PTT Exploration & Production
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Larger sales to boost 2014 profit to new high
Good profit in 1Q14 as expected
PTTEP posted 1Q14 net profit at B12.4bn, growing 67.4%qoq, close
to our projection. Major contribution was a 93.9%qoq decrease in Fx
loss to only B128m in this quarter, but was partially offset by an
extraordinary expense of B2bn (before tax) from the shutdown of
the unsuccessful H5 well that had been drilled to replace the leaked
well. Normalized profit increased 4.6%qoq, thanks to an average
petroleum selling price that rose 0.7%qoq to US$64.92/barrel
following a 1.9%qoq increase in a gas selling price to
US$7.79/million BTU. Crude oil price dropped slightly by 0.7%qoq to
US$100.84/barrel, while total sales slid 0.4%qoq to 298,000 barrels
a day. Overall, 1Q14 net profit has made up 18.4% of our FY2014
forecast.
Continuous growth foreseen in 2Q14
We maintain our forecast for FY2014. 2Q14 profit is projected to
grow from 1Q14, owing to increasing sales after the acquisition of
two projects from Hess Corporation Thailand on 22 April. The two
projects are 1) Sinphuhorm (Hess holding 35% stake) with 100
million cubic feet a day capacity of natural gas production and 2)
Pailin (Hess holding 15% stake) with 360 million cubic feet a day
capacity of natural gas production, which would help increase total
sales volume of PTTEP by 10,000 barrels a day. For Zawtika project
in Myanmar (M9), the company maintained its plan to delay the
commercial production of natural gas for selling back to Thailand
(240 million cubic feet a day) from 1 April previously scheduled to
July 2014. Accordingly, petroleum sales in 2H14 are anticipated to
grow from 1H14, which would help to boost the quarterly profit and
full year profit to make a new high by year with the growth of
20.1%yoy.
Buy
We recommend buying PTTEP. 2014 fair value (DCF) is B195/share,
implying 22% upside. 2014 P/E ratio is only 9.4x, still lower than
the regional average of 11.1x.
