PTT Exploration & Production

Undergo correction. Buy for oil price rebound in 2H15 BUY

PTT Exploration & Production Plc

- Massive net loss projected in 4Q14

PTTEP is estimated to face B24.8bn net loss in 4Q14, versus B15.3bn net

profit in 3Q14, as a result of the following factors: 1) B34bn impairment

charge is expected from Montara and KKD Oil Sand projects; 2) Under the

assumption that Dubai crude oil price plunges by 26.2%qoq, petroleum

selling price is projected to drop by 13.4%qoq to US$56.4/barrel; 3)

Production cost is expected to increase by 9.0%qoq to US$47.9/barrel.

Overall, FY2014 earnings are estimated at B21bn, dropping 62.4%yoy,

lower than our initial full-year forecast.

- Revise down FY2014 forecast to reflect weak performance in 4Q14

We revise down PTTEP's FY2014 earnings forecast by 62.3% to reflect

weaker-than-expect earning performance in 4Q14. FY2014 net profit is

estimated at B21bn, plunging 62.4%yoy. Nevertheless, PTTEP's net profit is

expected to revive by 99.1%yoy in 2015 because there would be no

massive extraordinary expense like in 4Q14. Oil price is currently lower than

2015 Dubai crude oil price assumption of US$75/barrel. However, oil

oversupply problem is likely to subside because high-cost non-OPEC oil

production (e.g. shale oil producers: the US and Canada) has declined due

to financial crisis and minor oil companies have lowered their production.

- Oil price to rebound in 2H15. Good entry point

Under the new forecast, FY2015 fair value (DCF) is revised down from B140

to B134. The share price has plunged by over 38% in five months, already

absorbed the contraction in oil price and impairment charge in 4Q14. As oil

price is expected to rebound in 2H15, this is a good entry point.