Norman Harsono, Jakarta – Indonesia's largest oil and gas company, state-owned Pertamina, booked a US$767.92 million net loss in the first half of this year amid weak energy demand and prices.
The company's latest financial report shows that the performance in the January-June period of this year makes a reversal from $659.96 million in profit booked in the same period last year.
"Pertamina was hit by a triple shock," company spokeswoman Fajriyah Usman told The Jakarta Post on Monday. She was referring to low global crude oil prices, weak domestic demand and a weak rupiah-to-dollar exchange rate amid the ongoing health crises.
Pertamina joins other oil and gas companies worldwide, including giants, such as Britain's BP, Saudi Arabia's Aramco and the United States' Chevron, that logged major losses in this year's first half due to the pandemic.
Aramco, often dubbed the world's most profitable company, saw its net profit fall by 50 percent to $23.7 billion in the first semester, according to the company's latest financial report.
Pertamina's revenue plunged by 19.8 percent year-on-year (yoy) to $20.48 billion, largely driven by lower domestic fuel and crude oil sales, as major Indonesian cities underwent large-scale social restrictions (PSBB), curbing demand for transportation.
To minimize losses, Pertamina reduced total expenses by 14.1 percent yoy to $18.87 billion, largely by cutting sales expenses, yet upstream-related expenses actually rose as the state-owned company strives to meet government oil and gas production targets.
The financial report also shows that the company booked a $211.83 million loss in the first half due to the weak rupiah exchange rate, which increases Pertamina's oil import costs.
Pertamina's financial woes will strain the company's ability to retain employees, partners, contractors, foreign assets, tax payouts and dividend payouts, said Gadjah Mada University (UGM) economist Fahmy Radhi, summarizing the recent development's potential impact.
"In the end, it will be unavoidable for Pertamina and its partners to fire employees," he told the Post. "Under such conditions, Pertamina cannot contribute to economic growth."
Pertamina expects to see profits by year-end as global crude oil prices and domestic fuel demand recover over the following months, added Fajriyah.
Global crude oil benchmark price Brent dropped as low as $19.33 per barrel on April 21 but has since rebounded to $44.47 per barrel on Monday, Bloomberg data show.
Despite some recovery, the US's Energy Information Administration (EIA) and credit rating agency Fitch Ratings expect Brent prices to remain lower than last year at less than $50 per barrel.
"Pertamina is optimistic that, by year end, there will be a positive trend," said the spokeswoman.
However, the risk of a second COVID-19 wave, which would likely trigger new lockdowns, loomed large over the global oil and gas industry, said analyst Dulles Wang of energy consultancy Wood Mackenzie America in a statement on Aug 18.
"A second large-scale lockdown would deepen the recession and possibly delay any rebound in GDP until 2022. This would have a significant impact on the oil and gas sectors," he said.