PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP)

2Q13 net profit drops 47.4% qoq but norm profit drops 7.3% qoq

PTTEP 2Q13 net profit was reported at B10.66bn, dipping 47.4% qoq, worse
than projected, as petroleum product sales volume was projected too high
and operational cost was projected too low. However, decrease in 2Q13 net
profit went as projected mostly due to recognized extraordinary expense
from Fx loss at the total of B5.14bn, as baht/US$ and baht/CAD at end-2Q13
had weakened, compared to end-1Q13. If extraordinary item is excluded,
2Q13 norm profit dropped only 7.3% qoq to B15.8bn. Though 2Q13 sales
volume rose 0.4% qoq to the average of 292,700 barrel per day as MTJDA
project had resumed production after maintenance shutdown in 1Q13, it was
partially negated by maintenance shutdown of Bongkot South and Arthit
projects. Rise in sales volume was not great enough to negate the following:
1) Average sale price of petroleum product fell 2.79% qoq to
US$65.18/barrel (oil sale price fell 8% qoq to US$95.14/barrel, while natural
gas sale price rose 2.5% qoq to US$8.16/million BTU). 2) For operation cost,
lifting cost rose 4.9% qoq to US$4.69/barrel due to maintenance shutdown
of Bongkot South and Arthit projects in 2Q13, raising average cost. Overall,
1H13 net profit was B30.9bn, rising 18.8% yoy, and accounting for 50.3% of
FY2013 earning forecast.
- 3Q13 profit likely to grow qoq, FY2013 to grow 7% yoy
We maintain our FY2013 earnings forecast as 3Q13 profit is likely to improve
from 2Q13. Sales volume is likely to increase after Montara project has
started its commercial run, and the income would be recognized in 3Q13
from the first sale at 10,000 barrel per day, probably rising to 30,000 barrel
per day in late-2013. Moreover, production capacity would increase as
Bongkot South, Arthit, B8/32 and 9A projects would resume their production.
Also, (Dubai) oil price is likely to soar above US$100/barrel, along with
global economy, especially the US that has been recovering continuously.
Political conflicts in the Middle East would also escalate oil price. Addition
ordinary income is expected to be recognized from compensation for
Montara's insurance claim at B850m in 2H13. Overall, FY2013 total profit is
expected to grow 7.3% yoy and likely to make a yearly new high due to
increasing production volume.
- Recommend "BUY", 1H13 dividend is B3/share or yield of 1.88%
We project fair value at end-2013 (DCF) at B188.70/share. We reiterate
"BUY" for its 18% upside and long-term fundamental factors that is likely to
grow due to new investment projects. PTTEP has announced dividend
payment from 1H13 earning result at B3/share, 1.88% half-year dividend
yield.