Pertamina may use bond proceeds for acquisition

The government has permitted state-run oil and gas giant Pertamina to use proceeds from its planned US$1.5 billion bond issuance to finance the firm’s plan to acquire a stake in an Angolan oil block.

State-Owned Enterprises Minister Mustafa Abubakar said on Monday that his office, which is the majority shareholder of Pertamina, has agreed to allow the firm to issue the 30-year dollar-denominated bond “in the remaining seven months of this year”.

“The $1.5 billion global bond has been included in the 2011 business plan and the committee has agreed on it. If Pertamina wants to, [the proceeds] can all be used for the Angola, Cepu and West Madura blocks and to revitalize wells in an attempt to boost the nation’s oil output,” Mustafa said after a meeting at the Office of the Coordinating Minister for the Economy in Jakarta.

Pertamina has reportedly bid $3.5 billion for Exxon Mobil Corp.’s 25 percent stake an Angolan block earlier this month, surpassing offers from Chinese rival China Petrochemical Corp., known as Sinopec Group, and India’s Oil & Natural Gas Corp.

The firm has also been appointed by the government to operate the West Madura Offshore oil and gas block, replacing Kodeco Energy Co. Ltd. Additionally, the government has been requested to take over gas exploration from US-based Exxon Mobil Corp. At the Cepu block.

Pertamina previously aimed to raise $1 billion from the bond issuance, but given that demands amounted to about $3 billion, shareholders understood that Pertamina may need more funds for its corporate actions and agreed to upsize the release to $1.5 billion, Mustafa said. “It can be guaranteed that all will be subscribed.”

The company sold the first part of the issuance, $1 billion of 10-year notes, on May 16, which yielded 235.1 basis points more than similar-maturity Treasuries and it was currently marketing as much as $500 million in notes to yield between 6.75 percent and 6.875 percent, according to Bloomberg data.