A Financial Ratio Analysis of Oil and Gas Private Company in Indonesia: Before and After Declining the Oil Production

Copyright © 2018Authors. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. e-ISSN: 2622-4585 | p-ISSN: 2580-0132 International Journal of Business Studies Vol. 2 No. 2 ( June 2018) 75 industry and ‘big energy’. The pattern towards renewable and alternatives energy is likewise another threat to traditional oil and gas companies. Nonetheless, the oil and gas industry are still remarkably successful and still experiences massive growth (Dutta, 2013). At this moment, crude oil is one of the most present and essential resource in everyday life. The oil business is a standout amongst the most powerful branches in the world of economy. More than four billion metric tons of oil is produced worldwide annually. Oil and gas companies are among the biggest corporation around the world. Among the top ten companies worldwide based on revenue, six are in the oil business (Statistica, 2016). The biggest volumes of products of the oil and gas industry are fuel oil and gasoline (petrol). Petroleum is the essential material for a huge number of chemical products, including pharmaceuticals, fertilizers, solvents and plastics (Dutta, 2013). Oil companies are starting to assemble themselves back that cost have recovered from their lowest levels in a decade. A barrel of WTI crude has been lounging around $50 a barrel all year, up to from $30 in early 2016. Rising prices, in addition to cost cuts and the revenue produced from side projects, is beginning to help many companies to turn a bene it once more (Gensler, 2017). In the case of oil price, in accordance to PWC (2017) oil and gas industry has experienced dramatic volatility. Data reveal that from its peak in mid2008 the price is US$145 per barrel, the oil price collapsed by more than 70% and ended in 2008 at US$40 per barrel following the global inancial crisis. There was a signi icant increase at US$79,4 per barrel in 2010 and a further increased to 112,73 per barrel. Meanwhile, it falls down to US$49,46 per barrels in 2016 (Ministry of Energy and Mineral Resources of Republic of Indonesia, 2016). According to Wood Mackenzie analyse in 2016, there has been decreasing of 30% investment expenditure compared in the year of 2015. These shows progressively that an investment of oil and gas globally in 2016 only achieved 56% rather than in 2014 (SKK Migas, 2016). From the igure 1 above, it shows the information about the performance of crude oil and gas in Indonesia from 1996 to 2020. The instability of oil price has been in luenced by the limited production and high demand (Daryanto, Nurfadilah, 2018). The highest amount of oil and gas production was in 1974 to 1977. The lowest amount of oil and gas production is in the year 2000 to 2014. The present study is focusing on oil and gas industry. It is shroud one of biggest energy company in Indonesia in the period of 2012 to 2016. The purpose of this study is to measure the Figure 1. Performance of Crude Oil and Gas Bu ilt up P ha se Peak 1997 Plateau Phase Peak 1995 Dclined 1-12% eclined 3-5% GAS


INTRODUCTION
The world contains great amount of nonconventional oil, and various oil substitutes. In any case, the speed of the decrease in the production of conventional oil makes it probable that these non-conventional sources cannot come on-stream suf iciently quick to completely adjust (Bentley, 2002). Over the years, there has been a developing negative supposition towards the oil and gas As we know that the oil and gas industry is a huge industry and a big contributor to government revenue. However, a signi icant decline in government revenues from this sector is in 2014 by 14.11% to 4.46% in 2015, and in 2016 the value is not too far from the previous year that is 4.58%. This is due to the decline in world oil prices and also the decline in production of Indonesian private oil and gas companies. The purpose of this study is to analyze the inancial performance of Indonesia's private oil and gas company before and afte r declining the national oil and gas production. The data were collected from inancial report of PT. Medco Internasional, Tbk and divided into two periods. The period before the decline in production from 2011 to 2013, and after the decline in production from 2014 to 2016. Financial ratio analysis (FRA) and paired sample t-test were used to analyze the data. The results show that Indonesia's private oil and gas company is still in good performance even in one year suffered considerable losses. The value of cash ratio, inventory turnover, and collection period signi icantly different before and after the decline in oil and gas production. The authors believe that indings will be helpful for managers who continuously attempt to explore opportunities to provide a higher return. industry and 'big energy'. The pattern towards renewable and alternatives energy is likewise another threat to traditional oil and gas companies. Nonetheless, the oil and gas industry are still remarkably successful and still experiences massive growth (Dutta, 2013).
At this moment, crude oil is one of the most present and essential resource in everyday life. The oil business is a standout amongst the most powerful branches in the world of economy. More than four billion metric tons of oil is produced worldwide annually. Oil and gas companies are among the biggest corporation around the world. Among the top ten companies worldwide based on revenue, six are in the oil business (Statistica, 2016).
The biggest volumes of products of the oil and gas industry are fuel oil and gasoline (petrol). Petroleum is the essential material for a huge number of chemical products, including pharmaceuticals, fertilizers, solvents and plastics (Dutta, 2013). Oil companies are starting to assemble themselves back that cost have recovered from their lowest levels in a decade. A barrel of WTI crude has been lounging around $50 a barrel all year, up to from $30 in early 2016. Rising prices, in addition to cost cuts and the revenue produced from side projects, is beginning to help many companies to turn a bene it once more (Gensler, 2017).
In the case of oil price, in accordance to PWC (2017) oil and gas industry has experienced dramatic volatility. Data reveal that from its peak in mid-2008 the price is US$145 per barrel, the oil price collapsed by more than 70% and ended in 2008 at US$40 per barrel following the global inancial crisis. There was a signi icant increase at US$79,4 per barrel in 2010 and a further increased to 112,73 per barrel. Meanwhile, it falls down to US$49,46 per barrels in 2016 (Ministry of Energy and Mineral Resources of Republic of Indonesia, 2016). According to Wood Mackenzie analyse in 2016, there has been decreasing of 30% investment expenditure compared in the year of 2015. These shows progressively that an investment of oil and gas globally in 2016 only achieved 56% rather than in 2014 (SKK Migas, 2016).
From the igure 1 above, it shows the information about the performance of crude oil and gas in Indonesia from 1996 to 2020. The instability of oil price has been in luenced by the limited production and high demand (Daryanto, Nurfadilah, 2018). The highest amount of oil and gas production was in 1974 to 1977. The lowest amount of oil and gas production is in the year 2000 to 2014.
The present study is focusing on oil and gas industry. It is shroud one of biggest energy company in Indonesia in the period of 2012 to 2016. The purpose of this study is to measure the   1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998  level performance of oil and gas industry in Indonesia using inancial ratio analysis. The outcome of this study will facilitate the student and academicians to assess the inancial performance of the company and to make learning more practical and understood. This study also will be bene icial for managers to evaluate the performance of their company before making decisions.
This study is organized into seven sections. Section one captures the introduction, section two highlight the performance of Indonesia's oil and gas industry, section three highlight the literature review about previous researcher, section four for discuss the methodology, section ive discuss the inding and analysis, section six highlight the implication and section seven captures the conclusion.

Development of Oil and Gas Industry in Indonesia
The advancement of current oil and gas in Indonesia started when the irst drilling conducted in 1871 in the village of Maja, Majalengka, West Java by Dutch businessman named January Reeric, later the business closed. The primary disclosure of oil assets in Indonesia occurred in 1883 that oil ield and Ponds near Pangkalan Brandan Said by a Dutchman named AG Zeijlker. After the war of independence in the age of revolution, physically assumed control over the oil establishment by the Indonesian Government.  State revenue from the oil and gas industry from January to December 2016 is US$9,42 million, US$5,3 million from the oil industry and US$4,1 million from gas industry. That number meet 86% targeted state revenue for 2016 which is US$10,9 million. The amount is 38% of total revenue produced from the oil and gas industry. Compared to 2015, state revenue decreases by 21%, yet followed by cost recovery by 13% (SKK Migas, 2016). With national energy demand surging on average 7% annually, but oil and gas production irmly on a downward curve, many are left thinking about whether the Indonesian hydrocarbons industry can ever genuinely rediscover the grandness days of old. In 2015, PT.Pertamina contributing some US$28,5 billion in tax and royalties to the treasury. Currently Indonesia ranks 20th out of world oil producers processing roughly 1,1% of total global production, and 10th largest producer worldwide for gas, second to China in Asia Paci ic (Georgescu et al, 2016). According to Indonesian Petroleum Association (IPA) igures, the country's remaining proven, probable and possible (P3) oil reserves stand at a considerable 7,375 million stock tank barrels (MMSTB), while P3 gas reserves amount to a mighty 150 trillion cubic feet (TFC) (IPA, 2015).

Previous Research on Financial Performance
The good evaluation method to measure the company performances is the inancial ratio, based on Megaladevi (2015). This method usually compares the performance company with competitors. Accounting is one of methods to measure inancial performance. (Waddock and Graves 1997;Cochran and Wood 1984) are researchers who use this method. The historical aspects are used to quantify their inancial performance (Mcguire, Schneeweis, & Hill, 1986). Financial performance of oil and gas Company in Indonesia are limited resources ( (Daryanto, Nurfadilah, 2018). Based on Tarawneh (2006) Banking industry has applied to examine, evaluate, ranked the inancial ratio analysis based on their performance.

Research Model and Hypothesis
It describes the process of measuring inancial performances and examines the differences between the performance of oil and gas industry before and after the decline in oil and gas production. It expands the knowledge with more practical experience.
Ÿ H1: Using cash ratio, there is signi icance difference in inancial performance before and after the decline in oil and gas production. Ÿ H2: Using current ratio, there is a signi icant difference in inancial performance before and after the decline in oil and gas production. Ÿ H3: Using a total of equity to total asset ratio, there is signi icance in inancial performance difference before and after the decline in oil and gas industry. Ÿ H4: Using return on equity ratio, there is a signi icance difference in inancial performance before and after the decline in oil and gas production.
Year  Ÿ H5: Using return on investment ratio, there is a signi icance difference in inancial performance before and after the decline in oil and gas production. Ÿ H6: Using investment turnover ratio, there is a signi icance difference in inancial performance before and after the decline in oil and gas production. Ÿ H7: Using total asset turnover, there is a signi icance difference in inancial performance before and after the decline in oil and gas production. Ÿ H8: Using collection period ratio, there is a signi icance difference in inancial performance before and after the decline in oil and gas production.

METHODOLOGY
The descriptive inancial ratio analysis was used to analyze the inancial performance of Indonesia's private oil and gas company before and after declining the national oil and gas production during the period of 2011 to 2016. Then, Paired sample t-test also used to examine the signi icance differences in the period of before (2011 to 2013) and after (2014 to 2016) declining in national oil and gas production. Paired sample t -test is a statistical technique to use in before-after studies to compare two population means (Daryanto, Nurfadilah, 2018). PT Medco Energi Internasional Tbk is selected because it is the market leader of Oil & Gas private company in Indonesia. In this study, data were collected from Annual Report (audited) from 2011 until 2016. The variables are included pro itability ratio, liquidity ratio, activity ratio and solvency ratio.

Pro itability Ratio
Pro itability is measured using the criteria as Return on Equity (ROE) = x 100%. Return on equity (ROE) indicates the company's pro itability and growth potential. In addition, return on investment (ROI) is a pro itability ratio that calculates the pro its of an investment as a percentage of the original cost. The equation of ROI can be expressed as Return on Investment (ROI) = x 100%. ROI show the ability of the company to measure the income generated on investment relative to the amount of money invested.

Liquidity Ratio
The liquidity ratio measures the company ability to pay its short-term debt. It can be expressed as Cash Ratio x 100%. Cash ratio measures the liquidity of the company to pay the current liabilities with only cash and cash equivalents. In addition, it measures the company ability to repay its current liability with current asset as expressed as Current Ratio = x 100%. The current ratio measures the company ability to pay its short-term and longterm liabilities using their short-term assets.

Activity Ratio
The activity ratios measure the ef iciency of the company in using its resources. First, Collection Period = x 365 days. It is an important indicator to monitor their cash low and collect a debt from customers. If the companies have high collection period, they should communicate with their customers regarding debts. Second, Inventory Turnover = . This ratio measures how many times the inventory is being sold of a certain period of time. If the ratio is high, it indicates that the inventory level is inadequate. If the ratio is low, it indicates that the company is overstocking and de iciencies in the marketing effort. Third, Total Asset Turnover = x 100%. This ratio measures the company ability to measure the ef iciency to use its asset to generate sales. It indicates the company ability to generate revenue from deploying its asset. A higher ratio indicates that company using its assets more ef iciently and lower ratio indicate that company is using its asset de iciently.

Solvency Ratio
This ratio measures the percentage of company's asset owned by investors and the leverage level of the company with its debt. It can be expressed as Total Equity to Total Asset = x 100%.

RESULT AND DISCUSSION
Pro itability Performance Figure 5 shows the percentage of return on  because 50 % is general standard (Daryanto, et. al, 2017). Medco should increase pro it every year to mitigate the risks. Table 3 is result from paired sample t -test. The results are three hypotheses are accepted and ive hypotheses are rejected. Cash ratio has huge difference between the mean before and after oil and gas crisis with the P-value ≤ α ( 0.004 < 0.05) and t -value (-2.0), the inventory turnover has huge difference between before and after, with the P-value ≤ α ( 0.034 < 0.05) and t -value (3.63), and the last hypothesis that accepted is collection period with the P-value ≤ α ( 0.033 < 0.05) and tvalue (-3.73). It means there are effect of failing oil prices and decreasing oil production. We refuse the total assets to turnover with P-value ≤ α ( 0.989< 0.05) and t-value (3.41), return on Investment with P-value ≤ α (0.257 > 005), Return on equity with P-value ≤ α (0.22 > 0.05), total equity to total assets with P-value ≤ α (0.105 > 0.05) and current ratio with P-value ≤ α (0.092 > 0.05). So, TETA, TATO, current ratio, ROI and ROE are rejected.

CONCLUSION
After measuring inancial performance of Indonesia's private Oil and Gas Company before (2011 -2013) and after decline in oil and gas production (2014 -2015) nationally. This research discovers that the inancial performance of PT. MEDCO ENERGI INTERNASIONAL TBK for six years quite good, even though in 2015 suffered considered loss, but in 2016 Medco can rise up.   Three ratios are signi icantly different in period before and after decline oil and gas production nationally such as cash ratio, inventory ratio, and collection period. Five the others ratio such as current ratio, return on investment, return on equity, total equity to total assets, and total assets turnover are not signi icant different from before and after decline oil and gas production nationally.