MedcoEnergi, has announced its second quarter 2013 results. The Company’s business strategy remains constant with the focus on E&P business. Up to 2Q 2013 MedcoEnergi has made significant progress on its major projects development. In the Senoro upstream gas project, the facilities construction has reached 21% progress, with land acquisition and site preparation completed and construction crews at work.The related downstream Donggi Senoro LNG development has reached 88% progress, 10% faster than schedule. Both projects will come together for first gas by the end of next year. In Libya, the Company has established a Joint Operating Company, named Nafusah Oil Operations BV in March 2013. This has inaugurated the start of the development of oil facilities for Area 47 Phase-1, with a target oil production of 50,000 BOPD by the end 2016. Furthernore in Libya, the Company has obtained a two-year extension for Appraisal for the remaining 10 discoveries in Area 47 which will be followed by the Phase-2 development. Domestically in May 2013, MedcoEnergi successfully made a gas discovery from Matang-1 well in Block A PSC Aceh, testing gas at a rate of 25 MMSCFD with low H2S content and 15% CO2.

By end 2Q 2013, MedcoEnergi has booked revenues of USD 428.5 million, 6.7% lower than the same period in last year of USD 459.5 million. The lower revenues are mainly driven by lower oil price (USD 108.5/bbl in 2013 vs USD 120.8/bbl in 2012) and lower oil rate (26.9 MBOPD in 2013 vs 30.6 MBOPD in 2012). The decrease in oil rate is caused not only by technical issues such as the natural decline of the mature oil fields, a delay in oil lifting from one asset (Bawean) but also non-technical aspects, including delay in obtaining permit/license from local authorities, central government or due to overlapping working areas with plantation or mining; hindrance in drilling works at site; and security issue of illegal tapping and oil theft. Through drilling and workover activities done year to date, the Company is endeavoring to arrest the natural production decline of 20-25% per year from its domestic mature assets, and we are confident these activities will reduce the decline to 10-15% per year in the coming quarters.

The gas production remains stable at around 153.8 BBTU (billion British Thermal Unit) per day. A successful renegotiation of gas sales prices in a number of contracts has increased the average gas price by 35%, from USD 3.83/MMBTU in YTD (year to date) June 2012 to USD 5.17/MMBTU in YTD June 2013. The Company will continue this effort with other gas contracts which have less than the prevailing price for domestic gas.

In 2Q 2013 the Company’s production cost and operating expense are reduced by 2.5%, from USD 316.7 million in 2012 to USD 308.4 million in 2013. The operating income is booked at USD 120.2 million and EBITDA (Earnings before Interest, Tax and Depreciation/Amortisation) is recorded at USD 166.3 million for 2Q 2013. To strengthen its financials in the long run, the Company has written off non performing asset (impairment), primarily for the Ethanol plant in Lampung and also booked deferred tax assets (DTA) for some E&P assets. Since early this year the Ethanol plant operation has been experiencing difficulty in securing a sustainable feedstock supply as well as in selling product due to a weak commodity price of ethanol product. In total, the amount of the impairment and DTA is calculated at USD 19.2 million. Taking into account this amount, MedcoEnergi books a Net Income (Profit Attributable to Shareholders) of USD 5.1 million for the second quarter of 2013.

Lukman Mahfoedz, President Director & CEO of MedcoEnergi said “Despite the Company’s slow down in performance for this quarter, the Company fundamentals remain strong, demonstrated by the significant progress in our major projects development, especially in Senoro and Libya. Starting in next year our portfolio of producing asset will become bigger when Senoro is on stream, to be followed in 2016 and beyond by the completion of other major projects such as Area 47 Libya, Block A and EOR Rimau. This will sustain our company growth in the long run.” Lukman also added “I am very pleased with the progress in our other energyrelated business for coal mining and power generation. The coal mining has started contributing revenues of USD 17.1 million for this quarter, with a total production of 300,000 ton. This level of production is on track to realise our target of 600,000 ton by the end of 2013. In power generation sector, we will add a total installed capacity of approximately 17 MW and 120 MW in 2013 and 2014 respectively, consisting of an expansion power project of 30 MW in MEB and a new gas-fired power project UBE 2x35MW, both are in Batam, and minihydro projects with a total 40 MW capacity.” As a closing remark, Lukman expects the support from the Central Government to resolve non-technical issues on oil and gas activity, particularly in obtaining permits from local authorities or overlapping of working areas with plantation, mining, to maintain the continuity of oil and gas operations at site.