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Indonesia's second biggest publicly traded oil company, PT
Energi Mega Persada (EMP), is ready to pledge its assets as collateral
in order to secure financing for the company's expansion plans.
In order to anticipate an increase in future funding needs,
shareholders approved a management proposal Thursday to use the
company's assets as collateral to secure loans.
"The shareholders also approved the lending of some of the money raised
from our recent rights issue to our subsidiaries, Kalilla Energy Ltd.,
Pan Asia Enterprise Ltd., and Lapindo Brantas Inc.," EMP capital
markets vice president Herwin W. Hidayat told reporters following the
shareholders meeting.
The company has been saddled with liability for the damage caused by
the mud volcano disaster at the Lapindo gas field in Sidoarjo, East
Java.
According to a non-binding agreement with the government, Lapindo, 50
percent owned by EMP, has said it will pay up to US$180 million in
compensation by no later than March.
However, Herwin said that shareholder approval for the use of EMP's
assets as loan collateral was not intended to raise funds for the
Lapindo's payouts, but rather for EMP's expansion plans.
EMP is targeting a 30 percent increase in production this year.
"Our average production rate in 2006 was 11,000 barrels of oil per day
and 100 million cubic feet of gas per day. We are hoping to increase
that by 30 percent this year," Herwin said.
In relation to the damage caused by the Sidoarjo mud volcano, Lapindo
has so far paid out a total of US$85.9 million. About $14 million of
this has been used to rent homes for those displaced by the disaster,
and to pay for food and medical supplies.
The company has also spent about $26 million on building dikes -- now
stretching for some 10 kilometers -- $8 million on water pumps and
$37.4 million on drilling two relief wells.
Meanwhile, EMP director Faiz Shahab said that a shortage of rigs would
delay production from the company's Terang and Sirasun fields in East
Java by as long as nine months.
The fields could be producing 300 million cubic feet a day of natural
gas starting in the fourth quarter of 2008, he explained.
"We had planned to pump gas in the first quarter of 2008," Shahab said.
"However, high oil prices stretched the availability of rigs and
production equipment in the industry and caused many projects to be
delayed.".
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