PTT Exploration& Production

PTT Exploration & Production Plc (PTTEP) 

 

- Oil prices to get better in 2H15 

There are three important issues from the analyst meeting yesterday. 1) PTTEP projected the oil prices to improve in 2H15 from decreasing shale gas/oil production in the US and continuously erupting political problems and wars in the Middle East. 2) Sales volume in 2015 may grow at a slower rate than forecast, possibly 3-6%yoy versus the previous target of 6%yoy, due to weakening domestic demands as a consequence of the sluggish economic rebound. 3) PTTEP has still been focusing on reducing cost, aiming at cutting its cost by 10%yoy by 2015. 

- Disappointing sales are risk 

Tentatively, we maintain our FY2015 forecast. Although the earnings forecast cut is likely if petroleum sales miss our initial forecast, the economy that would start to rebound in 2H15 may help boost petroleum demands again. However, normalized profit in 2015 would certainly weaken from 2014 as petroleum selling prices (crude oil and natural gas) would decline, especially gas price that would drop around 10%qoq since 2Q15 onward; this is a major reason for the earnings decline in 2Q15 when compared with 1Q15. Nevertheless, gradually improving oil prices would help sustain PTTEP’s profit anyway. 

- Share price undergoes substantial correction, time to accumulate 

2015 fair value (DCF) is B140. The share price decline likely has already reflected all negative factors until a downside is limited now. This is a good entry point, hoping for an oil price surge in 2H15.