Rating On Indonesia’s PT Medco Energi Internasional Unaffected By Divestment

Standard & Poor's Ratings Services said today that Indonesia PT Medco Energi Internasional Tbk.’s (Medco; B+/Negative/--) divestment of PT Medco E&P Brantas will not in itself have any impact on the ratings or outlook on Medco.

The sale would provide closure to the uncertainty over the final liability for Medco from the Brantas mud flow problem, of which Medco had 32% interest. Medco had provided for US$22 million for the mud flow problem in its 2006 third-quarter results. It would now have to make further provision on the US$65 million original investment in PT Medco E&P Brantas.

From this sale, as stated by the company, Medco is not expected to have any further liabilities, obligations and cash calls from the mud flow at the Brantas block. The outlook remains negative on increased debt burden to fund aggressive capital expenditure. It could be revised to stable given: (1) improvements in business profile such as increasing reserves and production; and (2) completion in securing of new contracts to improve the company's proved reserves.