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Medco Investment Strategy during Downturn Oil Era
Hilmi Panigoro
President Director of Medco Energi International
SIEP Conference- Houston Texas, 19 November 2016
Delivering Energy
www.medcoenergi.com
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Main Business Activities
MedcoEnergi is a publicly listed, integrated energy company with significant interests in Power Generation and
support services alongside its core Oil & Gas Exploration & Production activities in Indonesia, the Middle East, North
Africa and the US.
3 3
2005
Awarded
EPSA IV PSC
Contract for
Area 47
Libya
1980
Established
as Meta Epsi
Pribumi
Drilling
Company
1994
Initial Public
Offering in
Indonesia
1995
Acquired
100% shares
of Stanvac
Indonesia
from
Exxon/Mobil
1996
Discovered
largest
onshore oil
reserve
(Kaji-
Semoga)
2007
Discovered
352 MMBOE
hydrocarbon
resources in
Area 47
Libya; about
90%
exploration
success ratio
2009
LNG Sales
Agreement
signed with
Japanese &
Korean
buyers, gas to
be supplied
from Senoro-
Toili Block
2010
Obtained 20-
year
extension for
3 PSC
contract area
in Indonesia
(South
Sumatra,
Block A and
Bawean)
2011
Obtained
Commerciality
approval on
Area 47, Libya
Received Final
Investment
Decision for
Senoro-Toili
Gas and LNG
projects
2012
Acquired 25%
in Block 9
Malik, Yemen
First coal
sales
shipment to
China
2006
Awarded
Oman Service
Contract.
Increased
production up
to 100% in 5-
years time
Senoro and
DSNLG
commence
operation
25 year of
extension for
Karim, Oman
Rimau Block
received 5th
Gold PROPER
Award
Medco Journey to World Class Energy Company
Acquired new
assets in
Tunisia and
Oman
Get Project
Financing for
DSLNG and
Sarulla from
JBIC of
USD 2.7 Billion
2014 2015
Signed SPA with
ConocoPhillips to
acquire 40% WI in the
Block B South Natuna
Sea
Finalized acquisition
50% PT Amman Mineral
Investama which
indirectly control 82.2%
WI in PT Newmont Nusa
Tenggara.
2016
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Changing energy mix
• Fossil fuels continue to provide most of the
world’s energy
• Natural gas is the fastest growing fossil fuel
• Oil grows remain stable
• Coal is the slowest growing fuel
• Continuous rapid growth in renewables
Global Energy Market faces continuous change
Continuous change is the norm for energy markets
Source : BP & Woodmac 2015
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Fluctuation of oil price impacts to company’s strategy
• Oil price fluctuations are common and sharply 5 times within 30 years.
• A challenge for oil and gas companies is how to adapt in a fluctuating environment,
conducts adaptation and mitigation so that the company's goals can be achieved through
the right strategy
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Leveraging MedcoEnergi’s strong domestic position …
• Medco will create value by evaluating each opportunity
against our return and profitability benchmarks.
• With commodity prices projected to remain low, there will
be opportunities to acquire domestic resources.
• The acquisition of PT Newmont Nusa Tenggara and
South Natuna Sea Block B are excellent examples of how
targeted domestic resource acquisitions can create value
for the Company’s stakeholders.
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• Transaction is completed on 2 November 2016
• 87,000 ha Copper & Gold mine located SW
Sumbawa Island, W. Nusa Tenggara Province,
550 m above sea level. 81 km from Mataram.
• 4th generation CoW signed 1986, for 30 years
operation from start of production in 2000
• Producing Mine
Batu Hijau Mine Copper Gold
Proved
Reserves
2.6 bil lbs 2.7 mil oz
Resources 10.3 bil lbs 13.9 mil oz
2015
Production
239.6 mil lbs 0.3 mil oz
Facilities 120,000 tpd processing facility, grinding
facility, pipe assembly facilities for tailings
management, warehousing, 158 mw
coal-fired powerplant, port with ferry
terminal, air services and town site for
housing and school
Batu Hijau mine
PT Amman Mineral Nusa Tenggara
MedcoEnergi Leads “Indonesia, Inc.” to Bring Back Indonesia’s Strategic Assets from Newmont
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Potential Development: Elang with est. resources 12,945 mil lbs
copper, 19.7 mil oz gold with potential to produce 300-430 mil lbs
copper and 0.35-0.60 mil oz gold annually
PT Amman Mineral Nusa Tenggara
MedcoEnergi Leads “Indonesia, Inc.” to Bring Back Indonesia’s Strategic Assets from Newmont
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South Natuna Sea Block B (SNSB)
• An offshore PSC located in the South Natuna Sea with
world class operating scale and large hydrocarbon base
(gross 3P resources > 569 mmboe)
• Current Ownership Structure:
• ConocoPhillips : 40% (Operator)
• INPEX : 35%
• Chevron : 25%
• Current gross production: 266 mmcfd gas and 19 mbopd
oil/condensate
• Current net production 28 mboepd
• SNSB is Operator of the PSC and the West Natuna
Transportation System (WNTS), a 650 km natural gas
pipelines, which services gas sales from 3 producing
PSCs in the South Natuna Sea to the Onshore Receiving
Facility in Singapore
• In place gas-liquids processing, storage and export
infrastructure with additional capacity for future
expansion
• Best in class Health, Safety, and Environmental Records
• Highly experienced and proven operating team of 800
employees and 320 contractors
Sourc
e: C
onocoP
hilip
s O
ct 2
015
Enhancing capabilities through the integration of world-class offshore operations.
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The largest single-contract geothermal power project in the world
Production Well Drilling Progress
• Located in Tapanuli Utara district, North
Sumatra with contracted capacity of
3X110MW.
• 30 years Energy Sales Contract with PT PLN
with Take or Pay 90% capacity factor. Joint
Operating Contract with PT PGE.
• Ownership:
₋ MPI (18.9975%),
₋ INPEX (18.2525%),
₋ ORMAT (12.75%),
₋ ITOCHU (25%),
₋ KYUSHU (25%)
• Total project investment cost of US$1.6 billion.
• Secured project financing of US$1.17 billion
for 20 years with JBIC, ADB, and 6
commercial banks.
• As of September 2016 Phase I and Phase II
power plant construction progress have
reached 95.8% and 51.8% respectively. Power Plant Construction Front View
Sarulla Phase I – Geothermal Power Development
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Cost and capital efficiency, operational effectiveness
• Sustainable reductions in our
cash cost structure
• Manage base production
decline and reduce downtime
• Deferral and renegotiation of
exploration commitments
• Selectively capture the
benefits of further supplier
market deflation
Improving unit cash cost°
Managing capital delivery
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4 4
4
Lifting Cost
G&A Cost
9M1
6
7.9
4.7
3.2
2014
A
15
2013
A
16
2016
G*
<10
6-7
2-3
2015
A
13
87
315
357
288
2013
A
2016
G*
100-145
2015
A
2014
A
9M1
6
Capex
US$/BOE
US$ mn
° Cash cost without Oman Service Contract | * Excluding
acquisitions
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Well balanced 2P reserves
57.2%
Domestic
Foreign
152
76.0%
9.4% 146
34.3%
14.6% SNSB 8.5%
• Large well balanced 2P
reserves backed by a strong
resource base
• Monetize our resources
through capital discipline and
project execution
• Prioritize domestic projects for
early cash generation
• Focus on lower risk, cost
effective near field resources
and exploration
• South Natuna Sea Block B
acquisition will add 35 mmboe
of 2P reserves and 23 mmboe
of contingent resources
2P Reserves – 298
Reserves and resources in mmboe, Reserve life index in years
Gas Oil
17 Reserve Life Index
Foreign
Domestic
SNSB
Resources > 380
71.3%
Oil
22.7%
SNSB
Gas
6.0% 6.0%
SNSB
Foreign
71.4%
Domestic
22.5%
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Phase I COD
Q1 2018
Iliran
High
Block A
Simeng
-garis 2013
Appraise Select Define Execution Production
Senoro II
Telisa
Semoga
Matang 2012
Kuala
Langsa 1992
Temelat 2011
Tunisia 2014
Arung 2013 Sarulla
Geo-
Thermal
North
Temelat 2009
Libya 2007
POD Submission
2016
FEED
Completed
2016
Phase I COD
Q4 2016
Libya 2007
Oil Gas Power
Ijen
Geo-
Thermal
Cibala-
pulang
Mini
Hydro
Healthy project pipeline
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619 657566 572
865
1,054982
1,342
623
792
1,102 1,085
884
680
272
0
200
400
600
800
1,000
1,200
1,400
1,600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tax
GOI's Shares
Total Contribution
Medco’s contribution to the Government of Indonesia in 2015 is
US$ 272 million (IDR 3.6 Trillion) and US$ 12.1 billion in the last 15 years
MedcoEnergi’s contribution to Goverment of Indonesia
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• Global energy market faces continuous change. Changing energy mix, energy pattern and energy prices
• Oil price fluctuations are common and fluctuate sharply 5 times within 30 years.
• A challenge for oil and gas companies is how to adapt in a fluctuating environment, conducts adaptation and mitigation so that the company's goals can be achieved through the right strategy
• Medco will create value by evaluating each opportunity against our return and profitability benchmarks.
• With commodity prices projected to remain low, there will be opportunities to acquire domestic resources.
• The acquisition of PT Newmont Nusa Tenggara and South Natuna Sea Block B are excellent examples of how targeted domestic resource acquisitions can create value for the Company’s stakeholders
Delivering
in 2016
Solid
Liquidity
Looking
Forward
Conclusion