JAKARTA (TheInsiderStories) – After recording a huge losses of US$264.7 million in 2020, PT Perusahaan Gas Negara Tbk (IDX: PGAS) will aggressively develop the liquefied natural gas (LNG) in overseas market in this year, said the management last week. The company has targeting Japan, South Korea, Taiwan, China, the Southeast Asia region, Pakistan, Turkey, and several countries in Europe.
In this year, the natural gas distribution and transmission firm is more optimistic about its financial performance due to the economic recovery factor. The unit of energy producer, PT Pertamina, has set a target of gas trading volume increases by 10.14 percent to 912 billion British thermal units (BBtu) per day in this year compared to 2020 which amounted to 828 BBtu per day.
The gas transmission volume is targeted to increase by 8.36 percent to 1,360 million standard cubic feet per day (MMSCFD) from the previous 1,255 MMSCFD. The volume of oil and gas lifting is targeted to increase 26.6 percent to 9.5 million barrels of oil equivalent per day (MMBOED) from the previous 7.5 MMBOED.
The issuer also targeting the volume of gas processing operations to reach 162 TPD in 2021 compared to last year of 128 TPD and oil transmission is expected to increase to 11.2 MMBOE from previously 3.7 MMBOE. While, the regasification was reduced to 53 BBtu per day from 95 BBtu and LNG from zero to 55 BBtu per day. The other business diversification is an expansion in telecommunications, construction and engineering, as well as property through subsidiaries and affiliates with the aim of achieving the company’ revenue and profit projections.
In 2020, the pandemic has hit Perusahaan Gas Negara‘ financial performance. During last year, the company posted a net loss of $264.7 million, from 2019 booked a net profit of $67.58 million. The company’s revenue also dropped by 25 percent to $2.88 billion compared to a year before of $3.84 billion.
Finance director, Arie Nobelta Kaban, acknowledged the losses, mainly due to external factors such as value added tax dispute in the 2012 – 2013 filed by the tax office amounting to $278.4 million. In addition, there were asset impairments in the oil and gas sector of $78.9 million.
Last week, Moody’s Investors Service has confirmed the corporate family rating and senior unsecured rating of PT Saka Energi Indonesia, the unit of the company, at B2. The rating outlook has been changed to negative from ratings under review.
“The confirmation of Saka’ B2 rating is based on our assessment that the imminent risk to its liquidity has been partially mitigated by its plan to seek judicial review of its $127.7 million tax dispute. At the same time, we now expect free cash flows at Saka over the next 12 months will be higher than our previous forecast because of improved oil prices, lower capital spending and certain tax refunds,” says Hui Ting Sim, a Moody’s analyst, in the latest report.
At the same time, the agency now expect free cash flows at the unit of Perusahaan Gas Negara over the next 12 months will be higher than Moody’s previous forecast because of improved oil prices, lower capital spending and certain tax refunds.
“The negative outlook reflects potential deterioration of Saka’s liquidity over the next six to nine months if the outcome of the judicial review of tax penalty is not in favor of the company or if Saka fails to get an extension of its $361 million shareholder loan maturing in January 2022,” adds Sim.
Saka Energi faces a potential tax penalty liability of $127.7 million relating to its purchase of a 65 percent stake in Pangkah block from Hess Corporation (Ba1 stable) in 2014. While, the upstream oil and gas producer is currently preparing its application to seek judicial review, it will take some time for its appeal to be filed with the Supreme Court in Indonesia (Baa2 stable).
The company does not expect to receive a tax invoice over this period. An unexpected acceleration of this tax penalty liability will put downward pressure on the rating. While its parent (Baa2 stable), has extended the maturity of shareholder loans in the past, the partial repayment of shareholder loan in January 2021 has increased uncertainty with respect to further extensions.
Further repayment of its $361 million shareholder loan due January 2022 will be credit negative. Saka Energi‘ liquidity will be good with cash holdings above $150 million in 2022 if the company is not required to service the potential tax penalty or repay its shareholder loan. Its expects to receive a refund of $39.8 million from the tax office in 2021, following a favorable verdict by the Supreme Court in December 2020 for another tax dispute involving Saka Pangkah LLC.
Moody’s estimates, the company will produce around 27,000 BOEPD over the next two years and maintain capital spending at around $80 million per year. Moody’s forecasts are based on its medium-term Brent crude oil price assumption of $45 – $65 per barrel. The one-notch uplift from parental support incorporated in Saka’ B2 ratings takes into account the cross-default clauses between the company and the parent.
Then, the reputational and funding risks to the Subholding gas and its ultimate shareholder, Pertamina (Baa2 stable), should Saka default. The company is an independent oil and gas exploration and production company in Indonesia. Saka Energi holds working interests in 11 oil and gas blocks, six of which are producing.
In the first nine months of 2020, the producer reported net production of 25,700 BPOED. The company is wholly owned by Perusahaan Gas Negara. In turn, the parent is 56.96 percent owned by Indonesia’ 100 percent state-owned national oil company, Pertamina.
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