PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP)  

 

- Net profit foreseen in 1Q15 

We project PTTEP’s earnings in 1Q15 to revert to net profit of around B4.85bn, versus net loss of B24.4bn in 4Q14. However, normalized profit would weaken 65.7%qoq as a result of 1) a 14.2%qoq decrease in average selling price of petroleum to US$48.5/barrel following 30.2%qoq decreasing Dubai crude oil price and 2) a 6.7%qoq decrease in product sales to 324,000 barrels/day due to lower sales of Montara and Contract 4 (Pailin) projects. Yet, there are still positive factors; total cost would decline as much as 14.7%qoq and tax expense would be lower owing to stronger THB. Overall, 1Q15 net profit would comprise 12% of our full year forecast. 

 

- Profit to gradually improve in the rest of 2015 

Initially, we maintain our FY2015 earnings forecast. The profit is projected to gradually improve in the rest of 2015 since crude oil prices would rise on reviving demands following the world economic rebound and subsiding oversupply problem after high-cost producers have lowered their oil production; we keep Dubai price assumption at US$75/barrel. Nevertheless, under our projection that the oil price would decrease around 21.8%yoy, FY2015 normalized profit would drop by 16.3%yoy, but net profit would surge 95.9%yoy because there would be no massive extraordinary expense like in 2014. 

 

- Share price already undergoes correction. Buy and wait for oil price surge  

FY2015 fair value (DCF) is B134. The share price has declined more than 30% in the past six months, partly absorbing the shrinkage in oil price. As the oil price is expected to rebound in 2H15, this is a good entry point.