DBS PGAS

Perusahaan Gas Negara

National gas output to rise slightly in 2009

(Buy; PGAS IJ; Rp2,125; TP Rp2,279)

It is reported that the upstream oil and gas regulator, BPMigas, is targeting a national gas production of 7.5bn cubic feet per day in 2009, a slight increase from 7.46bn cubic feet per day produced in 2008.

Data from BPMigas shows that several gas contractors that operate aging fields have set lower output this year, however it will be balanced by several other gas companies that have set higher production targets for 2009. The companies that plan to achieve higher production are Pertamina (state oil and gas company), ConocoPhillips Ltd., ExxonMobil Oil Indonesia Inc., and Kodeco Energy Co., Ltd.

The increase output from Pertamina and ConocoPhillips is positive for PGAS, as both companies contribute more than 60% of PGAS distribution gas supply. We expect PGAS distribution gas volume to increase by 32% in 2009 to 796mmcfd. We maintain our BUY recommendation on PGAS and at present the counter is traded at 8.7x FY09 PE.