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Pertamina
- Sector: Energy
- Sub Sector: Oil and Gas
- Region: Indonesia
- Bond: PERTIJ 3.1 30
- Indicative Yield-to-Maturity (YTM): 5.339%
- Credit Rating : -/BBB/-
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Fundamental View
AS OF 30 Dec 2024Pertamina enjoys very strong linkages with the Government of Indonesia (GoI) and is assured of extraordinary support in times of distress.
Slightly higher YoY FY24E Brent crude prices could lift upstream margins and overall EBITDA (given the upstream business accounts for >65% of consolidated EBITDA).
Although leverage typically remains low, Pertamina incurs large capex spending that could pressure its free cash flow generation.
High persisting dividend outflows could restrain free cash flow improvements.
Business Description
AS OF 30 Dec 2024- Pertamina is involved in a broad range of upstream and downstream oil, gas, geothermal and petrochemical operations.
- In the upstream sector, it engages in the exploration, development and production and supply of crude oil, natural gas and geothermal energy.
- As for the downstream sector, the company carries out refining, marketing and distribution of oil, gas, fuel products and petrochemical and other non-fuel products.
- As of 31 December 2022, its total proved oil reserves stood at ~1,289 mmbbl (mn barrels of oil) and gas reserves stood at ~817 mmboe (mn barrels of oil equivalent). Its average daily oil and gas production was ~1,044,000 boe per day in FY23. The company owns and operates 6 refineries in Indonesia.
- Under the Public Service Obligation (PSO) mandate, Pertamina is responsible for providing certain grades of motor gasoline, automotive diesel oil, kerosene and LPG at subsidized prices. The subsidized retail price is often times lower than the cost of production, creating a shortfall, for which it receives reimbursements from the GoI.
Risk & Catalysts
AS OF 30 Dec 2024Pertamina’s profitability is materially affected by volatility in oil & gas prices. Prolonged periods of low oil prices could hurt upstream earnings that form the bulk of overall EBITDA (>65%).
As retail prices of certain fuel products are regulated, realized prices may be below its cost of sales.
Pertamina has to initially absorb the shortfall between the regulated retail price and the cost of producing and distributing certain fuel products. If the price of crude oil exceeds the price ceiling set by the GoI, the company may receive insufficient subsidy reimbursements.
Capex typically remains elevated and which pressurizes its free cash flow generation.
Key Metric
AS OF 30 Dec 2024| $ mn | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Debt to Book Cap | 36.2% | 38.5% | 41.2% | 42.1% | 37.6% |
| Net Debt to Book Cap | 22.4% | 18.9% | 21.9% | 12.5% | 8.5% |
| Debt/Total Equity | 56.8% | 62.5% | 70.0% | 72.7% | 60.4% |
| Debt/Total Assets | 26.4% | 28.3% | 29.9% | 30.8% | 27.4% |
| Gross Leverage | 2.2x | 2.4x | 2.5x | 1.9x | 1.9x |
| Net Leverage | 1.3x | 1.2x | 1.3x | 0.6x | 0.4x |
| Interest Coverage | 8.1x | 7.8x | 8.7x | 11.2x | 8.9x |
| EBITDA Margin | 14.9% | 19.9% | 16.0% | 16.7% | 17.7% |
CreditSight View Comment
AS OF 19 Mar 2025We have a Market perform recommendation on Pertamina. Pertamina’s Jan-30/31 bonds trade 22 bp/24 bp wider than Petronas’ 30/32 bonds, while its longer-dated bonds trade an average of 42 bp wider. We see this differential as fair given Petronas’ solid net cash position, larger EBITDA, and stronger financial reporting quality; we believe the wider differential for the longer-dated bonds is attributable to Petronas’ notes trading tight. We remain comfortable with Pertamina’s full state-ownership, timely fuel subsidy and compensation from the Indonesian government, our expectation for Pertamina’s strategic policy role to sustain, positive free cash flow generation, robust credit metrics and adequate liquidity. That said, its capex remains elevated amid a ramp up in energy transition goals.
Recommendation Reviewed: March 19, 2025
Recommendation Changed: May 16, 2023
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