PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP)

Fx loss to depress 4Q13 profit by 28.4%qoq
We project PTTEP's 4Q13 net profit at B12.7bn, contracting 28.4%qoq,
mainly due to B4bn Fx loss in 4Q13 (versus B1bn Fx loss in 3Q13), as
end-4Q13 THB and CAD have depreciated from end-3Q13 by 4.7% and
3.9%, respectively. However, B692m insurance claim from Montara
project would be booked in 4Q13 (remaining US$12m is projected to be
booked in 2014 (from the total claims of US$245m)). 4Q13 normalized
profit is projected to shrink only 11.1%qoq to B16.8bn. PTTEP's sales
volume is projected to increase by 3.7%qoq to 297,000 barrel/day, as
GSP#5 resumed working after the unplanned shutdown in 3Q13, and
Vietnam 16-1 and Bongkot North field resumed working after the
planned shutdown in 3Q13. Also, profit from Natuna Sea A project (220
million cubic feet/day of natural gas and 2,350 barrels/day of crude oil,
PTTEP holding 11.5% stake) would be recognized after acquisition in
early-December 2013. However, these supporting factors would be
negated by the following factors: 1) Total production cost is projected to
increase by 3.1%qoq to US$35.1 as a result of rising impairment cost
and selling and administrative expenses (which are usually higher than
any quarter in 4Q). 2) B1.26bn additional tax expense will be recognized
in 4Q13, as it was previously booked lower than it should be in 3Q13, so
it needs to be revised up in 4Q13. 4Q13 average sale price is projected
at US$66/barrel, close to 3Q13, as natural gas and crude oil prices
stayed unchanged. We project FY2013 net profit at B61.5bn, growing
7.3%yoy.

1Q14 profit to rebound from sales volume of new project
We project that 1Q14 normalized profit would rebound from 4Q13,
mainly from leaping sales volume. Profit from Zawtika project in
Myanmar would be booked from February 2014 on. Capacity of Montara
project in Australia would increase from 17,000-18,000 to 30,000
barrel/day within March 2015. Moreover, profit from Natuna Sea A
project would be recognized for a full quarter. Under the assumption
that average petroleum sales price remains unchanged from 4Q13,
FY2014 profit is projected to leap by 19.8%yoy as a result of
depreciating THB and additional production capacity from Natuna Sea A
(220 million cubic feet/day of natural gas and 2,350 barrels/day of crude
oil) and Zawtika project in Myanmar (300 million cubic feet/day of
natural gas) from 1Q14 on.

"BUY". 2H13 dividend yield at 2.04%
We derive end-2014 fair value (DCF) at B220.07, implying 41% upside.
PTTEP’s share price has been decreasing significantly whereas peers'
prices have been rising to absorb global economic recovery, making
PTTEP attractive. Also, PTTEP is not pressed much by the political
turmoil. 2014 PER is as low as 8.4x, lower than the sector's regional
average of 10x. 2H13 dividend is expected at B3.2/share (2.04%
dividend yield).