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Indonesia’s Medco cuts capex and production over oil price crash

US oil futures were up 3.9 per cent at US$65.13 a barrel at 8.13am in Singapore. PHOTO: AFP. Sketched by the Pan Pacific Agency.

Pan Pacific Agency | COMMUICATION AGENCY FOR PACIFICA REGIONS

JAKARTA, Mar 27, 2020, The Jakarta Post. Publicly listed oil and gas company PT Medco Energi Internasional has slashed its capital expenditure and production targets this year because of weakened global demand and the recent oil price crash, The Jakarta Post reported.

Indonesia’s eighth most productive oil producer plans to reduce its 2020 capital expenditure by 30 percent to US$240 million “with potential for further 2021 reductions”. Three quarters of the funds are to go to Medco’s oil and gas business. The remainder is to go to the company’s electricity ventures.

Medco also plans to slash oil and gas production – “into 2021 and beyond” – by 5 million barrels of oil equivalent per day (mboepd) to 105 mboepd this year. The company may further cut production by 5 mboepd if demand weakens.

“In this low price environment, Medco has sufficient liquidity and supporting structures in place,” writes the company in its latest update presentation on March 17.

Global crude oil prices fell about 30 percent on March 9 after Saudi Arabia, the world’s largest oil exporter, slashed selling prices and set plans to increase crude production, effectively starting a price war between oil exporting countries.

International oil price benchmark Brent fell 60.2 percent year-to-date to $26.37 per barrel on March 26, Bloomberg data shows.

Indonesia’s Upstream Oil and Gas Special Regulatory Taskforce (SKKMigas) previously said the government would make sure domestic oil and gas production rates remained unchanged. However, as industry analysts have pointed out, many oil companies need deep spending cuts to protect their cash flows.

Medco stocks, publicly traded at the Indonesia Stock Exchange (IDX) as MEDC, rose 5.85 percent in the afternoon break on March 27 in line with the increase in the benchmark Jakarta Composite Index’s (JCI), which rose 5.13 percent.

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