Medco Hires Credit Suisse to Sell Service Unit Stake

By Leony Aurora, Bloomberg, Jakarta, The Jakarta Post -- PT Medco Energi Internasional, Indonesia's biggest publicly traded oil company, said Credit Suisse will help sell its 52 percent stake in a drilling service unit. The unit’s shares surged as much as 11 percent.

PT Apexindo Pratama Duta may post net income of $75 million next year and should be valued at 12 times its future earnings, President Hilmi Panigoro said in a telephone interview Friday. That values the company at $900 million, or a 51 percent premium to Apexindo's market value as of Thursday.

Medco plans to sell the stake because rig rentals have peaked, Panigoro said on July 19. The rates have more than tripled since 2004 as explorers step up efforts to find oil and benefit from record crude prices. Medco in August last year scrapped talks to sell the stake with companies including India's Aban Offshore Ltd. and China Oilfield Services Ltd.

“Medco should sell Apexindo if it wants to focus on its exploration and production activities,” Ahmad Solihin, an analyst at PT Mandiri Sekuritas, said in Jakarta Friday. “It won’t have the capital to support Apexindo’s growth as the rig business is quite expensive.”

Apexindo jumped as much as Rp 225, its biggest intraday gain in four months, to Rp 2,350 on the Jakarta Stock Exchange Friday. It traded at Rp 2,250 at 2:21 p.m. Medco climbed 1.3 percent to Rp 3,900 on the bourse.

``At the right price, everything is for sale,'' Panigoro said. The company is trading at 9.9 times next year’s earnings, according to Bloomberg data.

Apexindo is valued at about Rp 2,500 a share based on its assets, according to Mandiri’s Sholihin, who has a “ buy”recommendation on the share. That’s an 18 percent premium to the company’s closing price Thursday.

Medco expects to complete the stake sale by the end of the first quarter of next year, Panigoro said.

Apexindo rose 2.4 percent to 2,175 rupiah at 10.a.m. on the Jakarta Stock Exchange today. The company is traded at 9.4 times next year's earnings, according to Bloomberg data.

The Bisnis Indonesia newspaper today reported that the stake in Apexindo has been offered to as many as 30 potential investors, including TPG Inc., a U.S. private equity firm, and Ashmore Group Plc.

``Credit Suisse is always in talks with TPG, as it's a client,'' Panigoro said. ``It's too early to say with whom we may be speaking to.''

Apexindo owns and operates nine onshore drilling rigs, and four swamp barges contracted by the Indonesian unit ot Total SA. Its also operates one jack-up rig in the Middle East for Norway Statoil ASA and another one in Total’s field in East Kalimantan.

Apexindo is 32-percent owned by SeaDrill Ltd., a company controlled by Norwegian billionaire John Fredriksen.