MedcoEnergi signs deal to sell crude to Mitsubishi?s subsidiary

Jakarta-listed PT Medco Energi Internasional, through its wholly-owned subsidiary Petroleum Exploration & Production International Limited has signed a Crude Oil Sales and Purchases Agreement with Petro-Diamond Singapore (Pte) Ltd, a wholly-owned subsidiary of Mitsubishi Corporation which serves as a strategic vehicle for a wide range of Mitsubishi?s energy business in Southeast Asia for trading crude oil and petroleum products.

Mitsubishi is the holder of 39.4 percent of issued shares in Encore Energy Pte. Ltd., a company which holds 50.7 percent shares of MedcoEnergi?s issued shares. It is thus an indirect shareholder of MedcoEnergi

The crude oil which will be sold are MedcoEnergi?s net entitlement of crude oil produced from the operation of Kaji-Semoga fields in Rimau block, the firm said in a statement on June 30.

?The time period of the sales of crude oil to Mitsubishi will be three years, starting in January 2012 up to December 2014. The first delivery will start in January 2012,? the firm said.

According to the firm, the appointment of Mitsubishi as the buyer of crude oil was conducted based on the following considerations:
1. Mitsubishi is a trading company with standard criteria of a company that has investment grade rating based on the global rating companies, Standard & Poor?s and Moody?s.
2. The offering crude oil price refers to the Indonesian Crude Price of Sumatra Light Crude with a certain premium which is agreed by the company and Mitsubishi and considered favorable amidst the current fluctuation in oil prices.
3. The results of independent evaluator which stated the fairness of this Crude Oil Sales transaction.

The transaction will secure MedcoEnergi?s ability to collect revenue from the allocated production of its Rimau field without tapping info the oil spot market.

Moreover, the transact ion also would provide it with a higher assurance for receiving its cash-flow until end of year 2014. (romel)