JAKARTA – Gross split profit-sharing contracts initiated by the Indonesian government back in 2024 are deemed to be more favourable for oil and gas contractors, thus igniting positive sentiment for upstream oil and gas upstreaming sector.

The system, regulated through Regulation of the Minister of Energy and Mineral Resources (ESDM) No.13/2024, grants contractors pre-tax profit-share of 74-95%.

The system will simplify variable and progressive components of the framework used in the upstream oil and gas sector, according to the research by PT Ina Sekuritas Indonesia.

For example, an issuer in the upstream oil and gas such as PT Elnusa Tbk (ELSA), according to Ina Sekuritas’s report, is said to occupy strategic position to acquire more projects with competitive prices. “Thus, it may still maintain solid yield despite fluctuation on oil prices,” said Ina Sekuritas.

Moreover, the parent company of ELSA, PT Pertamina Hulu Energi (PHE), is currently renegotiating its contract in Masela Bloc. The negotiation over this biggest gas project in Indonesia might potentially trigger business growth for ELSA.

In the meantime, PT AKR Corporindo Tbk (AKRA) is said to still face several challenges, ranging from its Q3 2024’s profit hitting way below projections, to revised target of industrial land sales at JIIPE.

Another upstream oil and gas issuer under Ina Sekuritas’s highlight is PT Perusahaan Gas Negara (Persero) Tbk (PGAS). This issuer, also known as PGN, reported positive gas distribution margins in Q3 2024. However, PGAS is still facing several government policy risks.

“We give a BUY rating for AKRA and ELSA due to their strong growth potential, while PGAS is rated NEUTRAL considering regulatory risks,” said Ina Sekuritas.

AKRA and ELSA have received BUY recommendations with target prices of IDR 1,230 and IDR 432, respectively. Meanwhile, PGAS has a target price of IDR 1,585. (KR/ZH)