PTT's 20% profit slump in first-half not out of line, management says

The management also said|some of PTT’s major investment projects abroad, including its |recent US$2.5-billion oil-supply deal with Ecuador, were still worth pursuing.

Pailin Chuchottaworn, president and chief executive officer, said world oil prices had dived from $105.3 a barrel to $56.60 during the period.

Chief financial officer Wirat Uanarumit said profits plunged 49 per cent at Exxon, 69 per cent at Chevron, 147 per cent at BP and 44 per cent at Petronas. Shell reported a 14-per-cent decline, but that included gains from asset divestitures.

Other oil majors had also taken more impairment costs than PTT over the past 12 months. PTT Group had taken a $784-million impairment charge, equivalent to 35 per cent of its net profit, while Shell wrote off $6.98 billion (34 per cent of its profit), Chevron $2.96 billion (20 per cent), Total $6.5 billion (65 per cent), BP $3.6 billion (13 per cent) and Petronas $6.7 billion (43 per cent).

Only Exxon took no impairment charge because of its view that the oil-price slump was temporary.

PTT’s integrated oil business that spans upstream to downstream production helped it to achieve the "resilient" performance.

"For PTT, any [more impairments] would be little. For PTT Exploration and Production, it depends on how it views the trends of oil prices over the long term. [But overall], we have already done most of it. There shouldn’t be many more surprises," Wirat said.

Pailin said PTT Green Energy, which had already disposed of three of its five oil-palm projects in Indonesia, would continue to look for opportunities to shed the remaining assets. The damage has already been written off.

Wirat said the crude-oil-supply agreement that PTT signed with Petroecuador last month, which obliged the Thai firm to make a $2.5-billion up-front payment, was not unusual for the international oil-trading business.

"This kind of advance purchase is a normal practice that big trading firms are doing in a bid to secure supplies. And we don’t take credit risk directly from the Ecuadorian company, since we have bought insurance to cover the trade," he said.

Pailin said that at current prices of liquefied natural gas, Cove Energy could still press ahead with its LNG export project.

The UK-headquartered petroleum company with stakes in gas fields off Mozambique was acquired for $1.92 billion in 2012 by PTT’s upstream subsidiary PTT Exploration and Production.

"It will take four to five years to finish the project. If then the LNG price increases from $7 to $8 [per million British thermal units] to slightly over $10 as we expect, it will be feasible," he said.

The decision to develop the LNG business will rest upon Anadarko Petroleum Corp, the operator and major shareholder of Mozambique’s Rovuma Area 1 gas field that Cove has only an 8.5-per-cent stake in.

Wirat said PTTEP was also looking to exploit the low-oil-price crisis to increase its petroleum reserves.

"PTTEP has made a lot of cost reductions. But it still has low reserves that it wants to increase. It has Bt100 billion cash on hand ready for investing," he said.

Pailin said PTT’s outlook for the second half would depend more on the macroeconomic situation than on oil prices, which are expected to stay within a steadier range of $50-$60 a barrel.

PTT Group’s second-quarter net profits also fell 19.1 per cent from a year ago to Bt23.7 billion, but rose 5.1 per cent from the first quarter. This was in line with analysts’ consensus estimate of Bt24.3 billion.