Revenue Acceleration by Temporary Rental Pump Option in Plato Platform: Case Study in PT. Prominent Petro

Abstract

This article explores the financial analysis and risk assessment of a company called PT. Prominent Petro, which is considering accelerating production in one of its production facilities, Plato Platform, by installing a temporary rental pump while waiting for the completion of a new permanent pump installation. The financial analysis used Capital Budgeting Technique with Discounted Cash Flow method. The risk analysis was performed by using Sensitivity Analysis and Monte Carlo analysis covering two timeframe scenarios of permanent pump installation, On Time Scenario and Delay Scenario. In On-Time Scenario, the results of the analysis showed that the temporary rental pump option would provide higher financial returns to the company, with an estimated NPV of 6.998 million USD, 7.7% higher than the baseline (no rental) option. Sensitivity analysis revealed that the most significant factor affecting the company's financial return was the realization of gas production. Monte Carlo analysis demonstrated that both Rental and No Rental investment proposals were low-risk and robust, with the rental option having higher risk and return. In Delay Scenario, without temporary rental pump, project financial return will decrease from 6.496 million USD to 5.907 million USD, with the discounted payback period delayed from 1.17 years to 1.80 years. However, the utilization of temporary rental pump option either for six- or twelve-months duration will improve the financial return to 6.4 million USD, similar with financial return of baseline option without delay. Furthermore, a decision tree analysis was developed to estimate the expected monetary value for the company. The analysis concluded that the rental pump option provided a better financial return, with an expected monetary value of $6.484 Million. Overall, the findings suggest that the temporary rental pump option give better financial result for the company.