Interview: Medco eyes $1.5 billion London listing

PT Medco Energi, Indonesia's largest upstream oil and gas exploration company, expects to raise around $1.5 billion through a secondary public offering on the London Stock Exchange in July, the Dow Jones Newswires reported on Monday quting a company executive as saying.

The planned secondary offer will constitute up to a 40% stake in the firm, company President Hilmi Panigoro told Dow Jones Newswires. The total would represent an offering price around a 50% premium over the firm's current stock market price on the Jakarta stock exchange, he said.

"We plan to raise around $1.5 billion from selling around 1.32 billion shares," Panigoro said.

The company also plans to diversify its business focus to include crude palm oil plantations and cement production, he said, reflecting an aggressive expansionary drive by Medco's founding Panigoro family since it bought back a controlling stake in the firm this year.

Funds from the secondary offer will help repay $400 million in debt to Singapore's UOB Asia Ltd. a unit of Singapore's United Overseas Bank Ltd, and any excess cash resulting from sale will be used to finance gas and oil exploration and more business expansions, Panigoro said.

Medco has mandated UOB Asia and Merrill Lynch & Co. to underwrite the IPO. A roadshow to Singapore, Hong Kong, London, Philadelphia, New York and Boston will launch in June.

Panigoro said he expects strong international demand for the share offering, given the company's expectations for a 10% year-on-year revenue increase this year on high oil and gas prices. Medco's oil output in 2005 is also expected to increase by 10% from 154,000 barrels a day in 2004, he said.

Medco is looking to pump-up needed investment in oil and gas exploration as well as tap a likely jump in domestic cement demand. The government has estimated that $150 billion is needed in infrastructure investment to deliver an average 6.6% economic expansion from 2004 to 2009.

Meanwhile, 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 barrel a year between 2001 and 2005. Analysts say Indonesia, the only Southeast Asian member of the Organization of Petroleum Exporting Countries, produced in February the smallest amount of crude oil in 30 years, due to dwindling reserves and lack of new exploration activities over the past decade.

BP Migas, Indonesia's official upstream oil and gas regulating body, projected last month that the country's Jeruk crude oil field, jointly developed by Medco with Australia's Santos Ltd., will contribute a new flow of 7,500 b/d in 2005.

During the first nine month of 2004, Medco's net profit was $44.5 million, compared with $41.4 million in same period a year earlier. Medco controls approximately $1.43 billion in assets.

The Panigoro Family owns an 85.51% stake in Medco through energy company New Links Energy Resources Ltd. New Links is 100% owned by Encore Ltd, which is controlled by the Panigoro Family.

"After the stake sale, I expect the Panigoro Family to retain a controlling (share) in Medco," Panigoro said.

Medco is also eyeing a possible investment of up to $500 million in the development of a geothermal plant in Sarula in North Sumatra province.

"We have received offers from a Japanese and an American company to take part in bidding for the development of the plant," Panigoro said, without elaborating.

The firm's diversification plans include a $400 million cement plant project in East Java province, funded by internal cash reserves or the participation of an unidentified strategic investor.

Medco also plans to develop its 20,000-hectare crude palm oil plantation in Central Kalimantan province.

Panigoro said that despite the diversification plans, Medco's oil and gas interests will remain the firm's core business and revenue driver.

Medco shares rose 7.9% Monday to close at Rp 2,725. (*)