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Oil and gas service firm Elnusa embarks on more aggressive expansion plan

JAKARTA (Rambu Energy) – PT Elnusa Tbk (ELSA.JK), a listed oil and gas service company with a focus on seismic survey and oil and gas drilling service, is embarking on a more aggressive plan. On Monday, the company announced its plan to acquire a biodiesel processing company with an acquisition value of US$10 million-US$15 million.

The plan reflects the changing of the company’s new strategy to move beyond seismic survey and oil and gas drilling activities.

Sri Nirbito, division head for New Venture and Strategic Planning of Elnusa, told reporters on Monday that the acquisition plan to buy an undisclosed biodiesel company will be executed this year. The acquisition of the biodiesel firm will pave the way for the company to embark on a renewable energy.

Sri Nirbito said that as part of the move to expand into producing biodiesel, Elnusa also plans to set up a joint venture with a listed plantation firm, with an estimated investment of around US$20 million.

The company eyes South Sumatera as its base to produce biodiesel. It targets to produce 100,000 kiloliters of biodiesel per year.

Elnusa’s move to produce biodiesel is in line with the government’s drive to diversify energy sources and reducing its dependency on oil imports, which has so far proved to destabilize the country’s trade balance as well as overall balance of payment, which ultimately put pressure on the country’s currency rupiah.

Nurkholis, vice president of Corporate Finance Elnusa, added that apart from moving into producing biodiesel, Elnusa is also expanding its wing to marine support and logistic. The three new business lines – biodiesel, marine support and logistic – is targeted to contribute around 35 percent of the company’s revenues in 2014.

To support its expansion, Elnusa is seeking new loan valued at Rp840 billion to as part of the company’s efforts to meet its planned 2014 capital expenditure of Rp1.2 trillion. The company said it has secured commitment from a number of banks, including Bank Central Asia. No further details were provided.

On Tuesday, the company published its 2013 financial report. In 2013, the company posted net profit of Rp238.06 billion, surged 86 percent from previous year. The company’s Vice President for Corporate Finance Nurkholis said that the ne profit was far higher than the company’s target of Rp138 billion.

He said the strong results was partly driven by the company’s “aggressive and selective” strategy. In 2013, the company focused on high margin business such as drilling and oilfield services. In 2013, this unit posted a growth of 33 percent. At the same time, the company reduced its exposure in low-margin business activities.

As a result of this strategy, the company posted revenues of Rp4.1 trillion, down 14 percent from previous year, partly due to slowing down seismic activities. The largest contributor of the revenues was upstream oil and gas service, which contributed 63 percent of the company’s revenues. (*)


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