S&P assigns B-plus to Medco
Monday, February 4 2002 - 01:39 PM WIB
The outlook is stable, S&P said.
The ratings agency also assigned a B-plus to the proposed US$150-million senior unsecured notes issued by Medco's 100 percent subsidiary MEI Euro Finance Ltd, and guaranteed by Medco.
The independent Indonesian oil and gas exploration and production company declared total revenues of around $419-million in the 12 months to September 2001.
The company currently averages around 95,000 barrels per day of crude output, based on Platts records. Thailand's PTT Exploration and Production Public Co Ltd recently became a shareholder in Medco Energi by buying a 40 percent stake in the latter's holding company New Links.
Medco's proved oil reserves, totaling 178-million barrelsl of oil equivalent, are located primarily in South Sumatra. To date, the company's exposure to gas has been limited, in part due to the undeveloped domestic gas transmission infrastructure, S&P noted.
About 84 percent of production and 67 percent of proved reserves is concentrated in the Rimau block in South Sumatra.
The credit rating reflects material country risks relevant to the credit of all Indonesian entities, with the sovereign foreign currency rating of triple-C reflecting the severe economic and political uncertainties that have plagued the country since the Asian currency crisis of 1997-98; and uncertainty in the regulatory environment.
"Although the direction of policy in Indonesia is largely positive--with state oil company Pertamina to have its regulatory and commercial functions separated, and the interests of the country's regions better served--the operational impact of these expected changes remains to be seen," S&P said.
It also noted that with Medco's short proved reserve life of five years, it would need to incur significant development costs, and will face various execution risks to convert its substantial probable reserves into proved reserves.
Medco is to embark on an aggressive drilling program over the next five years and will spend about $650-million on developmental activities, it noted. Also, production and proved reserve growth will be highly dependent on the materialization of gas sales contracts.(*)