acquisition costs.
“It seems the company wants to shift its focus from the Middle East, where it has to face more risks and higher operational costs amid prolonged conflict situations,” Reza told The Jakarta Post.
Previously on Nov. 2, Medco Energy announced that it had officially acquired a 50 percent stake owned by Amman Mineral Investama (AMI), which controls an 82.2 percent stake of Newmont Nusa Tenggara (NNT).
NNT currently operates the Batu Hijau mine in Sumbawa, the country’s second-largest copper and gold mine, which produced about 240 million pounds of copper and 300,000 ounces of gold last year.
Later on Nov. 9, Medco Energi stated that it had reached an agreement to acquire a 26.67 percent stake in the Block A gas field in Aceh from its current partner KrisEnergy.
Once the transfer of the participating interests has been agreed upon by the central government and the regional administration, Medco Energi’s operating interest in the gas field will increase to 85 percent, while the remaining 15 percent will be owned by KrisEnergy.
Back in July, Meta Adhya Tirta Umbulan, a joint venture between Medco Energi’s Medco Gas Indonesia and private construction firm Bangun Cipta Kontraktor, signed a working contract with the East Java provincial administration for the construction of the Umbulan water supply system worth Rp 2 trillion (US$149.16 million).
“By taking the Umbulan project, Medco Energi has started to diversify in a bid to find a more sustainable way to support its business in the long run, considering the volatility that will always haunt the oil and gas industry,” Reza said.