PTTEP announces $24-billion five-year investment budget

PTT Exploration and Production has revealed a five-year (2015-2019) investment plan totalling US$24 billion (Bt788 billion), to be allocated both in Thailand and overseas.

Up to 80 per cent will be invested in Thailand and other Southeast Asian countries such as Indonesia, Myanmar and Vietnam. 

PTTEP is also still interested in shale oil in the United States, president and chief executive officer Tevin Vongvanich told a news conference yesterday.

“Our negotiating team is still talking with US shale-oil producers on buying some stakes in the business,” he said, adding that the company hoped to finalise this as soon as possible.

Tevin said the announced investment amount did not yet include expenditure for new business opportunities aimed at increasing the company’s petroleum reserves. 

Projects will be prioritised to ensure flexibility, while sales volume is targeted at 343,000 barrels of oil equivalent per day in 2015, a rise of 6 per cent. Projects aimed at ensuring reliable supplies for domestic consumption will also be priorities, followed by those in the development phase for which investment strategies had to be adjusted in line with current global oil prices.

“The company has internal cash on hand of $3 billion and will raise more money from issuing debentures worth $1.6 billion in 2015. That will be enough for its business expansion next year,” he said.

In 2015, overall investment expenditure will be $4.83 billion, of which 52 per cent is allocated to maintaining production levels for projects in Thailand, namely the Arthit, S1, Bongkot, Contract 4, and MTJDA-B17 projects. 

Another 20 per cent will be spent on projects in Southeast Asia, mainly in Myanmar, to maintain production levels for the Zawtika Project, development of the Myanmar M3 Project, and feasibility studies for that country’s PSC G & EP 2, MOGE 3, MD-7 and MD-8 projects. 

Supporting the expected 6-per-cent increase in sales volume next year to 343,000boed will be full-year contributions of the Zawtika project and assets acquired from Hess Thailand, as well as the expectation of the first crude oil from the Algerian 433a and 416b projects in the second quarter.

“The fluctuating global oil prices have inevitably had an impact on our operations, forcing us to adjust the five-year investment plan,” Tevin said. 

 

‘Save to Be Safe’ 

“We are also initiating a ‘Save … to Be Safe’ project to reduce operating costs. Despite the tough times, the company still has strong liquidity to support opportunistic mergers and acquisitions. We will closely monitor the movement of crude-oil prices. 

If the prices fall below our projections, we have room to adjust the investment budget downwards in order to maintain our good liquidity and strong performance.” 

The company expects to post sales volume this year of about 320,000boed, 9 per cent higher than in 2013. The increase resulted from the start-up of the Zawtika project and the acquisition of Hess Thailand.

Despite the decrease in the oil price in the fourth quarter, PTTEP says it has experienced a minimal impact on its recurring operations because crude-oil sales volume accounts for 33 per cent of its total, and the company has also hedged against falling crude prices. 

Meanwhile, the short-term outlook of lower oil prices has had a relatively subdued impact on gas prices, as 30-50 per cent of the company’s natural-gas sales price is indexed to oil prices with a three-month, six-month or one-year lag time depending on the project.

The majority of the company’s production is natural gas, accounting for 67 per cent of total sales volume. 

However, the significant decrease in oil prices may result in decreased fair values of certain assets at the end of the accounting period, and subsequently affect the statement of profit and loss. Therefore, PTTEP will continue to monitor the movement of oil prices closely and act in accordance with the accounting standards, it says.