Company Update

23 Desember 2022

Oil & Gas Sector Update December 23, 2022

Exploring Resources beneath the Archipelago

Key Takeaways:
• With the easing of China’s zero-covid policy and OPEC+ production cut by 2 MBOPED, or equivalent to 2% of the world production, oil demand is projected to rise in FY23F with the price expected to be normalized, yet still above the pre-pandemic level.
• Y23F ICP was set to be at USD95/barrel (vs USD87.5/barrel in Nov-22) and the oil lifting target was raised to 660 MBOEPD (vs 633 MBOEPD in FY22).
• Natural gas price is expected to rise by 2Q23 after China's easing of zero-Covid policy and decreased Russian gas flow, as before the war, Nordstream 1 and 2 contributed 31% of Europe's total gas supply.
• In FY23F, Indonesia targeted its natural gas lifting to be at 1,100 MBOEPD (vs 964 MBOEPD in FY22).
• Investors are now eyeing for O&G companies to pay dividends to shareholders and/or further business expansion with their huge amount of cash flow generated in FY22.
• We remain Overweight on the O&G sector due to the potential expansion to green energy and well exploration in FY23F along with the rise in ICP and lifting target. Our top picks in the sector are AKRA (TP: IDR1,700) and PGAS (TP: IDR2,200) as currently, the stock is trading slightly on STD-1 (5-yrs avg). Downside risks: 1) global inflation; 2) China pandemic condition; 3) Russia-Ukraine war; 4) EU and US O&G Reserves.

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