PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP)

Q1 2013’s net profit soars surprisingly 47.1% qoq, making historical new high
PTTEP posted 1Q13’s net profit at B20.3bn or a surge of 47.1%qoq, which
was better than our projection because we had underestimated average
petroleum sale price. Other items, on the other hand, were close to our
projection. Petroleum selling price in 1Q13 shifted 0.98%qoq to
US$67.03/bbl on average following condensate selling price (based on
average crude oil price), which rose 1.87%qoq to US$103.74/bbl, while
natural gas selling price dropped slightly by 0.87%qoq to US$7.96/million
BTU. At the same time, production and sales volume in 1Q13 declined
0.94%qoq to 291,000 bbls a day as a result of a 23-day maintenance
shutdown of MTJDA project (in January 2013), while sales volume of Yanada
gas field in Myanmar decreased because of lower order from PTT. However, a
key positive factor to support the profit growth in this quarter was lifting cost
that decreased as much as 8.02%qoq to a normal level of US$4.47/bbl after
rising in the prior quarter as a result of a halt of production of many big
projects. Consequently, overall, norm profit in 1Q13 increased 18.42%qoq to
B17.4bn. Moreover, in 1Q13 the company booked a FX gain of around
B2.65bn, mainly from debt repayments of receivables in Thai Baht (a benefit
from the Baht appreciation against US Dollar), while deferred tax debt
decreased B1.55bn. Overall, 1Q13’s net profit accounts for 33% of our
FY2013’s forecast.
- Q2 2013’s profit might weaken qoq, but growth still foreseen in FY2013
We project the profit in 2Q13 to weaken from 1Q13 because of the following
reasons. 1) Average petroleum sale price might decrease along with global
crude oil price (under an assumption for Dubai crude oil price at lower than
US$105/bbl in the rest of 2Q13). 2) The company might recognize an
extraordinary expense for impairment of Montara project in Australia average
by B900m a month since February 2013 until the day of its commercial
operation. Recently, the management has announced to postpone the
commercial run for another 1 month to late May 2013 because of technical
problems (previously it had been postponed from February 2013 to April
2013). However, this would be compensated by production and sales volume
that is projected to increase around 1.38%qoq to 294,000 a day from a
resumption of MTJDA normal operation after a maintenance shutdown in
1Q13. Accordingly, overall profit in 2013 would continue growing by
7.25%yoy and making a new high.
- BUY. 2013’s fair value is B188.70/share
2013’s fair value (DCF) is derived at B188.70/share. We reiterate our BUY
recommendation due to the company’s long-term growth potential from new
projects. 2013’s PER is only 9.4x, lower than the regional average of 12x.